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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 12, 2000
REGISTRATION NO. 333-____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GENERAL SEMICONDUCTOR, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 13-3575653
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
10 Melville Park Road
Melville, New York 11747
(631) 847-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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Stephen B. Paige, Esq.
Senior Vice President, General Counsel and Secretary
GENERAL SEMICONDUCTOR, INC.
10 Melville Park Road
Melville, New York 11747
(631) 847-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
Lois Herzeca, Esq.
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
One New York Plaza
New York, New York 10004
(212) 859-8000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. /_/
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. /_/
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. /_/
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /_/
CALCULATION OF REGISTRATION FEE
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Title of Securities Amount to be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered Aggregate Price Per Note Aggregate Offering Price Registration Fee
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<S> <C> <C> <C> <C>
5 3/4% Convertible Subordinated Notes $172,500,000(1) 100%(2)(3) $172,500,000 (2) $45,540
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Common Stock, $.01 par value 11,093,248(4) -- -- (5)
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</TABLE>
(1) Represents the aggregate principal amount of the notes issued by the
Registrant.
(2) Estimated in accordance with Rule 457 of Regulation C under the Securities
Act of 1933, as amended, solely for the purpose of determining the
registration fee.
(3) Exclusive of accrued interest and distributions, if any.
(4) Represents the number of shares of common stock that are initially issuable
upon conversion of the notes and includes an additional indeterminate
number of shares of common stock issuable upon conversion in the future
pursuant to Rule 416 of the Securities Act.
(5) No additional consideration will be received for the common stock and
therefore no registration fee is required pursuant to Rule 457(i).
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. The
selling securityholders may not sell their securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell the securities and it is not soliciting an
offer to buy the securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED JANUARY 12, 2000
PROSPECTUS
GENERAL SEMICONDUCTOR, INC.
$172,500,000 of 5 3/4% Convertible Subordinated Notes due 2006 and
11,093,248 Shares of Common Stock Issuable upon Conversion of the Notes
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This prospectus relates to 5 3/4 % Convertible Subordinated Notes due
December 15, 2006 of General Semiconductor, Inc., a Delaware corporation, held
by certain security holders who may offer for sale the notes and the shares of
our common stock into which the notes are convertible at any time at market
prices prevailing at the time of sale or at privately negotiated prices. The
selling security holders may sell the notes or the common stock directly to
purchasers or through underwriters, broker-dealers or agents, who may receive
compensation in the form of discounts, concessions or commissions.
The holders of the notes may convert the notes into shares of our
common stock at any time at a conversion rate of 64.3087 shares per $1,000
principal amount of notes. On or after December 15, 2002, we may redeem the
notes, in whole or in part, at the redemption prices set forth in the section
entitled "Description of the Notes--Redemption at the Company's Option."
In the event of a Change of Control, as defined in the section entitled
"Description of the Notes--Repurchase of Notes at the Option of the Holder Upon
a Change in Control," each holder of the notes may require us to repurchase the
notes at 100% of the principal amount of the notes plus accrued interest.
The notes are general, unsecured obligations that are subordinated in
right of payment to all of our existing and future senior indebtedness and
effectively subordinate to all existing and future liabilities of our
subsidiaries. See "Description of the Notes--Subordination."
On January 12, 2000 the last reported sale price of our common stock,
listed under the symbol "SEM", on the New York Stock Exchange ("NYSE") was
$13.375 per share.
Our 5 3/4% Convertible Subordinated Notes are currently eligible for
trading on the PORTAL Market of the Nasdaq Stock Market.
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INVESTING IN OUR COMMON STOCK OR OUR CONVERTIBLE SUBORDINATED NOTES
INVOLVES RISK. PLEASE CAREFULLY CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE
4 OF THIS PROSPECTUS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS JANUARY _____, 2000
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TABLE OF CONTENTS
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PAGE
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Summary......................................................... 1
Risk Factors.................................................... 4
Use of Proceeds................................................. 10
Price Range of Common Stock and Dividend Policy................. 10
Ratio of Earnings to Fixed Charges.............................. 11
Business........................................................ 12
Description of Notes............................................ 24
Description of Credit Facility.................................. 42
Description of Capital Stock.................................... 45
Certain United States Federal Tax Consequences.................. 49
Selling Securityholders......................................... 54
Plan of Distribution............................................ 55
Experts......................................................... 56
Validity of the Securities...................................... 56
Where You Can Find More Information............................. 57
Incorporation by Reference...................................... 57
Forward Looking Statements...................................... 58
Index to Financial Statements................................... F-1
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CERTAIN INFORMATION
On July 28, 1997, General Instrument Corporation spun-off to its
shareholders NextLevel Systems, Inc., its broadband communication business, and
CommScope, Inc., its coaxial and other cable business, as two independent public
companies. At the time of the spin-off, General Instrument Corporation changed
its name to General Semiconductor, Inc. and effected a one-for-four reverse
stock split. After the spin-off, NextLevel Systems, Inc. changed its name to
General Instrument Corporation. Unless the context otherwise requires,
references in this prospectus to "General Semiconductor," the "Company," "we,"
"us" or "our" are to General Semiconductor, Inc. and its direct and indirect
subsidiaries on a consolidated basis since the spin-off and to the business
conducted by the Power Semiconductor Division of General Instrument Corporation
prior to the spin-off.
This prospectus includes statistical data regarding the discrete
semiconductor industry and other industries which was obtained from industry
publications, including reports of Worldwide Semiconductor Trade Statistics
("WSTS"), which are published by the Semiconductor Industry Association ("SIA"),
and reports published by International Data Corporation ("IDC"). These industry
publications generally indicate that they have obtained information from sources
believed to be reliable, but do not guarantee the accuracy and completeness of
their information. While we believe these industry publications to be reliable,
we have not independently verified their data, and we do not guarantee the
accuracy or completeness of the information, nor can we provide any assurance
that our future performance will follow industry projections.
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SUMMARY
THE FOLLOWING IS A SUMMARY OF THE MORE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROSPECTUS. THIS SUMMARY IS NOT COMPLETE AND DOES NOT CONTAIN
ALL THE INFORMATION YOU SHOULD CONSIDER. YOU SHOULD READ THIS ENTIRE DOCUMENT
CAREFULLY, INCLUDING THE "RISK FACTORS."
THE COMPANY
We are a market leader in the discrete segment of the semiconductor
industry. We design and manufacture a broad array of discrete semiconductors,
including power rectifiers, transient voltage suppressors, small signal
transistors and small signal diodes. We are a world leader in the power
rectifier and transient voltage suppressor markets, which products represented
87% of our 1998 net sales, with an approximate 16% market share as measured by
net sales in 1998. Our products condition current and voltage, protect
electrical circuits from power surges, amplify and switch small electrical
signals and regulate voltage levels in circuits. Our products are essential
components of most electronic devices and systems and are used throughout a wide
range of industries, including the computer, automotive, telecommunications and
consumer electronics industries. We operate six production facilities located in
China, France, Germany, Ireland, Taiwan and New York, and we produce an average
of 35 million units per day.
During our 39 years of operation, we have focused on the design and
manufacture of discrete semiconductors. Our discrete semiconductor products are
different from integrated circuit semiconductor products because discrete
semiconductors are single function products and are generally characterized by:
- longer product life cycles;
- lower research and development investment requirements;
- a less complex and less costly fabrication process; and
- lower capital needs.
We believe the characteristics of the discrete semiconductor market and
our competitive strengths contribute to our stable and consistent operating
income. In 1998, 65% of our net sales were derived from the sale of four product
families, each of which we first introduced more than 20 years ago.
COMPANY STRENGTHS
We believe the characteristics of the discrete semiconductor market and
our competitive strengths contribute to our stable and consistent operating
income.
LONG-STANDING RELATIONSHIPS WITH DIVERSE, BLUE CHIP CUSTOMERS. During
our 39-year operating history, we have developed long-standing relationships
with many customers. We serve more than 500 customers worldwide, with no single
customer accounting for more than 6% of our 1998 net sales. Each of our ten
largest customers has been our customer for more than 25 years. Customers in our
end use markets include leading global manufacturers such as Robert Bosch
Corporation, Ford Motor Company, General Motors Corporation, Lucent
Technologies, Matsushita Electric Industrial Co. Ltd., Motorola Inc., Nokia
Corp., Phillips NV, Siemens AG, Samsung Electronics Co. Ltd. and Sony
Corporation.
GLOBAL, LOW COST OPERATIONS. We presently operate six production
facilities and 13 sales offices located in North America, Europe and Asia. We
believe that our global operations permit us to maintain our position as a low
cost, high quality manufacturer. All of our facilities have achieved ISO 9001 or
ISO 9002 certification status as to quality, and our five facilities that
manufacture products for the automotive industry have received the automotive
industry's QS 9000 certification. QS 9000 certification is a more stringent
quality system developed by Ford, Chrysler and General Motors to recognize the
outstanding overall performance of selected suppliers. Our
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Macroom, Ireland facility has received ISO 14001 certification. ISO 14001 is an
international certification awarded after extensive site audits demonstrate
compliance to the Environmental Management System Standards. We are continuously
engaged in cost reduction programs, primarily through reduced pricing of our raw
materials, improved material utilization, increased use of automation and other
manufacturing efficiencies.
HIGH QUALITY CUSTOMER SERVICE. Because we are an independent company
focused on the discrete segment of the semiconductor industry, all of our
service and support efforts are tailored to meet our customers' needs. We employ
approximately 200 sales, marketing and field applications engineers in 13
offices throughout North America, Europe and Asia. We target high growth end-use
markets and focus our sales efforts on our customers' design engineers and
purchasing managers in the automotive, computer, consumer and telecommunications
markets. Because we work closely with our original equipment manufacturer
customers in the design of their products, our products are frequently "designed
in" to the specifications of new products. We believe these close relationships
provide us with a substantial competitive advantage and further strengthen our
long-term customer relationships. Our customers require a high quality, reliable
source of supply, often in high volumes and with short lead times. They also
demand quick responses to technical questions and seek support in designing new
applications which will use our products.
DIVERSE END USE MARKETS. We have a diversified customer base in terms
of both geography and end use markets. We believe that this diversity minimizes
the impact of a loss in sales due to an economic slowdown in any geographic area
or end use market.
EXPERIENCED, COMMITTED MANAGEMENT TEAM. Our senior management team
consists of ten individuals who have an average of 14 years of experience with
us and 18 years of experience in the semiconductor industry. Ronald A. Ostertag,
our Chairman, President and Chief Executive Officer, has been with us for 21
years and has 27 years of experience in the semiconductor industry.
Our executive offices are located at 10 Melville Park Road, Melville,
New York 11747, and our telephone number is (631) 847-3000.
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THE OFFERING
Offering............................. $172,500,000 in principal amount
of 5 3/4% Convertible Subordinated
Notes due 2006 (and 11,093,248
shares of common stock issuable
upon conversion of the notes) by
selling security holders.
Issuer............................... General Semiconductor, Inc.
Maturity............................. December 15, 2006.
Interest............................. Annual rate: 5 3/4 %
Payment frequency: Every six months
on June 15 and December 15.
First payment: June 15, 2000.
Conversion Rights.................... The notes are convertible, at your
option, at any time prior to
maturity, into our common stock, at
a conversion price of $15.55 per
share of common stock, subject to
adjustment (the conversion ratio is
64.3087 shares of our common stock
per $1,000 principal amount of
notes).
Change of Control.................... We will be required to offer to
purchase the notes at 100% of their
principal amount, plus interest and
liquidated damages, if any, if a
change of control of our company
occurs.
Optional Redemption.................. On or after December 15, 2002, we
may redeem some or all of the notes
at any time at the redemption prices
listed in "Description of
Notes-Redemption at the Company's
Option."
Ranking.............................. The notes are subordinated,
unsecured general debts. They are
junior to all of our existing and
future senior indebtedness and
effectively subordinate to all
existing and future liabilities of
our subsidiaries.
As of December 31, 1999 the notes
were junior to $[ ] million of
senior indebtedness and effectively
subordinate to $[ ] million of
liabilities of our subsidiaries.
Use of Proceeds...................... We will not receive any proceeds
from the sale of the notes or the
shares of common stock offered in
this prospectus. See "Selling
Security Holders."
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RISK FACTORS
OUR SUBSTANTIAL INDEBTEDNESS COULD RESTRICT OUR OPERATIONS, MAKE US MORE
VULNERABLE TO ADVERSE ECONOMIC CONDITIONS AND MAKE IT MORE DIFFICULT FOR US TO
MAKE PAYMENTS ON THE NOTES.
We have had and will continue to have a substantial amount of
outstanding indebtedness with significant debt service requirements. As of
December 31, 1999, we had $[ ] million of outstanding indebtedness, and our pro
forma ratio of earnings to fixed charges (giving effect to the issuance of the
notes and the application of the proceeds) for the twelve months ended December
31, 1999 was [ .] In the future, we may incur additional indebtedness.
OUR SUBSTANTIAL CURRENT AND FUTURE INDEBTEDNESS COULD HAVE IMPORTANT
CONSEQUENCES TO YOU. FOR EXAMPLE, IT COULD:
- impair our ability to obtain additional financing in the future;
- reduce funds available to us for other purposes, including working
capital, capital expenditures, research and development, strategic
acquisitions and other general corporate purposes;
- restrict our ability to introduce new products or exploit business
opportunities;
- increase our vulnerability to economic downturns and competitive
pressures in the industry in which we operate;
- increase our vulnerability to interest rate increases to the
extent debt under our credit facility is not hedged because the
interest rates under our credit facility are variable;
- limit our ability to dispose of assets;
- make it more difficult for us to satisfy our obligations with
respect to the notes; and
- place us at a competitive disadvantage.
WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH TO SERVICE OUR DEBT. OUR ABILITY TO
GENERATE CASH DEPENDS UPON MANY FACTORS BEYOND OUR CONTROL.
We will require a significant amount of cash to service our
indebtedness and to fund our operations. Based on our current level of
operations, we believe that our cash flow from operations and our available
financing will be adequate to meet our anticipated requirements for operating
our business and servicing our debt. Our ability to generate cash depends upon,
among other things, our future operating performance. To a large extent, this
depends upon economic, financial, competitive and other factors beyond our
control. If we cannot generate enough cash from operations to make payments on
our indebtedness, we will need to refinance our indebtedness, obtain additional
financing or sell assets. We cannot assure you that we would be able to do so or
do so without additional expense.
WE MAY BE ABLE TO INCUR SIGNIFICANTLY MORE DEBT IN THE FUTURE, WHICH WILL
INCREASE THE RISKS RELATED TO OUR INDEBTEDNESS.
We may be able to incur substantial additional indebtedness in the
future. The indenture does not prohibit us or our subsidiaries from incurring
indebtedness. Our credit facility would permit additional borrowing of up to $[
] million as of December 31, 1999, subject to customary borrowing conditions.
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HOLDERS OF SENIOR INDEBTEDNESS WILL BE PAID BEFORE HOLDERS OF THE NOTES ARE
PAID.
The notes will be subordinated to our existing and future senior
indebtedness and will be structurally subordinated to all liabilities, including
trade payables, of our subsidiaries. As of December 31, 1999, the notes were
junior to $[ ] million of outstanding senior indebtedness and effectively junior
to $[ ] million of trade payables and other liabilities of our subsidiaries. If
we become bankrupt, liquidate or dissolve, our assets would be available to pay
obligations on the notes only after our senior indebtedness has been paid. We
cannot assure you that there will be sufficient assets to pay amounts due on the
notes. See "Description of Notes--General and "--Subordination."
If we fail to pay any of our designated senior indebtedness, we may
make payments on the notes only if we cure the default or the holders of the
senior indebtedness waive the default. Moreover, if any non-payment default
exists under our designated senior indebtedness and the holders of the
designated senior indebtedness elect to exercise their rights, we may not make
any cash payments on the notes for a period of up to 179 days in any 365 day
period, unless we cure the default, the holders of the senior indebtedness waive
the default or rescind acceleration of the indebtedness, or we repay the
indebtedness in full. See "Description of Notes -- Subordination."
THE RESTRICTIONS IMPOSED BY OUR CREDIT FACILITY COULD NEGATIVELY AFFECT OUR
BUSINESS. OUR FAILURE TO COMPLY WITH THESE RESTRICTIONS COULD RESULT IN A
DEFAULT UNDER OUR DEBT INSTRUMENTS.
Our credit facility contains covenants that restrict our ability and
our subsidiaries' ability to:
- dispose of assets;
- incur additional indebtedness;
- incur liens on property or assets;
- repay other indebtedness;
- pay dividends;
- enter into certain investments or transactions;
- repurchase or redeem capital stock;
- engage in mergers or consolidations; or
- engage in certain transactions with subsidiaries and affiliates
and otherwise restrict corporate activities.
In addition, the credit facility contains financial covenants,
including:
- a total debt to EBITDA ratio;
- a senior debt to EBITDA ratio;
- a net worth maintenance test; and
- an interest expense coverage ratio.
In December 1998 and June 1999, we amended our credit facility to
provide greater flexibility under the covenants in light of our anticipated
financial performance and business plans. We cannot assure you that we will be
able to amend our credit facility in the future, should it be necessary or
advisable to do so. Our compliance with our covenants in the future may be
affected by events beyond our control. Our breach or failure to comply with any
of
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the covenants could result in a default under the credit facility or the
indenture. If we default under the credit facility, the lenders could cause all
of our outstanding debt obligations under the credit facility to become due and
payable, require us to apply all of our available cash to repay the indebtedness
or prevent us from making debt service payments on any other indebtedness we
owe. If we are unable to repay any borrowings when due, the lenders under the
credit facility could proceed against their collateral. If a default under the
indenture occurs, the holders of the notes could elect to declare those notes
due and payable. A significant payment default under the credit facility or any
Event of Default under the indenture would be a cross default under the other
instrument and could result in the acceleration of the indebtedness under both
instruments. If the indebtedness under the credit facility or these notes is
accelerated, we may not have sufficient assets to repay amounts due under the
credit facility, these notes or any other debt securities then outstanding.
WE WILL DEPEND ON THE CASH FLOW OF OUR SUBSIDIARIES TO SATISFY OUR OBLIGATIONS
UNDER THE NOTES.
Our subsidiaries conduct a substantial portion of our manufacturing
operations and also own a substantial portion of our consolidated assets. Our
subsidiaries also contribute a significant portion of our sales. Consequently,
our operating cash flow and our ability to service our debt, including the
notes, depend, in part, upon the operating cash flow of our subsidiaries and the
payment of funds by them to us in the form of purchases or otherwise. These
payments may not be adequate to pay interest and principal on the notes when
due. In addition, the ability of our subsidiaries to make payments to us depends
on applicable law and restrictions under the credit facility and other present
and future debt instruments to which they are a party, which may include
requirements to maintain minimum levels of working capital and other assets.
WE OPERATE IN AN INDUSTRY THAT HAS RECENTLY EXPERIENCED UNUSUALLY LARGE PRICE
DECLINES AND FUTURE PRICING DECLINES MAY ADVERSELY AFFECT OUR BUSINESS, RESULTS
OF OPERATIONS AND LIQUIDITY.
The discrete segment of the semiconductor industry has recently
experienced unusually large price declines and may experience such declines in
the future. During 1998 and the first quarter of 1999, average selling prices of
our products weakened at rates beyond those historically experienced due to
continued excess capacity in the industry. The excess capacity resulted from a
combination of factors, including industry capacity expansion in 1996, economic
difficulties in Southeast Asia, the economic slowdown in Japan and difficulties
in the computer and computer peripherals industry. During this period, our
production facilities were underutilized. The underutilization of our facilities
for an extended period in the future could result in production inefficiencies
and cause a reduction in our operating margins. We cannot assure you that our
industry will not experience future price declines which could have a material
adverse effect on our business, results of operations and liquidity.
WE FACE SIGNIFICANT COMPETITION IN THE DISCRETE SEGMENT OF THE SEMICONDUCTOR
INDUSTRY, WHICH MAY ADVERSELY AFFECT US.
We are subject to competition from a substantial number of foreign and
domestic companies, some of which have greater financial, engineering,
manufacturing and other resources, or offer a broader product line than we do.
Our competitors can be expected to continue to improve the design and
performance of their products and to introduce new products with competitive
price and performance characteristics. Although we believe that we enjoy certain
technological and other advantages over our competitors, realizing and
maintaining such advantages will require continued investment by us in
engineering, research and development, marketing and customer service and
support. We cannot assure you that we will have sufficient resources to continue
to make such investments or that we will be successful in maintaining our
advantages.
OUR BUSINESS IS SUBJECT TO THE ECONOMIC AND POLITICAL RISKS OF OPERATING OUR
FACILITIES AND SELLING OUR PRODUCTS IN FOREIGN COUNTRIES.
Almost all of our products are manufactured or assembled in Taiwan
(Republic of China), the People's Republic of China, Ireland, Germany and
France. These foreign operations are subject to the risks inherent in situating
operations abroad, including risks with respect to currency exchange rates,
economic and political destabilization, restrictive actions by foreign
governments, nationalizations, natural events such as severe weather,
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floods and earthquakes, the laws and policies of the United States affecting
trade, foreign investment and loans, and foreign tax laws. Our cost-competitive
status could be adversely affected if, relative to our competitors, we
experience unfavorable movements in foreign currency exchange rates.
In addition, international sales of our products generally represent
approximately 70% of our annual sales. During 1998, sales to the Asia/Pacific
region accounted for approximately 35% of our annual sales. Our order trends
and average selling prices weakened significantly in 1998, reflecting the
economic difficulties in Southeast Asia, the economic slowdown in Japan and
the difficulties in the computer and computer peripherals industry. In the
first nine months of 1999, we have benefited from improving economic
conditions in Southeast Asia but conditions in Europe softened in the first
half of 1999. Our financial performance in the future may be adversely
affected by international economic conditions.
POTENTIAL ENVIRONMENTAL LIABILITIES, INCLUDING THOSE RELATING TO FORMER
OPERATIONS, MAY ADVERSELY IMPACT OUR FINANCIAL POSITION.
We are subject to various federal, state, local and foreign laws and
regulations governing environmental matters, including the use, discharge and
disposal of hazardous materials. We are presently engaged in the remediation of
sites associated with eight discontinued operations in six states, and we are a
"potentially responsible party" at five hazardous waste sites in four states. We
have recorded a reserve for environmental matters of $30.6 million at September
30, 1999. While the ultimate outcome of these matters cannot be determined, we
do not believe that the final disposition of these matters will have a material
adverse effect on our financial position, results of operations or cash flows
beyond the amounts previously provided for in our financial statements.
Our present and past facilities have been in operation for many
years, and, over that time, these facilities have used substances which are
or might be considered hazardous, and we have generated and disposed of
wastes which are or might be considered hazardous. In addition, new
environmental legislation or regulations may be enacted in the future.
Therefore, it is possible that additional environmental issues may arise in
the future which we cannot now predict.
WE MAY NOT BE ABLE TO SUCCESSFULLY MAKE ACQUISITIONS.
As part of our business strategy, we intend to make acquisitions. We
evaluate potential acquisitions on an ongoing basis; however, we do not
currently have any understanding or arrangements for a specific acquisition.
We may not be able to complete any acquisition in the future or
identify those candidates that would result in a successful transaction. In
addition, we may not be able to complete future acquisitions at acceptable
prices and terms, and increased competition for acquisition candidates could
result in fewer acquisition opportunities and higher acquisition prices. The
magnitude, timing and nature of future acquisitions will depend upon various
factors, including:
- the availability of suitable acquisition candidates;
- competition with others for suitable acquisitions;
- the negotiation of acceptable terms;
- our access to capital;
- the availability of skilled employees to manage and operate the
acquired companies; and
- general economic and business conditions.
We expect to finance acquisitions with cash on hand, through issuance
of debt or equity securities and through borrowings under credit arrangements,
including pursuant to our credit facility, subject to the restrictions set forth
in the credit facility. See "Description of Credit Facility." The ability to
obtain debt or equity financing is
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subject to market conditions and to limitations imposed on us by our credit
facility. Therefore, we may not be able to obtain additional financing in order
to finance future acquisitions. Our operating and financial flexibility could be
substantially limited if we use cash to complete acquisitions.
YEAR 2000 FAILURES MAY ADVERSELY IMPACT OUR OPERATIONS.
Our business could be adversely affected by information technology
issues related to the Year 2000 issue. The Year 2000 issue is a broad business
issue, whose impact extends to possible failure of our financial, distribution
and manufacturing systems, as well as to those of third parties. None of our
products contain date sensitive or date processing logic. The ability of third
parties with whom we do business to address adequately their Year 2000 issues is
outside our control. However, if any of our systems are not Year 2000 compliant
or if our customers, our suppliers or government agencies fail to achieve Year
2000 compliance, we may experience the following adverse consequences,
including:
- our customers may be unable to place orders with us due either to
our or their system failures;
- we may be unable to maintain adequate production scheduling,
inventory cost accounting and other elements of our business that
are dependent upon computer systems; and
- we may be unable to deliver our products on a timely basis.
WE MAY NOT BE ABLE TO REPURCHASE NOTES UPON A CHANGE OF CONTROL WHICH WOULD BE
AN EVENT OF DEFAULT UNDER THE INDENTURE.
Upon the occurrence of specified change of control events, we could be
required to purchase all outstanding notes at a price equal to 100% of their
principal amount, plus accrued interest to the repurchase date. Under our credit
facility, a change of control is an event of default, and, therefore, it
restricts us from repurchasing the notes without the approval of the lenders. We
cannot assure you that we will have sufficient funds available or will be
permitted by the lenders under the credit facility to repurchase the notes upon
a change of control. Our failure to repurchase the notes would constitute an
event of default under the indenture. See "Description of Notes--Repurchase of
Notes at the Option of the Holder Upon a Change of Control."
YOU MAY BE UNABLE TO SELL YOUR NOTES IF A TRADING MARKET FOR THE NOTES DOES NOT
DEVELOP.
The liquidity of any market for the notes will depend on the number of
holders of the notes, the interest of securities dealers in making a market in
the notes and other factors. Accordingly, we cannot assure you as to the
development or liquidity of any market for the notes. If an active trading
market for the notes does not develop, the market price and liquidity of the
notes may be adversely affected. If the notes are traded, they may trade at a
discount from their initial offering price depending upon prevailing interest
rates, the market for similar securities, our performance and certain other
factors.
THERE MAY BE VOLATILITY OF THE MARKET PRICE OF THE NOTES AND OUR COMMON STOCK.
The market price of our common stock has fluctuated in the past and may
continue to fluctuate. In addition, the securities markets have experienced
significant price and volume fluctuations. Factors such as political and
economic conditions in foreign countries, quarterly fluctuations in our
operating results and changes in our industry and our competitors may have a
significant impact on the market price of the notes and common stock into which
the notes are convertible. In particular, if we were to report operating results
which did not meet the expectations of research analysts, the market price of
the notes and our common stock could be materially adversely affected.
-8-
<PAGE>
WE CANNOT PREDICT THE EFFECT OF FUTURE SALES OF NOTES OR SHARES OF COMMON STOCK
ON THE MARKET PRICE OF OUR COMMON STOCK.
We cannot predict the effect, if any, that future sales of notes or
shares of our common stock will have on the market price of our common stock
prevailing from time to time. Sales of substantial amounts of our common stock,
including shares issued upon the conversion of the notes, or the perception that
such sales could occur, may adversely affect prevailing market prices for our
common stock. If all the notes were converted, approximately 11.1 million shares
of our common stock would be issuable upon conversion, which represents
approximately 26% of our common stock currently outstanding.
ANTI-TAKEOVER PROVISIONS COULD DELAY OR PREVENT A CHANGE IN CONTROL OR ADVERSELY
IMPACT THE PRICE OF OUR COMMON STOCK.
Provisions of our certificate of incorporation and provisions of the
Delaware General Corporation Law could have the effect of deterring hostile
takeovers or delaying, deterring or preventing a change in control of our
company, including transactions in which stockholders might otherwise receive a
premium for their shares over current market prices. See "Description of Capital
Stock."
-9-
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale of the notes or the
shares of common stock offered hereby. See "Selling Security Holders."
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Since the spin-off in July 1997, our common stock has been traded on
the New York Stock Exchange under the symbol "SEM." The following table sets
forth the high and low sale prices as reported by the New York Stock Exchange
during each of the periods below.
<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C>
YEAR ENDING DECEMBER 31, 1997
July 28 through September 30 .......................... $17 1/2 $12 3/8
Fourth Quarter......................................... 13 9 7/8
</TABLE>
<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C>
YEAR ENDING DECEMBER 31, 1998
First Quarter.......................................... $14 3/4 $10 5/8
Second Quarter......................................... 14 3/4 9 7/8
Third Quarter.......................................... 10 1/8 6
Fourth Quarter......................................... 10 11/16 5 15/16
</TABLE>
<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C>
YEAR ENDING DECEMBER 31, 1999
First Quarter.......................................... $9 7/16 $5 15/16
Second Quarter......................................... 9 3/4 6 3/8
Third Quarter.......................................... 12 5/8 7 7/8
Fourth Quarter......................................... 15 1/8 8 11/16
</TABLE>
<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C>
YEAR ENDING DECEMBER 31, 2000
First Quarter through January 11, 2000................ $14 3/8 $12 3/4
</TABLE>
As of December 31, 1999, there were 418 holders of record of our common
stock.
We have not paid any cash dividends since the spin-off. We do not
currently intend to pay dividends in the foreseeable future, but to reinvest
earnings in our business. Our ability to pay cash dividends on our common stock
is limited by certain covenants contained in our credit agreement.
-10-
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges
for each of the years ended December 31, 1994, 1995, 1996, 1997 and 1998 and for
the nine months ended September 30, 1998 and 1999.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------------------------------------------------
1994 1995 1996 1997 1998 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(1)................. 3.8x 9.6x 6.9x 4.5x 2.8x 3.0x 2.1x
</TABLE>
(1) For purposes of computing the ratio of earnings to fixed charges, earnings
are divided by fixed charges. Earnings represent the aggregate of pre-tax
income before non-recurring items and fixed charges, less capitalized
interest. Non-recurring charges for the year ended December 31, 1997
include $33.8 million incurred in connection with the spin-off, primarily
related to the separation of General Instrument Corporation's Taiwan
operations. Non-recurring charges for the year ended December 31, 1998
include $12.3 million incurred in the fourth quarter of 1998 related to
workforce reductions, the cost of early retirement programs, the closing of
two sales offices and the writing off of assets related to an unprofitable
product that was discontinued. Fixed charges represent interest and the
portion of rental expenses we consider representative of the interest
factor (one-third of rent expenses).
-11-
<PAGE>
BUSINESS
We are a market leader in the discrete segment of the semiconductor
industry. We design and manufacture a broad array of discrete semiconductors,
including power rectifiers, transient voltage suppressors, small signal
transistors and small signal diodes. We are a world leader in the power
rectifier and transient voltage suppressor markets, which products represented
87% of our 1998 net sales, with an approximate 16% market share as measured by
net sales in 1998. Our products condition current and voltage, protect
electrical circuits from power surges, amplify and switch small electrical
signals and regulate voltage levels in circuits. Our products are essential
components of most electronic devices and systems and are used throughout a wide
range of industries, including the computer, automotive, telecommunications and
consumer electronics industries. We operate six production facilities located in
China, France, Germany, Ireland, Taiwan and New York, and we produce an average
of 35 million units per day. For the LTM Period, we reported net sales of $403.1
million, operating income of $37.2 million, net income of $11.8 million and
Adjusted EBITDA of $76.3 million.
During our 39 years of operation, we have focused on the design and
manufacture of discrete semiconductors. Our discrete semiconductor products are
different from integrated circuit semiconductor products because discrete
semiconductors are single function products and are generally characterized by:
- longer product life cycles;
- lower research and development investment requirements;
- a less complex and less costly fabrication process; and
- lower capital needs.
We believe the characteristics of the discrete semiconductor market and
our competitive strengths contribute to our stable and consistent operating
income. In 1998, 65% of our net sales were derived from the sale of four product
families, each of which we first introduced more than 20 years ago.
Worldwide semiconductor market revenue was $125.6 billion in 1998,
according to WSTS. The discrete segment of this market accounted for $11.9
billion, or approximately 9.5%, of the total semiconductor market and the
sectors in which we compete accounted for $7.9 billion of this market. The
following charts illustrate the principal sectors of the semiconductor market
and the discrete segment by product category and highlight the areas in which we
compete:
1988 SEMICONDUCTOR MARKET
$125.6 BILLION
[Pie Chart]
Memory 18%
Logic ICs 15%
Analog 15%
Discretes 9%
Optical ICs 4%
Microcomponets 3.8%
Bipolar ICs 1%
1998 DISCRETE MARKET
$11.9 BILLION
[PIE CHART]
Power Transistors 22%
Small Signal Transisters 20%
MOSFETs 17%
Rectifiers 16%
Diodes 13%
Thyristors 7%
Other Discrete Devices 5%
-12-
<PAGE>
COMPANY STRENGTHS
We believe the characteristics of the discrete semiconductor market and
our competitive strengths contribute to our stable and consistent operating
income.
LONG-STANDING RELATIONSHIPS WITH DIVERSE, BLUE CHIP CUSTOMERS. During
our 39-year operating history, we have developed long-standing relationships
with many customers. We serve more than 500 customers worldwide, with no single
customer accounting for more than 6% of our 1998 net sales. Each of our ten
largest customers has been our customer for more than 25 years. Customers in our
end use markets include leading global manufacturers such as Robert Bosch
Corporation, Ford Motor Company, General Motors Corporation, Lucent
Technologies, Matsushita Electric Industrial Co., Ltd., Motorola Inc., Nokia
Corp., Phillips NV, Siemens AG, Samsung Electronics Co. Ltd. and Sony
Corporation.
GLOBAL, LOW COST OPERATIONS. We presently operate six production
facilities and 13 sales offices located in North America, Europe and Asia. We
believe that our global operations permit us to maintain our position as a low
cost, high quality manufacturer. All of our facilities have achieved ISO 9001 or
ISO 9002 certification status as to quality and our five facilities that
manufacture products for the automotive industry have received the automotive
industry's QS 9000 certification. QS 9000 certification is a more stringent
quality system developed by Ford, Chrysler and General Motors to recognize the
outstanding overall performance of selected suppliers. Our Macroom, Ireland
facility has received ISO 14001 certification. ISO 14001 is an international
certification awarded after extensive site audits demonstrate compliance to the
Environmental Management System Standards. We are continuously engaged in cost
reduction programs, primarily through reduced pricing of our raw materials,
improved material utilization, increased use of automation and other
manufacturing efficiencies.
HIGH QUALITY CUSTOMER SERVICE. Because we are an independent company
focused on the discrete segment of the semiconductor industry, all of our
service and support efforts are tailored to meet our customers' needs. We employ
approximately 200 sales, marketing and field applications engineers in 13
offices throughout North America, Europe and Asia. We target high growth end-use
markets and focus our sales efforts on our customers' design engineers and
purchasing managers in the automotive, computer, consumer and telecommunications
markets. Because we work closely with our original equipment manufacturer
customers in the design of their products, our products are frequently "designed
in" to the specifications of new products. We believe these close relationships
provide us with a substantial competitive advantage and further strengthen our
long-term customer relationships. Our customers require a high quality, reliable
source of supply, often in high volumes and with short lead times. They also
demand quick responses to technical questions and seek support in designing new
applications which will use our products.
DIVERSE END USE MARKETS. We have a diversified customer base in terms
of both geography and end use markets. The following charts illustrate our 1998
net sales by geographic area and by end use market:
1998 NET SALES BY GEOGRAPHIC AREA
[Pie Chart]
<TABLE>
<S> <C>
Europe 34%
North America 31%
Southeast Asia 21%
China 8%
Japan 6%
</TABLE>
1998 NET SALES BY END USE MARKET
[Pie Chart]
<TABLE>
<S> <C>
Distributors (1) 30%
Computer/Power Supply 24%
Automotive 18%
Consumer Products 13%
Telecom 6%
Other 9%
</TABLE>
-13-
<PAGE>
(1) Distributors sell our products to diverse end use markets, including
all those shown in the chart.
We believe that this diversity minimizes the impact of a potential loss
of sales due to an economic slowdown in any geographic area or end use market.
EXPERIENCED, COMMITTED MANAGEMENT TEAM. Our senior management team
consists of ten individuals who have an average of 14 years of experience with
us and 18 years of experience in the semiconductor industry. Ronald A. Ostertag,
our Chairman, President and Chief Executive Officer, has been with us for 21
years and has 27 years of experience in the semiconductor industry.
BUSINESS STRATEGY
Our objective is to maintain and strengthen our position as a leading
supplier of discrete semiconductors and, as a result, to achieve growth in net
sales and earnings. The principal elements of our strategy are:
BROADEN PRODUCT BASE THROUGH NEW PRODUCT INTRODUCTIONS. We seek to
build on our base of long-lived, well established products to introduce new
products that meet our customers' needs. We employ approximately 60 full-time
personnel in our research and development laboratories in Ireland, Taiwan, New
York and California. We spent $6.1 million on research and development in 1998
and $4.9 million during the nine months ended September 30, 1999.
In 1998 we introduced a number of new products to better meet our
customers' needs, including the surface mount high energy automotive transient
voltage suppressor device, the fast recovery mini-bridge and the high voltage
transient voltage suppressor products. The new surface mount high energy
automotive transient voltage suppressor device is designed to protect automotive
electronic systems from high energy surges. These products use our patented
PAR-TM- construction that ensures superior high temperature operation, which is
critical for automotive applications. The fast recovery mini-bridge is a
low-current surface mount bridge rectifier with fast switching characteristics.
This device saves space on printed circuit boards when compared to standard
bridges. The fast recovery time of this device reduces energy losses for fast
switching power supply applications. We have extended the voltage range of our
TRANSZORB-TM- transient voltage suppressor devices up to 550 volts, which is the
highest avalanche voltage currently offered in the industry. This new product
was specially designed to work in conjunction with newly developed integrated
circuits that provide much greater efficiencies to computer products. See
"--Research and Development."
To further broaden our product base, we recently opened a design center
for power MOSFET products with experienced MOSFET engineers. MOSFETs are
semiconductor devices that switch and/or amplify current and are used
principally by our computer, automotive and telecommunications customers. Our
strategy is to use a "fabless" approach, in which we will outsource the wafer
fabrication process, to manufacture this product. We recently entered into
manufacturing agreements with established foundries in Asia, which we believe
will enable us to enter the power MOSFET market more quickly than we otherwise
would be able to and with minimal capital requirements. We expect to address
this $2.0 billion market by combining our design expertise and customer service
orientation with this manufacturing. Although we believe that sales from this
product will be relatively small initially, we anticipate that power MOSFET
sales could be an important component of our future growth.
MAKE STRATEGIC, SYNERGISTIC ACQUISITIONS. We continually evaluate
candidates for strategic acquisitions and joint ventures that will permit us to
broaden our product offerings and increase our presence in our existing product
lines. Acquisitions will also permit us to leverage our existing sales and
distribution channels, including a sales force of more than 1,000 worldwide,
comprised of sales representatives, distributors, and approximately 200 direct
sales and technical personnel. For example, we acquired the small signal
products business of ITT Industries, Inc. in October 1997 for $9.0 million,
including direct acquisition costs. This business also contributed $53.1 million
to our sales in 1998. It also provided us entry to the small signal transistor,
zener diode and small signal diode sectors of the discrete products market,
collectively a $3.7 billion market in 1998.
-14-
<PAGE>
CONTINUE TO ACHIEVE COST SAVINGS. We are committed to being a low-cost
producer of our products. In order to achieve this, we continuously engage in
cost reduction programs. These cost reduction programs are made possible in part
by technological advancements in material sciences, wafer production processes
and packaging techniques. As a result of these advancements and through various
investments, we have been able to reduce costs in a number of ways, including,
but not limited to:
- automating production lines to reduce labor costs and increase
product quality;
- improving production processes to increase production yields;
- modifying product designs to reduce the amount of raw material
required to produce products;
- reducing raw material costs through negotiations with our vendors;
and
- moving higher labor cost processes to lower labor cost locations.
Our ability to reduce our costs has allowed us to maintain our earnings
and competitive position while satisfying our customers' requirements for
low-cost, high-quality products.
-15-
<PAGE>
PRODUCTS AND CUSTOMERS
The table below identifies our end markets and the percentage of our
1998 net sales attributable to each, and the principal products, representative
applications and major customers for those end markets.
<TABLE>
<CAPTION>
END MARKETS COMPUTER AUTOMOTIVE CONSUMER TELECOMMUNICATIONS LIGHTING DISTRIBUTORS
<S> <C> <C> <C> <C> <C> <C>
% OF NET SALES(1) 24% 18% 13% 6% 4% 30%
PRODUCTS Bridge Rectifiers Superectifiers Bridge Rectifiers Fast Efficient Bridge Rectifier All
Fast Efficient Small Signal Fast Efficient Rectifiers Fast Efficient
Rectifiers Diodes Rectifiers Small Signal Rectifiers
Schottky Rectifiers Small Signal Small Signal Diodes Superectifiers
Small Signal Transistors Diodes Small Signal
Diodes Transient Voltage Small Signal Transistors
Suppressors Transistors Superectifiers
Zener Diodes Zener Diodes Transient Voltage
Suppressors
REPRESENTATIVE CD ROM drive ABS Brake Cable Boxes Cordless Phone Compact All
APPLICATIONS Computer Battery System CD Player Internet Line Fluorescent
Charger Active DVD Card Lamp
Disk Drive Suspension Entertainment ISDN Board Electronic
Monitor Airbag Module Center Mobile Phone Ballast
Motherboard Collision Home Appliances/ Modems Energy Saving
PC Scanner Warning/ White Goods Pager Ballast
Printer Avoidance Home Satellite Satellite HID Ballast
Switch Mode System Dish Transmission Inverter Light
Power Supply Cruise Control Microwave Switching Ballast
Module Playstation/ Systems Neon Light
Engine Nintendo Projector
Management TV Ballast
Entertainment
Module
GPS Navigation
Systems
MAJOR SECTION Acer Bosch BOSE Alcatel Delta Arrow/Spoerle
CUSTOMERS API Delphi Braun Ericsson MagneTek Array
Astec Ford Daewoo Hughes Motorola Avnet
Delta Hella General Instrument Lucent Philips Distrel
LG Mitsubishi LG Motorola Siemens/Osram Eurodis
Phihong Motorola AIEG Matsushita Nokia Future
Philips Nadex Philips Nortel Networks Nadex
Samsung Nippon Ryoden Sagem Rutroik
SCI Denso/Denso Samsung Siemens Ryoden
SONY Siemens SONY Taitron
Valeo
</TABLE>
(1) These products do not equal 100% of our net sales because we also sell
miscellaneous products to various other end markets equal to
approximately 5% of our net sales.
PRINCIPAL PRODUCTS
We design, manufacture and sell a broad array of discrete
semiconductors, including:
- low- to medium-power rectifiers;
- transient voltage suppressors;
-16-
<PAGE>
- small signal diodes and transistors; and
- zener diodes.
We manufacture these products in a variety of packages, including
axial, bridge, power and surface mount packages.
RECTIFIERS. Rectifiers conduct electricity in one direction and block
it in the "reverse" direction. They are used to convert alternating current (AC)
into direct current (DC) which is used to power electronic equipment. The
current carried over power lines and into homes, offices and factories is
alternating current; however, most electronic equipment requires direct current
to operate. We offer a wide selection of rectifier products including bridge
rectifiers, fast efficient rectifiers, glass-passivated rectifiers, plastic
rectifiers, Schottky rectifiers and SUPERECTIFIERS-TM-.
Bridge rectifiers are essential for the vast majority of electronic
equipment that plugs into an electrical outlet. A bridge rectifier is comprised
of four separate rectifier components configured into a single package that
converts alternating current into full wave direct current. We manufacture a
complete line of bridge rectifiers that meet the power and case style
requirements of most electronic equipment.
The SUPERECTIFIER-TM- is a highly reliable and cost effective component
that incorporates several of our unique technologies. The SUPERECTIFIER-TM-
glass- plastic construction combines the superior reliability of spherical glass
constructed rectifiers with plastic cases that allow easier mass handling as
well as lower costs. The automotive and computer peripheral markets are the
principal markets for this product.
Our Schottky rectifier is designed for use in high-speed applications
such as computer and computer related products. Its design results in nearly
zero reverse recovery times (the speed at which the device can go from a state
of conducting current to a blocking mode) and very low forward voltage drop
which allows for low power losses. Our manufacturing process creates a highly
reliable Schottky product.
Fast efficient rectifiers are an extension of our Schottky product
portfolio. These products offer reverse recovery times as low as 25 nanoseconds
at voltage levels as high as 1,000 volts while maintaining the efficiencies of a
lower forward voltage loss. Fast efficient rectifiers are principally used for
computer and computer related applications.
TRANSIENT VOLTAGE SUPPRESSORS. Transient voltage suppressors are
similar to circuit breakers with the advantage that they do not have to be reset
or replaced. They are silicon-based semiconductors designed to provide
protection against all types of transient threats, ranging from electrostatic
discharge to induced lightning. These voltage clamping devices absorb large
amounts of energy for short periods of time. We offer a broad range of
state-of-the-art transient voltage suppressor devices for use in most modern
electronic equipment. In 1998, we introduced a line of patented transient
voltage suppressor devices specifically designed for automotive applications.
These include avalanche alternator rectifiers and a surface mount high-energy
transient voltage suppressor device.
SMALL SIGNAL DIODES. Small signal diodes perform various functions such
as signal blocking, routing and switching at lower current levels. These
components are used in a variety of products, including telecommunications
equipment, personal computer motherboards, automotive systems, power supplies
and consumer electronics.
SMALL SIGNAL TRANSISTORS. Small signal transistors deliver
amplification and switching functions. These products provide the critical
switching and amplification functions that are essential to most modern
electronic systems.
ZENER DIODES. Zener product lines provide a wide variety of specialized
functions for complex electronic circuits. These devices are used as voltage
regulators, voltage reference and voltage suppressors against electrostatic
discharge threats. Zener diodes are also used in most modern electronic systems
and end use markets.
-17-
<PAGE>
MARKETS AND CUSTOMERS
Our customer base is diverse, both geographically and by end use of our
products. We target our products primarily for use in the automotive, computer,
consumer electronics, telecommunications and lighting industries.
AUTOMOTIVE. Our discrete components are found in critical and "creature
comfort" systems throughout automotive design. Automotive customers seek highly
reliable components. Our components are used in many automotive applications
including airbag modules, global positioning satellite navigation systems,
catalytic converter heaters, climate control modules, engine cooling systems and
ignition modules.
COMPUTER. All computers and their associated peripherals require
sophisticated, controlled electrical energy. We provide the power rectifying
element for all computer electronic systems to transform unmanaged, raw electric
power into the controlled energy source modern digital systems require. Our
products also protect computer systems from transient threats, such as
electrostatic discharge and induced lightning. Our products are sold to computer
and computer component manufacturers in numerous applications, including switch
mode power supplies, computer battery chargers, modem cards, P.C.A. boards,
logic boards, laser printers, computer processors and monitors.
CONSUMER ELECTRONICS. Consumer appliances that plug into a wall outlet
or transmit a signal generally require discrete semiconductors. Our products are
placed in a broad range of consumer products, including refrigerators, garage
door openers, home satellite systems, washers, dryers and microwaves.
TELECOMMUNICATIONS. Our products perform various functions for the
telecommunications market. Because of the often critical nature of
telecommunications applications and the increasing demand for portability, these
applications require a very high degree of reliability and small size. Also,
device efficiencies are very important in battery operated products to minimize
power drain on batteries and maximize run time. For this reason, customers pay a
premium for components that operate with the least amount of energy loss.
Applications using our products include cordless phones, pagers, cellular base
stations, Integrated Services Digital Network (ISDN) boards and satellite
dishes.
LIGHTING. New electronic ballast systems, which have been replacing
older magnetic ballast systems and incandescent bulbs, provide greater
efficiency and significantly reduce operating costs. Most light fixtures require
alternating current (AC) to be converted into direct current (DC) in order to
function. Historically, this has been achieved through an array of twisted
copper wires known as magnetic ballast. Recently, as a result of the demand for
more efficient light fixtures, magnetic ballasts have been replaced in many
applications by electronic ballasts which use discrete semiconductors. Because
the new electronic ballast systems typically are priced at a relative premium,
these systems must be extremely reliable in order to justify the higher initial
cost. In addition to a high degree of reliability, electronic ballast
manufacturers require their components to be priced affordably and be compact.
We sell to all major applications within this end use market.
DISTRIBUTORS. Distributors meet the needs of customers with lower
volume requirements. Distributors serve all of our markets in all of our
regions, but our primary distributor sales are in North America and Europe.
SALES CHANNELS. Our products are sold through a direct sales force,
distributors and sales representatives. In each of the years ended December 31,
1996, 1997 and 1998, sales to customers in North America, Europe and Southeast
Asia each represented approximately 30% of our net sales. Sales to customers in
Japan represented the majority of the balance. Our customer base incorporates a
wide array of the world's largest manufacturers. No single customer accounted
for 6% or more of our sales during the years ended December 31, 1996, 1997 or
1998.
We have a sales force of more than 1,000 worldwide, comprised of sales
representatives, distributors and approximately 200 direct sales and technical
personnel to support our worldwide sales and distribution efforts. We maintain
13 sales offices located in Melville, New York; Carlsbad, California; Arlington
Heights, Illinois; Duluth, Georgia; Paris, France; Munich, Germany; Tokyo and
Osaka, Japan; Seoul, Korea; Taipei, Taiwan; Singapore; and Shanghai and Hong
Kong, China.
-18-
<PAGE>
Additionally, we use information technology to develop and maintain
strong customer relationships. For example, electronic data interchange is used
by many of our major customers to facilitate the order through delivery process.
In addition to electronic data interchange, we intend to expand upon the scope
of services provided through the Internet, extranets and other electronic means
to provide broader services to the marketplace. We expect that these services
will provide improved technical support, on-line order access and e-commerce
capability. The use of improved information technology, combined with strong
technical marketing and broad sales channels has helped us obtain new product
approvals and increase our market share with many of our major customers.
MANUFACTURING
Semiconductor manufacturing involves two phases of production: wafer
fabrication and assembly (or packaging). Wafer fabrication subjects silicon
wafers to various thermal, metallurgical and chemical process steps that change
their electrical and physical properties. These process steps define cells or
circuits within numerous individual devices (termed "dies" or "chips") on each
wafer. Assembly is the sequence of production steps that divide the wafer into
individual chips and enclose the chips in structures (termed "packages") that
make them usable in a circuit. Both wafer fabrication and assembly phases
incorporate wafer level and device level electrical testing to ensure that
device design integrity has been achieved.
Discrete semiconductors generally use process technology and equipment
already proven in the manufacturing of integrated circuits. The cost of discrete
semiconductor wafer fabrication facilities varies greatly, depending upon the
number and sophistication of the process steps required to produce the desired
electrical performance and functions. For example, while Schottky and transistor
products require complex and technically sophisticated process flows, the
capital requirements of these products are significantly less than for
integrated circuits. This is due, in part, to the fewer number of process steps
required to manufacture discrete semiconductor wafers and, therefore, the
requirement of less process equipment. Additionally, because the discrete
semiconductor manufacturing process is based on well established technology,
less expensive process equipment is required.
The entire manufacturing process has evolved over time, and labor
intensive processes have given way to more reliable automated processes. The
change to automated procedures has, in part, allowed us to reduce our
manufacturing costs, significantly improve product quality and reduce the impact
of declining prices.
We own or lease six production facilities in China, Taiwan, Ireland,
Germany, France and New York. In addition, we have manufacturing supply
agreements with various companies located in Asia. Our facilities are as
follows:
LOCATION PRODUCTS
WAFER FABRICATION ONLY:
Freiburg, Germany Small signal products
Westbury, New York Epitaxial wafers
WAFER FABRICATION AND ASSEMBLY:
Taipei, Taiwan Standard rectifiers
Schottky rectifiers
Fast efficient rectifiers
Transient voltage suppressors
Macroom, Ireland Transient voltage suppressors
Bridges
Standard rectifiers
Fast efficient rectifiers
ASSEMBLY ONLY:
Tianjin, China Rectifiers
Bridges
-19-
<PAGE>
Colmar, France Small signal products
All factories have received the quality certification designations
ISO9001 or ISO9002 and all factories except the factory located in Westbury, New
York, which does not manufacture end products for the automotive industry, have
received the quality certification designation QS9000. Our Macroom, Ireland
facility has received ISO 14001 certification. ISO 14001 is an international
certification awarded after extensive site audits demonstrate compliance to the
Environmental Management System Standards.
RESEARCH AND DEVELOPMENT
We plan to use the technology found in our long-lived, well-established
products to introduce new products that meet our customers' needs. We employ
approximately 60 full-time personnel in our research and development
laboratories in Ireland, Taiwan, Fremont, California and Westbury, New York. The
research and development laboratories in Ireland and Taiwan focus primarily on
the development of new packaging technology, and the development laboratory in
Westbury, New York focuses on applied material sciences.
Research and development expenditures totaled $5.8 million in 1996,
$6.0 million in 1997, $6.1 million in 1998 and $4.9 million for the nine months
ended September 30, 1999. Research and development expenditures reflect
continued development and the advancement of new product and packaging
technologies targeted for the automotive, telecommunications and computer end
use market applications.
We recently opened a design center in Fremont, California for power
MOSFET products with experienced senior MOSFET engineers, and have entered into
related manufacturing agreements with two established foundries in China and
Taiwan. MOSFETs are semiconductor devices that switch and/or amplify current
through changes in voltage.
In 1998 we introduced the surface mount high energy automotive
transient voltage suppressor device, the fast recovery mini-bridge and the high
voltage transient voltage suppressor products. The new surface mount high energy
automotive transient voltage suppressor device is designed to protect automotive
electronic systems from high energy surges. These products use our patented
PAR-TM- construction that ensures superior high temperature operation, which is
critical for automotive applications. The fast recovery mini-bridge is a low
current surface mount bridge rectifier with fast switching characteristics. This
device saves space on printed circuit boards when compared to standard bridges.
The fast recovery time of this device reduces energy losses for fast switching
power supply applications. We have extended the voltage range of our
TRANSZORB-TM- transient voltage suppressor devices up to 550 volts, which is the
highest avalanche voltage currently offered in the industry. This new product
was specially designed to work in conjunction with newly developed integrated
circuits that provide much greater efficiencies to computer products.
PATENTS
We actively seek patents for new products and designs. At September 30,
1999, we held 59 U.S. patents. Although we believe our patents provide a
competitive advantage, no single patent is material to our business. We also
rely on our proprietary knowledge and continuing technological innovation to
develop and maintain our competitive position.
BACKLOG
At September 30, 1999, we had an order backlog of approximately $143.3
million compared with $121.8 million at December 31, 1998 and $130.7 million at
September 30, 1998. Order backlog includes only orders for products scheduled to
be shipped within six months. Orders may be revised or canceled, either pursuant
to their terms or as a result of negotiations. Therefore, it is impossible to
predict accurately the amount of backlog orders that will result in sales.
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Our backlog at any particular date may not be representative of actual
sales for any succeeding period. The lead times for the release of purchase
orders depend upon the scheduling practices of individual customers. The
delivery times of new or non-standard products can be affected by scheduling
factors and other manufacturing considerations. The rate of booking new orders
can also vary significantly from month to month, and there is the possibility of
customer changes in delivery schedules or order cancellations.
COMPETITION
The discrete semiconductor industry is highly competitive. We compete
with companies worldwide, some of which have greater financial, marketing and
management resources than we do. We believe that our principal competitors
include ON Semiconductor, Philips Electronics N.V., ST Microelectronics N.V.,
Fairchild Semiconductor Corporation, Shindengen Electric Manufacturing Co.,
Ltd., Sanken Electric Co., Ltd. and a number of Taiwanese and Japanese
manufacturers.
EMPLOYEES
At September 30, 1999, we employed approximately 5,100 people
worldwide. We believe that our relations with both our union and non-union
employees are satisfactory.
RAW MATERIALS
Silicon ingots, molding compound and lead frames typically account for
approximately two-thirds of our raw material expense. We believe that our
relations with our suppliers are good, and we do not anticipate any supply
shortages in the foreseeable future.
We believe that the loss of any supplier would not have a long-term
material negative effect on our business because components and supplies are
generally available from a variety of sources. However, we could have set-up
costs and delays if we change suppliers. In the past, delays in delivery of
components have not had a material negative effect on shipments of our products.
PROPERTIES
Our principal administrative, production and research and development
facilities are located in the following locations:
<TABLE>
<CAPTION>
LOCATION LEASED OR OWNED SQUARE FEET
<S> <C> <C>
Melville, New York............................... Leased, Expires 2004 52,000
Westbury, New York............................... Leased, Expires 2005 (1) 18,000
Taipei, Taiwan................................... Owned 350,000
Macroom, Ireland................................. Owned 120,000
Tianjin, China................................... Ground Lease, Expires 2045 (2) 120,000
Freiburg, Germany................................ Leased, Expires 2007 (3) 55,000
Colmar, France................................... Owned 63,000
</TABLE>
- ----------
(1) We have an option to extend this lease until 2010.
(2) We own the facilities; however, the land upon which it is constructed is
leased.
(3) We have the right to terminate this lease beginning in 2000.
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We believe that our facilities around the world, whether owned or
leased, are well-maintained. Our manufacturing facilities contain sufficient
production capacity to meet our needs for the foreseeable future.
ENVIRONMENT
We are committed to operate worldwide in a manner which respects and
protects the environment. We use hazardous substances and generate solid and
hazardous waste in the ordinary course of our business. As a result, we are
subject to various federal, state, local and foreign laws and regulations
governing environmental matters, including the use, discharge and disposal of
hazardous materials. Because of the nature of our business, we incur costs to
comply with environmental laws. Although we believe we are in substantial
compliance with environmental requirements, we cannot assure you that our costs
to comply with environmental requirements will not increase in the future. We
cannot predict the kind of legislation or regulations that may be adopted in the
future with respect to environmental protection and waste disposal. To date, our
compliance with existing legislation and regulations has not had a material
negative effect on us and we do not expect future compliance to have a material
negative effect on our financial position, results of operations or cash flows.
In connection with the spin-off in 1997, we retained the obligations
with respect to environmental matters relating to our discontinued operations
and their status as a "potentially responsible party" with respect to the
offsite disposal of wastes. We are engaged in the remediation of eight
discontinued operations in six states, and are a "potentially responsible party"
at five hazardous waste sites in four states. Based on several factors,
including capital expenditures and expenses for our remediation programs, and
the proportionate share of the cost of the necessary investigation and eventual
remedial work that may be needed to be performed at the sites for which we have
been named as a "potentially responsible party," these matters are not expected
to have a material adverse effect on our financial position, results of
operations or cash flows.
Our present and past facilities have been in operation for many years,
and over that time in the course of those operations, these facilities have used
substances which are or might be considered hazardous. Additionally, we have
generated and disposed of wastes which are or might be considered hazardous.
Therefore, it is possible that additional environmental issues may arise in the
future which we cannot predict.
INTERNATIONAL OPERATIONS
We manufacture or assemble most of our products in Taiwan (Republic of
China), the People's Republic of China, Ireland, Germany and France. These
foreign operations are subject to the usual risks inherent in operating
overseas, including risks with respect to fluctuations in currency exchange
rates, economic and political destabilization, restrictive actions by foreign
governments, nationalizations, the laws and policies of the United States
affecting trade, foreign investment and loans and foreign tax laws. Our
cost-competitive status could be negatively affected if, relative to our
competitors, we experience unfavorable movements in foreign currency exchange
rates such as the appreciation of the New Taiwan dollar in relation to the U.S.
dollar.
International sales represent approximately 70% of our sales. Sales
to the Asia/Pacific region accounted for approximately 35% of our worldwide
sales in 1998. During 1998, order trends and average selling prices weakened
significantly reflecting the economic difficulties in Southeast Asia, the
economic slowdown in Japan and the difficulties in the computer and computer
peripherals industries. However, approximately 50% of our production is
located in Taiwan, the cost of which benefited from the weakening of the New
Taiwan Dollar in relation to the U.S. dollar in 1998. We cannot assure you as
to the extent or duration of the impact of these events on our financial
position, results of operations or cash flows. In the first nine months of
1999, we benefited from improving economic conditions in Southeast Asia, but
conditions in Europe softened in the first half of 1999.
LEGAL PROCEEDINGS
In connection with the spin-off in 1997, General Instrument Corporation
(formerly NextLevel Systems, Inc.) agreed to indemnify us with respect to
certain legal proceedings relating to the business transferred to General
Instrument Corporation, including the obligations, if any, arising out of or
relating to the two securities
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litigations described below. Therefore, we are of the opinion that the
resolution of these matters will not have an effect on our consolidated
financial position, results of operations or cash flows.
The action captioned IN RE GENERAL INSTRUMENT CORPORATION SECURITIES
LITIGATION pending in the U.S. District Court for the Northern District of
Illinois, Eastern Division, consolidates numerous class action complaints
(including the derivative action) filed in various courts between October 10 and
October 27, 1995, and is brought by plaintiffs, on their own behalf and as
representatives of a class of purchasers of General Instrument Corporation
common stock during the period March 21 through October 18, 1995. The complaint
alleges that prior to the spin-off, General Instrument Corporation and certain
of its officers and directors, as well as Forstmann Little & Co. and certain
related entities, violated the federal securities laws, namely Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934, as amended, by allegedly
making false and misleading statements and failing to disclose material facts
about General Instrument Corporation's planned shipments in 1995 of its CFT-2200
and DigiCipher II products. Also pending in the same court, under the same name,
is a derivative action brought on behalf of General Instrument Corporation. The
derivative action alleges that the members of General Instrument Corporation's
Board of Directors, several of its officers and Forstmann Little & Co. and
related entities have breached their fiduciary duties by reason of the matter
complained of in the class action and the defendants' alleged use of material
non-public information to sell shares of General Instrument Corporation common
stock for personal gain.
The action captioned BKP PARTNERS, L.P. V. GENERAL INSTRUMENT CORP. was
brought in February 1996 by certain holders of preferred stock of NextLevel
Communications, which was merged into a subsidiary of General Instrument
Corporation in September 1995. The action was originally filed in the Northern
District of California and was later transferred to the Northern District of
Illinois. The plaintiffs allege that the defendants violated federal securities
laws by making misrepresentations and omissions and breached fiduciary duties to
NextLevel in connection with the acquisition of NextLevel by General Instrument
Corporation. Plaintiffs seek, among other things, unspecified compensatory and
punitive damages and attorneys' fees and costs.
We are not a party to any pending legal proceedings other than various
claims and lawsuits arising in the normal course of business and those for which
we are indemnified. We are of the opinion that these litigations or claims will
not have a material negative effect on our consolidated financial position,
results of operations or cash flows.
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DESCRIPTION OF NOTES
Set forth below is a summary of certain provisions of the notes. The
notes were issued pursuant to an indenture (the "Indenture") dated as of
December 14, 1999 by and between us and The Bank of New York, as trustee (the
"Trustee"). The following summary of the notes, the Indenture and the
Registration Rights Agreement (as defined below) does not purport to be complete
and is qualified by reference to all of the provisions of the Indenture and the
Registration Rights Agreement, including the definitions of certain terms which
agreements are filed as exhibits to the Registration Statement of which this
prospectus is a part. Capitalized terms used herein without definition have the
meanings ascribed to them in the Indenture or the Registration Rights Agreement,
as appropriate. As used in this section, the "Company" refers to General
Semiconductor, Inc., exclusive of its subsidiaries. Wherever particular
provisions or defined terms of the Indenture (or the form of note which is a
part thereof) or the Registration Rights Agreement are referred to in this
summary, such provisions or defined terms are incorporated by reference as a
part of the statements made and such statements are qualified in their entirety
by such reference. Certain definitions of terms used in the following summary
are set forth under "Certain Definitions."
GENERAL
The notes are general, unsecured obligations of the Company, limited in
aggregate principal amount to $172.5 million. The notes and related obligations
are subordinated in right of payment to all existing and future Senior
Indebtedness and effectively junior to all existing and future trade payables
and other liabilities of the Company's Subsidiaries, as described under
"Subordination" below. The notes were issued only in fully registered form,
without coupons, in denominations of $1,000 and integral multiples of such
amount.
The notes mature on December 15, 2006. The notes bear interest at
the rate per annum of 5 3/4% from their date of issuance, or from the most
recent interest payment date to which interest has been paid or provided for,
payable semi-annually in cash in arrears on June 15 and December 15 of each
year, commencing June 15, 2000, to the Persons in whose names such notes are
registered at the close of business on June 1 and December 1 immediately
preceding such interest payment dates. Principal of, premium, if any, on,
interest on, and Liquidated Damages (as defined in "Registration Rights;
Liquidated Damages"), if any, with respect to, the notes is payable, the
notes are convertible and the notes may be presented for registration of
transfer or exchange, at the office or agency of the Company maintained for
such purpose, which office or agency shall be maintained in New York, New
York. Interest on the notes is calculated on the basis of a 360-day year
consisting of twelve 30-day months.
At the option of the Company, payment of interest and Liquidated
Damages, if any, may be made by check mailed to the holders of the notes at the
addresses set forth upon the registry books of the Company. No service charge
will be made for any registration of transfer or exchange of notes, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Until otherwise designated
by the Company, the Company's office or agency will be the corporate trust
office of the Trustee presently located at 101 Barclay Street, New York, New
York 10286.
The Indenture does not contain any financial covenants or any
restrictions on the payment of dividends, the issuance or repurchase of
securities of the Company or the incurrence of Indebtedness, including Senior
Indebtedness. The Indenture contains no covenants or other provisions to afford
protection to holders of notes in the event of a highly leveraged transaction or
a change of control of the Company, except to the limited extent described under
"Repurchase of Notes at the Option of the Holder Upon a Change of Control."
CONVERSION RIGHTS
Each holder of notes has the right at any time prior to the close of
business on the Stated Maturity of the notes, unless previously redeemed or
repurchased, at the holder's option, to convert any portion of the principal
amount thereof that is $1,000 or an integral multiple of such amount into shares
of common stock at the conversion price of $15.55 per share of common stock,
subject to adjustment as described below (the conversion ratio is 64.3087 shares
of our common stock per $1,000 principal amount of notes). The right to convert
a note called for
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redemption or delivered for repurchase and not withdrawn will terminate at the
close of business on two Business Days immediately prior to the Redemption Date
or Repurchase Date, as applicable, for such note, unless the Company
subsequently fails to pay the applicable Redemption Price or Repurchase Price,
as the case may be.
If any notes are converted during the period after any record date but
before the next interest payment date, interest on such notes will be paid on
the next interest payment date, notwithstanding such conversion, to the holder
of record on the record date of those notes. Any notes that are, however,
delivered to us for conversion after any record date but before the next
interest payment date must, except as described in the next sentence, be
accompanied by a payment equal to the interest payable on such interest payment
date on the principal amount of notes being converted. We will not require the
payment to us described in the preceding sentence if, during that period between
a record date and the next interest payment date, a conversion occurs on or
after the date that we have issued a redemption notice and prior to the date of
redemption. If any notes are converted after an interest payment date but on or
before the next record date, no interest will be paid on those notes. No
fractional shares will be issued upon conversion, but a cash adjustment will be
made for any fractional share.
The conversion price will be subject to adjustment in certain events,
including:
- any payment of a dividend or other distribution, payable in common
stock on any class of Capital Stock of the Company;
- any issuance to all or substantially all holders of our common
stock of rights, options or warrants entitling them to subscribe
for or purchase common stock at less than the then current market
price of our common stock, determined in accordance with the
Indenture; provided, however, that if such rights, options or
warrants are only exercisable upon the occurrence of certain
triggering events, then the conversion price will not be adjusted
until such triggering events occur;
- certain subdivisions, combinations or reclassifications of our
common stock;
- any distribution to all or substantially all holders of our common
stock of evidences of indebtedness, shares of Capital Stock (other
than common stock), cash or other assets (including securities,
but excluding those dividends, rights, options, warrants and
distributions referred to above and distributions in connection
with the liquidation, dissolution or winding up of the Company and
excluding dividends and distributions paid exclusively in cash and
in mergers and consolidations to which the penultimate paragraph
of this section applies);
- any distribution consisting exclusively of cash (excluding any
cash portion of distributions referred to above, or cash
distributed upon a merger or consolidation to which the
penultimate paragraph of this section applies) to all or
substantially all holders of our common stock in an aggregate
amount that, combined together with (A) all other such all-cash
distributions made within the then preceding 12 months in respect
of which no adjustments have been made and (B) any cash and the
fair market value of other consideration paid or payable in
respect of any tender offer by the Company or any of its
Subsidiaries for common stock concluded within the preceding 12
months in respect of which no adjustment has been made, exceeds
15.0% of the Company's market capitalization (defined as being the
product of the then current market price of our common stock
multiplied by the number of shares of our common stock then
outstanding) on the record date of such distribution; and
- the completion of a tender offer made by the Company or any of its
Subsidiaries for common stock to the extent that the aggregate
consideration, together with (A) any cash and other consideration
payable in a tender offer by the Company or any of its
Subsidiaries for common stock expiring within the 12 months
preceding the expiration of such tender offer in respect of which
no adjustment has been made and (B) the aggregate amount of any
such all-cash distributions referred to above to all holders of
our common stock within the 12 months preceding the expiration of
such tender offer in respect of which no adjustments have been
made, exceeds 15.0% of the Company's market capitalization on the
expiration of such tender offer.
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In the event of a distribution to all or substantially all of the
holders of our common stock of rights, warrants or options to subscribe for or
purchase any securities (other than those referred to above), the Company may,
instead of making an adjustment in the conversion price, provide that each
holder of a note, who converts the note after the record date for such
distribution and prior to the expiration of such rights, shall be entitled to
receive upon such conversion of the note, in addition to shares of common stock,
an appropriate number of such rights, warrants or options. No adjustment of the
conversion price will be required to be made until the cumulative adjustments
amount to one percent or more of the conversion price as last adjusted;
PROVIDED, HOWEVER, that any adjustment that would otherwise be required to be
made shall be carried forward and taken into account in a subsequent adjustment.
No adjustment of the conversion price will result in zero or in a negative
number or will reduce the conversion price below the then par value of the
common stock (in which case the conversion price would be reduced to such par
value), unless the common stock has no par value at such time (in which case the
conversion price would be reduced to $.01 per share).
The Company, from time to time and to the extent permitted by law, may
reduce the Conversion Price by any amount for any period of at least 20 Business
Days, in which case the Company shall give at least 15 days notice of such
reduction to the Trustee and the holders, if the Board of Directors has made a
determination that such reduction would be in the best interests of the Company,
which determination shall be conclusive. The Company may, at its option, make
such reductions in the Conversion Price, in addition to those set forth above,
as the Board of Directors deems advisable to avoid or diminish any income tax to
holders of common stock resulting from any dividend or distribution of stock (or
rights to acquire stock) or from any event treated as such for United States
Federal income tax purposes. See "Certain United States Federal Tax
Consequences."
In case of any reclassification or change of outstanding shares of
common stock issuable upon conversion of the notes (other than certain changes
in par value) or consolidation or merger of the Company with or into another
Person or any consolidation or merger of another Person with or into the Company
(with certain exceptions), or in case of any sale, transfer or conveyance of all
or substantially all of the assets of the Company, each note then outstanding
will, without the consent of any holder of notes, become convertible only into
the kind and amount of securities, cash and other property receivable upon such
reclassification, change, consolidation, merger, sale, transfer or conveyance by
a holder of the number of shares of common stock into which such note was
convertible immediately prior thereto after giving effect to any adjustment
required to be made as set forth above; PROVIDED that if the kind or amount of
securities, cash and other property is not the same for each share of our common
stock held immediately prior to such reclassification, change, consolidation,
merger, sale, transfer or conveyance, any holder who fails to exercise any right
of election shall receive per share the kind and amount of securities, cash or
other property received per share by a plurality of such shares.
The Company will use all reasonable efforts to cause all registrations
to be made with, and to obtain any approvals by, any governmental authority
under any Federal or state law of the United States that may be required on the
part of the Company in connection with the conversion of the notes into common
stock. If at any time during the two-year period following the date of the
original issuance of the notes a registration statement under the Securities Act
covering the shares of common stock issuable upon conversion of the notes is not
effective or is otherwise unavailable for effecting resales of such shares,
shares of common stock issued upon conversion of the notes may not be sold or
otherwise transferred except in accordance with or pursuant to an exemption
from, or otherwise in a transaction not subject to, the registration
requirements of the Securities Act.
SUBORDINATION
The notes are subordinated to the Company's existing and future Senior
Indebtedness and will be structurally subordinated to all liabilities, including
trade payables, of the Company's Subsidiaries. As of December 31, 1999, the
notes were junior to $104.0 million of outstanding Senior Indebtedness and
effectively junior to $[ ] million of trade payables and other liabilities of
our Subsidiaries. If we become bankrupt, liquidate or dissolve, our assets would
be available to pay obligations on the notes only after our Senior Indebtedness
has been paid. The Indenture does not restrict the incurrence of Senior
Indebtedness or other Indebtedness by the Company or its Subsidiaries or the
ability of the Company to transfer assets or business operations to its
Subsidiaries, subject to the
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provisions described under "Repurchase of Notes at the Option of the holder Upon
a Change of Control" and "Limitation on Merger, Sale or Consolidation."
The Indenture provides that no payment or distribution, by setoff or
otherwise, may be made by or on behalf of the Company, directly or through any
Subsidiary, on account of the principal of, premium, if any, or interest on and
Liquidated Damages or any other obligations under or with respect to, the notes,
or to acquire, redeem or defease any of the notes, including repurchases of
notes at the option of the holder, for cash, securities or property, other than
Junior Securities, or on account of the redemption provisions of the notes,
collectively, the "Subordinated Obligations:"
- upon the maturity of any Senior Indebtedness, by lapse of time,
acceleration (unless waived) or otherwise, unless and until all
principal of, premium, if any, and interest on, and fees, charges,
expenses, indemnifications and all other amounts payable in
respect of Senior Indebtedness are first paid in full in cash, or
- in the event of default in the payment of any principal of,
premium, if any, or interest on, any Designated Senior
Indebtedness when it becomes due and payable, whether at maturity
or at a date fixed for prepayment or by declaration or otherwise
(including the events described in the preceding paragraph,
collectively, a "Payment Default"), unless and until such Payment
Default has been cured or waived or otherwise has ceased to exist.
The payment of cash, property or securities, other than Junior
Securities, upon conversion of a note will constitute payment on a
note and therefore will be subject to the subordination provisions
in the Indenture.
Upon
- the happening of an event of default, other than a Payment
Default, that permits, or would permit with the passage of time or
the giving of notice, the holders of any Designated Senior
Indebtedness or their representative immediately to accelerate the
maturity of such Designated Senior Indebtedness (collectively, a
"Non-Payment Default") and
- written notice of such Non-Payment Default being given to the
Company and the Trustee by the holders of such Designated Senior
Indebtedness or their representative (a "Blockage Notice"), then,
unless and until such Non-Payment Default has been cured or waived
or otherwise has ceased to exist, no payment or distribution, by
setoff or otherwise, redemption, defeasance or acquisition may be
made by or on behalf of the Company, directly or through any
Subsidiary, on account of the Subordinated Obligations.
Notwithstanding the foregoing and if no Payment Default then exists, at
the end of the Payment Blockage Period, the Company shall be required to pay to
the holders of the notes all regularly scheduled payments on the notes that were
not paid during the Payment Blockage Period due to the foregoing prohibitions
(and upon the making of such payments any acceleration of the notes made or
other remedies commenced during the Payment Blockage Period shall be of no
further force or effect) and to resume all other payments as and when due on the
notes. Not more than one Blockage Notice may be given in any consecutive 365-day
period, irrespective of the number of defaults with respect to Senior
Indebtedness during that period. In no event, however, may the total number of
days during which any Payment Blockage Period is or Payment Blockage Periods are
in effect exceed 179 days in the aggregate during any consecutive 365-day
period.
Upon any distribution of assets or securities of the Company upon any
dissolution, winding up, total or partial liquidation or reorganization of the
Company, whether voluntary or involuntary, in bankruptcy, insolvency,
receivership or a similar proceeding or upon assignment for the benefit of the
creditors or any marshaling of assets or liabilities:
- the holders of all Senior Indebtedness will first be entitled to
receive payment in full in cash (including cash collateralization
of outstanding letters of credit) before the holders of the notes
are entitled to
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receive any payment or distribution, other than Junior Securities,
on account of the Subordinated Obligations and
- any payment or distribution of assets or securities of the Company
of any kind or character, whether in cash, property or securities,
other than Junior Securities, to which the holders of the notes or
the Trustee on behalf of the holders would be entitled, by setoff
or otherwise, except for the subordination provisions contained in
the Indenture, will be paid by the liquidating trustee or agent or
other person making such a payment or distribution directly to the
holders of Senior Indebtedness or their representative to the
extent necessary to make payment in full in cash of all such
Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to the
holders of such Senior Indebtedness.
In the event that any payment or distribution of assets or securities
of the Company or any Subsidiary, other than Junior Securities, is received by
the holders of the notes or the Trustee on behalf of the holders or any Paying
Agent at a time when the payment or distribution is prohibited, the payment or
distribution will be held in trust for the benefit of the holders of Senior
Indebtedness. The payment or distribution will be paid or delivered by the
holders or the Trustee or the Paying Agent, as the case may be, to the holders
of the Senior Indebtedness remaining unpaid or their representatives, or to the
trustees under any indenture pursuant to which any instruments evidencing any of
the Senior Indebtedness may have been issued. The amount of such payment or
distribution will be made ratably according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness held or represented by each, for
application to the payment of all Senior Indebtedness remaining unpaid
(including cash collateralization of outstanding letters of credit), to the
extent necessary to pay all Senior Indebtedness in full in cash after giving
effect to any concurrent payment or distribution, or provision therefor, to the
holders of Senior Indebtedness.
No provision contained in the Indenture or the notes affects the
obligation of the Company, which is absolute and unconditional, to pay, when
due, principal of, premium, if any, and interest on the notes. The subordination
provisions of the Indenture and the notes does not prevent the occurrence of any
Event of Default under the Indenture or limit the rights of the Trustee or any
holder of any notes, subject to the preceding paragraphs, to pursue any other
rights or remedies with respect to the notes.
The Company conducts a substantial portion of its operations through
its Subsidiaries. Accordingly, the Company's ability to meet its cash
obligations in the future in part will be dependent upon the ability of its
Subsidiaries to make cash distributions to the Company. The ability of its
Subsidiaries to make distributions to the Company is and will continue to be
restricted by, among other limitations, applicable provisions of the laws of
national and state governments and may be restricted by contractual provisions.
The Indenture does not limit the ability of the Company's Subsidiaries to incur
such contractual restrictions in the future. The right of the Company to receive
distributions in respect of the assets of any Subsidiary, and thus the ability
of holders of the notes to benefit indirectly from such assets, is generally
subject to the prior claims of creditors, including trade creditors, of that
Subsidiary except to the extent that the Company itself is recognized as a
creditor of such Subsidiary, in which case the Company's claims would still be
subject to any security interest of other non-subordinated or PARI PASSU
creditors of such Subsidiary. The notes, therefore, are effectively subordinated
to obligations to creditors, including trade creditors, of Subsidiaries of the
Company with respect to the assets of the Subsidiaries against which such
creditors have a more direct claim. An acceleration of Subsidiary debt or a
failure to pay the same at the maturity thereof will not constitute an Event of
Default under the Indenture.
As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or an assignment for the benefit of the creditors of the Company or
any of its Subsidiaries or a marshaling of assets or liabilities of the Company
and its Subsidiaries, holders of notes may receive ratably less than other
creditors.
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REDEMPTION AT THE COMPANY'S OPTION
The notes are not be subject to redemption prior to December 15, 2002
and are redeemable on and after such date at the option of the Company, in whole
or in part, upon not less than 30 days' nor more than 60 days' notice to each
holder, at the following Redemption Prices, expressed as percentages of the
principal amount, if redeemed during the 12-month period commencing December 15
of the years indicated below, in each case, subject to the right of holders of
record on a record date to receive interest due on an interest payment date that
is on or prior to such Redemption Date, together with accrued and unpaid
interest and Liquidated Damages, if any, to, but excluding, the Redemption Date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2002......................................... 103.286%
2003......................................... 102.464%
2004......................................... 101.643%
2005 and thereafter.......................... 100.821%
</TABLE>
In the case of a partial redemption, the Trustee will select the notes
or portions thereof for redemption on a pro rata basis, by lot or in such other
manner it deems appropriate and fair. The notes may be redeemed in part in
integral multiples of $1,000 only.
Notice of any redemption will be sent, by first-class mail, at least 30
days and not more than 60 days prior to the date fixed for redemption (the
"Redemption Date"), to the holder of each note to be redeemed to such holder's
last address as then shown upon the registry books of the Registrar. The notice
of redemption must state the Redemption Date, the Redemption Price and the
amount of accrued interest and Liquidated Damages, if any, to be paid. Any
notice that relates to a note to be redeemed in part only must state the portion
of the principal amount to be redeemed and must state that on and after the
Redemption Date, upon surrender of such note, a new note or notes in principal
amount equal to the unredeemed portion thereof will be issued. On and after the
Redemption Date, interest will cease to accrue on the notes or portions thereof
called for redemption, unless the Company defaults in its obligations with
respect thereto. The notes do not have the benefit of any sinking fund.
REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF
CONTROL
The Indenture provides that in the event that a Change of Control has
occurred, each holder of notes will have the right, at such holder's option,
pursuant to an irrevocable and unconditional offer by the Company (the
"Repurchase Offer") to purchase all notes on the date (the "Repurchase Date")
that is no later than 45 Business Days, except as described below, after the
occurrence of such Change of Control, or, at the Company's option, prior to such
Change of Control but after the public announcement thereof, at a cash price
(the "Repurchase Price") equal to 100% of the principal amount thereof, together
with accrued and unpaid interest and Liquidated Damages, if any, to, but
excluding, the Repurchase Date. A holder of notes may accept the Repurchase
Offer with respect to all or a portion of its notes, PROVIDED that the principal
amount of such notes must be in integral multiples of $1,000. The Repurchase
Offer shall be made within 25 Business Days following a Change of Control and
shall remain open for 20 Business Days following its commencement except to the
extent that a longer period is required by applicable law, the "Repurchase Offer
Period." Upon expiration of the Repurchase Offer Period, the Company will
purchase all notes tendered in response to the Repurchase Offer. If required by
applicable law, the Repurchase Date and the Repurchase Offer Period may be
extended as so required.
On or before the Repurchase Date, the Company will:
- accept for payment notes or portions of notes properly tendered
pursuant to the Repurchase Offer,
- deposit with the Paying Agent cash sufficient to pay the
Repurchase Price, together with accrued and unpaid interest and
Liquidated Damages, if any, of all notes so tendered and
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- deliver to the Trustee the notes so accepted, together with an
officers' certificate listing the notes or portions of notes being
purchased by the Company.
The Paying Agent will promptly mail to the holders of notes so accepted
payment in an amount equal to the Repurchase Price, together with accrued and
unpaid interest and Liquidated Damages, if any, and the Trustee will promptly
authenticate and mail or deliver to such holders a new note or notes equal in
principal amount to any unpurchased portion of the notes surrendered. Any notes
not so accepted will be promptly mailed or delivered by the Company to the
holder thereof. The Company will announce publicly the results of the Repurchase
Offer on or as soon as practicable after the Repurchase Date.
The phrase "all or substantially all" of the assets of the Company, as
included in the definition of Change of Control, is likely to be interpreted by
reference to applicable state law at the relevant time, and will be dependent on
the facts and circumstances existing at such time. As a result, there may be a
degree of uncertainty in ascertaining whether a sale or transfer of "all or
substantially all" of the assets of the Company has occurred.
The Change of Control purchase feature of the notes may make more
difficult or discourage a takeover of the Company, and, thus, the removal of
incumbent management. The Change of Control purchase feature resulted from
negotiations between the Company and the Initial Purchasers.
The provisions of the Indenture relating to a Change of Control may not
afford the holders of the notes protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger, spin-off or similar
transaction that may adversely affect holders, if such transaction does not
constitute a Change of Control. Moreover, certain events with respect to the
Company which may involve an actual change of control of the Company may not
constitute a Change of Control for purposes of the Indenture.
The right to require the Company to repurchase notes as a result of the
occurrence of a Change of Control could create an event of default under Senior
Indebtedness as a result of which any repurchase could be blocked by the
subordination provisions of the notes. Failure of the Company to repurchase the
notes when required would result in an Event of Default with respect to the
notes whether or not such repurchase is permitted by the subordination
provisions. See "Subordination."
Except as described herein, no modification of the Indenture regarding
the provisions on repurchase at the option of any holder of a note upon a Change
of Control that adversely affects a holder is permissible without the consent of
the holder of the note so affected. In the event of a Change of Control, if
holders of in excess of two-thirds of the outstanding aggregate principal amount
of the notes so determine at any time following the occurrence of such Change of
Control and before the close of business on the Business Day immediately
preceding the Repurchase Date, such event shall not be treated as a Change of
Control for purposes of the Indenture. In such event, (1) the Company will not
be required to make the Repurchase Offer, (2) to the extent the Repurchase Offer
has already been made, such Repurchase Offer will be deemed revoked and (3) to
the extent any notes have been tendered in response to any such revoked
Repurchase Offer, such tender will be rescinded and the notes so tendered will
be promptly returned to the holders of the notes. For purposes of any such
determination by the holders of the outstanding notes, notes held by the Company
or an Affiliate of the Company (including any Person that would become an
Affiliate of the Company (or its successor) as a consequence of the event or
series of events that otherwise would be treated as a Change of Control for
purposes of the Indenture) shall be disregarded.
To the extent applicable, the Company will comply with the provisions
of Rules 13e-4 and 14e-1 or any other tender offer rules under the Exchange Act
and any other securities laws, and will file a Schedule 13e-4 or any other
schedule if required under such rules, in connection with any offer by the
Company to repurchase notes at the option of the holders upon a Change of
Control.
The Credit Agreement contains a "change of control" provision that in
relevant part is similar to the provision in the Indenture relating to a Change
of Control, and the occurrence of such a "change of control" would constitute a
default under the Credit Agreement. The Company's obligations under the Credit
Agreement are senior in right of payment to the notes and the Credit Agreement
will not permit the purchase of the notes absent consent
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of the lenders under the Credit Agreement in the event of a Change of Control,
even though the failure by the Company to comply with its obligations in the
event of a Change of Control would constitute an Event of Default under the
Indenture. In addition, the exercise by the holders of their right to require
the Company to repurchase the notes could cause a default under the Credit
Agreement, even if the Change of Control itself does not, due to the financial
effect of such repurchase on the Company. If the Company is unable to obtain the
requisite consents and/or repay all Indebtedness which prohibits the repurchase
of the notes upon the occurrence of a Change of Control, the Company would
remain prohibited by such Indebtedness from purchasing any notes and, as a
result, the Company could not commence a Change of Control Offer to purchase the
notes, which would constitute an Event of Default under the Indenture. Such an
Event of Default under the Indenture would also constitute an Event of Default
under the Credit Agreement which would permit the lenders thereunder to
accelerate all of the Company's Indebtedness under the Credit Agreement. If a
Change of Control were to occur, there can be no assurance that the Company
would have sufficient assets to first satisfy its obligations under the Credit
Agreement or other agreements relating to any Indebtedness, if accelerated, and
then to purchase all of the notes that might be delivered by holders seeking to
accept a Change of Control Offer.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Indenture provides that the Company may not, directly or
indirectly, consolidate with or merge with or into, or sell, lease or otherwise
dispose of all or substantially all of its assets, on a consolidated basis,
whether in a single transaction or a series of related transactions, to another
Person or group of affiliated Persons, other than to its Wholly Owned
Subsidiaries, unless:
(1) either
(a) in the case of a merger or consolidation, the Company is the
surviving entity or
(b) the resulting, surviving or transferee entity is a corporation
organized under the laws of the United States, any state thereof or the
District of Columbia and expressly assumes by supplemental indenture
all of the obligations of the Company in connection with the notes and
the Indenture; and
(2) no Default or Event of Default shall exist immediately before or
after giving effect on a pro forma basis to such transaction.
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company in accordance with the foregoing,
the successor corporation formed by such consolidation or into which the Company
is merged or to which such transfer is made, shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
the Indenture with the same effect as if such successor corporation had been
named therein as the Company, and the Company will be released from its
obligations under the Indenture and the notes, except as to any obligations that
arise from or as a result of such transaction.
For purposes of the foregoing, the transfer, by lease, assignment, sale
or otherwise, of all or substantially all of the properties and assets of one or
more Subsidiaries, which properties and assets, if held by the Company instead
of such Subsidiary, would constitute all or substantially all of the properties
and assets of the Company, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Company. This "Limitation
on Merger, Sale or Consolidation" covenant will not apply to a sale, assignment,
transfer, conveyance or other disposition of assets between or among the Company
and any of its Wholly Owned Subsidiaries.
REPORTS
Whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee, within 15 days after it is or would have been required to file such
with the SEC annual and quarterly consolidated financial statements
substantially equivalent to financial statements that would have been included
in reports filed with the SEC if the Company were subject to the requirements of
Section 13 or 15(d) of the Exchange Act, including, with respect to annual
information only, a
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report thereon by the Company's certified independent public accountants as such
would be required in such reports to the SEC and, in each case, together with a
management's discussion and analysis of financial condition and results of
operations as such would be so required. In addition, for so long as the notes
or the common stock into which they are convertible are Transfer Restricted
Securities (as defined), and if the Company ceases to have a class of equity
securities registered under Section 12(b) or 12(g) of the Exchange Act, or
ceases to be subject to Section 15(d) of the Exchange Act, the Company will
continue to provide to the holders the information specified by Rule 144A(d)(4).
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as:
- the failure by the Company to pay any installment of interest on,
or Liquidated Damages with respect to, the notes as and when due
and payable, whether or not prohibited by the subordination
provisions of the Indenture, and the continuance of any such
failure for 30 days,
- the failure by the Company to pay all or any part of the principal
of, or premium, if any, on the notes when and as the same become
due and payable at maturity, redemption, by acceleration or
otherwise, including, without limitation, pursuant to any
Repurchase Offer, whether or not prohibited by the subordination
provisions of the Indenture,
- the failure of the Company to perform its covenants and agreements
regarding any conversion of notes required under the Indenture and
the continuance of any such failure for 30 days,
- the failure by the Company to observe or perform any other
covenant or agreement contained in the notes or the Indenture and,
subject to certain exceptions, the continuance of such failure for
a period of 60 days after written notice is given to the Company
by the Trustee or to the Company and the Trustee by the holders of
at least 25% in aggregate principal amount of the notes
outstanding,
- certain events of bankruptcy, insolvency or reorganization in
respect of the Company or any of its Significant Subsidiaries,
- failure to make any payment at final stated maturity, including
any applicable grace period, in respect of Indebtedness of the
Company (other than non-recourse obligations) in an amount in
excess of $10 million, and continuance of such failure for 30 days
after written notice is given to the Company by the Trustee or to
the Company and the Trustee by the holders of at least 25% in
aggregate principal amount of notes outstanding,
- default with respect to any Indebtedness of the Company (other
than non-recourse obligations), which default results in the
acceleration of Indebtedness in an amount in excess of $10 million
without such Indebtedness having been discharged or such
acceleration having been rescinded or annulled for 30 days after
written notice is given to the Company by the Trustee or to the
Company and the Trustee by the holders of at least 25% in
aggregate principal amount of notes outstanding and
- final unsatisfied judgments not covered by insurance aggregating
in excess of $5 million (net of any insurance or indemnity
payments actually received in respect thereof prior to or within
60 days from the date of such final judgment), at any one time
rendered against the Company or any of its Significant
Subsidiaries and not stayed, bonded or discharged within 60 days.
The Indenture provides that if a Default occurs and is continuing, the
Trustee must, within 90 days after the Trustee's receiving actual notice of
occurrence of such Default, give to the holders notice of such Default, but the
Trustee shall be protected in withholding such notice if it in good faith
determines that the withholding of such notice is in the interest of the
holders, except in the case of a Default in the payment of the principal of,
premium, if any, or interest on any of the notes when due or in the payment of
any redemption or repurchase obligation.
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The Indenture provides that if an Event of Default occurs and is
continuing (other than an Event of Default caused by certain events of
bankruptcy, insolvency, or reorganization with respect to the Company), then in
every such case, unless the principal of all of the notes shall have already
become due and payable, either the Trustee or the holders of at least 25% in
aggregate principal amount of the notes then outstanding, by notice in writing
to the Company (and to the Trustee if given by holders), may declare all
principal, premium, if any, accrued interest and Liquidated Damages, if any, on
or with respect to the notes to be due and payable immediately. If an Event of
Default caused by certain events of bankruptcy, insolvency, or reorganization
with respect to the Company occurs, all principal, premium, if any, accrued
interest and Liquidated Damages, if any, will be immediately due and payable on
all outstanding notes without any declaration or other act on the part of the
Trustee or the holders. The holders of no less than a majority in aggregate
principal amount of notes generally are authorized to rescind such acceleration
if all existing Events of Default, other than the non-payment of the principal
of, premium, if any, and interest on, and Liquidated Damages, if any, with
respect to, the notes that have become due solely by such acceleration, have
been cured or waived. If any Designated Senior Indebtedness is outstanding at
the time of any acceleration of the notes, the Company shall not make any
payment with respect to the notes until five Business Days after the holders of
such Designated Senior Debt receive notice of such acceleration.
Prior to the declaration of acceleration of the maturity of the notes,
the holders of a majority in aggregate principal amount of the notes at the time
outstanding may waive on behalf of all the holders any default, except a default
in the payment of principal of, interest on, or Liquidated Damages with respect
to, any note not yet cured, or a default with respect to any covenant or
provision that cannot be modified or amended without the consent of the holder
of each outstanding note affected. Subject to the provisions of the Indenture
relating to the duties of the Trustee, the Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the request,
order or direction of any of the holders, unless such holders have offered to
the Trustee security or indemnity satisfactory to the Trustee. Subject to all
provisions of the Indenture and applicable law, the holders of a majority in
aggregate principal amount of the notes at the time outstanding will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee.
The Indenture provides that no holder may pursue any remedy under the
Indenture, except for a default in the payment of principal of, premium, if any,
or interest on, or Liquidated Damages, if any, with respect to, the notes unless
the holders of at least 25% in principal amount of the outstanding notes make a
written request to the Trustee to pursue the remedy, such holders offer to the
Trustee indemnity satisfactory to the Trustee against any loss, liability or
expense, the Trustee does not comply with the request within 60 days after the
receipt of the request and the offer of indemnity, and the Trustee shall not
have received a contrary direction from the holders of a majority in principal
amount of the outstanding notes.
AMENDMENTS AND SUPPLEMENTS
The Indenture contains provisions permitting the Company and the
Trustee to enter into a supplemental indenture for certain purposes without the
consent of the holders. With the consent of the holders of not less than a
majority in aggregate principal amount of the notes at the time outstanding, the
Company and the Trustee are permitted to amend or supplement the Indenture or
any supplemental indenture or modify or waive the rights of the holders;
PROVIDED that no such modification may, without the consent of each holder
affected thereby:
- change the Stated Maturity of any note or reduce the principal
amount thereof or the rate (or extend the time for payment) of
interest thereon or any premium payable upon the redemption
thereof, or change the place of payment where, or the coin or
currency in which, any note or any premium or the interest thereon
is payable, or impair the right to institute suit for the
conversion of any note or the enforcement of any such payment on
or after the due date thereof (including, in the case of
redemption, on or after the Redemption Date), or reduce the
Repurchase Price, or alter the Repurchase Offer (other than as set
forth herein) or redemption provisions in a manner adverse to the
holders, or
- reduce the percentage in principal amount of the outstanding
notes, the consent of whose holders is required for any such
amendment, supplemental indenture or waiver provided for in the
Indenture or
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- adversely affect the right of such holder to convert notes or
alter, in a manner that adversely affects the right of such
holder, the provisions relating to anti-dilution protection in
respect thereof.
A supplemental indenture entered into in compliance with the
"Limitation on Merger, Sale or Consolidation" covenant would not require the
consent of the holders of the notes.
NO PERSONAL LIABILITY OF SHAREHOLDERS, OFFICERS, DIRECTORS AND
EMPLOYEES
The Indenture provides that no shareholder, employee, officer, director
or partner, as such, past, present or future, of the Company or any successor
corporation shall have any personal liability in respect of the obligations of
the Company under the Indenture or the notes by reason of his, her or its status
as such shareholder, employee, officer, director or partner.
TRANSFER AND EXCHANGE
A holder may transfer or exchange the notes in accordance with the
Indenture. The Company or the Trustee may require a holder, among other things,
to furnish appropriate endorsements, legal opinions and transfer documents, and
to pay any taxes and fees required by law or permitted by the Indenture. The
Company is not required to transfer or exchange any notes selected for
redemption. Also, the Company is not required to transfer or exchange any notes
for a period of 15 days before the mailing of a Repurchase Offer or notice of
redemption.
The registered holder of a note may be treated as the owner of it for
all purposes.
BOOK ENTRY, DELIVERY AND FORM
The notes are evidenced by one or more global notes (the "Global
Note"), which have been deposited with, or on behalf of, the Depositary and
registered in the name of Cede & Co. ("Cede") as the Depositary's nominee.
Except as set forth below, the Global Note may be transferred, in whole or in
part, only to another nominee of the Depositary or to a successor of the
Depositary or its nominee.
Purchaser's of notes under this prospectus may hold their interests in
the Global Note directly through the Depositary if such holders are participants
in the Depositary, or indirectly through organizations which are participants in
the Depositary (the "Participants"). Transfers between Participants will be
effected in accordance with the Depositary's rules and will be settled in
same-day funds.
The Depositary has advised the Company that it is a limited-purpose
trust company that was created to hold securities for its Participants and to
facilitate the clearance and settlement of transactions in such securities
between Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust companies, clearing
corporations and certain other organizations. Access to the Depositary's system
is also available to other entities such as banks, brokers, dealers and trust
companies (collectively, "Indirect Participants") that clear through or maintain
a custodial relationship with a Participant, either directly or indirectly.
Ownership of the notes evidenced by the Global Notes will be shown on,
and the transfer of ownership the notes will be effected only through, records
maintained by the Depositary (with respect to the interests of Participants),
the Participants and the Indirect Participants. The laws of some states require
that certain Persons take physical delivery in definitive form of securities
that they own and that security interests in negotiable instruments can only be
perfected by delivery of certificates representing the instruments.
Consequently, the ability to transfer notes evidenced by the Global Notes will
be limited to such extent.
So long as the Depositary or its nominee is the registered owner of a
note, the Depositary or such nominee, as the case may be, will be considered the
sole owner or holder of the notes represented by the Global Notes for all
purposes under the Indenture. Except as provided below, owners of beneficial
interests in a Global Note will not be entitled to have notes represented by
such Global Note registered in their names, will not receive or be entitled to
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receive physical delivery of certificated notes, and will not be considered the
owners or holders thereof under the Indenture for any purpose, including with
respect to the giving of any directions, instructions or approvals to the
Trustee thereunder. As a result, the ability of a Person having a beneficial
interest in notes represented by a Global Note to pledge such interest to
Persons that do not participate in the Depositary's system, or to otherwise take
actions with respect to such interest, may be affected by the lack of a physical
certificate evidencing such interest.
Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of notes by the Depositary, or for maintaining, supervising or reviewing any
records of the Depositary relating to such notes.
Payments with respect to the principal of, premium, if any, interest
on, and Liquidated Damages with respect to, any note represented by a Global
Note registered in the name of the Depositary or its nominee on the applicable
record date will be payable by the Trustee to or at the direction of the
Depositary or its nominee in its capacity as the registered holder of the Global
Notes representing such notes under the Indenture. Under the terms of the
Indenture, the Company and the Trustee may treat the Persons in whose names the
notes, including the Global Notes, are registered as the owners of the notes for
the purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither the Company nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to beneficial
owners of notes (including, principal, premium, if any, interest, or Liquidated
Damages with respect thereto), or immediately to credit the accounts of the
relevant Participants with such payment, in amounts proportionate to their
respective holdings in principal amount of beneficial interests in the Global
Notes as shown on the records of the Depositary. Payments by the Participants
and the Indirect Participants to the beneficial owners of notes will be governed
by standing instructions and customary practice and will be the responsibility
of the Participants or the Indirect Participants.
Holders who desire to convert their notes into our common stock
pursuant to the terms of the notes should contact their brokers or other
Participants or Indirect Participants to obtain information on procedures,
including proper forms and cut-off times, for submitting such requests.
If (1) the Company notifies the Trustee in writing that the Depositary
is no longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (2) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of notes in
definitive form under the Indenture, then, upon surrender by the Depositary of
the Global Notes, certificated notes will be issued to each Person that the
Depositary identifies as the beneficial owner of the notes represented by the
Global Notes. In addition, subject to certain conditions, any Person having a
beneficial interest in a Global Note may, upon request to the Trustee, exchange
such beneficial interest for notes in the form of certificated notes. Upon any
such issuance, the Trustee is required to register such certificated notes in
the name of such Person or Persons (or the nominee of any thereof), and cause
the same to be delivered to such Person.
Neither the Company nor the Trustee shall be liable for any delay by
the Depositary or any Participant or Indirect Participant in identifying the
beneficial owners of the notes, and the Company and the Trustee may conclusively
rely on, and shall be protected in relying on, instructions from the Depositary
for all purposes (including with respect to the registration and delivery, and
the respective principal amounts, of the notes to be issued).
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
We entered into the Registration Rights Agreement with Donaldson,
Lufkin & Jenrette, Chase Securities, Inc. and Morgan Stanley Dean Witter
(the "Initial Purchasers") (the "Registration Rights Agreement"). According
to the Registration Rights Agreement, we agreed to file with the Securities
and Exchange Commission (the "Commission") on or prior to 90 days after
December 14, 1999 (the "Closing Date") a shelf registration statement under
the Securities Act on Form S-3 or another appropriate form to cover resales
of Transfer Restricted Securities (as defined below) by the holders of notes
who satisfy certain conditions relating to the provision of information.
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We have agreed to use our reasonable best efforts to cause the shelf
registration statement to be declared effective by the Commission within 180
days after the Closing Date and to keep the shelf registration statement
effective until the earlier of such date that is two years after the Closing
Date or the date all Transfer Restricted Securities covered by the shelf
registration statement have been sold or there cease to be outstanding any
Transfer Restricted Securities.
For purposes of the foregoing, "Transfer Restricted Securities" means
each note and share of common stock issued upon conversion thereof until the
earlier of the date on which such note or share of our common stock has been
effectively registered under the Securities Act and disposed of in accordance
with the shelf registration statement or the date on which such note or share of
our common stock is distributed to the public pursuant to Rule 144 under the
Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act
or any similar provisions then in force.
The Registration Rights Agreement provides that:
(1) we file the shelf registration statement with the Commission on or
prior to 90 days after the Closing Date; and
(2) we use our reasonable best efforts to cause the shelf registration
statement to be declared effective by the Commission on or prior
to 180 days after the Closing Date (the "Effectiveness Target
Date").
If:
(1) the shelf registration statement is not filed by us with the
Commission on or prior to 90 days after the Closing Date,
(2) the shelf Registration Statement has not been declared effective
by the Commission within 180 days after the Closing Date, or
(3) the shelf registration statement is filed and declared effective
but shall thereafter cease to be effective or the prospectus
contained therein ceases to be usable for its intended purpose
without being succeeded immediately by a post-effective amendment
to such shelf registration statement that cures such failure and
that is itself declared effective immediately (each such event
referred to in clauses (1) through (3), a "Registration Default"
and each period during which a Registration Default has occurred
and is continuing, a "Registration Default Period"), then
we will accrue liquidated damages ("Liquidated Damages") in favor of
each holder of Transfer Restricted Securities, in an amount (and if
such Transfer Restricted Securities are comprised of common stock, such
amount shall be calculated on the basis of the principal amount of
notes from which such Transfer Restricted Securities had been
converted) which shall accrue at a per annum rate of:
- 0.25% for the first 90 days of the Registration Default Period,
- 0.50% for the second 90 days of the Registration Default Period,
- 0.75% for the third 90 days of the Registration Default Period,
and
- 1.0% thereafter for the remaining portion of the Registration
Default Period.
All accrued Liquidated Damages shall be paid to the holders of notes or
shares of our common stock (as applicable) in the same manner as interest
payments on the notes on semi-annual payment dates which correspond to interest
payment dates for the notes.
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Following the cure of a Registration Default, Liquidated Damages will
cease to accrue with respect to such Registration Default.
We may suspend offerings and sales under the shelf registration
statement for up to 60 days in each year during which such shelf registration
statement is required to be effective, upon the occurrence of certain material
acquisitions or dispositions or other transactions.
We have agreed to:
- provide to each holder of Transfer Restricted Securities included
in the shelf registration statement copies of the prospectus
contained in the shelf registration statement,
- notify each such holder when the shelf registration statement has
become effective and
- take certain other actions as are required to permit resales of
the Transfer Restricted Securities.
A holder who elects to sell any Transfer Restricted Securities pursuant
to the shelf registration statement will be required to be named as a selling
security holder in the related prospectus, may be required to deliver a
prospectus to purchasers, may be subject to certain civil liability provisions
under the Securities Act in connection with those sales and will be bound by the
provisions of the Registration Rights Agreement that apply to a holder making
such an election, including certain indemnification provisions.
We have mailed the Notice of Registration Statement and Selling
Securityholder Questionnaire to the holders of Transfer Restricted Securities
not less than 20 business days prior to the time we intend in good faith to have
the shelf registration statement declared effective (the "Effective Time").
Holders of the Transfer Restricted Securities will be required to make
certain representations to us as described in the Registration Rights Agreement
and will be required to deliver promptly information to be used in connection
with this shelf registration statement in order to have their Transfer
Restricted Securities included in this shelf registration statement. If a holder
fails to provide such information within the prescribed time periods, the
Transfer Restricted Securities of such holder will not be included in this shelf
registration statement and the holder will not be entitled to any Liquidated
Damages. By acquiring Transfer Restricted Securities, a holder will be deemed to
have agreed to indemnify us against certain losses arising out of information
furnished by such holder in writing for inclusion in any shelf registration
statement. Holders of notes will also be required to suspend their use of the
prospectus included in a shelf registration statement under certain
circumstances upon receipt of written notice to that effect from us. A holder's
ability to sell such Transfer Restricted Securities may be limited or the price
at which such Transfer Restricted Securities can be sold may be adversely
affected if the Transfer Restricted Securities are not included in the shelf
registration statement.
GOVERNING LAW
The Indenture and the notes and the Registration Rights Agreement
provide that they are to be governed in accordance with the laws of the State of
New York, without regard to choice of laws provisions.
THE TRUSTEE
The Bank of New York is the Trustee under the Indenture. A successor
Trustee may be appointed in accordance with the terms of the Indenture.
The Indenture contains certain limitations on the rights of the
Trustee, in the event it becomes a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions with the Company and its Subsidiaries; PROVIDED,
HOWEVER, that if it acquires any conflicting interest (as defined), it must
eliminate such conflict or resign.
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In case an Event of Default shall occur and shall not be cured or
waived, the Trustee will be required to use the degree of care of a prudent
person in the conduct of its own affairs in the exercise of its powers. Subject
to such provisions, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request of any of the holders of
notes, unless they shall have offered to the Trustee reasonable security or
indemnity.
CERTAIN DEFINITIONS
"BENEFICIAL OWNER" has the meaning assigned to such term in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the
beneficial ownership of any particular "person" (as that term is used in
Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have
beneficial ownership of all securities that such "person" has the right to
acquire by conversion or exercise of other securities, whether such right is
currently exercisable or is exercisable only upon the occurrence of a
subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned"
shall have a corresponding meaning.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the obligation
of such Person to pay rent or other amounts under a lease to which such Person
is a party that is required to be classified and accounted for as a capital
lease obligation under Generally Accepted Accounting Principles.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
indebtedness), warrants, options, participation or other equivalents of or
interests (however designated) in stock issued by that Person.
"CHANGE OF CONTROL" means the occurrence of any of the following:
- the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one
or a series of related transactions, of all or substantially all
of the properties or assets of the Company and its Subsidiaries
taken as a whole to any "person" (as that term is used in Section
13(d)(3) of the Exchange Act);
- the adoption of a plan relating to the liquidation or dissolution
of the Company;
- the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is
that any "person" (as defined above) becomes the Beneficial Owner,
directly or indirectly, of more than 50% of the Voting Stock of
the Company, measured by the total voting power of all classes of
voting stock rather than number of shares; or
- the first day on which a majority of the members of the board of
directors of the Company are not Continuing Directors.
"COMMODITY PRICE PROTECTION AGREEMENT" means any forward contract,
commodity swap, commodity option or other similar financial agreement or
arrangement relating to, or the value which is dependent upon, fluctuations in
commodity prices.
"CONTINUING DIRECTOR" means, at any date of determination, any
member of the Board of Directors of the Company
(1) who was a member of such board on the date of initial issuance of
the notes or
(2) who was nominated for election or elected to such Board of
Directors by at least a majority of the directors who were such
Continuing Directors at the time of such nomination or election or
whose
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election to the Company's Board of Directors was recommended or
endorsed by at least a majority of the directors who were such
Continuing Directors at the time of such nomination or election.
"CREDIT AGREEMENT" means that certain Credit Agreement dated as of July
23, 1997, as amended as of December 31, 1998 and June 30, 1999, by and among the
Company and the lenders party thereto from time to time and The Chase Manhattan
Bank, as Administrative Agent, and the other financial institutions named
therein as Co-Agents, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, restated, modified, increased, renewed, refunded, replaced
or refinanced from time to time, whether or not with the same parties.
"CURRENCY HEDGING AGREEMENTS" means any spot or forward foreign
exchange agreements and currency swap, currency option or other similar
financial agreements or arrangements entered into by any Person or any of its
Subsidiaries in the ordinary course of business and designed to protect against
or manage exposure to fluctuations in foreign currency exchange rates.
"DESIGNATED SENIOR INDEBTEDNESS" means
(1) Senior Indebtedness outstanding under the Credit Agreement and
(2) any Senior Indebtedness the principal amount of which is $10
million or more and that has been designated by the Company as
"Designated Senior Indebtedness."
"HEDGING OBLIGATIONS" means, with respect to any specified Person,
the obligations of such Person under
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements;
(2) other agreements or arrangements designed solely to protect such
Person against fluctuations in interest rates; and
(3) Commodity Price Protection Agreements and Currency Hedging
Agreements.
"INDEBTEDNESS" of any Person means, without duplication,
(a) all liabilities and obligations, contingent or otherwise, of any
such Person,
(1) in respect of borrowed money (whether or not the lender has
recourse to all or any portion of the assets of such Person),
(2) evidenced by credit or loan agreements, bonds, notes,
debentures or similar instruments (including, without
limitation, notes or similar instruments given in connection
with the acquisition of any business, properties or assets of
any kind),
(3) evidenced by bankers' acceptances or similar instruments
issued or accepted by banks,
(4) for the payment of money relating to a Capitalized Lease
Obligation or
(5) evidenced by a letter of credit, bank guarantee or a
reimbursement obligation of such Person with respect to any
letter of credit;
(b) all obligations of such Person issued or assumed as the deferred
purchase price of property or services (but excluding trade
accounts payable or accrued liabilities arising in the ordinary
course of business);
(c) all net obligations of such Person under Hedging Obligations;
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(d) all liabilities of others of the kind described in the preceding
clauses (a), (b) or (c) that such Person has guaranteed or that is
otherwise its legal liability, or which is secured by a lien on
property of such Person; and
(e) any and all deferrals, renewals, extensions, modifications,
replacements, restatements, refinancings and refundings (whether
direct or indirect) of, or any indebtedness or obligation issued
in exchange for, any liability of the kind described in any of the
preceding clauses (a), (b), (c) or (d), or this clause (e),
whether or not between or among the same parties.
The term "Indebtedness" shall not include the incurrence of any
indebtedness in respect of bid, performance or surety bonds issued for the
account of the Company or any of its Subsidiaries in the ordinary course of
business, including guarantees or obligations of the Company or any Subsidiary
thereof with respect to letters of credit (other than letters of credit issued
under the Credit Agreement) supporting such bid, performance or surety
obligations, and guarantees made in the ordinary course of business by the
Company or any of its Subsidiaries of performance of any contractual obligation
by the Company, a Subsidiary or any other entity in which the Company or a
Subsidiary owns an Equity Interest (in each case other than for an obligation
for money borrowed).
"JUNIOR SECURITIES" means non-mandatorily redeemable Capital Stock in
the Company and any Indebtedness of the Company, in each case that
(1) is authorized and issued pursuant to a plan of reorganization of
the Company (which authorization states that it gives effect to
the subordination of such Junior Securities to all Senior
Indebtedness) as long as such plan of reorganization is approved
by the holders of Senior Indebtedness under the Credit Agreement,
(2) is subordinated to all Senior Indebtedness (and any debt
securities issued in exchange for Senior Indebtedness) to
substantially the same extent as, or to a greater extent than, the
Notes are subordinated to Senior Indebtedness pursuant to the
Indenture and has a stated maturity at least one year after (and
does not provide for principal payments prior to) the stated
maturity of any Senior Indebtedness and any debt securities issued
in exchange for Senior Indebtedness, and
(3) contains terms, provisions, covenants and default provisions not
more beneficial to the holders of the notes as compared to the
holders of the Senior Indebtedness on the issue date of the notes.
"SENIOR INDEBTEDNESS" means all obligations of the Company to pay the
principal of, premium, if any, interest (including all interest accruing
subsequent to the commencement of any bankruptcy or similar proceeding, whether
or not a claim for post-petition interest is allowed as a claim in any such
proceeding) and rent payable on or in connection with, and all letters of
credit, reimbursement obligations and fees, costs, expenses and other amounts
and liabilities accruing or payable on or in connection with, and Hedging
Obligations issued by parties to (and their affiliates), the Credit Agreement
and any other Indebtedness of the Company, whether outstanding on the date of
the Indenture or thereafter created, incurred, assumed, guaranteed or in effect
guaranteed by the Company, unless the instrument creating or evidencing such
Indebtedness expressly provides that such Indebtedness is not senior or superior
in right of payment to the notes or is PARI PASSU with, or subordinated to, the
notes; PROVIDED that in no event shall Senior Indebtedness include
(1) Indebtedness of the Company owed to any Subsidiary of the Company,
(2) Indebtedness of the Company representing any trade account payable
incurred in the ordinary course of business,
(3) any liability for taxes owed or owing by the Company or any
Subsidiary of the Company or
(4) the notes.
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"SIGNIFICANT SUBSIDIARY" means as of any date of determination,
(1) any Subsidiary of the Company that has aggregate total assets in
an amount in excess of 10% of the consolidated total assets of the
Company and its Subsidiaries at such date of determination and
(2) any Subsidiary of the Company for which the net income of such
Subsidiary and its Subsidiaries, determined on a consolidated
basis in accordance with generally accepted accounting principles,
during the four fiscal quarters most recently ended preceding the
date of determination, exceeded 10% of the net income of the
Company and its Subsidiaries during such period.
"STATED MATURITY" when used with respect to any note, means
December 15, 2006.
"SUBSIDIARY" with respect to any Person, means
(1) a corporation a majority of whose Capital Stock with voting power
normally entitled to vote in the election of directors is at the
time, directly or indirectly, owned by such Person, by such Person
and one or more Subsidiaries of such Person or by one or more
Subsidiaries of such Person,
(2) a partnership in which such Person or a Subsidiary of such Person
is, at the time, a general partner and owns alone or together with
one or more Subsidiaries of such Person a majority of the
partnership interests, or
(3) any other Person (other than a corporation) in which such Person,
one or more Subsidiaries of such Person or such Person and one or
more Subsidiaries of such Person, directly or indirectly, at the
date of determination thereof, has at least a majority ownership
interest.
"VOTING STOCK" of any Person as of any date means the Capital Stock
of such Person that is at the time entitled to vote in the election of the
board of directors of such Person.
"WHOLLY OWNED SUBSIDIARY" of any specified Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person and one
or more Wholly Owned Subsidiaries of such Person.
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DESCRIPTION OF CREDIT FACILITY
THE FOLLOWING SUMMARY OF OUR CREDIT FACILITY DOES NOT PURPORT TO BE
COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE CREDIT AGREEMENT
DESCRIBED BELOW, INCLUDING THE DEFINITIONS OF CERTAIN CAPITALIZED TERMS USED
HEREIN. ANY TERMS NOT DEFINED IN THIS SECTION ARE DEFINED IN THE CREDIT
FACILITY. SEE "WHERE YOU CAN FIND MORE INFORMATION."
In July 1997, we entered into a bank credit agreement, which was
amended in December 1998 and in June 1999 (as amended the "credit agreement"),
which provides for a $350.0 million secured revolving credit facility that
matures on December 31, 2002. As required by the credit facility, we entered
into a guarantee and collateral agreement in August 1999 under which we have
pledged substantially all of our domestic assets and a portion of the capital
stock of our foreign subsidiaries to our lenders. The commitment amount under
the credit agreement will be permanently reduced by 50% of the gross proceeds
from sale of the notes. The borrowings under the credit facility rank senior to,
and will be repaid prior to, any subordinated indebtedness, including the notes.
INTEREST RATE CALCULATIONS. Interest is payable quarterly, or at the
end of the relevant interest period, if earlier, at a per annum rate equal to
the Adjusted Base Rate for ABR Loans, or a Eurodollar Rate for Eurodollar
(LIBOR) Loans, plus in each case, the relevant applicable margin. We are also
able to set interest rates through a competitive bid procedure.
The Adjusted Base Rate is a fluctuating rate calculated on a daily
basis as the highest of:
- the rate of interest publicly announced by The Chase Manhattan
Bank for the date of determination;
- 1% over the sum of (a) the product of the secondary market rate
for three month certificates of deposit and a fraction of the
percentage for determining the reserve requirement for a
depositary institution, and (b) the net annual assessment rate
payable on such day to the FDIC for insuring time deposits; and
- 0.5% over the weighted average of the rates on overnight Federal
Funds transactions with members of the Federal Reserve System as
arranged by Federal Funds brokers on the date of determination.
The Eurodollar Base Rate is the per annum rate determined by the
administrative agent to be the arithmetic mean of the offered rates for deposits
in dollars with a term comparable to the interest period that appears on the
Telerate British Bankers Association Interest Settlement Rates Page. The
Eurodollar Rate is the Eurodollar Base Rate adjusted for reserve requirements.
On December 31, 1999, the borrowings under the credit facility had a weighted
average interest rate of [ ]%.
The credit agreement requires us to pay the following fees:
- a quarterly commitment fee based upon our leverage ratio;
- a fee to each lender based upon our leverage ratio in proportion
to the lender's standby letter of credit liability;
- an issuing fee of 0.125% per annum on the face amount of each
letter of credit; and
- an administrative fee to The Chase Manhattan Bank for its services
as administrative agent under the credit agreement.
COVENANTS AND CONDITIONS. In addition to specific customary covenants,
the credit agreement includes covenants that restrict our ability and our
subsidiaries' ability to:
- dispose of assets;
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- incur additional indebtedness;
- incur liens on property or assets;
- repay other indebtedness;
- pay dividends;
- enter into certain investments or transactions;
- repurchase or redeem capital stock;
- engage in mergers or consolidations;
- make acquisitions; or
- engage in certain transactions with subsidiaries and affiliates
and otherwise restrict corporate activities.
In addition, we may not prepay, redeem, defease or repurchase any
subordinated indebtedness or the notes except for regularly scheduled mandatory
payments of interest and certain other exceptions.
The credit facility contains financial covenants under which we are
required to maintain:
- a Leverage Ratio of (a) Consolidated Total Indebtedness to (b)
Consolidated EBITDA equal to or below 5.0 to 1.0 currently,
decreasing over time to 4.0 to 1.0;
- an Interest Coverage Ratio of (a) Consolidated EBITDA to (b)
Consolidated Interest Expense greater than or equal to 2.5 to 1.0;
- a Senior Debt Leverage Ratio of (a) Consolidated Total
Indebtedness less the aggregate principal amount of the notes to
(b) Consolidated EBITDA equal to or below 2.5 to 1.0 upon the
issuance of the notes, decreasing over time to 2.0 to 1.0; and
- a specified minimum net worth of at least the sum of (a) $65.0
million and (b) 50% of our cumulative Consolidated Net Income from
the date of the agreement.
CERTAIN PREPAYMENTS. The credit agreement requires that the committed
amount under the credit facility be permanently reduced upon the completion of
the following transactions by an amount equal to:
- 100% of the proceeds from certain asset dispositions, if we have
not reinvested those proceeds within one year of receipt, provided
that we may elect not to reduce commitments by up to $50.0 million
of such proceeds from such asset sales;
- 100% of the proceeds of all equity issuances; and
- 100% of the proceeds from the issuance of other debt issuances.
The credit agreement, however, provides that in no event shall such
a reduction reduce the commitment amount below $200.0 million.
SECURITY. Our obligations under the credit facility are be secured,
jointly and severally, by:
- a first priority lien on and security interest in all our domestic
assets and the assets of our direct and indirect domestic
subsidiaries; and
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- a first priority lien on 100% (65% for first tier foreign
subsidiaries) of the equity or other ownership interests of our
currently owned or hereafter acquired direct and indirect
subsidiaries.
In addition, substantially all of our Domestic Subsidiaries guarantee
the obligations under the credit facility.
EVENTS OF DEFAULT. The credit agreement contains customary events of
default, which include a default in the payment of principal or interest on debt
aggregating $10.0 million or more. If any event of default occurs, our
obligations under the credit agreement could be accelerated and the lenders
could foreclose on the collateral securing these obligations, with material
adverse results to the holders of the notes.
AMENDMENTS. The December 1998 amendment amended certain covenant
compliance calculations to provide us with greater flexibility to execute the
restructuring announced on November 6, 1998. In June 1999, we amended our credit
facility to make the following modifications:
- it permitted us to issue the notes;
- it required us to reduce the commitment amount by half of the
gross proceeds received from the sale of the notes;
- it provided us additional financial flexibility by modifying
certain financial covenants; and
- it modified the applicable margin to increase interest costs if
our debt to EBITDA ratio exceeds certain levels.
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DESCRIPTION OF CAPITAL STOCK
This summary highlights certain provisions of our certificate of
incorporation, as amended to date, and our by-laws. The following description of
our capital stock is not complete and is qualified in its entirety by the
provisions of our certificate of incorporation, our by-laws, our stockholders
rights plan and applicable law. See "Where You Can Find More Information."
Our certificate of incorporation provides that our authorized capital
stock consists of 400 million shares of common stock, par value $.01 per share,
and 20 million shares of preferred stock, par value $.01 per share.
COMMON STOCK
As of December 31, 1999, 37,056,759 shares of our common stock were
outstanding. All of the issued and outstanding shares of our common stock are
fully paid and non-assessable. The common stock issuable upon conversion of the
notes will be, when issued and paid for, fully paid and non-assessable. Each
holder of shares of our common stock is entitled to one vote per share on all
matters to be voted on by stockholders generally, including the election of
directors. There are no cumulative voting rights. Our board of directors is not
classified, and all of our directors are elected annually.
The holders of our common stock are entitled to dividends and other
distributions as may be declared from time to time by our board of directors out
of legally available funds, if any. See "Price Range of Common Stock and
Dividend Policy." Upon our liquidation, dissolution or winding up, holders of
our common stock would be entitled to share ratably in the distribution of all
of our assets remaining available for distribution after satisfaction of all our
liabilities and the payment of the liquidation preference of any outstanding
preferred stock as described below.
The holders of our common stock have no preemptive or other
subscription rights to purchase shares of our stock, nor are holders entitled to
the benefits of any redemption or sinking fund provisions.
PREFERRED STOCK
Our authorized capital stock includes 20 million shares of preferred
stock, none of which is currently outstanding. Our board of directors has the
authority, without further action by our stockholders, to divide the preferred
stock into series and to fix the rights, preferences, privileges and
restrictions of any series, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences and the number of shares
constituting any series or the designation of that series. The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change of control.
STOCKHOLDER RIGHTS PLAN
We have adopted a stockholder rights plan to protect stockholders from
various abusive takeover tactics, including attempts to acquire control of our
company at an inadequate price. Under the rights plan:
- our board of directors declared a dividend of one preferred stock
purchase right (a "Right") for each outstanding share of our
common stock; and
- each Right entitles the registered holder to purchase from us one
one-thousandth of a share of Series A Junior Participating
Preferred Stock, par value $.01 per share (the "Participating
Preferred Stock"), at a price of $100.
The description and terms of the Rights are described in a rights plan
between us and ChaseMellon Shareholder Services, L.L.C., as rights agent. The
description presented below is intended as a summary only and is qualified in
its entirety by reference to the rights plan.
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The Rights become exercisable and will begin to trade separately from
the common stock upon the earlier of:
- the first date of public announcement that a person or group,
other than an existing 15% stockholder or pursuant to a Permitted
Offer, as defined below, has acquired beneficial ownership of 15%
or more of the outstanding common stock, or
- ten business days following a person's or group's commencement of,
or announcement of, an intention to commence a tender or exchange
offer, the consummation of which would result in beneficial
ownership of 15% or more of the common stock.
The Rights will entitle holder to purchase common stock having a market
value, immediately prior to such acquisition, of twice the exercise price of the
Right in lieu of purchasing the Participating Preferred Stock. If our company is
acquired through a merger or other business combination transaction, other than
a Permitted Offer, each Right will entitle the holder to purchase common stock
of the surviving company having a market value immediately prior to such
acquisition, of twice the exercise price of the Right. We may redeem the Rights
for $0.01 each at any time prior to such acquisition. The Rights will expire on
January 6, 2007, unless earlier redeemed.
A "Permitted Offer" is a tender or exchange offer for all of our
outstanding common stock which is at a price and on terms determined, prior to
the purchase of shares under the tender or exchange offer, by at least a
majority of the board of directors to be adequate and otherwise in the best
interests of our company and our stockholders (other than the person or any
affiliate or associate thereof on whose basis the offer is being made) taking
into account all factors that the board of directors may deem relevant.
In connection with the stockholder rights plan, the board of directors
approved the creation of, out of the authorized but unissued shares of our
preferred stock, the Participating Preferred Stock, consisting of 400,000 shares
with a par value of $0.01 per share. The holders of the Participating Preferred
Stock are entitled to receive dividends, if declared by the board of directors,
from funds legally available. Each share of Participating Preferred Stock is
entitled to one thousand votes on all matters submitted to stockholder vote. The
shares of Participating Preferred Stock are not redeemable by, nor convertible
into our common stock or any of our other securities.
LIMITATION OF DIRECTOR LIABILITY
Our certificate of incorporation limits the liability of our directors
to us and our stockholders to the fullest extent permitted by Delaware law.
Specifically, our directors will not be personally liable for money damages for
breach of fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to us or our
stockholders;
- for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law, which
concerns unlawful payments of dividends, stock purchases or
redemptions; and
- for any transaction from which the director derived an improper
personal benefit.
DELAWARE ANTI-TAKEOVER LAW AND VARIOUS CHARTER AND BY-LAWS PROVISIONS
DELAWARE LAW. We must comply with the provisions of Section 203 of the
Delaware General Corporation Law. In general, Section 203 prohibits a publicly
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner.
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A "business combination" includes a merger, asset sale or other
transaction resulting in a financial benefit to the interested stockholder. An
"interested stockholder" is a person who, together with affiliates and
associates, owns, or, in some cases, within three years prior, did own, 15% or
more of the corporation's voting stock. Under Section 203, a business
combination between the Company and an interested stockholder is prohibited
unless it satisfies one of the following three conditions:
- our board of directors must have previously approved either the
business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
- upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of our voting stock outstanding at
the time the transaction commenced, excluding, for purposes of
determining the number of shares outstanding, shares owned by (1)
persons who are directors and also officers and (2) employee stock
plans, in some instances; and
- the business combination is approved by our board of directors and
authorized at an annual or special meeting of the stockholders by
the affirmative vote of the holders of at least 66 2'3% of the
outstanding voting stock that is not owned by the interested
stockholder.
SPECIAL MEETINGS. Our by-laws provide that special meetings of
stockholders for any purpose or purposes can be called only upon the request of
our chairman of the board, our president, our board of directors, or the holders
of shares entitled to at least a majority of the votes at the meeting.
AMENDMENT OF OUR BY-LAWS. To adopt, repeal, alter or amend the
provisions of our by-laws, our by-laws require the affirmative vote of either
the holders of at least a majority of the voting power of all of the issued and
outstanding shares of our capital stock entitled to vote on the matter or our
board of directors.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND PROPOSALS.
Our by-laws establish advance notice procedures for stockholders to make
nominations of candidates for election as directors, or bring other business
before an annual meeting of our stockholders.
These procedures provide that only persons who are nominated by or at
the direction of our board of directors, or by a stockholder who has given
timely written notice to our secretary before the meeting at which directors are
to be elected, will be eligible for election as one of our directors. Further,
these procedures provide that at an annual meeting, the only business that may
be conducted is the business that has been specified in the notice of the
meeting given by, or at the direction of, our board or by a stockholder who has
given timely written notice to our secretary of such stockholder's intention to
bring that business before the meeting.
Under these procedures, notice of stockholder nominations to be made or
business to be conducted at an annual meeting must be received by us not less
than 60 days nor more than 90 days before the date of the meeting, or, if less
than 70 days' notice or prior public disclosure of the date of the meeting is
given or made to the stockholders, the tenth day following the earlier of (1)
the day notice was mailed or (2) the day public disclosure was made. Under these
procedures, notice of a stockholder nomination to be made at a special meeting
at which directors are to be elected must be received by us not later than the
close of business on the tenth day following the day on which notice of the date
of the special meeting was mailed or public disclosure of the date of the
special meeting was made, whichever occurs first.
Under our by-laws, a stockholder's notice nominating a person for
election as a director must contain specific information about the proposed
nominee and the nominating stockholder. If our chairman of the board determines
that a nomination was not made in the manner described in our by-laws, the
nomination will be disregarded. Similarly, a stockholder's notice proposing the
conduct of business must contain specific information about the business and
about the proposing stockholder. If our chairman of the board determines that
business was not properly brought before the meeting in the manner described in
our by-laws, the business will not be conducted.
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By requiring advance notice of nominations by stockholders, our by-laws
afford our board an opportunity to consider the qualifications of the proposed
nominee and, to the extent deemed necessary or desirable by our board, to inform
stockholders about these qualifications. By requiring advance notice of other
proposed business, our by-laws also provide an orderly procedure for conducting
annual meetings of stockholders and, to the extent deemed necessary or desirable
by our board, provides our board with an opportunity to inform stockholders,
before meetings, of any business proposed to be conducted at the meetings,
together with any recommendations as to our board's position regarding action to
be taken with respect to the business, so that stockholders can better decide
whether to attend a meeting or to grant a proxy regarding the disposition of any
business.
The foregoing provisions may have the effect of precluding a contest
for the election of directors or the consideration of stockholder proposals if
the proper procedures are not followed, and of discouraging or deterring a third
party from conducting a solicitation of proxies to elect its own slate of
directors or to approve its own proposal, without regard to whether
consideration of these nominees or proposals might be harmful or beneficial to
us and our stockholders.
WRITTEN CONSENT PROVISIONS. Our by-laws provide that any action
required or permitted to be taken by the holders of capital stock at any meeting
of our stockholders may be taken without a meeting only by the holders of
outstanding capital stock having not less than the minimum number of votes that
would be necessary to authorize or take the action at a meeting at which all
shares entitled to vote were present and voted.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services, L.L.C.
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CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
The following is a summary of certain U.S. federal income tax
consequences and, in the case of Non-U.S. holders, as described below,
certain U.S. federal estate tax consequences, of the acquisition, ownership
and disposition of the notes and of the common stock into which the notes may
be converted by beneficial owners of the notes, but it is not intended as and
does not purport to be a complete analysis of all the potential U.S. federal
income, estate tax or other tax considerations which may be relevant to
certain investors in light of their particular investment or other
circumstances. In addition, we do not discuss any U.S. state or local income
or foreign income or other tax consequences. This summary is based upon the
provisions of the Internal Revenue Code of 1986, as amended, Treasury
Regulations and administrative and judicial interpretations thereof, all as
in effect as of the date of this prospectus and all of which are subject to
change or differing interpretation, possibly with retroactive effect. The
discussion below deals only with notes and common stock held as capital
assets which are, generally, property held for investment, and does not
address holders of notes or common stock that may be subject to special
rules, including, without limitation, certain U.S. expatriates, financial
institutions, insurance companies, tax-exempt entities, dealers in securities
or currencies, traders in securities that elect mark-to-market accounting
treatment, and persons who hold the notes or common stock as part of a
straddle, hedge, conversion or other integrated transaction. You should
consult your own tax advisor regarding the particular U.S. federal, state and
local and foreign income and other tax consequences of acquiring, owning and
disposing of the notes and common stock that may be applicable to you.
Certain Federal Income Tax Consequences to U.S. Holders
For purposes of the following discussion, a "U.S. holder" means a
beneficial owner of a note or common stock that is, for U.S. federal income tax
purposes,
(1) a citizen or individual resident of the United States,
(2) a corporation or partnership (unless the Internal Revenue Service
provides otherwise) created or organized in or under the laws of
the United States or of any political subdivision thereof,
(3) an estate the income of which is subject to U.S. federal income
taxation regardless of its source, or
(4) a trust if, in general, the trust is subject to the supervision of
a court within the United States and the control of one or more
United States persons as described in section 7701(a)(30) of the
Internal Revenue Code.
TAXATION OF STATED INTEREST. In general, stated interest paid on a
note will be taxable to a U.S. holder as ordinary income at the time it is
received or accrued in accordance with the U.S. holder's regular method of
accounting for federal income tax purposes.
LIQUIDATED DAMAGES. As more fully described above under "Descriptions
of Notes--Registration Rights; Liquidated Damages," in the event a registration
statement is not filed or does not become effective as provided in the
Registration Rights Agreement, we will be required to pay liquidated damages to
U.S. holders of the notes. Under the Treasury Regulations regarding contingent
payment debt instruments, any payment subject to a remote or incidental
contingency (i.e., there is a remote likelihood that the payment will be
required or the potential amount of the payment is insignificant relative to the
remaining payments on the debt instrument) is not considered a contingent
payment and is ignored for purposes of computing original issue discount
accruals. We believe that the liquidated damage payments with respect to the
notes are subject to either a remote or incidental contingency. Accordingly, a
U.S. holder of a note should be required to report any liquidated damage payment
as interest for U.S. federal income tax purposes only at the time the payment is
made or properly accrued under the U.S. holder's method of accounting.
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MARKET DISCOUNT. The resale of notes may be adversely affected
by the impact on a purchaser of the "market discount" provisions of the
Code. For this purpose, the market discount on a note generally will be equal
to the amount, if any, by which the stated redemption price at maturity of
the note immediately after its acquisition (other than at original issue)
exceeds the U.S. holder's adjusted tax basis in the note. Subject to a
de minimis exception, these provisions generally require a U.S. holder
who acquires a note at a market discount to treat as ordinary income any gain
recognized on the disposition of that note to the extent of the "accrued
market discount" on such note at the time of disposition, unless the U.S.
holder elects to include accrued market discount in income currently. This
election to include market discount in income currently, once made, applies
to all market discount obligations acquired on or after the first taxable
year to which the election applies and may not be revoked without the consent
of the IRS. In general, market discount will be treated as accruing on a
straight-line basis over the remaining term of the note at the time of
acquisition, or, at the election of the U.S. holder, under a constant yield
method. A U.S. holder who acquires a note at a market discount and who does
not elect to include accrued market discount in income currently may be
required to defer the deduction of a portion of the interest on any
indebtedness incurred or maintained to purchase or carry the note until the
note is disposed of in a taxable transaction. If a U.S. holder acquires a
note with market discount and receives common stock upon conversion of the
note, the amount of accrued market discount not previously included in income
with respect to the converted note through the date of conversion will be
treated as ordinary income upon the disposition of the common stock.
AMORTIZABLE BOND PREMIUM. If a U.S. holder of a note acquires the
note at a cost that is in excess of the amount payable at maturity (after
reducing that cost by an amount equal to the value of the conversion option),
the U.S. holder may elect under Section 171 of the Code to amortize the
excess cost (as an offset to interest income) on a constant interest rate
basis over the term of the note. However, because the notes may be redeemed
at our option at a price in excess of their principal amount, a U.S. holder
may be required to amortize any bond premium based on the earlier call date
and the call price payable at that time. If the U.S. holder makes an election
to amortize bond premium, the tax basis of all the U.S. holder's notes will
be reduced by the allowable bond premium amortization. The amortization
election would apply to all debt instruments held or subsequently acquired by
the electing purchaser and cannot be revoked without permission from the IRS.
On conversion of a note into conversion shares, no additional amortization of
any bond premium would be allowed, and any remaining premium would be added
to the U.S. holder's tax basis in the common stock received.
DISPOSITIONS. Upon the sale, exchange or retirement of a note or
upon the sale of a share of common stock, a U.S. holder generally will
recognize taxable gain or loss in an amount equal to the difference, if any,
between the amount realized on the disposition (excluding any amount received
that is attributable to accrued but unpaid interest) and the U.S. holder's
adjusted tax basis in the note or common stock. A U.S. holder's adjusted tax
basis in a note will generally equal the cost of such note to that holder,
less any principal payments received by that holder and increased by any
market discount previously included in income by that holder. A holder's tax
basis in the common stock received on conversion of a note will be the same
as the holder's adjusted tax basis in the note at the time of the conversion,
reduced by any basis allocable to a fractional share paid in cash. Gain or
loss recognized by a U.S. holder on the sale, exchange or retirement of a
note or upon the sale of a share of common stock generally will be capital
gain or loss and will be long-term capital gain or loss if the note or common
stock was held for more than one year. Long-term capital gain recognized by a
non-corporate U.S. holder generally will be subject to a maximum tax rate of
20%. Subject to certain limited exceptions, capital losses cannot be used to
offset ordinary income.
CONVERSION OF THE NOTES. A U.S. holder generally will not recognize any
income, gain or loss upon conversion of a note into common stock, except with
respect to cash received in lieu of a fractional share of common stock. The
holder's tax basis in the common stock received on conversion of a note will be
the same as the holder's adjusted tax basis in the note at the time of
conversion (reduced by any basis allocable to a fractional share), and the
holding period for the common stock received on conversion will generally
include the holding period of the note converted.
Cash received in lieu of a fractional share of common stock upon
conversion should be treated as a payment in exchange for the fractional share
of common stock. Accordingly, the receipt of cash in lieu of a fractional share
of common stock generally should result in capital gain or loss (measured by the
difference between the cash received for the fractional share and the U.S.
holder's adjusted tax basis in the fractional share).
DISTRIBUTIONS ON THE COMMON STOCK. The amount of any distribution
by us in respect of the common stock (including any liquidated damages in
respect of common stock as described above under "Description of Notes--
Registration Rights; Liquidated Damages") will be equal to the amount of cash
and the fair market value, on the date of distribution, of any property
distributed. Generally, distributions will be treated as a dividend, subject
to a tax as ordinary income, to the extent of our current or accumulated
earnings and profits, then as a tax-free return of capital to the extent of
the holder's tax basis in the common stock and thereafter as gain from the
sale or exchange of the stock.
ADJUSTMENT OF CONVERSION PRICE. If at any time we make a distribution
of property to stockholders that would be taxable to those stockholders as a
dividend (e.g., distributions of evidences of indebtedness or assets of our
company, but generally not stock dividends or rights to subscribe for common
stock) for U.S. federal income tax purposes and, in accordance with the
antidilution provisions of the notes, the conversion price of the notes is
decreased, the amount of that decrease may be deemed to be the payment of a
taxable dividend to holders of the notes. As a result, U.S. holders of notes
could recognize taxable income as a result of an event pursuant to which they
receive no cash or property.
BACKUP WITHHOLDING AND INFORMATION REPORTING. We are required to
furnish to record holders of the notes, other than corporations and other exempt
holders, and to the IRS, information with respect to interest paid on the notes
and dividends paid on the common stock.
In general, "backup withholding" at a rate of 31% may apply to payments
of principal and interest made on a note, payments of dividends on common stock,
and to the payment of the proceeds of a sale or exchange of common stock or of a
note before maturity, that are made to a non-corporate U.S. holder if such
holder fails to provide a correct taxpayer identification number or otherwise
comply with applicable requirements of the backup withholding rules. The backup
withholding tax is not an additional tax and may be credited against a U.S.
holder's U.S. federal income tax liability, provided that correct information is
provided to the Internal Revenue Service.
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CERTAIN U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO NON-U.S.
HOLDERS
For purposes of the following discussion, a "Non-U.S. holder" is a
beneficial owner of a note or common stock that is not, for U.S. federal income
tax purposes, a U.S. holder. An individual may, subject to certain exceptions,
be deemed to be a resident alien, as opposed to a non-resident alien, by virtue
of being present in the United States on at least 31 days in the calendar year
and for an aggregate of at least 183 days during a three-year period ending in
the current calendar year, counting for these purposes all of the days present
in the current year, one-third of the days present in the immediately preceding
year, and one-sixth of the days present in the second preceding year. Resident
aliens are subject to U.S. federal tax as if they were U.S. citizens.
Under present U.S. federal income and estate tax law and subject to the
discussions below concerning income effectively connected with a trade or
business in the United States and backup withholding:
- payments of principal, premium, if any, and interest on a note by
us or any of our agents to any Non-U.S. holder will not be subject
to withholding of U.S. federal income tax, provided that in the
case of interest
(1) the Non-U.S. holder does not directly or indirectly, actually or
constructively, own 10 percent or more of the total combined voting power of all
classes of our stock entitled to vote,
(2) the Non-U.S. holder is not
(A) a controlled foreign corporation that is related to us through
sufficient stock ownership, or
(B) a bank receiving interest described in Section 881(c)(3)(A) of the
Internal Revenue Code, and
(3) either
(A) the beneficial owner of the note certifies to us or our paying
agent, under penalties of perjury, that it is not a "United States person", as
defined in the Internal Revenue Code and provides its name, address, and U.S.
Taxpayer identification number, if any or
(B) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business (a "financial institution") and holds the note on behalf of the
beneficial owner certifies to us or our paying agent under penalties of perjury
that it, or the financial institution between it and the beneficial owner, has
received from the beneficial owner the certificate described in (A) above and
provides us or our paying agent with a copy of this certificate;
- payments of dividends on the common stock to a Non-U.S. holder
will be subject to withholding of U.S. federal income tax at a 30%
rate unless that rate is reduced by an applicable income tax
treaty. Dividends that are effectively connected with the holder's
conduct of a trade or business in the U.S. are generally subject
to U.S. federal income tax at regular rates, but are not generally
subject to the 30% withholding tax if the Non-U.S. holder files a
properly executed Form W-8ECI or currently a Form 4224 or
successor form with the payor;
- a Non-U.S. holder will not be subject to U.S. federal income tax
on any gain or income realized on the sale or other disposition of
common stock, or the sale, exchange, redemption, retirement at
maturity or other disposition of a note; provided that, in the
case of proceeds representing accrued interest, the conditions
described in the first bullet paragraph above are met, unless
(1) the Non-U.S. holder is an individual who is present in the United
States for 183 days or more during the taxable year of gain and certain other
conditions are met, or
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(2) the gain is effectively connected with the conduct of a U.S. trade
or business by such Non-U.S. holder, or if an income tax treaty applies, is
generally attributable to a U.S. "permanent establishment" maintained by the
Non-U.S. holder;
- interest on notes not excluded from U.S. withholding tax as
described in the first bullet paragraph above will be subject to
U.S. withholding at a 30% rate, except where an applicable tax
treaty provides for the reduction or elimination of such
withholding tax;
- a note held by an individual who at the time of death is not a
citizen or resident of the United States will not be subject to
U.S. federal estate tax as a result of such individual's death if,
at the time of the individual's death,
(1) the individual did not directly or indirectly, actually or
constructively, own 10 percent or more of the total combined voting power of all
classes of our stock entitled to vote, and
(2) the income on the note would not have been effectively connected
with the conduct of a trade or business by the individual in the United States;
and
- common stock owned or treated as owned by an individual who at the
time of death is not a citizen or resident of the United States
will be subject to U.S. federal estate tax unless otherwise
provided by an applicable estate tax treaty.
If a Non-U.S. holder of a note is engaged in a trade or business in the
United States and interest on or gain realized on the sale of the note is
effectively connected with the conduct of such trade or business or, if an
income tax treaty applies, and the Non-U.S. holder maintains a U.S. "permanent
establishment" to which the interest or gain is generally attributable, the
Non-U.S. holder, although exempt from the withholding tax discussed in the first
bullet paragraph above, provided that such holder furnishes a properly executed
United States Internal Revenue Service Form W-8ECI or currently a Form 4224 or
successor form on or before any payment date to claim such exemption, may be
subject to U.S. federal income tax on such interest, as well as on gain or
income discussed in the third bullet paragraph above, on a net basis in the same
manner as if it were a U.S. holder.
In addition, a foreign corporation that is a holder of a note or common
stock may be subject to a branch profits tax equal to 30% of its effectively
connected earnings and profits for the taxable year, subject to some
adjustments, unless it qualifies for a lower rate under an applicable income tax
treaty. For this purpose, interest on a note, dividends on common stock or gain
recognized on the disposition of a note or common stock will be treated as
effectively connected earnings and profits if that interest, dividend or gain is
effectively connected with the conduct by the foreign corporation of a trade or
business in the United States.
Treasury Regulations generally effective for payments made after
December 31, 2000 will provide alternative methods for satisfying the
certification requirement described in clause (3) of the first bullet paragraph
above and may also require a Non-U.S. holder claiming the benefit of an income
tax treaty to provide its U.S. taxpayer identification number.
These regulations generally also will require, in the case of a note or common
stock held by a foreign partnership, that
(1) in the case of interest, the certification described in clause (3)
of the first bullet paragraph above be provided by the partners and in the case
of dividends, the partners certify entitlement to a reduced rate of withholding
under an applicable treaty and
(2) the partnership provide certain information, including a U.S.
taxpayer identification number.
A look-through rule will apply in the case of tiered partnerships.
Under current Treasury Regulations, backup withholding at a rate of 31%
and information reporting will not apply to payments of interest or dividends
made by us or our paying agent, in its capacity as such, to a Non-U.S.
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holder of a note or common stock if such holder has provided the required
certification as set forth above or has otherwise established an exemption,
provided that neither we nor our paying agent has actual knowledge that the
holder is a United States person or that the conditions of any other exemption
are not in fact satisfied. We or our paying agent may, however, report payments
of interest or dividends on the notes or common stock. Payments of the proceeds
from a disposition by a Non-U.S. holder of a note or common stock made to or
through a foreign office of a broker will not be subject to information
reporting or backup withholding, except that information reporting may apply to
such payments if the broker is
(1) a United States person,
(2) a controlled foreign corporation for U.S. federal income tax
purposes,
(3) a foreign person 50% or more of whose gross income is effectively
connected with a U.S. trade or business for a specified three-year period,
unless the Non-U.S. holder is an exempt recipient or such broker has evidence
that the payee is a Non-U.S. holder and no actual knowledge that such evidence
is false and certain other conditions are met, or
(4) with respect to payments made after December 31, 2000, a foreign
partnership, if at any time during its tax year, one or more of its partners are
U.S. persons, as defined in Treasury Regulations, who in the aggregate hold more
than 50% of the income or capital interest in the partnership or if, at any time
during its tax year, such foreign partnership is engaged in a U.S. trade or
business.
Payments of the proceeds from a disposition by a Non-U.S. holder of a
note or common stock made to or through the U.S. office of a broker is subject
to information reporting and backup withholding unless the holder or beneficial
owner certifies under penalties of perjury that he or she is not a United States
person and satisfies certain other conditions or otherwise establishes an
exemption from information reporting and backup withholding.
Any amounts withheld under the backup withholding rules from a payment
to a Non-U.S. holder would be allowed as a refund or a credit against such
holder's U.S. federal income tax liability, provided the required information is
furnished to the Internal Revenue Service.
Non-U.S. holders should consult their tax advisors regarding U.S.
federal, state, local and foreign tax consequences to non-U.S. holders of
purchasing, holding and disposing of the notes or common stock.
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SELLING SECURITYHOLDERS
The notes were originally issued by us and sold by the Initial
Purchasers in a transaction exempt from the registration requirements of the
Securities Act to persons reasonably believed by the Initial Purchasers to be
qualified institutional buyers. Selling holders, including their transferees,
pledgees or donees or their successors, may from time to time offer and sell
pursuant to this prospectus any or all of the notes and common stock into which
the notes are convertible.
The following table sets forth information with respect to the selling
holders and the principal amounts of notes beneficially owned by each selling
holder that may be offered under this prospectus. The information is based on
information provided by or on behalf of the selling holders. The selling holders
may offer all, some or none of the notes or common stock into which the notes
are convertible. Because the selling holders may offer all or some portion of
the notes or the common stock, no estimate can be given as to the amount of the
notes or the common stock that will be held by the selling holders upon
termination of any sales. In addition, the selling holders identified below may
have sold, transferred or otherwise disposed of all or a portion of their notes
since the date on which they provided the information regarding their notes in
transactions exempt from the registration requirements of the Securities Act.
<TABLE>
<CAPTION>
COMMON COMMON
PRINCIPAL STOCK STOCK
AMOUNT OF ISSUABLE OWNED
NOTES UPON AFTER
BENEFICIALLY CONVERSION COMMON COMPLETION
OWNED AND OF THE STOCK OF THE
NAME OFFERED NOTES OFFERED OFFERING
----------- ------------ ---------- ------- ----------
<S> <C> <C> <C> <C>
</TABLE>
None of the selling holders nor any of their affiliates, officers,
directors or principal equity holders has held any position or office or has had
any material relationship with us within the past three years. The selling
holders purchased all of the notes in private transactions on or after December
14, 1999. All of the notes were "restricted securities" under the Securities Act
prior to this registration.
Information concerning the selling holders may change from time to time
and any changed information will be set forth in supplements to this prospectus
if and when necessary. In addition, the conversion rate and therefore, the
number of shares of common stock issuable upon conversion of the notes, is
subject to adjustment under certain circumstances. Accordingly, the aggregate
principal amount of notes and the number of shares of common stock into which
the notes are convertible may increase or decrease.
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PLAN OF DISTRIBUTION
The selling holders and their successors, including their transferees,
pledgees or donees or their successors, may sell the notes and the common stock
into which the notes are convertible directly to purchasers or through
underwriters, broker-dealers or agents, who may receive compensation in the form
of discounts, concessions or commissions from the selling holders or the
purchasers. These discounts, concessions or commissions as to any particular
underwriter, broker-dealer or agent may be in excess of those customary in the
types of transactions involved.
The notes and the common stock into which the notes are convertible may
be sold in one or more transactions at fixed prices, at prevailing market prices
at the time of sale, at prices related to the prevailing market prices, at
varying prices determined at the time of sale, or at negotiated prices. These
sales may be effected in transactions, which may involve crosses or block
transactions:
- on any national securities exchange or U.S. inter-dealer system of
a registered national securities association on which the notes or
the common stock may be listed or quoted at the time of sale;
- in the over-the-counter market;
- in transactions otherwise than on these exchanges or systems or in
the over-the-counter market;
- through the writing of options, whether the options are listed on
an options exchange or otherwise; or
- through the settlement of short sales.
In connection with the sale of the notes and the common stock into
which the notes are convertible or otherwise, the selling holders may enter into
hedging transactions with broker-dealers or other financial institutions, which
may in turn engage in short sales of the notes or the common stock into which
the notes are convertible in the course of hedging the positions they assume.
The selling holders may also sell the notes or the common stock into which the
notes are convertible short and deliver these securities to close out their
short positions, or loan or pledge the notes or the common stock into which the
notes are convertible to broker-dealers that in turn may sell these securities.
The aggregate proceeds to the selling holders from the sale of the
notes or common stock into which the notes are convertible offered by them will
be the purchase price of the notes or common stock less discounts and
commissions, if any. Each of the selling holders reserves the right to accept
and, together with their agents from time to time, to reject, in whole or in
part, any proposed purchase of notes or common stock to be made directly or
through agents. We will not receive any of the proceeds from this offering.
Our outstanding common stock is listed for trading on the New York
Stock Exchange. We do not intend to list the notes for trading on any national
securities exchange or on the New York Stock Exchange and can give no assurance
about the development of any trading market for the notes.
In order to comply with the securities laws of some states, if
applicable, the notes and common stock into which the notes are convertible may
be sold in these jurisdictions only through registered or licensed brokers or
dealers. In addition, in some states the notes and common stock into which the
notes are convertible may not be sold unless they have been registered or
qualified for sale or an exemption from registration or qualification
requirements is available and is complied with.
The selling holders and any underwriters, broker-dealers or agents that
participate in the sale of the notes and common stock into which the notes are
convertible may be "underwriters" within the meaning of Section 2(11) of the
Securities Act. Any discounts, commissions, concessions or profit they earn on
any resale of the shares may be underwriting discounts and commissions under the
Securities Act. Selling holders who are "underwriters" within the meaning of
Section 2(11) of the Securities Act will be subject to the prospectus delivery
requirements of the
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Securities Act. The selling holders have acknowledged that they understand their
obligations to comply with the provisions of the Exchange Act and the rules
thereunder relating to stock manipulation, particularly Regulation M.
In addition, any securities covered by this prospectus that qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus. A selling holder
may not sell any notes or common stock described in this prospectus and may not
transfer, devise or gift these securities by other means not described in this
prospectus.
To the extent required, the specific notes or common stock to be sold,
the names of the selling holders, the respective purchase prices and public
offering prices, the names of any agent, dealer or underwriter, and any
applicable commissions or discounts with respect to a particular offer will be
set forth in an accompanying prospectus supplement or, if appropriate, a
post-effective amendment to the registration statement of which this prospectus
is a part.
We entered into a registration rights agreement for the benefit of
holders of the notes to register their notes and common stock under applicable
federal and state securities laws under specific circumstances and at specific
times. The registration rights agreement provides for cross-indemnification of
the selling holders and us and their and our respective directors, officers and
controlling persons against specific liabilities in connection with the offer
and sale of the notes and the common stock, including liabilities under the
Securities Act. We will pay substantially all of the expenses incurred by the
selling holders incident to the offering and sale of the notes and the common
stock.
EXPERTS
The consolidated financial statements included in this prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated
in their report appearing herein, and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
VALIDITY OF THE SECURITIES
The validity of the notes and the common stock being offered by this
prospectus is being passed upon for us by Fried, Frank, Harris, Shriver &
Jacobson (a partnership including professional corporations), New York, New
York.
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Our principal executive offices are located at 10 Melville Park Road,
Melville, NY 11747 (telephone (631) 847-3000). We also maintain an Internet home
page at www.gensemi.com.
We have filed with the Securities and Exchange Commission a
registration statement on Form S-3 to register the securities offered by this
prospectus. However, this prospectus does not contain all of the information
contained in the registration statement and the exhibits and schedules to the
registration statement. We strongly encourage you to carefully read the
registration statement and the exhibits and schedules to the registration
statement. We also file annual, quarterly and special reports, proxy statements
and other information with the SEC.
You may inspect and copy such material at the public reference
facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the SEC's regional offices at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
Suite 1300, New York, New York 10048. You may also obtain copies of such
material from the SEC at prescribed rates by writing to the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Our SEC filings are also available to the public from
the SEC's web site at www.sec.gov.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information
contained in documents that we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus. Information in this prospectus supersedes information incorporated
by reference that we filed with the SEC prior to the date of this prospectus,
while information that we file later with the SEC will automatically update and
supersede this information. We incorporate by reference the documents listed
below:
1. Our Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1998, including all material incorporated by reference in that
report (except for Item 8 which is included herein);
2. Our Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1999, June 30, 1999 and September 30, 1999, including all material
incorporated by reference in each of those reports;
3. Our Current Reports on Form 8-K filed on December 1, 1999 and
December 14, 1999;
4. Our Definitive Proxy Statement on Schedule 14A, filed on March 24,
1999, excluding the sections captioned "Report of the Compensation Committee"
and "Performance Graph";
5. All other reports filed by us pursuant to Section 13(a) or 15(d) of
the Exchange Act since December 31, 1998, including all material incorporated by
reference in such reports; and
6. The description of the common stock contained in our Registration
Statement on Form 8-A, dated April 17, 1992, as amended.
In addition, we also incorporate by reference any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 (other than the information filed in response to
Items 402(k) and (l) of Regulation S-K). You may request a copy of these
filings, at no cost to you, by writing or telephoning us at: General
Semiconductor, Inc.: Attention: Investor Relations: 10 Melville Park Road,
Melville, NY 11747 (telephone (631) 847-3000).
-57-
<PAGE>
Our common stock is quoted on the NYSE under the symbol "SEM." The
last reported sales price of the common stock on the NYSE on January 12, 2000
was $13.375 per share. You may inspect reports and other information
concerning us at the offices of the NYSE, 20 Broad Street, New York,
New York 10004.
You should rely only on the information incorporated by reference or
provided in this prospectus. We have authorized no one to provide you with
different information. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of the
document.
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Statements that are
predictive in nature, that depend upon or refer to future events or conditions
or that include the words "expects," "anticipates," "intends," "plans,"
"believes," "estimates," "thinks" and similar expressions are forward-looking
statements. These statements involve known and unknown risks, uncertainties and
other factors, including general political, legislative, regulatory and economic
uncertainties as well as the specific factors described above, that may cause
our actual results and performance to be materially different from any future
results or performance expressed or implied by these forward-looking statements.
Although we believe that these statements are based upon reasonable assumptions,
we cannot assure you that our expectations will actually occur. These
forward-looking statements are made as of the date of this prospectus, and we
assume no obligation to update or revise them, whether as a result of new
information, future events or otherwise.
-58-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheet--December 31, 1997 and 1998 and
September 30, 1999 (unaudited)............................ F-3
Consolidated Statements of Operations for the Three Years
Ended December 31, 1998 and the Nine Months Ended
September 30, 1998 and 1999 (unaudited)................... F-4
Consolidated Statements of Stockholders' Equity for the
Three Years Ended December 31, 1998 and the Nine Months
Ended September 30, 1999 (unaudited)...................... F-5
Consolidated Statement of Cash Flows for the Three Years
Ended December 31, 1998 and the Nine Months Ended
September 30, 1998 and 1999 (unaudited)................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
General Semiconductor, Inc.
Melville, New York
We have audited the accompanying consolidated balance sheets of General
Semiconductor, Inc. and subsidiaries as of December 31, 1997 and 1998, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of General Semiconductor, Inc. and
subsidiaries as of December 31, 1997 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Jericho, New York
February 3, 1999 (June 30, 1999 as to Note 18)
F-2
<PAGE>
GENERAL SEMICONDUCTOR, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT STOCK PAR VALUE)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................... $ 5,192 $ 3,225 $ 5,846
Accounts receivable, less allowance for doubtful
accounts of $825, $769 and $809, respectively......... 54,077 59,643 62,460
Inventories............................................. 34,309 39,514 40,636
Prepaid expenses and other current assets............... 9,890 12,010 12,680
Deferred income taxes................................... 14,263 13,738 10,720
-------- -------- --------
Total current assets................................ 117,731 128,130 132,342
Property, plant and equipment--net...................... 218,752 223,743 228,568
Excess of cost over fair value of net assets acquired,
less accumulated amortization of $38,784, $43,929 and
$47,875, respectively................................. 167,895 162,751 158,895
Deferred income taxes................................... 26,509 29,376 28,980
Intangibles and other assets, less accumulated
amortization of $9,228, $11,099 and $12,484,
respectively.......................................... 19,418 19,447 19,201
-------- -------- --------
TOTAL ASSETS............................................ $550,305 $563,447 $567,986
-------- -------- --------
-------- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable........................................ $ 38,332 $ 31,343 $ 23,609
Accrued expenses........................................ 58,352 45,084 37,091
Current portion of long-term debt....................... 4,310 -- --
-------- -------- --------
Total current liabilities........................... 100,994 76,427 60,700
Long-term debt.......................................... 263,764 286,000 290,000
Deferred income taxes................................... 21,710 21,390 23,919
Other non-current liabilities........................... 77,476 74,283 72,349
-------- -------- --------
Total liabilities................................... 463,944 458,100 446,968
-------- -------- --------
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock, $0.01 par value; 20,000 shares
authorized; no shares issued.......................... -- -- --
Common Stock, $0.01 par value; 400,000 shares authorized;
36,887, 36,925 and 36,960 shares issued,
respectively.......................................... 369 369 370
Additional paid-in capital.............................. 55 507 609
Retained earnings....................................... 93,308 111,842 127,410
-------- -------- --------
93,732 112,718 128,389
Less--Treasury stock, at cost, 104 shares............... (7,371) (7,371) (7,371)
-------- -------- --------
Total stockholders' equity.......................... 86,361 105,347 121,018
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.............. $550,305 $563,447 $567,986
-------- -------- --------
-------- -------- --------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
GENERAL SEMICONDUCTOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------ --------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
NET SALES................................ $361,891 $380,038 $401,144 $302,382 $304,300
-------- -------- -------- -------- --------
OPERATING COSTS AND EXPENSES:
Cost of sales.......................... 230,687 289,313 283,582 211,720 224,418
Selling, general and administrative.... 42,594 44,668 46,802 34,769 33,542
Research and development............... 5,838 5,998 6,104 4,466 4,908
Amortization of excess of cost over
fair value of net assets acquired.... 5,154 5,143 5,145 3,858 3,856
Restructuring.......................... -- -- 12,324 -- --
-------- -------- -------- -------- --------
Total operating costs and expenses... 284,273 345,122 353,957 254,813 266,724
-------- -------- -------- -------- --------
OPERATING INCOME......................... 77,618 34,916 47,187 47,569 37,576
Other expense--net....................... (51) (42) (71) (84) 58
Interest expense--net.................... (10,396) (14,353) (20,026) (15,213) (16,876)
-------- -------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES........................... 67,171 20,521 27,090 32,272 20,758
Provision for income taxes............... (27,407) (11,649) (8,556) (10,005) (5,190)
-------- -------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS........ 39,764 8,872 18,534 22,267 15,568
DISCONTINUED OPERATIONS
Loss from discontinued operations, net of
income tax expense of $20,026 in 1996
and income tax benefit of $22,073 in
1997................................... (41,628) (2,939) -- -- --
-------- -------- -------- -------- --------
NET INCOME (LOSS)........................ $ (1,864) $ 5,933 $ 18,534 $ 22,267 $ 15,568
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic.................................. 32,924 35,414 36,811 36,808 36,821
Diluted................................ 36,852 35,576 36,899 36,898 36,934
BASIC EARNINGS (LOSS) PER SHARE:
Continuing operations.................. $ 1.20 $ 0.25 $ 0.50 $ 0.60 $ 0.42
Discontinued operations................ (1.26) (0.08) -- -- --
-------- -------- -------- -------- --------
Net income (loss)...................... $ (0.06) $ 0.17 $ 0.50 $ 0.60 $ 0.42
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
DILUTED EARNINGS (LOSS) PER SHARE:
Continuing operations.................. $ 1.15 $ 0.25 $ 0.50 $ 0.60 $ 0.42
Discontinued operations................ (0.88) (0.08) -- -- --
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Net income............................. $ 0.27 $ 0.17 $ 0.50 $ 0.60 $ 0.42
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
GENERAL SEMICONDUCTOR, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE INCOME
--------------------
COMMON STOCK ADDITIONAL UNREALIZED
------------------- PAID-IN RETAINED TREASURY UNEARNED GAIN ON
SHARES AMOUNT CAPITAL EARNINGS STOCK COMPENSATION INVESTMENT
-------- -------- ----------- -------- -------- ------------ --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996.... 31,509 $316 $ 667,134 $256,416 $(7,246) $(1,277) $ --
Exercise of stock options
and related tax benefit... 40 -- 3,475 -- -- -- --
Comprehensive income:
Net loss.................... -- -- -- (1,864) -- -- --
Total comprehensive
income.................... -- -- -- -- -- -- --
Amortization of unearned
compensation.............. -- -- -- -- -- 612 --
Treasury stock
transactions.............. -- -- -- -- (25) -- --
Conversion of Convertible
Junior Subordinated
Notes--net................ 2,737 27 255,585 -- -- -- --
------- ---- ----------- -------- ------- ------- --------
BALANCE, DECEMBER 31,
1996...................... 34,286 343 926,194 254,552 (7,271) (665) --
Exercise of stock options
and related tax benefit... 200 2 19,361 -- -- -- --
Comprehensive income:
Net income.................. -- -- -- 5,933 -- -- --
Unrealized gain on
investment, net of tax.... -- -- -- -- -- -- 22,018
Total comprehensive
income.................... -- -- -- -- -- -- --
Amortization of unearned
compensation.............. -- -- -- -- -- 243 --
Treasury stock
transactions.............. -- -- -- -- (100) -- --
Conversion of Convertible
Junior Subordinated
Notes--net................ 2,397 24 226,636 -- -- -- --
Distribution of General
Instrument and Commscope.. -- -- (1,172,191) (167,177) -- 422 (22,018)
Common stock issued......... 4 -- 55 -- -- -- --
------- ---- ----------- -------- ------- ------- --------
BALANCE, DECEMBER 31,
1997...................... 36,887 369 55 93,308 (7,371) -- --
Exercise of stock options
and related tax benefit... 38 -- 452 -- -- -- --
Comprehensive income:
Net income.................. -- -- -- 18,534 -- -- --
Total comprehensive
income.................... -- -- -- -- -- -- --
------- ---- ----------- -------- ------- ------- --------
BALANCE, DECEMBER 31,
1998...................... 36,925 369 507 111,842 (7,371) -- --
Exercise of stock options
and related tax benefit... 35 1 102 -- -- -- --
Comprehensive income:
Net income (unaudited)...... -- -- -- 15,568 -- -- --
Total comprehensive
income.................... -- -- -- -- -- -- --
------- ---- ----------- -------- ------- ------- --------
BALANCE, SEPTEMBER 30, 1999
(UNAUDITED)............... 36,960 $370 $ 609 $127,410 $(7,371) $ -- $ --
------- ---- ----------- -------- ------- ------- --------
------- ---- ----------- -------- ------- ------- --------
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
BALANCE, JANUARY 1, 1996.... $ 915,343
Exercise of stock options
and related tax benefit... 3,475
Comprehensive income:
Net loss.................... --
Total comprehensive
income.................... (1,864)
Amortization of unearned
compensation.............. 612
Treasury stock
transactions.............. (25)
Conversion of Convertible
Junior Subordinated
Notes--net................ 255,612
-----------
BALANCE, DECEMBER 31,
1996...................... 1,173,153
Exercise of stock options
and related tax benefit... 19,363
Comprehensive income:
Net income.................. --
Unrealized gain on
investment, net of tax.... --
Total comprehensive
income.................... 27,951
Amortization of unearned
compensation.............. 243
Treasury stock
transactions.............. (100)
Conversion of Convertible
Junior Subordinated
Notes--net................ 226,660
Distribution of General
Instrument and Commscope.. (1,360,964)
Common stock issued......... 55
-----------
BALANCE, DECEMBER 31,
1997...................... 86,361
Exercise of stock options
and related tax benefit... 452
Comprehensive income:
Net income.................. --
Total comprehensive
income.................... 18,534
-----------
BALANCE, DECEMBER 31,
1998...................... 105,347
Exercise of stock options
and related tax benefit... 103
Comprehensive income:
Net income (unaudited)...... --
Total comprehensive
income.................... 15,568
-----------
BALANCE, SEPTEMBER 30, 1999
(UNAUDITED)............... $ 121,018
-----------
-----------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
GENERAL SEMICONDUCTOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------ --------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
OPERATING ACTIVITIES:
Income from continuing operations............... $ 39,764 $ 8,872 $18,534 $22,267 $15,568
Adjustments to reconcile income from continuing
operations to net cash provided by continuing
operating activities:
Depreciation and amortization................. 22,613 24,232 24,982 18,424 20,534
Asset write-off in conjunction with
restructuring............................... -- -- 3,865 -- --
Changes in assets and liabilities, net of
effect of business acquired:
Accounts receivable......................... 9,190 (13,335) (5,565) (1,045) (2,817)
Inventories................................. (8,028) 2,465 (5,204) (1,761) (1,122)
Prepaid expenses and other current assets... 663 (3,208) (2,694) (2,903) (670)
Other non-current assets.................... 44 666 (766) (1,726) (1,136)
Deferred income taxes....................... 14,736 (1,236) (2,662) 528 5,943
Accounts payable and accrued expenses....... (12,655) 9,274 5,151 (14,702) (15,727)
Other non-current liabilities............... (222) 1,685 (3,193) (2,302) (1,934)
Other......................................... 2,014 (331) (689) (327) (628)
-------- -------- ------- ------- -------
Net cash provided by continuing operating
activities.................................... 68,119 29,084 31,759 16,453 18,011
-------- -------- ------- ------- -------
Cash (used in) provided by discontinued
operations.................................... (225,227) 145,452 (25,177) (25,177) --
-------- -------- ------- ------- -------
INVESTING ACTIVITIES:
Expenditures for property, plant and
equipment................................... (60,299) (29,208) (26,898) (17,780) (19,492)
Proceeds from sale (purchases) of short-term
investments................................. (24,974) 24,974 -- -- --
Proceeds from sale of assets.................. 4,368 3,000 -- -- --
Payment for business acquired................. -- (8,982) -- -- --
-------- -------- ------- ------- -------
Net cash used in investing activities........... (80,905) (10,216) (26,898) (17,780) (19,492)
-------- -------- ------- ------- -------
FINANCING ACTIVITIES:
Costs associated with the issuance of debt and
Common Stock................................ (1,053) (1,130) -- -- --
Net proceeds from (repayments of) revolving
credit facilities........................... 231,000 (192,000) 64,000 71,000 4,000
Redemption of Convertible Junior Subordinated
Notes....................................... (6,440) (245) -- -- --
Principal repayment of debt................... (4,310) (4,310) (46,074) (46,074) --
Proceeds from exercise of stock options....... 2,686 18,305 423 423 102
-------- -------- ------- ------- -------
Net cash provided by (used in) financing
activities.................................... 221,883 (179,380) 18,349 25,349 4,102
-------- -------- ------- ------- -------
Decrease in cash and cash equivalents........... (16,130) (15,060) (1,967) (1,155) 2,621
Cash and cash equivalents, beginning of
period........................................ 36,382 20,252 5,192 5,192 3,225
-------- -------- ------- ------- -------
Cash and cash equivalents, end of year period... $ 20,252 $ 5,192 $ 3,225 $ 4,037 $ 5,846
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
SUPPLEMENTAL CASH FLOW INFORMATION, RELATING TO
CONTINUING AND DISCONTINUED OPERATIONS:
Income taxes paid............................. $ 55,647 $ 37,224 $ 9,776 $14,276 $ 3,128
Interest paid................................. $ 41,766 $ 32,033 $19,677 $15,286 $18,902
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
General Semiconductor, Inc. ("General Semiconductor" or the "Company") is a
world leader in the discrete segment of the semiconductor industry. The Company
designs, manufactures and sells low-to-medium-power rectifiers, small signal
transistors and transient voltage suppression ("TVS") components in axial,
bridge, surface mount and array packages. Power rectifiers, small signal devices
and TVS products are semiconductors that are essential components of most
electronic devices and systems. Rectifiers convert alternating current (AC) into
direct current (DC) which can be utilized by electronic equipment. TVS devices
provide protection from electrical surges, ranging from electrostatic discharge
to induced lightning. Small signal devices amplify or switch low level currents.
The Company's products are primarily targeted for use in the computer,
automotive, telecommunications, lighting and consumer electronics industries.
General Instrument Corporation ("GI") (i) transferred all the assets and
liabilities relating to the manufacture and sale of broadband communications
products used in the cable television, satellite, and telecommunications
industries and all rights to the related GI trademarks to its wholly-owned
subsidiary NextLevel Systems, Inc. ("NextLevel"), and all the assets and
liabilities relating to the manufacture and sale of coaxial, fiber optic and
other electric cable used in the cable television, satellite and other
industries to its wholly-owned subsidiary CommScope, Inc. ("CommScope") and (ii)
distributed all of the outstanding shares of capital stock of each of NextLevel
and CommScope to its stockholders on a pro rata basis as a dividend (the
"Distribution") in a transaction that was finalized on July 28, 1997 (the
"Distribution Date"). On the Distribution Date, NextLevel and CommScope began
operating as independent entities with publicly traded common stock. GI retained
no ownership interest in either NextLevel or CommScope. Concurrent with the
Distribution, GI changed its name to General Semiconductor, Inc. and effected a
one for four reverse stock split (the "Stock Split"). On February 2, 1998
NextLevel changed its name to General Instrument Corporation ("General
Instrument").
In this report, all share and per share amounts have been retroactively
restated to reflect the Stock Split. In addition, the number of common shares
issued have been adjusted to reflect the Stock Split and an amount equal to the
par value of the reduction of the shares has been transferred from common stock
to additional paid-in capital as of January 1, 1996, the earliest period
reported.
The revenues, costs and expenses and cash flows of the businesses
transferred to General Instrument and CommScope (the "Discontinued Operations"),
have been excluded from the respective captions in the Consolidated Statements
of Operations and Consolidated Statements of Cash Flows and have been reported
through the Distribution Date as "Income (Loss) from discontinued operations",
net of applicable income taxes and as "Cash (used in) provided by discontinued
operations" for all periods presented. For the purpose of governing certain of
the ongoing relationships among General Semiconductor, General Instrument and
CommScope after the Distribution, these entities entered into various agreements
that provide for an orderly transition, the separation and distribution of the
operating assets and liabilities and pension plan assets and liabilities of GI,
as well as tax sharing, and other matters.
In the opinion of management, the accompanying unaudited consolidated
financial statements include all necessary adjustments (consisting of normal
recurring adjustments) and present fairly the Company's financial position as of
September 30, 1999, the results of its operations for the nine months ended
September 30, 1998 and 1999 and its cash flows for the nine months ended
September 30, 1998
F-7
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION (CONTINUED)
and 1999 in conformity with generally accepted accounting principles for
interim financial information applied on a consistent basis. There were no
adjustments of a non-recurring nature recorded during the nine months ended
September 30, 1998 and 1999. The results of operations for the nine months
ended September 30, 1999 are not necessarily indicative of the results to be
expected for the full year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The accompanying consolidated financial
statements include the accounts of General Semiconductor and its wholly-owned
subsidiaries. All intercompany accounts and transactions have been eliminated in
consolidation.
USE OF ESTIMATES. The preparation of the accompanying consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of sales and
expenses during the reporting period. Actual results could differ from those
estimates.
CASH EQUIVALENTS. The Company considers all highly liquid investments with
a maturity of three months or less at the date of purchase to be cash
equivalents.
INVENTORIES. Inventories are stated at the lower of cost, determined on a
first-in, first-out ("FIFO") basis, or market.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are stated at
cost. Provisions for depreciation are based on estimated useful lives of the
assets using the straight-line method. Useful lives are 12 to 40 years for
buildings and improvements; estimated useful life or lease term, whichever is
shorter, for leasehold improvements and 3 to 10 years for machinery and
equipment. The cost of maintenance and repairs is charged to operations as
incurred.
INTANGIBLE ASSETS. Intangible assets consist primarily of patents which are
amortized on a straight-line basis over their useful lives not exceeding 20
years.
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED. The excess of cost
over fair value of net assets acquired is being amortized on a straight-line
basis over 40 years. Management periodically evaluates the appropriateness of
both the carrying value and remaining life of the excess of cost over fair value
of net assets acquired by assessing recoverability based on forecasted operating
cash flows, on an undiscounted basis, and other factors.
LONG-LIVED ASSETS. In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," the Company evaluates long-lived
assets for impairment whenever events or changes in circumstances indicate that
the carrying values of such assets may not be recoverable. The Company evaluates
the carrying values of such assets using future undiscounted cash flows.
REVENUE RECOGNITION. The Company recognizes revenue when products are
shipped with appropriate provisions for uncollectible accounts and credits for
returns.
F-8
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION. The Company has determined the U.S. dollar to
be the functional currency of all foreign subsidiaries. Accordingly, gains and
losses recognized as a result of translating foreign subsidiaries' monetary
assets and liabilities from local foreign currencies to U.S. dollars are
reflected in the accompanying consolidated statements of operations.
RESEARCH AND DEVELOPMENT. The Company charges research and development
expenses to operations as incurred.
ENVIRONMENTAL LIABILITIES. The Company accounts for environmental
expenditures in accordance with Statement of Position 96-1, "Environmental
Remediation Liabilities". Accordingly, the Company accrues for environmental
expenses resulting from existing conditions that relate to past operations when
the costs are probable and reasonably estimable.
INCOME TAXES. Deferred income taxes reflect the future tax consequences of
differences between the financial reporting and income tax bases of assets and
liabilities. Deferred income taxes are provided for the income tax liabilities
to be incurred on the repatriation of undistributed earnings of the Company's
foreign subsidiaries, except for locations where the Company has designated
earnings to be permanently reinvested.
COMPREHENSIVE INCOME. In 1998 the Company adopted SFAS No. 130, "Reporting
Comprehensive Income". This statement establishes rules for the reporting of
comprehensive income and its components. Comprehensive income is presented in
the Consolidated Statement of Stockholders' Equity. The adoption of SFAS 130 had
no impact on total stockholders' equity. Prior year financial statements have
been reclassified to conform to the SFAS 130 requirements.
RECLASSIFICATIONS. Certain prior year amounts have been reclassified to
conform to the current year presentation.
3. ACQUISITION
On October 1, 1997 the Company purchased certain assets and assumed certain
liabilities related to the discrete semiconductor business of ITT Industries,
Inc. for $8.0 million plus $1.0 million in direct transaction costs. The
acquisition was accounted for as a purchase transaction and, accordingly, the
results of operations are included in the Consolidated Statement of Operations
since the date of acquisition. The pro forma effects, assuming this transaction
was effective January 1, 1996, were not material to the Company's results of
operations, financial position or cash flows for the years ended December 31,
1996 and 1997.
F-9
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
4. INVENTORIES
<TABLE>
<CAPTION>
INVENTORIES CONSIST OF: DECEMBER 31, 1997 DECEMBER 31, 1998 SEPTEMBER 30, 1999
- ----------------------- ----------------- ----------------- ------------------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials............... $ 7,181 $ 5,139 $ 5,881
Work in process............. 12,052 14,181 12,568
Finished goods.............. 15,076 20,194 22,187
------- ------- -------
Total....................... $34,309 $39,514 $40,636
------- ------- -------
------- ------- -------
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
Land and land improvements.................. $ 76,328 $ 76,321
Buildings, improvements and leasehold
improvements.............................. 63,485 64,106
Machinery and equipment..................... 208,067 232,690
--------- ---------
347,880 373,117
Accumulated depreciation.................... (129,128) (149,374)
--------- ---------
Property, plant and equipment, net.......... $ 218,752 $ 223,743
--------- ---------
--------- ---------
</TABLE>
Depreciation expense aggregated $14.4 million, $16.8 million and $18.0
million for 1996, 1997 and 1998, respectively.
6. ACCRUED EXPENSES
Accrued expenses consist of:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
Salaries and compensation liabilities....... $14,849 $14,355
Distribution and reorganization
liabilities............................... 18,734 --
Restructuring liabilities................... -- 7,809
Benefit plan liabilities.................... 4,916 7,709
Other....................................... 19,853 15,211
------- -------
Total....................................... $58,352 $45,084
------- -------
------- -------
</TABLE>
In connection with the Distribution, the Company recorded in income from
continuing operations a pre-tax charge of $32.7 million to cost of sales and
$1.1 million to selling, general and administrative expenses during the year
ended December 31, 1997. These costs related to employees of General
Semiconductor and were incurred in connection with the separation of the Taiwan
operations between General Semiconductor and General Instrument.
F-10
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
6. ACCRUED EXPENSES (CONTINUED)
On November 6, 1998 the Company announced a restructuring plan designed to
enhance the interface of operations and customers, to improve its cost
structure, efficiency and its competitive position and to accelerate growth. The
restructuring included reducing the workforce by decentralizing certain
purchasing, marketing, finance and research and development functions and
providing early retirement to a group of employees, closing two sales offices
and writing off assets related to an unprofitable product that will no longer be
manufactured. Restructuring charges recorded in the fourth quarter of 1998
included approximately $8.4 million in charges primarily related to severance
and early retirement costs and $3.9 million in non-cash charges for asset
write-offs.
7. OTHER NON-CURRENT LIABILITIES
Other non-current liabilities consist of:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
Environmental liabilities................... $32,415 $29,363
Benefit plan liabilities.................... 36,070 35,596
Other....................................... 8,991 9,324
------- -------
Total....................................... $77,476 $74,283
------- -------
------- -------
</TABLE>
8. INCOME TAXES
General Semiconductor, General Instrument and CommScope entered into a tax
sharing agreement (the "Tax Sharing Agreement") that defines the parties' rights
and obligations with respect to federal, state and other income or franchise
taxes related to the businesses of GI for tax periods prior to, including and
following the Distribution and with respect to certain other tax matters.
General Instrument is responsible for consolidated federal income taxes,
consolidated or combined state income taxes and separate state income taxes of
GI and its subsidiaries and preparation and filings of the applicable returns
through July 25, 1997. Such liability was determined assuming a closing of the
books on July 25, 1997. Liability for foreign income taxes and other taxes was
generally allocated to the legal entity on which such taxes were imposed except
that liability for taxes relating to the transferred businesses (as defined in
the Tax Sharing Agreement) were generally allocated to General Instrument.
Notwithstanding the above, each of General Instrument, CommScope and General
Semiconductor is responsible for any such taxes to the extent that such taxes
are attributable to action taken by that entity or its affiliates after the
Distribution that is inconsistent with the tax treatment contemplated in the tax
ruling received from the Internal Revenue Service. The Company believes that the
Tax Sharing Agreement is fair to each of the parties and contains terms which
generally are comparable to those which would have been reached at arms-length
negotiations with unaffiliated parties.
The domestic and foreign components of income from continuing operations
before income taxes is:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Domestic......................................... $62,084 $16,354 $ 8,141
Foreign.......................................... 5,087 4,167 18,949
------- ------- -------
Total............................................ $67,171 $20,521 $27,090
------- ------- -------
------- ------- -------
</TABLE>
F-11
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
8. INCOME TAXES (CONTINUED)
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1997 1998
------- ------- ------
<S> <C> <C> <C>
Current:
Federal........................................... $ 9,477 $ 4,691 $3,848
Foreign........................................... 2,842 2,754 6,539
State............................................. 922 2,200 831
------- ------- ------
13,241 9,645 11,218
------- ------- ------
Deferred:
Federal........................................... 9,472 3,066 (11)
Foreign........................................... 3,129 (1,325) (2,478)
State............................................. 2,015 263 (173)
------- ------- ------
14,616 2,004 (2,662)
------- ------- ------
Net change in valuation allowance................. (450) -- --
------- ------- ------
Provision for income taxes........................ $27,407 $11.649 $8,556
------- ------- ------
------- ------- ------
</TABLE>
The following table presents the principal reasons for the difference
between the actual income tax provision and the tax provision computed by
applying the U.S. federal statutory income tax rate to income from continuing
operations before income taxes:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Federal income tax provision at 35%.............. $23,510 $ 7,182 $ 9,482
Valuation allowance benefit...................... (450) -- --
State income taxes-net of federal benefit........ 1,909 1,601 428
Foreign operations............................... 1,805 1,470 (2,166)
Non-deductible expenses.......................... 1,844 914 1,945
Other-net........................................ (1,211) 482 (1,133)
------- ------- -------
Provision for income taxes....................... $27,407 $11,649 $ 8,556
------- ------- -------
------- ------- -------
Effective income tax rate........................ 40.8% 56.8% 31.6%
</TABLE>
Income taxes related to foreign operations in 1996, 1997 and 1998 reflect
the Company's ability to recognize the benefit of foreign tax credits.
F-12
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
8. INCOME TAXES (CONTINUED)
Deferred income taxes recorded in the accompanying consolidated balance
sheets are comprised of:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998
------------------------------ ------------------------------
ASSET LIABILITY NET ASSET LIABILITY NET
-------- ------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Current Deferred Income Taxes:
Accounts receivable and inventory
reserves................................ $ 2,177 $ -- $ 2,177 $ 3,845 $ -- $ 3,845
Product and warranty liabilities.......... 437 -- 437 332 -- 332
Employee benefits......................... 5,576 -- 5,576 5,213 -- 5,213
Other current............................. 6,073 -- 6,073 4,348 -- 4,348
-------- ------- -------- -------- ------- --------
$ 14,263 $ -- $ 14,263 $ 13,738 $ -- $ 13,738
-------- ------- -------- -------- ------- --------
-------- ------- -------- -------- ------- --------
Non-Current Deferred Income Taxes:
Domestic capital loss carryforwards....... $ 17,518 $ -- $ 17,518 $ 17,518 $ -- $ 17,518
Fixed and intangible assets............... (4,745) 1,081 (5,826) (6,041) -- (6,041)
Environmental liabilities................. 12,318 -- 12,318 11,158 -- 11,158
Employee benefits......................... 12,535 205 12,330 12,188 -- 12,188
Other non-current......................... 8,660 20,424 (11,764) 14,330 21,390 (7,060)
Valuation allowance....................... (19,777) -- (19,777) (19,777) -- (19,777)
-------- ------- -------- -------- ------- --------
$ 26,509 $21,710 $ 4,799 $ 29,376 $21,390 $ 7,986
-------- ------- -------- -------- ------- --------
-------- ------- -------- -------- ------- --------
</TABLE>
In accordance with the Tax Sharing Agreement, approximately $17.8 million of
deferred tax assets related to the Company were allocated to General Instrument
in connection with the Distribution.
Deferred taxes have not been provided on undistributed earnings of certain
foreign operations of $9.9 million and $14.3 million in 1997 and 1998,
respectively, as those earnings are considered to be permanently reinvested.
Determining the tax liability that would arise if these amounts were remitted is
not practicable.
The valuation allowance at December 31,1998 relates principally to domestic
capital loss carryforwards, which expire in 2002. The valuation allowance will
be reduced when and if the Company generates domestic capital gains.
During 1996 the Company settled certain tax matters which resulted in
credits to excess of cost over fair value of net assets acquired of $1.8 million
since such matters related to the period prior to August 1990, when affiliates
of Forstmann Little & Co., a private investment firm, acquired the Company.
F-13
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
9. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
Senior bank indebtedness:
Revolving credit facility................. $222,000 $286,000
Taiwan loan............................... 46,074 --
-------- --------
268,074 286,000
Less current maturities..................... 4,310 --
-------- --------
Long-term debt.............................. $263,764 $286,000
-------- --------
-------- --------
</TABLE>
In July 1997, the Company entered into a bank credit agreement, which was
amended in December 1998, (as amended, the "Credit Agreement") which provides
for a $350.0 million secured revolving credit facility that matures on December
31, 2002. The Credit Agreement requires the Company to pay a facility fee on the
total commitment. The Credit Agreement permits the Company to choose between two
interest rate options: the Adjusted Base Rate (as defined in the Credit
Agreement), or a Eurodollar rate (LIBOR) plus a margin which varies based on the
Company's ratio of indebtedness to earnings before interest, taxes, depreciation
and amortization as defined in the Credit Agreement. The facility fee also
varies based on that ratio. The Company is also able to set interest rates
through a competitive bid procedure. The Credit Agreement, contains financial
and operating covenants, including limitations on guarantee obligations, liens,
sale of assets, indebtedness, investments, capital expenditures, payment of
dividends and leases, and requires the maintenance of certain financial ratios.
In addition, certain changes in control of the Company would cause an event of
default under the Credit Agreement. The December 1998 amendment amended certain
covenant compliance calculations to provide the Company with greater flexibility
to execute the restructuring announced on November 6, 1998. At December 31, 1998
the Company was in compliance with all such amended covenants.
At December 31, 1997 the Company had a $60 million loan agreement with a
consortium of banks in Taiwan. On February 26, 1998 the Company consolidated its
debt and repaid the entire Taiwan loan balance of $46.1 million with proceeds
from borrowings under the Credit Agreement.
In May 1996, the Company issued a notice to redeem $250 million in principal
amount of its 5% Convertible Junior Subordinated Notes (the "Notes"). Of the
Notes called, $244 million in principal amount were converted into the Company's
Common Stock prior to the redemption date, with the remaining $6 million
redeemed for cash. Additionally, $16 million and $6 million in principal amount
of Notes that were not called for redemption were also converted into GI Common
Stock during 1996 and 1995, respectively. These conversions resulted in the
issuance of 2.8 million shares of Common Stock. In connection with the Common
Stock conversions, $4.4 million was charged to additional paid-in capital, net
of the related tax benefit, for unamortized deferred financing costs and accrued
but unpaid interest related to the converted Notes. During 1997 the remaining
Notes outstanding were converted into GI Common Stock at a conversion price of
$23.75 per share (unadjusted for the Distribution and Stock Split) resulting in
the issuance of 2.4 million shares, and $0.2 million in principal amount of
Notes were redeemed. In connection with the conversion, GI charged approximately
$1.5 million to additional paid-in capital, net of the related tax benefit, for
unamortized deferred financing costs and accrued but unpaid interest related to
the converted Notes.
F-14
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
9. LONG-TERM DEBT (CONTINUED)
The Company repaid the GI revolving credit facility in July 1997 utilizing a
combination of the bank credit facility described above and amounts received
from General Instrument and CommScope at the Distribution Date totaling $170.1
million.
The Company entered into two interest rate swap transactions with a term of
one year beginning on January 22, 1998. Pursuant to these agreements it paid a
fixed interest rate averaging 5.96% on a notional amount of $100 million and
received interest on the $100 million notional amount based on a three month
LIBOR rate set quarterly beginning on January 22, 1998. The fair value of the
swaps as of December 31, 1998 was $(0.2) million. During February 1998, the
Company purchased two interest rate caps each with a notional amount of $50
million. The caps became effective on April 27, 1998 and June 29, 1998 with
terms of nine months and six months, respectively. Under the terms of the caps,
the Company was paid an amount equal to the excess, if any, of three month LIBOR
above 6% multiplied by the notional amounts. The cost of the caps was
immaterial. The purpose of the swap agreement and the caps is to reduce its
amount of debt subject to floating interest rates.
The weighted average interest rate on the Company's long-term debt at
December 31, 1997 and 1998 was 6.6% and 5.8%, respectively.
Net interest expense included in the 1996 and 1997 Consolidated Statement of
Operations through the Distribution Date represents an allocation based upon
General Semiconductor's net assets as a percentage of total assets of GI.
10. COMMITMENTS AND CONTINGENCIES
The Company leases office space, manufacturing facilities and transportation
and other equipment under operating leases which expire at various dates through
the year 2004. Rent expense was $2.9 million, $3.3 million and $5.4 million in
1996, 1997 and 1998, respectively.
Future minimum lease payments required under operating leases as of December
31, 1998 are:
<TABLE>
<S> <C>
1999........................................................ $4,454
2000........................................................ 3,028
2001........................................................ 1,853
2002........................................................ 1,255
2003........................................................ 1,119
Thereafter.................................................. 295
</TABLE>
The Company has approximately $11.0 million in letters of credit outstanding
at December 31, 1998.
ENVIRONMENTAL MATTERS. The Company is subject to various federal, state,
local and foreign laws and regulations governing environmental matters,
including the use, discharge and disposal of hazardous materials. The Company's
manufacturing facilities are believed to be in substantial compliance with
current laws and regulations. Complying with current laws and regulations has
not had a material adverse effect on the Company's financial condition. In
connection with the Distribution, the Company retained the obligations with
respect to environmental matters relating to its discontinued operations and its
status as a "potentially responsible party." The Company is presently engaged in
the remediation of eight discontinued operations in six states, and is a
"potentially responsible party" at five hazardous waste sites in four states.
F-15
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company has engaged independent consultants to assist management in
evaluating potential liabilities related to environmental matters. Management
assesses the input from these independent consultants along with other
information known to the Company in its effort to continually monitor these
potential liabilities. Management assesses its environmental exposure on a
site-by-site basis, including those sites where the Company has been named as a
"potentially responsible party". Such assessments include the Company's share of
remediation costs, information known to the Company concerning the size of the
hazardous waste sites, their years of operation and the number of past users and
their financial viability. The Company has a reserve recorded for environmental
matters of $31.9 million at December 31, 1998 ($34.9 million at December 31,
1997). While the ultimate outcome of these matters cannot be determined,
management does not believe that the final disposition of these matters will
have a material adverse effect on the Company's financial position, results of
operations or cash flows beyond the amounts previously provided for in the
financial statements.
The Company's present and past facilities have been in operation for many
years, and over that time in the course of those operations, such facilities
have used substances which are or might be considered hazardous, and the Company
has generated and disposed of wastes which are or might be considered hazardous.
Therefore, it is possible that additional environmental issues may arise in the
future, which the Company cannot now predict.
LITIGATION. A securities class action is presently pending in the United
States District Court for the Northern District of Illinois, Eastern Division,
IN RE GENERAL INSTRUMENT CORPORATION SECURITIES LITIGATION.This action, which
consolidates numerous class action complaints filed in various courts between
October 10 and October 27, 1995, is brought by plaintiffs, on their own behalf
and as representatives of a class of purchasers of GI common stock during the
period March 21, 1995 through October 18, 1995. The complaint alleges that prior
to the Distribution, GI and certain of its officers and directors, as well as
Forstmann Little & Co. and certain related entities, violated the federal
securities laws, namely, Sections 10(b) and 20(a) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), by allegedly making false and
misleading statements and failing to disclose material facts about GI's planned
shipments in 1995 of its CFT-2200 and DigiCipher II products. Also pending in
the same court, under the same name, is a derivative action brought on behalf of
GI. The derivative action alleges that the members of GI's Board of Directors,
several of its officers and Forstmann Little & Co. and related entities have
breached their fiduciary duties by reason of the matter complained of in the
class action and the defendants' alleged use of material non-public information
to sell shares of GI common stock for personal gain.
An action entitled BKP PARTNERS, L.P. V. GENERAL INSTRUMENT CORP. was
brought in February 1996 by certain holders of preferred stock of Next Level
Communications ("NLC"), which was merged into a subsidiary of GI in September
1995. The action was originally filed in the Northern District of California and
was subsequently transferred to the Northern District of Illinois. The
plaintiffs allege that the defendants violated federal securities laws by making
misrepresentations and omissions and breached fiduciary duties to NLC in
connection with the acquisition of NLC by GI. Plaintiffs seek, among other
things, unspecified compensatory and punitive damages and attorney's fees and
costs.
In connection with the Distribution, General Instrument (formerly "NextLevel
Systems, Inc.") agreed to indemnify the Company with respect to its obligations,
if any, arising out of or relating to IN
F-16
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
RE GENERAL INSTRUMENT CORPORATION SECURITIES LITIGATION (including the
derivative action), and the BKP PARTNERS, L.P. V. GENERAL INSTRUMENT CORP.
litigation. Therefore, management is of the opinion that the resolution of these
matters will have no effect on the Company's consolidated financial position,
results of operations or cash flows.
General Semiconductor is not a party to any pending legal proceedings other
than various claims and lawsuits arising in the normal course of business and
those for which they are indemnified. Management is of the opinion that such
litigation or claims will not have a material adverse effect on the Company's
consolidated financial position, results of operations or cash flows.
11. EMPLOYEE BENEFITS
In February 1998, the Financial Accounting Standards Board issued SFAS No.
132 "Employer' Disclosures about Pensions and Other Post-Retirement Benefits--an
amendment of FASB Statement No. 87, 88 and 106". SFAS 132 revises employers'
disclosures about pension and other post-retirement benefit plans. It does not
change the measurement of recognition of those plans. The Company has adopted
the provisions of SFAS 132 in their disclosures below.
PENSION PLANS. In connection with the Distribution, the Company, General
Instrument and CommScope entered into an Employee Benefits Allocation Agreement
(the "Agreement"). The Agreement provides that the Company generally will assume
or retain, as the case may be, all liabilities under employee benefits plans
maintained by GI or any of its subsidiaries with respect to employees of General
Semiconductor or any of its retained subsidiaries and employees of previously
divested operations other than the liabilities related to employees of General
Instrument or CommScope subsequent to the Distribution.
Net periodic pension cost consists of:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------------------------
1996 1997 1998
------------------- ------------------- -------------------
DOMESTIC FOREIGN DOMESTIC FOREIGN DOMESTIC FOREIGN
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Service cost..................................... $ 325 $2,968 $ 407 $2,746 $ 482 $2,513
Interest......................................... 4,616 3,503 5,117 3,301 5,209 3,040
Expected return on plan assets................... (5,670) (1,663) (5,620) (1,185) (5,979) (853)
Transition (asset) obligation.................... -- -- -- 188 -- 160
Amortization of prior service costs.............. 878 906 (12) -- (12) --
Recognized actuarial (gain) or loss.............. -- -- 2 756 198 522
------ ------ ------ ------ ------ ------
Net periodic pension cost (income)............... $ 149 $5,714 $ (106) $5,806 $ (102) $5,382
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
</TABLE>
F-17
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
11. EMPLOYEE BENEFITS (CONTINUED)
The status of the Company's continuing pension plans and the related amounts
recorded in the accompanying consolidated balance sheets are:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998
------------------- -------------------
DOMESTIC FOREIGN DOMESTIC FOREIGN
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Change in Benefit Obligation
Benefit obligation at beginning of year.................. $65,431 $ 60,586 $75,741 $ 46,863
Service cost........................................... 407 2,746 482 2,513
Interest cost.......................................... 5,117 3,301 5,209 3,040
Actuarial (gain) or loss............................... 9,034 2,086 4,499 (174)
Impact of foreign exchange............................. -- (8,119) -- 885
Benefits paid.......................................... (4,248) (151) (5,646) (2,540)
Curtailment loss....................................... -- 3,272 -- --
Settlement payment..................................... -- (16,858) -- --
------- -------- ------- --------
Benefit obligation at end of year........................ 75,741 46,863 80,285 50,587
------- -------- ------- --------
Change in Plan Assets
Fair value of plan assets at beginning of year........... 67,599 23,944 78,539 11,018
Actual return on plan assets (net of expenses)......... 15,188 999 13,012 1,132
Employer contributions................................. -- 6,568 -- 2,543
Impact of foreign exchange............................. -- (3,484) -- 155
Benefits paid.......................................... (4,248) (17,009) (5,646) (2,540)
------- -------- ------- --------
Fair value of plan assets at end of year................. 78,539 11,018 85,905 12,308
------- -------- ------- --------
Reconciliation of the Funded Status
Funded status.......................................... 2,798 (35,845) 5,620 (38,279)
Unrecognized transition (asset) or obligation.......... -- 1,670 -- 1,523
Unrecognized prior service cost........................ (77) -- (65) --
Unrecognized actuarial (gain) or loss.................. (834) 12,451 (3,567) 11,496
------- -------- ------- --------
Asset (liability) recognized at year-end............... $ 1,887 $(21,724) $ 1,988 $(25,260)
------- -------- ------- --------
Actuarial assumptions:
Discount rate............................................ 7.00% 6.75% 6.75% 6.75%
Investment return........................................ 9.00% 7.00% 9.00% 7.00%
Compensation increases................................... 4.75% 6.00% 4.75% 6.00%
</TABLE>
The domestic pension plans consist principally of a qualified retirement
plan which has satisfied the full funding limitation requirements under the
Employee Retirement Income Security Act of 1974 ("ERISA"). Contributions to the
plan in 1996 were $3.8 million. The Company made no contributions to the plan in
1997 or 1998. Domestic plan assets consist of fixed income and equity
securities. The Company also has an unfunded supplemental retirement plan for
certain members of management. Net pension cost and accrued pension obligations
for this plan are included in the amounts above.
The foreign pension plans consist principally of a Taiwan and a German
pension plan which are funded in accordance with statutory requirements. Foreign
pension contributions were $2.7 million in 1996. Foreign plan assets principally
consist of fixed income securities.
F-18
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
11. EMPLOYEE BENEFITS (CONTINUED)
DEFINED CONTRIBUTION PLANS. The Company maintains defined contribution plans
covering all domestic non-union employees and employees in Ireland and France.
Company contributions were $0.4 million in 1996 and $0.7 million in 1997 and
1998.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. The Company maintains an
unfunded contributory group medical plan (the "Plan") for all full-time U.S.
employees not covered by a collective bargaining agreement who meet defined age
and service requirements. The Company recognizes the cost of providing and
maintaining postretirement benefits during employees' active service periods.
The Plan is the primary provider of benefits for retirees up to age 65. After
age 65, Medicare becomes the primary provider. Net periodic postretirement
benefit cost consists of:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Service cost.......................................... $ 78 $ 87 $ 91
Interest.............................................. 872 891 918
Amortization of prior service cost.................... (383) (383) (383)
Recognized actuarial (gain) or loss................... -- 12 135
---- ---- ----
Net periodic postretirement benefit cost.............. $567 $607 $761
---- ---- ----
</TABLE>
The status of the Plan and the related amounts recorded in the accompanying
consolidated balance sheets are:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998
------------------ ------------------
<S> <C> <C>
Change in Benefit Obligation
Benefit obligation at beginning of year................... $ 11,888 $ 13,286
Service cost............................................ 87 91
Interest cost........................................... 891 918
Actuarial (gain) or loss................................ 1,932 2,056
Benefits paid........................................... (1,512) (2,424)
-------- --------
Benefit obligation at end of year......................... 13,286 13,927
-------- --------
Change in Plan Assets
Fair value of plan assets at beginning of year............ -- --
Actual return on plan assets............................ -- --
Employer contributions.................................. 1,512 2,424
Benefits paid........................................... (1,512) (2,424)
-------- --------
Fair value of plan assets at end of year.................. -- --
-------- --------
Reconciliation of the Funded Status
Funded status............................................. (13,286) (13,927)
Unrecognized transition (asset) or obligation............. -- --
Unrecognized prior service cost........................... (5,217) (4,834)
Unrecognized actuarial (gain) or loss..................... 3,033 4,955
-------- --------
Accrued benefit liability at year end..................... $(15,470) $(13,806)
-------- --------
-------- --------
Actuarial assumptions:
Discount rate............................................. 7.00% 6.75%
Expected return on plan assets............................ N/A N/A
</TABLE>
F-19
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
11. EMPLOYEE BENEFITS (CONTINUED)
The assumed rate of future increases in health care costs for 1997 and 1998
was 12.5% and 11.25%, respectively, for pre-age 65 retirees, and 10% and 9%,
respectively, for post-age 65 retirees, and is expected to decline to 6% by the
year 2003 for pre-age 65 retirees and by the year 2005 for post-age 65 retirees,
respectively. Under the Plan, the actuarially determined effect of a one
percentage point increase in the assumed health care cost trend rate on annual
net postretirement benefit cost and the APBO would be $1.3 million and $1.4
million, respectively, for 1997 and 1998.
In accordance with the Employee Benefits Allocation Agreement, approximately
$8.0 million of net pension liabilities related to the Company were transferred
to General Instrument in connection with the Distribution for the year ended
December 31, 1997.
POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS. The postemployment benefits
obligation relates principally to medical costs for former employees on
long-term disability. As of December 31, 1997 and 1998 $0.9 million and $1.0
million was accrued for postemployment benefits, respectively.
12. STOCKHOLDERS' EQUITY
DISTRIBUTION. GI distributed all of its outstanding shares of capital stock
of each of General Instrument and CommScope to its stockholders on a pro rata
basis as a dividend in a transaction that was consummated on July 28, 1997.
Approximately 147.3 million shares of General Instrument Common Stock, based on
a ratio of one for one, were distributed to GI's stockholders of record on July
25, 1997. On July 28, 1997 approximately 49.1 million shares of CommScope Common
Stock, based on a ratio of one for three, were distributed to General Instrument
stockholders of record on that date. General Semiconductor (formerly GI)
retained no ownership interest in either General Instrument or CommScope.
Additionally, immediately following the Distribution, General Semiconductor
effected a one for four reverse stock split.
STOCK OPTION PLAN. Following the Distribution, the Company continued in
effect the 1993 Long-Term Incentive Plan, renamed the Amended and Restated
General Semiconductor, Inc. 1993 Long-Term Incentive Plan (the "1993 LTIP") as
adjusted to reflect the Distribution and Stock Split. Stock options granted
generally vest ratably over a three year period beginning on the first
anniversary from the date granted, expire after ten years and have exercise
prices equal to the market value of the Company's common stock at the date of
grant.
In May 1998, the stockholders of the Company approved the adoption of the
General Semiconductor, Inc. 1998 Long-Term Incentive Plan (the "1998 LTIP")
which provides for the granting of stock options, stock appreciation rights,
restricted stock, performance units, performance shares and phantom stock to
employees of the Company and its subsidiaries and the granting of stock options
to directors of the Company. The 1998 LTIP replaces the Company's 1993 LTIP. No
further awards or options were granted pursuant to the 1993 LTIP. All shares
available for future grant under the 1993 LTIP and those shares in respect of
options or awards granted or issued pursuant to the 1993 LTIP which are
subsequently forfeited, expired or otherwise terminate without having been
exercised will be added to the number of shares available for grant under the
1998 LTIP.
F-20
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
12. STOCKHOLDERS' EQUITY (CONTINUED)
The following table summarizes stock option activity relating to the
Company's 1993 LTIP and 1998 LTIP (collectively, the "LTIP Plans") since the
Distribution.
<TABLE>
<CAPTION>
WEIGHTED-
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Outstanding at Distribution Date..................... 2,838 $11.77
Granted.............................................. 195 14.94
Cancelled............................................ (17) 12.00
----- ------
Options outstanding at December 31, 1997............. 3,016 $11.98
Granted.............................................. 1,715 8.96
Exercised............................................ (38) 11.28
Cancelled............................................ (69) 12.03
----- ------
Options outstanding at December 31, 1998............. 4,624 $10.86
----- ------
----- ------
</TABLE>
For the period January 1, 1997 through the Distribution, 8,422 options to
purchase GI common stock were granted, 798 options were exercised and 4,032
options were canceled. The weighted-average exercise price of these options
(unadjusted for the Distribution and Stock Split) was $23.14, $22.95 and $29.50,
respectively. At the Distribution Date, all unexercised GI stock options held by
General Semiconductor employees and certain Directors of GI were converted into
General Semiconductor stock options. For the holders of unexercised General
Semiconductor stock options, the number of options was adjusted and all exercise
prices were decreased immediately following the Distribution to preserve the
economic value of the options that existed prior to the Distribution Date.
The following table summarizes information about stock options outstanding
and exercisable under the Company's LTIP Plans.
<TABLE>
<CAPTION>
SHARES UNDER OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------- ---------------------
WEIGHTED-
NUMBER AVERAGE NUMBER
OUTSTANDING REMAINING WEIGHTED- EXERCISABLE WEIGHTED-
AT CONTRACTUAL AVERAGE AT AVERAGE
RANGE OF DECEMBER 31, TERM EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICES 1998 (YEARS) PRICE 1998 PRICE
- ---------------- ----- --- ------ ------ ------
<S> <C> <C> <C> <C> <C>
$1.48 to $11.60 1,382 8.7 $ 7.37 258 $ 8.35
$11.75 to $12.06 1,613 8.0 $11.75 705 $11.75
$12.36 to $14.94 1,629 7.4 $12.94 907 $13.02
----- ------
4,624 8.0 $10.86 1,870 $11.90
----- ------
</TABLE>
At December 31, 1997 and 1998, 0.7 million shares and 3.8 million shares,
respectively, were reserved for future awards under the Company's LTIP Plans.
The tax benefits arising from stock options exercised during the years ended
December 31, 1996, 1997 and 1998 in the amount of $0.8 million, $1.1 million,
and $0.1 million, respectively, were recorded in stockholders' equity as
additional paid-in capital.
F-21
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
12. STOCKHOLDERS' EQUITY (CONTINUED)
In addition, under the provisions of the Incentive Plan, the Company issued
4 thousand shares of Common Stock to certain members of its Board of Directors
during the year ended December 31, 1997.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
its LTIP Plans. Since the exercise price of all stock options granted under the
LTIP Plans in 1996, 1997 and 1998 was equal to the closing price of the Common
Stock on the New York Stock Exchange on the date of grant, no compensation
expense has been recognized by the Company for its stock-based compensation plan
during these years other than for restricted stock agreements. Compensation
expense, relating to both continuing and discontinued operations, would have
been $21.9 million, $27.1 million and $5.4 million in 1996, 1997 and 1998,
respectively, had compensation cost for stock options awarded during these years
under the Company's stock option agreements been determined based upon the fair
value at the grant date consistent with the methodology prescribed under SFAS
No. 123, "Accounting for Stock-Based Compensation". The Company's pro forma net
income (loss) and diluted earnings (loss) per share would have been ($15.2)
million and ($0.46) per share for 1996, $(10.9) million and $(0.31) per share
for 1997 and $15.2 million and $0.41 per share for 1998. The estimated
weighted-average per share fair value of the options granted during 1996 was
$10.80, was $9.70 January 1, 1997 through the Distribution Date, $6.38 for the
remainder of 1997 and $4.18 for 1998, on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Expected life (years).................................. 4.0 4.0 4.0
Risk-free interest rate................................ 6.18% 6.39% 4.81%
Expected volatility-pre-Distribution................... 43% 43% N/A
Expected volatility-post-Distribution.................. N/A 45% 54%
Expected dividend yield................................ 0% 0% 0%
</TABLE>
The pro forma effect on net income (loss) and earnings (loss) per share for
1996, 1997 and 1998 may not be representative of the pro forma effect in future
years because it includes compensation cost on a straight-line basis over the
vesting periods of the grants and does not take into consideration the pro forma
compensation costs for grants made prior to 1995.
STOCKHOLDER RIGHTS PLAN. On January 6, 1997 the Board of Directors adopted a
stockholder rights plan designed to protect stockholders from various abusive
takeover tactics, including attempts to acquire control of the Company at an
inadequate price. Under the rights plan, which was amended in March 1999, each
stockholder, subsequent to the distribution date of January 24, 1997, receives a
dividend of one right for each outstanding share of Common Stock. The rights are
attached to, and presently only trade with, the Common Stock and currently are
not exercisable. Except as specified below, upon becoming exercisable, all
rights holders will be entitled to purchase from the Company one one-thousandth
of a share of Series A Junior Participating Preferred Stock ("Participating
Preferred Stock") at a price of $100.
The rights become exercisable and will begin to trade separately from the
Common Stock upon the earlier of (i) the first date of public announcement that
a person or group (other than an existing 15%
F-22
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
12. STOCKHOLDERS' EQUITY (CONTINUED)
stockholder or pursuant to a Permitted Offer, as defined) has acquired
beneficial ownership of 15% or more of the outstanding Common Stock, or (ii) 10
business days following a person's or group's commencement of, or announcement
of, an intention to commence a tender or exchange offer, the consummation of
which would result in beneficial ownership of 15% or more of the Common Stock.
The rights will entitle holders to purchase Common Stock having a market value
(immediately prior to such acquisition) of twice the exercise price of the right
in lieu of purchasing the Participating Preferred Stock. If the Company is
acquired through a merger or other business combination transaction (other than
a Permitted Offer, as defined), each right will entitle the holder to purchase
common stock of the surviving company having a market value (immediately prior
to such acquisition) of twice the exercise price of the right. The Company may
redeem the rights for $0.01 each at any time prior to such acquisition. The
rights will expire on January 6, 2007, unless earlier redeemed.
In connection with the stockholder rights plan, the Board of Directors
approved the creation of, out of the authorized but unissued shares of preferred
stock of the Company, the Participating Preferred Stock, consisting of 0.4
million shares with a par value of $0.01 per share. The holders of the
Participating Preferred Stock are entitled to receive dividends, if declared by
the Board of Directors, from funds legally available. Each share of
Participating Preferred Stock is entitled to one thousand votes on all matters
submitted to stockholder vote. The shares of Participating Preferred Stock are
not redeemable by the Company nor convertible into Common Stock or any other
security of the Company.
13. EARNINGS PER SHARE
The Company adopted SFAS No. 128 "Earnings per Share" during 1997. In
accordance with this pronouncement, the Company retroactively adopted this
standard and restated all historical earnings per share data contained in this
report. SFAS 128 requires presentations of "basic" and "diluted" earnings per
share.
Basic earnings per share is computed by dividing income from continuing
operations by the weighted-average number of common shares outstanding during
the applicable periods. For the year ended December 31, 1998 and the nine months
ended September 30, 1998 and 1999, the diluted earnings per share computation is
based on net income divided by the weighted-average number of common shares
outstanding adjusted for the dilutive effect of stock options. For the year
ended December 31, 1996 and 1997, the diluted earnings per share computations
are based on income from continuing operations adjusted for interest and
amortization of debt issuance costs related to convertible debt, if dilutive,
divided by the weighted-average number of common shares outstanding adjusted for
the dilutive effect of stock options and convertible securities. The diluted
earnings per share calculations assume the exercise of stock options using the
treasury stock method.
Set forth below are reconciliations of the numerators and denominators of
the basic and diluted per share computations for each of the years ended
December 31, 1996, 1997 and 1998 and the nine months ended September 30, 1998
and 1999.
F-23
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
13. EARNINGS PER SHARE (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
<TABLE>
<CAPTION>
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
BASIC EPS
Income from continuing operations......................... $39,764 32,924 $1.20
EFFECT OF DILUTIVE SECURITIES
Options................................................... -- 171 --
Convertible debt.......................................... 2,658 3,757 --
------- ------ -----
DILUTED EPS
Income from continuing operations plus assumed
conversions............................................. $42,422 36,852 $1.15
------- ------ -----
------- ------ -----
</TABLE>
FOR THE YEAR ENDED DECEMBER 31, 1997
------------------------------------
<TABLE>
<CAPTION>
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
BASIC EPS
Income from continuing operations......................... $8,872 35,414 $0.25
EFFECT OF DILUTIVE SECURITIES
Options................................................... -- 162 --
------ ------ -----
DILUTED EPS
Income from continuing operations plus assumed
conversions............................................. $8,872 35,576 $0.25
------ ------ -----
------ ------ -----
</TABLE>
The effect of the Notes outstanding through the Distribution is excluded
from the above computation of diluted earnings per share because the impact was
anti-dilutive. Had the impact of the weighted-average shares outstanding related
to the Notes of 1,305 shares been included in the diluted calculation, the
diluted weighted- average shares outstanding of as December 31, 1997 would have
been 36,881 shares.
FOR THE YEAR ENDED DECEMBER 31, 1998
------------------------------------
<TABLE>
<CAPTION>
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
BASIC EPS
Income available to common stockholders................... $18,534 36,811 $0.50
EFFECT OF DILUTIVE SECURITIES
Options................................................... -- 88 --
------- ------ -----
DILUTED EPS
Net income plus assumed conversions....................... $18,534 36,899 $0.50
------- ------ -----
------- ------ -----
</TABLE>
F-24
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
13. EARNINGS PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1998 ENDED SEPTEMBER 30, 1999
---------------------------------- ----------------------------------
INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
--------- ----------- -------- --------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Net income...................... $22,267 36,808 $0.60 $15,568 36,821 $0.42
EFFECT OF DILUTIVE SECURITIES
Options......................... -- 90 -- -- 113 --
------- ------ ----- ------- ------ -----
DILUTED EPS
Net income plus assumed
conversions................... $22,267 36,898 $0.60 $15,568 36,934 $0.42
------- ------ ----- ------- ------ -----
------- ------ ----- ------- ------ -----
</TABLE>
14. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
Derivative instruments are primarily used by the Company to reduce financial
risk arising from changes in foreign exchange and interest rates. The Company
does not use derivative instruments for trading purposes, nor does it engage in
currency or interest rate speculation. Derivatives used by the Company consist
of foreign exchange, interest rate and other instruments. The Company believes
that the various counterparties with which the Company enters into these
agreements consist of only financially sound institutions and, accordingly,
believes that the credit risk for non-performance of these contracts is not
significant. The Company monitors its underlying market risk exposures on an
ongoing basis and believes that it can modify or adapt its hedging strategies as
needed.
FOREIGN EXCHANGE INSTRUMENTS. The Company enters into forward contracts on a
month-to-month basis to minimize the effect of foreign currency fluctuations
with regard to certain monetary assets and liabilities denominated in currencies
other than the U.S. dollar. Gains and losses on these contracts generally
offset, in the same period, gains and losses resulting from the translation of
monetary assets and liabilities to U.S. dollars on a monthly basis, reducing the
risk of exchange rate movements in the Company's results of operations.
On a selective basis, the Company enters into forward contracts and
purchased option contracts designed to hedge the currency exposure of
contractual and other firm commitments denominated in foreign currencies and the
currency exposure of anticipated, but not yet committed, transactions expected
to be denominated in foreign currencies. The purpose of these activities is to
protect the Company from the risk that the eventual net cash flows in U.S.
dollars from foreign receivables and payables will be adversely affected by
changes in exchange rates. Gains and losses on all purchased options and those
forward contracts which hedge contractual and other firm commitments are
deferred and recognized in the Company's results of operations in the same
period as the gain or loss from the underlying transactions. Gains and losses on
forward contracts used to hedge anticipated, but not yet committed, transactions
are recognized in the Company's results of operations as changes in exchange
rates for the applicable foreign currencies occur. Historically, foreign
contracts with respect to contractual and other firm commitments and
anticipated, but not yet committed, transactions have been short-term in nature.
In addition, purchased options have had no intrinsic value at the time of
purchase.
F-25
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
14. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (CONTINUED)
The Company settles foreign exchange contracts generally at maturity and at
prevailing market rates. The Company recognizes in its results of operations
over the life of the contract the amortization of contract premium on purchased
options. The amortization of these premiums during each of the three years in
the period ended December 31, 1998 was not significant. As of December 31, 1997
and 1998, the Company had outstanding forward and purchased option contracts in
the amounts of $19.9 million and $21.3 million, respectively, comprised of
foreign currencies which were to be sold and $23.2 million and $79.6 million,
respectively, comprised of foreign currencies which were to be purchased. All
outstanding forward and purchased option contracts as of December 31, 1998
mature within twelve months.
As of December 31, 1998 the Company owned the following forward and option
contracts:
FORWARD CONTRACTS:
<TABLE>
<CAPTION>
US DOLLAR (000'S)
AVERAGE US DOLLAR (000'S) FAIR
CURRENCY RATE PURCHASE/(SELL) VALUE
- -------- -------------- ----------------- -----------------
<S> <C> <C> <C>
New Taiwan Dollar............. 32.57 NTD/US $(54,283) $ 545
German Marks.................. 1.67 DM/US 11,392 60
Japanese Yen.................. 115.62 JPY/US 8,779 (155)
Irish Punt.................... 1.49 US/IEP (3,125) (5)
British Pounds................ 1.68 US/BPS 1,093 5
</TABLE>
PURCHASED OPTIONS:
<TABLE>
<CAPTION>
US DOLLAR (000'S)
AVERAGE US DOLLAR (000'S) FAIR
CURRENCY RATE PURCHASE/(SELL) VALUE
- -------- -------------- ----------------- -----------------
<S> <C> <C> <C>
New Taiwan Dollar............. 33.03 NTD/US (22,161) $ 600
</TABLE>
Deferred gains or losses on the above contracts at December 31, 1997 and
1998 were not significant. Foreign currency transaction gains included in income
from continuing operations were $0.9 million, $3.8 million and $1.6 million in
1996, 1997 and 1998, respectively. As of December 31, 1997 the Company had no
purchased option contracts outstanding. All outstanding forward contracts at
December 31, 1997 matured within three months, and the fair values of the
contracts were not material. Fair values are based on quoted market prices.
INTEREST RATE DERIVATIVE INSTRUMENTS. On a selective basis, the Company from
time to time enters into interest rate cap or swap agreements to reduce the
potential negative impact of increases in interest rates on its outstanding
variable-rate debt under the Credit Agreement. The Company recognizes in its
results of operations over the term of the contract, as interest expense, the
amortization of contract premiums incurred from purchasing interest rate caps.
Net payments or receipts resulting from these agreements are recorded as
adjustments to interest expense. The effect of interest rate instruments on the
Company's results of operations in each of the three years in the period ended
December 31, 1998 was not significant.
F-26
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
14. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (CONTINUED) The Company entered
into two interest rate swap transactions with a term of one year beginning on
January 22, 1998. Pursuant to these agreements it paid a fixed interest rate
averaging 5.96% on a notional amount of $100 million and received interest on
the $100 million notional amount based on a three month LIBOR rate set quarterly
beginning on January 22, 1998. During February 1998, the Company purchased two
interest rate caps each with a notional amount of $50 million. The caps became
effective on April 27, 1998 and June 29, 1998 with terms of nine months and six
months, respectively. Under the terms of the caps, the Company was paid an
amount equal to the excess, if any, of three month LIBOR above 6% multiplied by
the notional amounts. The cost of the caps was immaterial.
At December 31, 1998 the Company held the following interest rate derivative
instruments:
<TABLE>
<CAPTION>
INSTRUMENT NOTIONAL AMOUNT FIXED RATE FLOATING RATE FAIR VALUE
- ---------- --------------- ---------- --------------- ----------
<S> <C> <C> <C> <C>
Interest Rate Cap........ $50,000 6.000% 3-month LIBOR --
Floating to Fixed Swap... 50,000 5.953% 3-month LIBOR (100)
Floating to Fixed Swap... 50,000 5.966% 3-month LIBOR (100)
</TABLE>
Fair values are based on quoted market prices.
OTHER FINANCIAL INSTRUMENTS. As of December 31, 1997 and 1998 the carrying
value of cash and cash equivalents, trade accounts receivable and trade accounts
payable approximates fair value because of the immediate or short-term maturity
of these financial instruments. The carrying amount of the Company's senior bank
indebtedness approximates fair value because the underlying instruments have
variable interest rates that adjust to market on a short-term basis.
CONCENTRATION OF CREDIT RISK. The Company's accounts receivable are
generated from sales to customers in a variety of end-use markets that are
geographically and economically dispersed and payment is generally due within 30
days. Accordingly, the Company does not believe it is subject to any significant
concentration of credit risk.
15. GEOGRAPHIC SEGMENT INFORMATION
General Semiconductor is engaged in one industry segment, specifically, the
design, manufacture and sale of discrete semiconductors. The Company manages its
business on a geographic basis. Summarized financial information for the
Company's reportable geographic segments is presented in the following table.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. Net sales by reportable geographic
segment reflects the originating source of the unaffiliated sale. Intercompany
transfers represent the originating geographic source of the transfer and
principally reflect product assembly which is accounted for at cost plus a
nominal profit. In determining earnings (loss) before provision for income taxes
for each geographic segment, sales and purchases between areas have been
accounted for on the basis of internal transfer prices set by the Company.
Corporate assets consist of patents, the excess of cost over fair value of net
F-27
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
15. GEOGRAPHIC SEGMENT INFORMATION (CONTINUED)
assets acquired and deferred financing costs. Long-lived assets in the European
and Far East geographic segments are related primarily to Ireland and Taiwan,
respectively.
<TABLE>
<CAPTION>
UNITED
STATES EUROPE FAR EAST CHINA CORPORATE CONSOLIDATED
-------- -------- -------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
Net sales (a)......................... $232,902 $ 98,921 $ 30,068 $ -- $ -- $361,891
Intercompany transfers................ 90,855 41,369 133,981 -- (266,205) --
-------- -------- -------- ------- --------- --------
Net sales........................... 323,757 140,290 164,049 -- (266,205) $361,891
-------- -------- -------- ------- --------- --------
-------- -------- -------- ------- --------- --------
Interest income....................... -- 419 127 43 -- 589
Interest expense...................... -- 286 3,780 -- 6,919 10,985
Depreciation and amortization
expense............................. 10,136 3,831 8,435 211 -- 22,613
Earnings(loss) before provision for
income taxes........................ 60,364 2,464 8,009 (3,666) -- 67,171
Income tax expense.................... 21,840 4,508 1,059 -- -- 27,407
Long-lived assets..................... 90,836 47,220 60,904 12,258 190,219 401,437
Capital expenditures.................. $ 9,049 $ 20,504 $ 21,225 $ 9,521 $ -- $ 60,299
YEAR ENDED DECEMBER 31, 1997:
Net sales (a)......................... $245,772 $102,881 $ 31,385 $ -- $ -- $380,038
Intercompany transfers................ 102,966 84,301 137,293 4,752 (329,312) --
-------- -------- -------- ------- --------- --------
Net sales............................. 348,738 187,182 168,678 4,752 (329,312) $380,038
-------- -------- -------- ------- --------- --------
-------- -------- -------- ------- --------- --------
Interest income....................... -- 224 58 26 -- 308
Interest expense...................... -- 223 3,561 -- 10,877 14,661
Depreciation and amortization
expense............................. 9,711 4,323 9,514 684 -- 24,232
Earnings (loss) before provision for
income taxes taxes(c)............... 14,535 630 8,328 (2,972) -- 20,521
Income tax expense.................... 5,452 1,042 5,155 -- -- 11,649
Long-lived assets..................... 94,670 47,360 59,827 27,094 177,112 406,063
Capital expenditures.................. $ 7,106 $ 1,039 $ 8,100 $12,963 $ -- $ 29,208
</TABLE>
F-28
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
15. GEOGRAPHIC SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
UNITED
STATES EUROPE FAR EAST CHINA CORPORATE CONSOLIDATED
-------- -------- -------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998:
Net sales (a)......................... $225,711 $135,247 $ 40,186 $ -- $ -- $401,144
Intercompany transfers................ 114,833 136,993 170,568 28,956 (451,350) --
-------- -------- -------- ------- --------- --------
Net sales........................... 340,544 272,240 210,754 28,956 (451,350) $401,144
-------- -------- -------- ------- --------- --------
-------- -------- -------- ------- --------- --------
Interest income....................... -- 48 26 29 273 376
Interest expense...................... -- 297 588 -- 19,517 20,402
Depreciation and amortization
expense............................. 8,770 4,654 8,913 2,645 -- 24,982
Earnings before provision for income
taxes(b)............................ 6,614 3,802 11,061 5,613 -- 27,090
Income tax expense.................... 3,073 3,364 1,989 130 -- 8,556
Long-lived assets..................... 93,691 52,931 57,264 29,049 173,007 405,942
Capital expenditures.................. $ 2,731 $ 14,042 $ 7,532 $ 2,593 $ -- $ 26,898
NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED):
Net sales (a)....................... $170,856 $105,251 $ 26,275 $ -- $ -- $302,382
Intercompany transfers.............. 85,100 105,514 123,708 20,575 (334,897) --
-------- -------- -------- ------- --------- --------
Net sales......................... 255,956 210,765 149,983 20,575 (334,897) 302,382
-------- -------- -------- ------- --------- --------
-------- -------- -------- ------- --------- --------
Interest income..................... -- 15 11 21 200 247
Interest expense.................... -- 216 579 -- 14,665 15,460
Depreciation and amortization
expense........................... 6,512 3,378 6,615 1,919 -- 18,424
Earnings before provision for income
taxes............................. 12,108 7,394 8,370 4,400 -- 32,272
Income tax expense.................. $ 3,571 $ 2,214 $ 4,100 $ 120 $ -- $ 10,005
NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED):
Net sales (a)....................... $159,425 $ 97,913 $ 46,962 $ -- $ -- $304,300
Intercompany transfers.............. 97,263 103,963 124,192 30,806 (356,224) --
-------- -------- -------- ------- --------- --------
Net sales......................... 256,688 201,876 171,154 30,806 (356,224) 304,300
-------- -------- -------- ------- --------- --------
-------- -------- -------- ------- --------- --------
Interest income..................... -- 27 10 9 13 59
Interest expense.................... -- 187 31 -- 16,717 16,935
Depreciation and amortization
expense........................... 7,075 4,248 6,735 2,476 -- 20,534
Earnings before provision for income
taxes............................. 1,677 3,699 11,072 4,310 -- 20,758
Income tax expense.................. $ 2,655 $ 499 $ 2,005 $ 31 $ -- $ 5,190
</TABLE>
F-29
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
15. GEOGRAPHIC SEGMENT INFORMATION (CONTINUED)
(a) Included in United States net sales are export sales as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Taiwan.................................. $ 93,718 $ 99,134 $ 69,156 $54,088 $45,407
China................................... 23,792 28,602 32,904 24,224 28,127
-------- -------- -------- ------- -------
$117,510 $127,736 $102,060 $78,312 $73,534
-------- -------- -------- ------- -------
-------- -------- -------- ------- -------
</TABLE>
Net sales, by destination, within the European geographic segment are:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
France.................................. $ 9,550 $ 9,988 $ 12,993 $ 10,174 $ 9,542
Germany................................. 39,285 41,265 59,326 47,563 42,692
Italy................................... 12,172 12,662 14,272 11,496 9,742
U.K..................................... 12,697 13,457 15,315 12,226 12,940
Other................................... 25,217 25,509 33,341 23,792 22,997
------- -------- -------- -------- -------
$98,921 $102,881 $135,247 $105,251 $97,913
------- -------- -------- -------- -------
------- -------- -------- -------- -------
</TABLE>
(b) Earnings before provision for income taxes in 1998 includes restructuring
charges of $12.3 million ($8.5 million net of tax).
(c) Earnings before provision for income taxes in 1997 includes charges of $33.8
million, ($25.3 million net of tax), primarily related to the separation of
GI's Taiwan operations.
No single customer accounted for more than 10% of the Company's sales during
the years ended December 31, 1996, 1997 and 1998.
F-30
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
16. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly data for 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
QUARTER ENDED 1997
---------------------------------------------------
MARCH 31(A) JUNE 30(B) SEPTEMBER 30 DECEMBER 31
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales...................................... $ 85,369 $95,511 $ 95,568 $103,590
Gross profit................................... 19,426 6,915 30,662 33,722
Income(loss) from continuing operations........ 707 (9,416) 8,506 9,075
Net income(loss)............................... 17,683 (8,182) (12,643) 9,075
Earnings(loss) per share(c)
Basic:
Continuing operations...................... $ 0.02 $ (0.27) $ 0.23 $ 0.25
Net income(loss)........................... 0.52 (0.24) (0.35) 0.25
Diluted:
Continuing operations...................... $ 0.02 $ (0.27) $ 0.23 $ 0.25
Net income(loss)........................... 0.51 (0.24) (0.33) 0.25
<CAPTION>
QUARTER ENDED 1998
-----------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31(D)
--------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
Net sales. $ 106,397 $ 98,762 $ 97,223 $ 98,762
Gross profit................................... 35,289 28,647 26,726 26,900
Net income(loss)............................... 9,466 6,846 5,956 (3,734)
Earnings(loss) per share
Basic:....................................... $ 0.26 $ 0.19 $ 0.16 $ (0.10)
Diluted:..................................... 0.26 0.19 0.16 (0.10)
</TABLE>
- ----------
(a) Includes charges of $7.4 million ($5.5 million or $0.15 per share net of
tax) primarily related to the separation of GI's Taiwan operations. These
costs include $7.3 million charged to cost of sales and $0.1 million charged
to selling, general and administrative expense.
(b) Includes charges of $26.4 million ($19.8 million or $0.54 per share net of
tax) primarily related to the separation of GI's Taiwan operations. These
costs include $25.4 million charged to cost of sales and $1.0 million
charged to selling, general and administrative expense.
(c) Earnings (loss) per share data has been adjusted to reflect the one for four
reverse stock split and restated in conformance with SFAS No. 128.
(d) Includes restructuring charges of $12.3 million ($8.5 million or $0.23 per
share net of tax).
17. DISCONTINUED OPERATIONS
Net sales for the Discontinued Operations included in the Consolidated
Statement of Operations were $2.3 billion and $1.3 billion for the years ended
December 31, 1996 and 1997, respectively.
Discontinued operations includes $2.7 million and $52.9 million, net of
applicable income taxes, for the years ended December 31, 1996 and 1997,
respectively, for costs incurred primarily related to the
F-31
<PAGE>
GENERAL SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
17. DISCONTINUED OPERATIONS (CONTINUED)
separation of the Taiwan operations between General Semiconductor and General
Instrument and for professional fees and certain other administrative and
financing costs incurred directly related to the Distribution.
The distribution of the net assets of discontinued businesses reduced
stockholders' equity by $1.4 billion of which $1.2 billion was allocated to
additional paid-in capital and $0.2 billion to retained earnings.
18. SUBSEQUENT EVENT
Effective June 30, 1999, the Company's $350 million credit facility
(discussed in Note 9) was amended to modify several financial covenants to
provide greater financial flexibility. The Company is considering a convertible
subordinated debt offering which may be completed in 1999. The Company expects
to use the proceeds of any such offering to repay outstanding indebtedness under
the credit facility and the credit facility will be permanently reduced by 50%
of the gross proceeds of the convertible subordinated debt offering.
F-32
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE
YOU WRITTEN INFORMATION OTHER THAN THIS PROSPECTUS OR TO MAKE REPRESENTATIONS AS
TO MATTERS NOT STATED IN THIS PROSPECTUS. YOU MUST NOT RELY ON UNAUTHORIZED
INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES OR OUR
SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE
THAT WOULD NOT BE PERMITTED OR LEGAL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALES MADE HEREUNDER AFTER THE DATE OF THIS PROSPECTUS SHALL CREATE AN
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR OUR AFFAIRS HAVE NOT
CHANGED SINCE THE DATE HEREOF.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GENERAL SEMICONDUCTOR, INC.
$172,500,000 of 5 3/4% Convertible
Subordinated Notes and 11,093,248 shares of
Common Stock Issuable upon Conversion of
the Notes
----------------------------
PROSPECTUS
----------------------------
January , 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of expenses of the Registrant in
connection with the securities being registered. All of the expenses are
estimated, except for the registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee........... $45,540
Legal fees and expenses....................................... $25,000
Accounting fees and expenses.................................. $15,000
New York Stock Exchange Supplemental Listing fee.............. $3,000
--------
Miscellaneous................................................. $1,460
--------
Total........................................................ $90,000
--------
--------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL")
provides that a corporation may indemnify its directors and officers, as well as
other employees and individuals (each an "Indemnified Party," and collectively,
"Indemnified Parties"), against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement in connection with specified actions,
suits, or proceedings, whether civil, criminal, administrative, or
investigative, other than in connection with actions by or in the right of the
corporation (a "derivative action"), if an Indemnified Party acted in good faith
and in a manner such Indemnified Party reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his or
her conduct was unlawful. A similar standard is applicable in the case of
derivative actions, except that a corporation may only indemnify an Indemnified
Party for expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such derivative action. Additionally, in the context of
a derivative action, DGCL Section 145 requires court approval before there can
be any indemnification where an Indemnified Party has been found liable to the
corporation. The statute provides that it is not exclusive of other
indemnification arrangements that may be granted pursuant to a corporation's
charter, by-laws, disinterested director vote, stockholder vote, agreement, or
otherwise.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability for (i) any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) any willful or negligent declaration of an
unlawful dividend, stock purchase or redemption, or (iv) any transaction from
which the director derived an improper personal benefit.
The Certificate of Incorporation and By-Laws of the Registrant provide
that directors and officers of the Registrant shall not, to the fullest extent
permitted by the DGCL, be liable to the Registrant or any of its stockholders
for monetary damages for any breach of fiduciary duty as a director or officer,
as the case may be. The Certificate of Incorporation and By-Laws of the
Registrant also provide that if the DGCL is amended to permit further
elimination or limitation of the personal liability of directors and officers,
then the liability of the directors and officers of the Registrant shall be
eliminated or limited to the fullest extent permitted by the DGCL, as so
amended.
The Registrant has entered into agreements to indemnify its directors
and officers in addition to the indemnification provided for in its Certificate
of Incorporation and By-Laws. These agreements, among other things, indemnify
the Registrant's directors and officers to the fullest extent permitted by
Delaware law for certain expenses (including attorney's fees), liabilities,
judgments, fines and settlement amounts incurred by such person
II-1
<PAGE>
arising out of or in connection with such person's service as a director or
officer of the Registrant or an affiliate of the Registrant.
The Registrant maintains directors' and officers' liability insurance,
under which its directors and officers are insured, within the limits and
subject to the limitations of the policies, against certain expenses in
connection with the defense of, and certain liabilities which might be imposed
as a result of, actions, suits or proceedings to which directors and officers
are parties by reason of being or have been directors or officers of the
Registrant, as the case may be.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
-------- -----------
<S> <C>
3.1* Restated Certificate of Incorporation of General
Semiconductor, Inc. (including Certificate of
Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock)
3.2* Amended and Restated By-Laws of General Semiconductor,
Inc.
4.1** Rights Agreement, dated January 6, 1997, between General
Semiconductor, Inc. and ChaseMellon Shareholder
Services, LLC
4.2*** Amendment No. 1 to the Rights Agreement, dated as of
March 10, 1999, between General Semiconductor, Inc. and
ChaseMellon Shareholder Services, LLC
4.4 Purchase Agreement dated December 8, 1999 between
General Semiconductor, Inc. and the Initial Purchasers
4.5 Indenture, dated as of December 14, 1999 between General
Semiconductor and The Bank of New York, as Trustee
4.6 Registration Rights Agreement, dated December 14, 1999
between General Semiconductor and the Initial
Purchasers.
4.7**** Specimen Stock Certificate.
5.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson
12 Statements re: Computations of Ratios
23.1 Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibit 5.1)
23.2 Independent Auditors' Consent of Deloitte & Touche LLP
24 Powers of Attorney (included on the signature page
hereof)
25 Statement of Eligibility of the Trustee on Form T-1
</TABLE>
- ---------------
* Incorporated herein by reference from the Company's Annual Report on Form
10-K/A for the fiscal year ended December 31, 1998 filed March 25, 1999
(File No. 1-5442)
** Incorporated herein by reference from the Registration Statement on Form
8-A filed January 10, 1997 (File No. 1-5442).
*** Incorporated herein by reference from the Amendment to the Registration
Statement on Form 8-A/A filed March 16, 1999 (File No. 1-5442).
**** Incorporated herein by reference from the Company's Registration Statement
on Form S-8 filed July 20, 1998 (File No. 333-9190).
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement;
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that the undertakings set forth in paragraphs (1)(i)
and (ii) above do not apply if the information required to be included in
a post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer, or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a
II-3
<PAGE>
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Melville, State of New York, on January 12, 2000.
GENERAL SEMICONDUCTOR, INC.
By: /s/ Ronald A. Ostertag
------------------------------
Ronald A. Ostertag
Chairman, President and
Chief Executive Officer
Each of the undersigned hereby appoints Stephen B. Paige and Andrew M.
Caggia. and each of them (with full power to act alone), as attorney and agents
for the undersigned, with full power of substitution, for and in the name, place
and stead of the undersigned, to sign and file with the Commission under the
Securities Act any and all amendments and exhibits to this Registration
Statement and any and all applications, instruments and other documents to be
filed with the Commission pertaining to the registration of the securities
covered hereby, with full power and authority to do and perform any and all acts
and things whatsoever requisite or desirable.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE CAPACITY IN WHICH SIGNED DATE
--------- ------------------------ ----
/s/ Ronald A. Ostertag Chairman, President and January 12, 2000
- ----------------------- Chief Executive Officer
Ronald A. Ostertag (Principal Executive Officer)
/s/ Andrew M. Caggia Senior Vice President January 12, 2000
- ----------------------- and Chief Financial Officer
Andrew M. Caggia (Principal Financial Officer)
/s/ Robert J. Gange Vice President and Controller January 12, 2000
- ---------------------- (Principal Accounting Officer)
Robert J. Gange
/s/ C. Scott Kulicke Director January 12, 2000
- ----------------------
C. Scott Kulicke
/s/ Ronald Rosenzweig Director January 12, 2000
- ----------------------
Ronald Rosenzweig
/s/ Peter A. Schwartz Director January 12, 2000
- ----------------------
Peter A. Schwartz
/s/ Samuel L. Simmons Director January 12, 2000
- ----------------------
Samuel L. Simmons
/s/ Gerard T. Wrixon Director January 12, 2000
- --------------------------
Gerard T. Wrixon
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
-------- -----------
<S> <C>
3.1* Restated Certificate of Incorporation of General
Semiconductor, Inc. (including Certificate of
Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock)
3.2* Amended and Restated By-Laws of General Semiconductor,
Inc.
4.1** Rights Agreement, dated January 6, 1997, between General
Semiconductor, Inc. and ChaseMellon Shareholder
Services, LLC
4.2*** Amendment No. 1 to the Rights Agreement, dated as of
March 10, 1999, between General Semiconductor, Inc. and
ChaseMellon Shareholder Services, LLC
4.4 Purchase Agreement dated December 8, 1999 between
General Semiconductor, Inc. and the Initial Purchasers
4.5 Indenture, dated as of December 14, 1999 between General
Semiconductor and The Bank of New York, as Trustee
4.6 Registration Rights Agreement, dated December 14, 1999
between General Semiconductor and the Initial
Purchasers.
4.7**** Specimen Stock Certificate.
5.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson
12 Statements re: Computations of Ratios
23.1 Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibit 5.1)
23.2 Independent Auditors' Consent of Deloitte & Touche LLP
24 Powers of Attorney (included on the signature page
hereof)
25 Statement of Eligibility of the Trustee on Form T-1
</TABLE>
- --------------
* Incorporated herein by reference from the Company's Annual Report on Form
10-K/A for the fiscal year ended December 31, 1998 filed March 25, 1999
(File No. 1-5442)
** Incorporated herein by reference from the Registration Statement on Form
8-A filed January 10, 1997 (File No. 1-5442).
*** Incorporated herein by reference from the Amendment to the Registration
Statement on Form 8-A/A filed March 16, 1999 (File No. 1-5442).
**** Incorporated herein by reference from the Company's Registration Statement
on Form S-8 filed July 20, 1998 (File No. 333-9190).
<PAGE>
EXHIBIT 4.4
GENERAL SEMICONDUCTOR, INC.
$150,000,000
Principal Amount
5.75% Convertible Subordinated Notes due 2006
Purchase Agreement
December 8, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CHASE SECURITIES INC.
MORGAN STANLEY & CO. INCORPORATED
<PAGE>
5.75% Convertible Subordinated Notes due 2006
of General Semiconductor, Inc.
PURCHASE AGREEMENT
December 8, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CHASE SECURITIES INC.
MORGAN STANLEY & CO. INCORPORATED
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
General Semiconductor, Inc., a Delaware corporation (the
"COMPANY"), proposes to issue and sell to Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), Chase Securities Inc. and Morgan Stanley & Co.
Incorporated (each an "INITIAL PURCHASER" and, collectively, the "INITIAL
PURCHASERS") an aggregate of $150,000,000 in principal amount of its 5.75%
Convertible Subordinated Notes due 2006 (the "FIRM NOTES"), subject to the terms
and conditions set forth herein. The Company also proposes to issue and sell to
the Initial Purchasers not more than an additional $22,500,000 principal amount
of its 5.75% Convertible Subordinated Notes due 2006 (the "ADDITIONAL NOTES"),
if requested by the Initial Purchasers as provided in Section 2 hereof. The Firm
Notes and the Additional Notes are herein collectively referred to as the
"NOTES". The Notes are to be issued pursuant to the provisions of an indenture
(the "INDENTURE"), to be dated as of the Closing Date (as defined below),
between the Company and The Bank of New York, as trustee (the "TRUSTEE"),
pursuant to which the Notes, as provided therein, will be convertible at the
option of the holders thereof into shares of the Company's common stock, par
value $.01 per share (the "COMMON STOCK"). The Notes and the Common Stock
issuable upon conversion thereof are herein collectively referred to as the
"SECURITIES". The Securities and the Indenture are more fully described in the
Offering Memorandum (as hereinafter defined). Capitalized terms used but not
defined herein shall have the meanings given to such terms in the Indenture.
1. OFFERING MEMORANDUM. The Notes will be offered and sold to the
Initial Purchasers pursuant to one or more exemptions from the registration
requirements under the Securities Act of 1933, as amended (the "ACT"). The
Company has prepared a preliminary offering memorandum, dated November 29, 1999
(the "PRELIMINARY OFFERING MEMORANDUM") and a final offering memorandum, dated
December 9, 1999 (the "OFFERING MEMORANDUM"), relating to the Notes.
-2-
<PAGE>
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Notes (and all securities issued
in exchange therefor, in substitution thereof or upon conversion thereof) shall
bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE HEREOF. BY THE
ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), OR
(B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT (AN "IAI")),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THESE
SECURITIES EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES,
(B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (D) TO AN IAI THAT, PRIOR TO SUCH TRANSFER,
FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THESE
SECURITIES (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE)
AND, IF THE COMPANY SO REQUESTS AN OPINION OF COUNSEL ACCEPTABLE
TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (F) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THESE
SECURITIES OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING."
2. AGREEMENTS TO SELL AND PURCHASE. (a) On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchasers, and the Initial Purchasers agree,
severally and
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not jointly, to purchase from the Company, the principal amount of Firm Notes
set forth opposite its name as set forth on Schedule A hereto at a purchase
price equal to 97.0% of the principal amount thereof (the "PURCHASE PRICE").
(b) On the basis of the representations and warranties
contained in this Agreement, and subject to its terms and conditions, (i) the
Company agrees to issue and sell the Additional Notes and (ii) the Initial
Purchasers shall have a right, but not the obligation, to purchase, severally
and not jointly, the Additional Notes, from the Company at the Purchase Price.
Additional Notes may be purchased solely for the purpose of covering
over-allotments made in connections with the Offering of the Firm Notes. The
Initial Purchasers may exercise their right to purchase Additional Notes in
whole or in part from time to time by giving written notice thereof to the
Company at any time within 30 days after the date of this Agreement. Donaldson,
Lufkin & Jenrette Securities Corporation shall give any such notice on behalf of
the Initial Purchasers and such notice shall specify the aggregate principal
amount of Additional Notes to be purchased pursuant to such exercise and the
date for payment and delivery thereof. The date specified in any such notice
shall be a business day (i) no earlier than the Closing Date (as hereinafter
defined), (ii) no later than ten business days after such notice has been given
and (iii) no earlier than two business days after such notice has been given. If
any Additional Notes are to be purchased, each Initial Purchaser, severally and
not jointly, agrees to purchase from the Company the principal amount of
Additional Notes which bears the same proportion to the total principal amount
of Additional Notes to be purchased from the Company as the principal amount of
Firm Notes set forth opposite the name of such Initial Purchaser in Schedule A
bears to the total principal amount of Firm Notes.
3. TERMS OF OFFERING. The Initial Purchasers have advised the
Company that the Initial Purchasers will make offers (the "EXEMPT RESALES") of
the Notes purchased hereunder on the terms set forth in the Offering Memorandum,
as amended or supplemented, solely to persons whom the Initial Purchasers
reasonably believe to be "qualified institutional buyers" as defined in Rule
144A under the Act ("QIBS") (such persons sometimes being referred to herein as
the "ELIGIBLE PURCHASERS"). The Initial Purchasers will offer the Notes to
Eligible Purchasers initially at a price equal to 100% of the principal amount
thereof. Such price may be changed at any time without notice.
Holders (including subsequent transferees) of the Securities will have
the registration rights set forth in the registration rights agreement (the
"REGISTRATION RIGHTS AGREEMENT"), to be dated the Closing Date, in substantially
the form of Exhibit A hereto, for so long as such Securities constitute
"TRANSFER RESTRICTED SECURITIES" (as defined in the Registration Rights
Agreement). Pursuant to the Registration Rights Agreement, the Company will
agree to file with the Securities and Exchange Commission (the "COMMISSION")
under the circumstances set forth therein, a shelf registration statement
pursuant to Rule 415 under the Act (the "REGISTRATION STATEMENT") relating to
the resale by certain holders of the Securities and to use its best efforts to
cause such Registration Statements to be declared and remain effective and
usable for the periods specified in the Registration Rights Agreement. This
Agreement, the Indenture, the Notes and the Registration Rights Agreement are
hereinafter sometimes referred to collectively as the "OPERATIVE DOCUMENTS."
4. DELIVERY AND PAYMENT
(a) Delivery of, and payment of the Purchase Price for, the
Firm Notes shall be made at the offices of Baker & McKenzie or such other
location as may be mutually acceptable. Such delivery and payment shall be made
at 9:00 a.m. New York City time, on December 14, 1999 or at such other time on
the same date or
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such other date as the Initial Purchasers and the Company shall agree in
writing. The time and date of such delivery and the payment for the Firm Notes
are herein called the "CLOSING DATE".
(b) Delivery of, and payment for, any Additional Notes to be
purchased by the Initial Purchasers shall be made at the offices of Baker &
McKenzie at 9:00 a.m. New York City time, on the date specified in the exercise
notice given by Donaldson, Lufkin & Jenrette Securities Corporation pursuant to
Section 2(b) or such other time on the same or such other date as the Initial
Purchasers and the Company shall agree in writing. The time and date of delivery
and payment for any Additional Notes are hereinafter referred to as an "OPTION
CLOSING DATE".
(c) One or more of the Notes in definitive global form,
registered in the name of Cede & Co., as nominee of the Depository Trust Company
("DTC"), having an aggregate principal amount corresponding to the aggregate
principal amount of the Notes (collectively, the "GLOBAL NOTE"), shall be
delivered by the Company to the Initial Purchasers (or as the Initial Purchasers
direct) in each case with any transfer taxes thereon duly paid by the Company
against payment by the Initial Purchasers of the Purchase Price thereof by wire
transfer in same day funds to the order of the Company. The Global Note shall be
made available to the Initial Purchasers for inspection not later than 9:30
a.m., New York City time, on the business day immediately preceding the Closing
Date.
5. AGREEMENTS OF THE COMPANY The Company hereby agrees with the
Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if
requested by the Initial Purchasers, confirm such advice in writing, (i) of the
issuance by any state securities commission of any stop order suspending the
qualification or exemption from qualification of any Notes for offering or sale
in any jurisdiction designated by the Initial Purchasers pursuant to Section
5(e) hereof, or the initiation of any proceeding by any state securities
commission or any other federal or state regulatory authority for such purpose
and (ii) of the happening of any event during the period referred to in Section
5(c) below that makes any statement of a material fact made in the Preliminary
Offering Memorandum or the Offering Memorandum untrue or that requires any
additions to or changes in the Preliminary Offering Memorandum or the Offering
Memorandum in order to make the statements therein not misleading. The Company
shall use its reasonable best efforts to prevent the issuance of any stop order
or order suspending the qualification or exemption of any Notes under any state
securities or Blue Sky laws and, if at any time any state securities commission
or other federal or state regulatory authority shall issue an order suspending
the qualification or exemption of any Notes under any state securities or Blue
Sky laws, the Company shall use its reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons
identified by the Initial Purchasers to the Company as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any amendments
or supplements thereto, as the Initial Purchasers may reasonably request for the
time period specified in Section 5(c). Subject to the Initial Purchasers'
compliance with its representations and warranties and agreements set forth in
Section 7 hereof, the Company consents to the use of the Preliminary Offering
Memorandum and the Offering Memorandum and any amendments and supplements
thereto required pursuant hereto, by the Initial Purchasers in connection with
Exempt Resales.
(c) During such period as in the opinion of counsel for the
Initial Purchasers an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchasers (i) not to make any
amendment or supplement to the Offering Memorandum of which the Initial
Purchasers shall not previously have been advised or to which the Initial
Purchasers shall reasonably object after being so advised and (ii) to prepare
promptly upon the Initial Purchasers' reasonable request, any amendment or
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supplement to the Offering Memorandum which may be necessary or advisable in
connection with such Exempt Resales.
(d) If, during the period referred to in Section 5(c) above,
any event shall occur or condition shall exist as a result of which, in the
opinion of counsel to the Initial Purchasers, it becomes necessary to amend or
supplement the Offering Memorandum in order to make the statements therein, in
the light of the circumstances when such Offering Memorandum is delivered to an
Eligible Purchaser, not misleading, or if, in the opinion of counsel to the
Initial Purchasers, it is necessary to amend or supplement the Offering
Memorandum to comply with any applicable law, forthwith to prepare an
appropriate amendment or supplement to such Offering Memorandum so that the
statements therein, as so amended or supplemented, will not, in the light of the
circumstances when it is so delivered, be misleading, or so that such Offering
Memorandum will comply with applicable law, and to furnish to the Initial
Purchasers and such other persons as the Initial Purchasers may designate such
number of copies thereof as the Initial Purchasers may reasonably request.
(e) Prior to the sale of all Notes pursuant to Exempt Resales
as contemplated hereby, to cooperate with the Initial Purchasers and counsel to
the Initial Purchasers in connection with the registration or qualification of
the Notes for offer and sale to the Initial Purchasers and pursuant to Exempt
Resales under the securities or Blue Sky laws of such jurisdictions as the
Initial Purchasers may reasonably request and to continue such registration or
qualification in effect so long as required for Exempt Resales and to file such
consents to service of process or other documents as may be necessary in order
to effect such registration or qualification; PROVIDED, HOWEVER, that the
Company shall not be required in connection therewith to qualify as a foreign
corporation in any jurisdiction in which it is not now so qualified or to take
any action that would subject it to general consent to service of process or
taxation other than as to matters and transactions relating to the Preliminary
Offering Memorandum, the Offering Memorandum or Exempt Resales, in any
jurisdiction in which it is not now so subject.
(f) So long as the Notes are outstanding, to mail and make
generally available as soon as practicable after the end of each fiscal year to
the record holders of the Notes a financial report of the Company and its
subsidiaries on a consolidated basis (and a similar financial report of all
unconsolidated subsidiaries, if any), all such financial reports to include a
consolidated balance sheet, a consolidated statement of operations, a
consolidated statement of cash flows and a consolidated statement of
shareholders' equity as of the end of and for such fiscal year, together with
comparable information as of the end of and for the preceding year, certified by
the Company's independent public accountants.
(g) So long as the Notes are outstanding, to furnish to the
Initial Purchasers as soon as available, copies of all reports or other
communications furnished by the Company to its security holders or furnished to
or filed with the Commission or any national securities exchange on which any
class of securities of the Company is listed and such other publicly available
information concerning the Company and/or its subsidiaries as the Initial
Purchasers may reasonably request.
(h) So long as any of the Notes remain outstanding and during
any period in which the Company is not subject to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), to make
available to any holder of Securities in connection with any sale thereof and
any prospective purchaser of such Securities from such holder, the information
("RULE 144A INFORMATION") required by Rule 144A(d)(4) under the Act.
(i) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of the obligations of the Company
under this Agreement, including: (i) the fees, disbursements and expenses of
counsel to the Company and accountants of the Company in connection with the
sale and delivery of the Notes to the Initial Purchasers and pursuant to Exempt
Resales, and all other fees and expenses in connection with the preparation,
printing, filing and distribution of the Preliminary Offering Memorandum, the
Offering
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Memorandum and all amendments and supplements to any of the foregoing (including
financial statements), including the mailing and delivering of copies thereof to
the Initial Purchasers and persons designated by them in the quantities
specified herein, (ii) all costs and expenses related to the transfer and
delivery of the Notes to the Initial Purchasers, including any transfer or other
taxes payable thereon, (iii) all costs of printing or producing this Agreement,
the other Operative Documents and any other agreements or documents in
connection with the offering, purchase, sale or delivery of the Securities, (iv)
all expenses in connection with the registration or qualification of the
Securities for offer and sale under the securities or Blue Sky laws of the
several states and all costs of printing or producing any preliminary and
supplemental Blue Sky memoranda in connection therewith (including the filing
fees and reasonable fees and disbursements of counsel for the Initial Purchasers
in connection with such registration or qualification and memoranda relating
thereto), (v) the cost of printing certificates representing the Securities,
(vi) all expenses and listing fees in connection with the application for
quotation of the Notes in the National Association of Securities Dealers, Inc.
("NASD") Automated Quotation System - PORTAL ("PORTAL"), (vii) the fees and
expenses of the Trustee and the reasonable fees and disbursements of the
Trustee's counsel in connection with the Indenture and the Notes, (viii) the
costs and charges of any transfer agent, registrar and/or depositary (including
DTC), (ix) any fees charged by rating agencies for the rating of the Notes, (x)
all costs and expenses of the Registration Statement, as set forth in the
Registration Rights Agreement, (xi) all expenses and listing fees in connection
with the application for listing the Common Stock on the New York Stock Exchange
and (xii) and all other costs and expenses incident to the performance of the
obligations of the Company hereunder for which provision is not otherwise made
in this Section. It is understood, however, that, except as specifically
provided in this Section and Sections 8 and 11 hereof, the Initial Purchasers
will pay all of their own costs and expenses, including the fees of their
counsel, transfer taxes on resales of any of the Notes by them and any
advertising expenses connected with any offers they may make.
(j) To use its best efforts to effect the inclusion of the
Notes in PORTAL and to maintain the listing of the Notes on PORTAL for so long
as the Notes are outstanding.
(k) To obtain the approval of DTC for "book-entry" transfer of
the Notes, and to comply with all of its agreements set forth in the
representation letters of the Company to DTC relating to the approval of the
Notes by DTC for "book-entry" transfer.
(l) To cause the Common Stock issuable upon conversion of the
Notes to be duly authorized for listing on the New York Stock Exchange (the
"NYSE") prior to the Firm Closing Date, subject to notice of official issuance.
The Company will ensure that such Common Stock remain authorized for listing on
the NYSE or any other national securities exchange following the Firm Closing
Date for so long as any shares of Common Stock remain registered under the
Exchange Act.
(m) The Company shall not (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
(ii) enter into any swap or other arrangement that transfers all or a portion of
the economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise), except to the Initial Purchasers pursuant to this Agreement,
for a period of 90 days after the Closing Date without the prior written consent
of Donaldson, Lufkin & Jenrette Securities Corporation. Notwithstanding the
foregoing, during such period (i) the Company may grant stock options pursuant
to the Company's existing stock option plan, (ii) the Company may issue shares
of Common Stock as consideration for acquisitions of businesses and (iii) the
Company may issue shares of Common Stock upon the exercise of an option or
warrant or the conversion of a security outstanding on the date hereof. The
Company also agrees not to file any registration statement, except in accordance
with the terms of the Registration Rights Agreement, with respect to any shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock for a period of 90 days after the Closing Date
without the
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prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation.
The Company shall, prior to or concurrently with the execution of this
Agreement, deliver an agreement executed by each of the directors and executive
officers of the Company listed on Annex I hereto to the effect that such person
will not, during the period commencing on the date such person signs such
agreement and ending 90 days after the Closing Date without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation, (A) engage in
any of the transactions described in the first sentence of this paragraph or (B)
make any demand for, or exercise any right with respect to, the registration of
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, except that such persons may dispose of shares of
Common Stock as bona fide gifts if the recipient of such gift agrees in writing
to be bound by the terms of this provision and such persons may each dispose of
up to an aggregate of 1,000 shares of Common Stock during this period.
(n) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Notes to the Initial Purchasers or
pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Notes under the Act.
(o) Not to voluntarily claim, and to actively resist any
attempts to claim, the benefit of any usury laws against the holders of any
Notes.
(p) To comply with all of its agreements set forth in the
Registration Rights Agreement.
(q) To use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by it prior
to the Closing Date and to satisfy all conditions precedent to the delivery of
the Notes.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. As
of the date hereof, the Company represents and warrants to, and agrees with, the
Initial Purchasers that:
(a) The Preliminary Offering Memorandum and the Offering
Memorandum do not, and any supplement or amendment to them will not, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not apply
to (i) statements in or omissions from the Preliminary Offering Memorandum or
the Offering Memorandum (or any supplement or amendment thereto) based upon
information relating to the Initial Purchasers furnished to the Company in
writing by the Initial Purchasers expressly for use therein or (ii) statements
in or omissions from the Preliminary Offering Memorandum which were corrected in
the Offering Memorandum. No stop order preventing the use of the Preliminary
Offering Memorandum or the Offering Memorandum, or any amendment or supplement
thereto, or any order asserting that any of the transactions contemplated by
this Agreement are subject to the registration requirements of the Act, has been
issued.
(b) Each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the corporate power and
authority to carry on its business as described in the Preliminary Offering
Memorandum and the Offering Memorandum and to own, lease and operate its
properties, and each is duly qualified and is in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole (a
"MATERIAL ADVERSE EFFECT").
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(c) All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid, non-assessable
and not subject to any preemptive or similar rights.
(d) All of the outstanding shares of capital stock of each of
the Company's subsidiaries have been duly authorized and validly issued and are
fully paid and non-assessable, and, except as otherwise described in the
Offering Memorandum under "Description of Credit Facility", are owned by the
Company, directly or indirectly through one or more subsidiaries, free and clear
of any security interest, claim, lien, encumbrance or adverse interest of any
nature (each, a "LIEN"), except as to such Liens which could not reasonably be
expected to have a Material Adverse Effect.
(e) This Agreement has been duly authorized, executed and
delivered by the Company.
(f) The Indenture has been duly authorized by the Company and,
on the Closing Date, will have been validly executed and delivered by the
Company. When the Indenture has been duly executed and delivered by the Company,
the Indenture will be a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms subject to (i) applicable
bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance,
reorganization, moratorium and other laws affecting creditors' rights and
remedies generally and (ii) general principles of equity, including, without
limitation, standards of materiality, good faith, fair dealing and
reasonableness, equitable defenses and limits as to the availability of
equitable remedies (whether such principles are considered in a proceeding at
law or equity). On the Closing Date, the Indenture will conform in all material
respects to the description thereof contained in the Offering Memorandum.
(g) The Notes have been duly authorized and, on the Closing
Date, will have been validly executed and delivered by the Company. When the
Notes have been issued, executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, the Notes will be
entitled to the benefits of the Indenture and will be valid and binding
obligations of the Company, enforceable in accordance with their terms subject
to (i) applicable bankruptcy, insolvency, fraudulent transfer, fraudulent
conveyance, reorganization, moratorium and other laws affecting creditors'
rights and remedies generally and (ii) general principles of equity, including,
without limitation, standards of materiality, good faith, fair dealing and
reasonableness, equitable defenses and limits as to the availability of
equitable remedies (whether such principles are considered in a proceeding at
law or equity). On the Closing Date, the Notes will conform in all material
respects to the description thereof contained in the Offering Memorandum.
(h) The Notes are convertible into Common Stock in accordance
with the terms of the Indenture; the shares of Common Stock initially issuable
upon conversion of the Notes have been duly authorized and reserved for issuance
upon such conversion and, when issued upon such conversion, will be validly
issued, fully paid and nonassessable, will conform to the description thereof
contained in the Offering Memorandum and will be duly authorized for listing on
the NYSE, subject to notice of official issuance; the Company has the authorized
and outstanding capital stock as set forth in the Offering Memorandum; and the
stockholders of the Company or other holders of the Company's securities have no
pre-emptive or similar rights with respect to the Notes or the Common Stock
issuable upon the Notes.
(i) The Registration Rights Agreement has been duly authorized
by the Company and, on the Closing Date, will have been duly executed and
delivered by the Company. When the Registration Rights Agreement has been duly
executed and delivered, the Registration Rights Agreement will be a valid and
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binding agreement of the Company, enforceable against the Company in accordance
with its terms subject to (i) applicable bankruptcy, insolvency, fraudulent
transfer, fraudulent conveyance, reorganization, moratorium and other laws
affecting creditors' rights and remedies generally, (ii) general principles of
equity, including, without limitation, standards of materiality, good faith,
fair dealing and reasonableness, equitable defenses and limits as to the
availability of equitable remedies (whether such principles are considered in a
proceeding at law or equity) and (iii) the qualification that rights to
indemnification and contribution may be limited by applicable law or equitable
principles or otherwise unenforceable as against public policy. On the Closing
Date, the Registration Rights Agreement will conform in all material respects to
the description thereof in the Offering Memorandum.
(j) Neither the Company nor any of its subsidiaries is (i) in
violation of its respective charter or by-laws or (ii) in default in the
performance of any obligation, agreement, covenant or condition contained in any
indenture, loan agreement, mortgage, lease or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries or their respective property is bound, which
violation or default, in the case of clause (ii), could reasonably be expected
to have a Material Adverse Effect.
(k) The execution, delivery and performance of the Operative
Documents by the Company, compliance by the Company with all provisions hereof
and thereof and the consummation of the transactions contemplated hereby and
thereby will not (i) require any consent, approval, authorization or other order
of, or qualification with, any court or governmental body or agency (except such
as may be required under the securities or Blue Sky laws of the various states),
(ii) conflict with or constitute a breach of any of the terms or provisions of,
or a default under, the charter or by-laws of the Company or any of its
subsidiaries, (iii) conflict with or constitute a breach of any of the terms or
provisions of any indenture, loan agreement, mortgage, lease or other agreement
or instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or their respective property is
bound, which violation or default in the case of this clause (iii) could
reasonably be expected to have a Material Adverse Effect, (iv) violate or
conflict with any applicable law or any rule, regulation, judgment, order or
decree of any court or any governmental body or agency having jurisdiction over
the Company, any of its subsidiaries or their respective property, (v) result in
the imposition or creation of (or the obligation to create or impose) a Lien
under, any agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
their respective property is bound which Lien could reasonably be expected to
have a Material Adverse Effect, or (vi) result in the termination, suspension or
revocation of any Authorization (as defined below) of the Company or any of its
subsidiaries or result in any other impairment of the rights of the holder of
any such Authorization, which termination, suspension or revocation could
reasonably be expected to have a Material Adverse Effect.
(l) There are no legal or governmental proceedings pending or,
to the best of the Company's knowledge, threatened to which the Company or any
of its subsidiaries is or could be a party or to which any of their respective
property is or could be subject, which would reasonably be expected to result,
singly or in the aggregate, in a Material Adverse Effect.
(m) To the best of the Company's knowledge, neither the
Company nor any of its subsidiaries has violated any provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), any provisions of
the Foreign Corrupt Practices Act or the rules and regulations promulgated
thereunder or, except as set forth in the Offering Memorandum under "Business --
Environment," any foreign, federal, state or local law or regulation relating to
the protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), except
for such violations which, singly or in the aggregate, would not have a Material
Adverse Effect.
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(n) Except as set forth in the Offering Memorandum under "Risk
Factors -- Potential environmental liabilities, including those relating to
former operations, may adversely impact our financial position," there are no
costs or liabilities associated with Environmental Laws (including, without
limitation, any capital or operating expenditures required for clean-up, closure
of properties or compliance with Environmental Laws or any Authorization, any
related constraints on operating activities and any potential liabilities to
third parties) which would, singly or in the aggregate, have a Material Adverse
Effect.
(o) Each of the Company and its subsidiaries has such permits,
licenses, consents, exemptions, franchises, authorizations and other approvals
(each, an "AUTHORIZATION") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business, except where the failure to
have any such Authorization or to make any such filing or notice would not,
singly or in the aggregate, have a Material Adverse Effect. Each such
Authorization is valid and in full force and effect and each of the Company and
its subsidiaries is in compliance with all the terms and conditions thereof and
with the rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred (including, without
limitation, the receipt of any notice from any authority or governing body)
which allows or, after notice or lapse of time or both, would allow, revocation,
suspension or termination of any such Authorization or results or, after notice
or lapse of time or both, would result in any other impairment of the rights of
the holder of any such Authorization; except where such failure to be valid and
in full force and effect or to be in compliance, or the occurrence of any such
event, would not, singly or in the aggregate, have a Material Adverse Effect.
(p) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its subsidiaries, in each case free and clear of all Liens and defects,
except such as are described in the Offering Memorandum or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as would not, singly or in the
aggregate, have a Material Adverse Effect, in each case except as described in
the Offering Memorandum.
(q) The Company and its subsidiaries own or possess, or can
acquire on reasonable terms, all patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names ("INTELLECTUAL PROPERTY") currently
employed by them in connection with the business now operated by them except
where the failure to own or possess or otherwise be able to acquire such
intellectual property would not, singly or in the aggregate, have a Material
Adverse Effect; and neither the Company nor any of its subsidiaries has received
any notice of infringement of or conflict with asserted rights of others with
respect to any of such intellectual property which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would have a
Material Adverse Effect.
(r) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are customary in the businesses in which they are
engaged; and neither the Company nor any of its subsidiaries (i) has received
notice from any insurer or agent of such insurer that substantial capital
improvements or other material expenditures will have to be made in order to
continue such insurance or (ii) has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers at a cost that would not
have a Material Adverse Effect.
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(s) Except as disclosed in the Offering Memorandum, no
relationship, direct or indirect, exists between or among the Company or any of
its subsidiaries on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company or any of its subsidiaries on the other
hand, which would be required by the Act to be described in the Offering
Memorandum if the Offering Memorandum were a prospectus included in a
registration statement on Form S-1 filed with the Commission.
(t) All material tax returns required to be filed by the
Company and each of its subsidiaries in any jurisdiction have been filed, other
than those filings being contested in good faith, and all material taxes,
including withholding taxes, penalties and interest, assessments, fees and other
charges due pursuant to such returns or pursuant to any assessment received by
the Company or any of its subsidiaries have been paid, other than those being
contested in good faith and for which adequate reserves have been provided.
(u) The accountants, Deloitte & Touche LLP, that have
certified the financial statements and supporting schedules included in the
Preliminary Offering Memorandum and the Offering Memorandum are independent
public accountants with respect to the Company, as required by the Act and the
Exchange Act. The historical financial statements, together with related
schedules and notes, set forth in the Preliminary Offering Memorandum and the
Offering Memorandum comply as to form in all material respects with the
requirements applicable to registration statements on Form S-1 under the Act.
(v) The historical financial statements, together with related
schedules and notes forming part of the Offering Memorandum (and any amendment
or supplement thereto), present fairly the consolidated financial position,
results of operations and changes in financial position of the Company and its
subsidiaries on the basis stated in the Offering Memorandum at the respective
dates or for the respective periods to which they apply; such statements and
related schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other financial and statistical
information and data set forth in the Offering Memorandum (and any amendment or
supplement thereto) are, in all material respects, accurately presented and
prepared on a basis consistent with such financial statements and the books and
records of the Company.
(w) The Company is not and, after giving effect to the
offering and sale of the Notes and the application of the net proceeds thereof
as described in the Offering Memorandum, will not be, an "investment company,"
as such term is defined in the Investment Company Act of 1940, as amended.
(x) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to require the
Company to file a registration statement under the Act with respect to any
securities of the Company or to require the Company to include such securities
with the Notes registered pursuant to any Registration Statement.
(y) Neither the Company nor any of its subsidiaries nor any
agent thereof acting on the behalf of them has taken, and none of them will
take, any action that might cause this Agreement or the issuance or sale of the
Notes to violate Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part
220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of
the Board of Governors of the Federal Reserve System.
(z) No "nationally recognized statistical rating organization"
as such term is defined for purposes of Rule 436(g)(2) under the Act (i) has
imposed (or has informed the Company that it is considering imposing) any
condition (financial or otherwise) on the Company's retaining any rating
assigned to the Company or any securities of the Company or (ii) has indicated
to the Company that it is considering (a) the
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downgrading, suspension or withdrawal of, or any review for a possible change
that does not indicate the direction of the possible change in, any rating so
assigned or (b) any change in the outlook for any rating of the Company or any
securities of the Company.
(aa) Since the respective dates as of which information is
given in the Offering Memorandum other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement), (i) there has not occurred any material adverse change
or any development involving a prospective material adverse change in the
condition, financial or otherwise, or the earnings, business, management or
operations of the Company and its subsidiaries, taken as a whole, (ii) there has
not been any material adverse change or any development involving a prospective
material adverse change in the capital stock or in the long-term debt of the
Company or any of its subsidiaries and (iii) neither the Company nor any of its
subsidiaries has incurred any material liability or obligation, direct or
contingent.
(bb) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, contains all the information specified in,
and meeting the requirements of, Rule 144A(d)(4) under the Act.
(cc) When the Notes are issued and delivered pursuant to this
Agreement, the Notes will not be of the same class (within the meaning of Rule
144A under the Act) as any security of the Company that is listed on a national
securities exchange registered under Section 6 of the Exchange Act or that is
quoted in a United States automated inter-dealer quotation system.
(dd) No form of general solicitation or general advertising
(as defined in Regulation D under the Act) was used by the Company or any of its
representatives (other than the Initial Purchasers, as to whom the Company makes
no representation) in connection with the offer and sale of the Notes
contemplated hereby, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising. No
securities of the same class as the Securities have been issued and sold by the
Company within the six-month period immediately prior to the date hereof.
(ee) Prior to the effectiveness of any Registration Statement,
the Indenture is not required to be qualified under the TIA.
(ff) No registration under the Act of the Securities is
required for the sale of the Securities to the Initial Purchasers as
contemplated hereby or for the Exempt Resales assuming the accuracy of the
Initial Purchasers' representations and warranties and agreements set forth in
Section 7 hereof.
(gg) Each certificate signed by any officer of the Company and
delivered to the Initial Purchasers or counsel for the Initial Purchasers shall
be deemed to be a representation and warranty by the Company to the Initial
Purchasers as to the matters covered thereby.
(hh) All indebtedness of the Company that will be repaid with
the proceeds of the issuance and sale of the Notes was incurred, and the
indebtedness represented by the Notes is being incurred, for proper purposes and
in good faith and the Company was, at the time of incurrence of such
indebtedness that will be repaid with the proceeds of the issuance and sale of
the Notes, and will be on the Closing Date and on each Option Closing Date
(after giving effect to the application of the proceeds from the issuance of the
Notes) solvent, and had at the time of the incurrence of such indebtedness that
will be repaid with the proceeds of the issuance and sale of the Notes and will
have on the Closing Date and on
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each Option Closing Date (after giving effect to the application of the proceeds
from the issuance of the Notes) sufficient capital for carrying on its business
and was, at the time of the incurrence of such indebtedness that will be repaid
with the proceeds of the issuance and sale of the Notes, and will be on the
Closing Date and on each Option Closing Date (after giving effect to the
application of the proceeds from the issuance of the Notes) able to pay its
debts as they mature.
The Company acknowledges that the Initial Purchasers and, for
purposes of the opinions to be delivered to the Initial Purchasers pursuant to
Section 9 hereof, counsel to the Company and counsel to the Initial Purchasers
will rely upon the accuracy and truth of the foregoing representations and
hereby consents to such reliance.
7. INITIAL PURCHASERS' REPRESENTATIONS AND WARRANTIES. Each
Initial Purchaser, severally and not jointly, represents and warrants to, and
agrees with, the Company:
(a) Such Initial Purchaser is either a QIB or an Accredited
Institution, in either case, with such knowledge and experience in financial and
business matters as is necessary in order to evaluate the merits and risks of an
investment in the Notes.
(b) Such Initial Purchaser (A) is not acquiring the Securities
with a view to any distribution thereof or with any present intention of
offering or selling any of the Securities in a transaction that would violate
the Act or the securities laws of any state of the United States or any other
applicable jurisdiction and (B) will be reoffering and reselling the Securities
only to QIBs in reliance on the exemption from the registration requirements of
the Act provided by Rule 144A.
(c) Such Initial Purchaser agrees that no form of general
solicitation or general advertising (within the meaning of Regulation D under
the Act) has been or will be used by such Initial Purchaser or any of its
representatives in connection with the offer and sale of the Securities pursuant
hereto, including, but not limited to, articles, notices or other communications
published in any newspaper, magazine or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising.
(d) Such Initial Purchaser agrees that, in connection with
Exempt Resales, such Initial Purchaser will solicit offers to buy the Securities
only from, and will offer to sell the Securities only to, Eligible Purchasers.
Each Initial Purchaser further agrees that it will offer to sell the Securities
only to, and will solicit offers to buy the Securities only from Eligible
Purchasers that such Initial Purchaser reasonably believes are QIBs that agree
that (x) the Securities purchased by them may be resold, pledged or otherwise
transferred within the time period referred to under Rule 144(k) (taking into
account the provisions of Rule 144(d) under the Act, if applicable) under the
Act, as in effect on the date of the transfer of such Securities, only (i) to
the Company or any of its subsidiaries, (ii) to a person whom the seller
reasonably believes is a QIB purchasing for its own account or for the account
of a QIB in a transaction meeting the requirements of Rule 144A under the Act,
(iii) in an offshore transaction (as defined in Rule 902 under the Act) meeting
the requirements of Rule 904 of the Act, (iv) in a transaction meeting the
requirements of Rule 144 under the Act, (v) to an Accredited Institution that,
prior to such transfer, furnishes the Trustee a signed letter containing certain
representations and agreements relating to the registration of transfer of such
Securities (the form of which is substantially the same as ANNEX A to the
Offering Memorandum) and, if requested by the Company, an opinion of counsel
acceptable to the Company that such transfer is in compliance with the Act, (vi)
in accordance with another exemption from the registration requirements of the
Act (and based upon an opinion of counsel acceptable to the Company) or (vii)
pursuant to an effective registration statement and, in each case, in accordance
with the applicable securities laws of any state of the United States or any
other applicable jurisdiction and (y) they will deliver to each person to whom
such Securities or an interest therein is transferred a notice substantially to
the effect of the foregoing.
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<PAGE>
(e) Such Initial Purchaser further represents and agrees that
(1) it has not offered or sold and will not offer or sell any Securities to
persons in the United Kingdom prior to the expiration of the period of six
months from the issue date of the Securities, except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their business or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995, (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Securities in, from or otherwise
involving the United Kingdom and (iii) it has only issued or passed on and will
only issue or pass on in the United Kingdom any document received by it in
connection with the issuance of the Notes to a person who is of a kind described
in Article 11(3) of the Financial Services Act of 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom the document may
otherwise lawfully be issued or passed on.
(f) Such Initial Purchaser agrees that it will not offer, sell
or deliver any of the Securities in any jurisdiction outside the United States
except under circumstances that will result in compliance with the applicable
laws thereof, and that it will take at its own expense whatever action is
required to permit its purchase and resale of the Securities in such
jurisdictions. Such Initial Purchaser understands that no action has been taken
to permit a public offering in any jurisdiction outside the United States where
action would be required for such purpose.
Each Initial Purchaser acknowledges that the Company, for
purposes of the opinions to be delivered to each Initial Purchaser pursuant to
Section 9 hereof, counsel to the Company and counsel to the Initial Purchasers
will rely upon the accuracy and truth of the foregoing representations and each
Initial Purchaser hereby consents to such reliance.
8. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Initial Purchaser, its directors, its officers and each person, if any, who
controls such Initial Purchaser (within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act), from and against any and all losses, claims,
damages, liabilities and judgments (including, without limitation, any
reasonable legal or other expenses incurred in connection with investigating or
defending any matter, including any action, that could give rise to any such
losses, claims, damages, liabilities or judgments) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Offering Memorandum (or any amendment or supplement thereto), the Preliminary
Offering Memorandum or any Rule 144A Information provided by the Company to any
holder or prospective purchaser of Securities pursuant to Section 5(h) or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Initial Purchaser furnished in
writing to the Company by such Initial Purchaser; provided, however, that the
foregoing indemnity agreement with respect to any Preliminary Offering
Memorandum shall not inure to the benefit of any Initial Purchaser who failed to
deliver a Final Offering Memorandum, as then amended or supplemented (so long as
such Final Offering Memorandum and any amendment or supplement thereto was
provided by the Company to the several Initial Purchasers in the requisite
quantity and on a timely basis to permit proper delivery on or prior to the
Closing Date) to the person asserting any losses, claims, damages, liabilities
or judgments caused by any untrue statement or alleged untrue statement of a
material fact contained in such Preliminary Offering Memorandum, or caused by
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, if
such material misstatement or omission or alleged material misstatement or
omission was cured in the Final Offering Memorandum, as so amended or
supplemented.
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<PAGE>
(b) Each Initial Purchaser, severally and not jointly, agrees
to indemnify and hold harmless the Company and its directors and officers and
each person, if any, who controls (within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act) the Company to the same extent as the
foregoing indemnity from the Company to the Initial Purchasers but only with
reference to information relating to such Initial Purchaser furnished in writing
to the Company by such Initial Purchaser expressly for use in the Preliminary
Offering Memorandum or the Offering Memorandum.
(c) In case any action shall be commenced involving any person
in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b)
(the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in
writing and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all reasonable fees and expenses of such counsel, as
incurred (except that in the case of any action in respect of which indemnity
may be sought pursuant to both Sections 8(a) and 8(b), the Initial Purchasers
shall not be required to assume the defense of such action pursuant to this
Section 8(c), but may employ separate counsel and participate in the defense
thereof, but the fees and expenses of such counsel, except as provided below,
shall be at the expense of the Initial Purchasers). Any indemnified party shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified party unless (i) the employment of such counsel shall
have been specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified parties
and all such fees and expenses, to the extent reasonable, shall be reimbursed as
they are incurred. Such firm shall be designated in writing by Donaldson, Lufkin
& Jenrette Securities Corporation, in the case of the parties indemnified
pursuant to Section 8(a), and by the Company, in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall not be obligated to
indemnify and hold harmless any indemnified party from and against any losses,
claims, damages, liabilities and judgments by reason of any settlement of any
action effected without the indemnifying party's written consent. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement or compromise of, or consent to the entry of
judgment with respect to, any pending or threatened action in respect of which
the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action 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 the indemnified party.
(d) To the extent the indemnification provided for in this
Section 8 is unavailable to an indemnified party or insufficient in respect of
any losses, claims, damages, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Initial Purchasers, on the other hand, from
the offering of the Securities or (ii) if the allocation provided by clause
8(d)(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Company, on the one hand, and
the Initial Purchasers, on the other hand, in connection with the statements or
omissions which
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<PAGE>
resulted in such losses, claims, damages, liabilities or judgments, as well as
any other relevant equitable considerations. The relative benefits received by
the Company, on the one hand, and the Initial Purchasers, on the other hand,
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Securities (after Initial Purchaser's discounts or commissions,
but before deducting expenses) received by the Company, and the total discounts
and commissions received by the Initial Purchasers bear to the total price to
investors of the Securities, in each case as set forth in the table on the cover
page of the Offering Memorandum. The relative fault of the Company, on the one
hand, and the Initial Purchasers, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, on the one hand, or the Initial
Purchasers, on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company and the Initial Purchasers agree that it would not
be just and equitable if contribution pursuant to this Section 8(d) were
determined by pro rata allocation (even if the Initial Purchasers were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such
indemnified party in connection with investigating or defending any matter,
including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, the Initial Purchasers shall not be required to contribute any amount
in excess of the amount by which the total discounts and commissions received by
such Initial Purchasers exceeds the amount of any damages which the Initial
Purchasers has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the respective
principal amount of Securities purchased by each of the Initial Purchasers
hereunder, and not joint.
(e) The remedies provided for in this Section 8 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
9. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The obligations
of the Initial Purchasers to purchase the Firm Notes under this Agreement on the
Closing Date and the Additional Notes, if any, on any Option Closing Date are
subject to the satisfaction of each of the following conditions.
(a) All the representations and warranties of the Company
contained in this Agreement shall be true and correct on the Closing Date, or on
each Option Closing Date, if any, with the same force and effect as if made on
and as of the Closing Date or on each Option Closing Date, if any.
(b) On or after the date hereof, (i) there shall not have
occurred any downgrading, suspension or withdrawal of, nor shall any notice have
been given of any potential or intended downgrading, suspension or withdrawal
of, or of any review (or of any potential or intended review) for a possible
change that does not indicate the direction of the possible change in, any
rating of the Company or any securities of the Company (including, without
limitation, the placing of any of the foregoing ratings on credit watch with
negative or developing implications or under review with an uncertain direction)
by any "nationally recognized statistical rating organization" as such term is
defined for purposes of Rule 436(g)(2) under the Act, (ii) there shall not have
occurred any change, nor shall any notice have been given of any potential or
intended negative change, in the outlook for any rating of the Company or any
securities of the Company by any such rating organization and (iii) no such
rating organization shall have given notice that it has assigned (or is
considering assigning) a lower rating to the Notes than that on which the Notes
were marketed.
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<PAGE>
(c) Since the respective dates as of which information is
given in the Offering Memorandum other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement), (i) there shall not have occurred any change or any
development involving a prospective change in the condition, financial or
otherwise, or the earnings, business, management or operations of the Company
and its subsidiaries, taken as a whole, (ii) there shall not have been any
change or any development involving a prospective change in the capital stock or
in the long-term debt of the Company or any of its subsidiaries and (iii)
neither the Company nor any of its subsidiaries shall have incurred any
liability or obligation, direct or contingent, the effect of which, in any such
case described in clause 9(c)(i), 9(c)(ii) or 9(c)(iii), in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Securities on the terms and in the manner contemplated in the Offering
Memorandum.
(d) You shall have received on the Closing Date a certificate,
dated the Closing Date, and on an Option Closing Date, if any, dated such Option
Closing Date, signed by the President and the Chief Financial Officer of the
Company, confirming the matters set forth in Sections 6(aa), 9(a) and 9(b) and
stating that the Company has complied with all the agreements and satisfied all
of the conditions herein contained and required to be complied with or satisfied
on or prior to the Closing Date or Option Closing Date, as the case may be.
(e) You shall have received on the Closing Date and each
Option Closing Date, if any, an opinion (satisfactory to you and counsel for the
Initial Purchasers), dated the Closing Date or such Option Closing Date, as the
case may be, of Fried, Frank, Harris, Shriver & Jacobson, counsel for the
Company, to the effect set forth as Exhibit B, and an opinion of Stephen B.
Paige, Esq., Senior Vice President and General Counsel for the Company, to the
effect set forth on Exhibit C.
The opinions of Fried, Frank, Harris, Shriver & Jacobson and
Stephen B. Paige, Esq., Senior Vice President and General Counsel to the
Company, described in Section 9(e) above shall be rendered to you at the request
of the Company and shall so state therein. In addition, such counsel may state
that the opinions expressed therein are solely for the Initial Purchasers'
benefit and may not be relied upon in any manner or for any purpose by any other
person.
(f) The Initial Purchasers shall have received on the Closing
Date and on each Option Closing Date, an opinion, dated the Closing Date, of
Baker & McKenzie, counsel for the Initial Purchasers, in form and substance
reasonably satisfactory to the Initial Purchasers.
(g) The Initial Purchasers shall have received, at the time
this Agreement is executed and at the Closing Date and each Option Closing Date,
letters dated the date hereof or the Closing Date or an Option Closing Date, as
the case may be, in the form and substance satisfactory to the Initial
Purchasers from Deloitte & Touche LLP, independent public accountants,
containing the information and statements of the type ordinarily included in
accountants' "comfort letters" to the Initial Purchasers with respect to the
Initial Purchasers with respect to the financial statements and certain
financial information contained in the Offering Memorandum.
(h) The Notes shall have been approved by the NASD for trading
and duly listed in PORTAL.
(i) The Initial Purchasers shall have received a counterpart,
conformed as executed, of the Indenture which shall have been entered into by
the Company and the Trustee.
(j) The Company shall have executed the Registration Rights
Agreement and the Initial Purchasers shall have received an original copy
thereof, duly executed by the Company.
(k) The Company shall not have failed at or prior to the
Closing Date or any Option Closing Date, as the case may be, to perform or
comply with any of the agreements herein
-18-
<PAGE>
contained and required to be performed or complied with by the Company at or
prior to the Closing Date or Option Closing Date, as the case may be.
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement may
be terminated at any time on or prior to the Closing Date by the Initial
Purchasers by written notice to the Company if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in the Initial
Purchasers' judgment, is material and adverse and, in the Initial Purchasers'
judgment, makes it impracticable to market the Securities on the terms and in
the manner contemplated in the Offering Memorandum, (ii) the suspension or
material limitation of trading in securities or other instruments on the New
York Stock Exchange, the American Stock Exchange, the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or the
Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in your opinion materially and
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, (v) the declaration of a banking moratorium by
either federal or New York State authorities or (vi) the taking of any action by
any federal, state or local government or agency in respect of its monetary or
fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States.
If on the Closing Date or an Option Closing Date, as the case may be,
any one or more of the Initial Purchasers shall fail or refuse to purchase the
Notes which it or they have agreed to purchase hereunder on such date and the
aggregate principal amount of the Notes which such defaulting Initial Purchaser
or Initial Purchasers, as the case may be, agreed but failed or refused to
purchase is not more than one-tenth of the aggregate principal amount of the
Notes to be purchased on such date by all Initial Purchasers, each
non-defaulting Initial Purchaser shall be obligated severally, in the proportion
which the principal amount of the Notes set forth opposite its name in Schedule
A bears to the aggregate principal amount of the Notes which all the
non-defaulting Initial Purchasers, as the case may be, have agreed to purchase,
or in such other proportion as you may specify, to purchase the Notes which such
defaulting Initial Purchaser or Initial Purchasers, as the case may be, agreed
but failed or refused to purchase on such date; PROVIDED that in no event shall
the aggregate principal amount of the Notes which any Initial Purchaser has
agreed to purchase pursuant to Section 2 hereof be increased pursuant to this
Section 10 by an amount in excess of one-ninth of such principal amount of the
Notes without the written consent of such Initial Purchaser. If on the Closing
Date, or an Option Closing Date, as the case may be, any Initial Purchaser or
Initial Purchasers shall fail or refuse to purchase the Notes and the aggregate
principal amount of the Notes with respect to which such default occurs is more
than one-tenth of the aggregate principal amount of the Notes to be purchased by
all Initial Purchasers and arrangements satisfactory to the Initial Purchasers
and the Company for purchase of such the Notes are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Initial Purchaser and the Company. In any such case which
does not result in termination of this Agreement, either you or the Company
shall have the right to postpone the Closing Date, or such Option Closing Date,
as the case may be, but in no event for longer than seven days, in order that
the required changes, if any, in the Offering Memorandum or any other documents
or arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Initial Purchaser from liability in respect of any
default of any such Initial Purchaser under this Agreement.
11. MISCELLANEOUS. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company to Ten Melville
Park Road, Melville, New York 11747, Attention: Stephen B. Paige, Esq.,
telephone (631) 847-3000, and (ii) if to the Initial Purchasers, Donaldson,
Lufkin & Jenrette
-19-
<PAGE>
Securities Corporation, 277 Park Avenue, New York, New York 10172, Attention:
Syndicate Department, or in any case to such other address as the person to be
notified may have requested in writing.
The respective indemnities, contribution agreements,
representations and warranties of the Company and the Initial Purchasers set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Securities
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of the Initial Purchasers; the officers or directors of the
Initial Purchasers, any person controlling the Initial Purchasers, the Company,
the officers or directors of the Company, or any person controlling the Company,
(ii) acceptance of the Securities and payment for them hereunder and (iii)
termination of the Agreement.
If for any reason the Notes are not delivered by or on behalf
of the Company as provided herein (other than as a result of any termination of
this Agreement pursuant to Section 10), the Company agrees to reimburse the
Initial Purchasers for all reasonable out-of-pocket expenses (including the
reasonable fees and disbursements of counsel) incurred by them Notwithstanding
any termination of this Agreement, the Company shall be liable for all expenses
which it has agreed to pay pursuant to Section 5(i) hereof. The Company also
agrees to reimburse the Initial Purchasers and its officers, directors and each
person, if any, who controls such Initial Purchasers within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act for any and all
reasonable fees and expenses (including without limitation the reasonable fees
and expenses of counsel) incurred by them in connection with enforcing their
rights under this Agreement (including without limitation its rights under
Section 8).
Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Company, the
Initial Purchasers, the Initial Purchasers' directors and officers, any
controlling persons referred to herein, the directors of the Company and their
respective successors and assigns, all as and to the extent provided in this
Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" shall not include a
purchaser of any of the Securities from the Initial Purchasers merely because of
such purchase.
This Agreement shall be governed and construed in accordance
with the laws of the State of New York.
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
-20-
<PAGE>
Please confirm that the foregoing correctly sets forth the
agreement among the Company, and the Initial Purchasers.
Very truly yours,
GENERAL SEMICONDUCTOR, INC.
By: /s/ Ronald A. Ostertag
-----------------------------
Name: Ronald A. Ostertag
Title: Chairman and President
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CHASE SECURITIES INC.
MORGAN STANLEY & CO. INCORPORATED
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ William Wilson
-----------------------------
Name: William Wilson
Title: Vice President
-21-
<PAGE>
SCHEDULE A
<TABLE>
PRINCIPAL AMOUNT
INITIAL PURCHASER OF NOTES
----------------------
<S> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation $120,000,000
Chase Securities Inc. $ 15,000,000
Morgan Stanley & Co. Incorporated $ 15,000,000
Total $150,000,000
</TABLE>
-22-
<PAGE>
ANNEX I
Ronald A. Ostertag, Chairman, President and Chief Executive Officer
Andrew M. Caggia, Senior Vice President and Chief Financial Officer
Robert J. Gange, Vice President and Controller
Vincent M. Guercio, Senior Vice President, e-commerce
W. John Nelson, President, Asia/Pacific Operations
Stephen B. Paige, Senior Vice President, General Counsel and Secretary
Linda S. Perry, Senior Vice President, Human Resources
John P. Phillips, President, Europe and North America Operations
C. Scott Kulicke, Director
Ronald Rosenzweig, Director
Peter A. Schwartz, Director
Samuel L. Simmons, Director
Prof. Gerard T. Wrixon, Director
-23-
<PAGE>
EXHIBIT A
Form of Registration Rights Agreement
-24-
<PAGE>
EXHIBIT B
Form of Opinion of Fried, Frank, Harris, Shriver & Jacobson
(i) the Notes have been duly authorized and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial Purchasers in
accordance with the terms of this Agreement, will be entitled to the
benefits of the Indenture and will be valid and binding obligations of
the Company, enforceable in accordance with their terms subject to (i)
applicable bankruptcy, insolvency, fraudulent transfer, fraudulent
conveyance, reorganization, moratorium and other laws affecting
creditors' rights and remedies generally and (ii) general principles of
equity, including, without limitation, standards of materiality, good
faith, fair dealing and reasonableness, equitable defenses and limits
as to the availability of equitable remedies (whether such principles
are considered in a proceeding at law or equity);
(ii) the Indenture has been duly authorized, executed
and delivered by the Company and is a valid and binding agreement of
the Company, enforceable against the Company in accordance with its
terms, subject to (i) applicable bankruptcy, insolvency, fraudulent
transfer, fraudulent conveyance, reorganization, moratorium and other
laws affecting creditors' rights and remedies generally and (ii)
general principles of equity, including, without limitation, standards
of materiality, good faith, fair dealing and reasonableness, equitable
defenses and limits as to the availability of equitable remedies
(whether such principles are considered in a proceeding at law or
equity);
(iii) the Notes are convertible into Common Stock in
accordance with the terms of the Indenture; the shares of Common Stock
initially issuable upon conversion of the Notes have been duly
authorized and reserved for issuance upon such conversion and, when
issued upon such conversion and receipt of the Notes in accordance with
the terms of the Indenture, will be validly issued, fully paid and
nonassessable; the Company has the authorized capital stock as set
forth in the Offering Memorandum; and the stockholders of the Company
have no pre-emptive or similar rights under applicable law or the
Company's Certificate of Incorporation or By-Laws with respect to the
Notes or the Common Stock issuable upon conversion of the Notes.
(iv) this Agreement has been duly authorized,
executed and delivered by the Company;
(v) the Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and is a valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms, subject to (i) applicable bankruptcy,
insolvency, fraudulent transfer, fraudulent conveyance, reorganization,
moratorium and other laws affecting creditors' rights and remedies
generally, (ii) general principles of equity, including, without
limitation, standards of materiality, good faith, fair dealing and
reasonableness, equitable defenses and limits as to the availability of
equitable remedies (whether such principles are considered in a
proceeding at law or equity) and (iii) the qualification that rights to
indemnification and contribution may be limited by applicable law or
equitable principles or otherwise unenforceable as against public
policy;
-25-
<PAGE>
(vi) the descriptions under the captions "Description
of Credit Facility," "Description of Notes" and "Certain United States
Federal Income Tax Consequences" in the Offering Memorandum, insofar as
such descriptions constitute a summary of the legal matters or
documents referred to therein, fairly summarize the mattes referred to
therein;
(vii) the issue and sale of the Notes and the
compliance by the Company with all of the provisions of the Notes, the
Indenture and this Agreement and the consummation of the transactions
herein and therein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute
a default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument known to us to which the Company or
any of its subsidiaries is party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject (this opinion being
limited (x) to such counsel's review of only those agreements filed as
exhibits to the Company's Annual Report on Form 10-K/A for the fiscal
year ended December 31, 1998 (as amended) and the Company's quarterly
reports on Form 10-Q for the quarterly periods ended March 31, 1999,
June 30, 1999 and September 30, 1999, and (y) in that such counsel need
not express any opinion with respect to any such conflict, breach or
violation not readily ascertainable from the face of any such
agreement, or arising under or based upon any cross-default provision
insofar as it relates to a default under an agreement not so filed or
arising under or based upon any covenant of a financial or numerical
nature or requiring computations), nor will such actions result in any
violation of the provisions of (i) the Certificate of Incorporation or
By-laws of the Company (ii) any statute, rule or regulation of any
governmental agency or authority of the United States or of the State
of New York or under the Delaware General Corporation Law (the "DGCL"),
and (iii) any order of any court binding upon the Company or any of its
subsidiaries (the opinion in this clause (iii) being limited to (x)
such counsel's review of only those court orders that are specifically
identified in an Officer's Certificate of the Company set forth therein
as an Annex and (y) in that such counsel need not express an opinion
with respect to any such violation not readily ascertainable from the
face of any such court order);
(viii) the Company is not and, after giving effect to
the offering and sale of the Notes and the application of the net
proceeds thereof as described in the Offering Memorandum, will not be,
an "investment company" as such term is defined in the Investment
Company Act of 1940, as amended;
(ix) the Indenture complies as to form in all
material respects with the requirements of the TIA, and the rules and
regulations of the Commission applicable to an indenture which is
qualified thereunder. It is not necessary in connection with the offer,
sale and delivery of the Notes to the Initial Purchasers in the manner
contemplated by this Agreement or in connection with the Exempt Resales
to qualify the Indenture under the TIA.
(x) no registration under the Act of the Securities
is required for the sale of the Securities to the Initial Purchasers as
contemplated by this Agreement or for the Exempt Resales assuming that
(i) each Initial Purchaser is a QIB, (ii) the accuracy of, and
compliance with, the Initial Purchasers' representations and agreements
contained in Section 7 of this Agreement and (iii) the
-26-
<PAGE>
accuracy of the representations of the Company set forth in Sections
6(bb), (cc) and (dd) of this Agreement; and
(xi) such counsel shall state that in the course of
the preparation by the Company of the Offering Memorandum, it
participated in conferences with certain of the officers and
representatives of, and the independent public accountants for the
Company, at which the contents of the Offering Memorandum were
discussed. Between the date of the Offering Memorandum and the time of
delivery of this opinion, such counsel shall also state that it
participated in additional conferences with certain of the officers and
representatives of, and independent public accountants for the Company
at which the contents of the Offering Memorandum were discussed to a
limited extent. Given the limitations inherent in the independent
verification of factual matters and the character of determinations
involved in the process, such counsel need not pass upon or assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Offering Memorandum, except to the extent
provided in paragraph (vi) above. Subject to the foregoing and on the
basis of the information gained in the performance of the services
referred to therein, including information obtained from the officers
and other representatives of, and the independent public accountants
for the Company, no facts have come to such counsel's attention that
cause them to believe that the Offering Memorandum, as of its date,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading. Also, subject to the foregoing, no
facts have come to such counsel's attention in the course of the
proceedings described in the second sentence of this paragraph that
cause them to believe that the Offering Memorandum, as of the date and
time of the delivery of the opinion, contains an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
Such counsel need not express any view or belief, however, with respect
to financial statements, or the notes or schedules thereto, or other
financial data included in or omitted from the Offering Memorandum.
-27-
<PAGE>
EXHIBIT C
Form of Opinion of Stephen B. Paige, Esq.
(i) the Company is validly existing as a corporation
in good standing under the laws of the jurisdiction of incorporation
and has the corporate power and authority to carry on its business as
described in the Offering Memorandum and to own, lease and operate its
properties (such counsel being entitled to rely in respect of the
opinion in this clause upon opinions of local counsel, and in respect
of matters of fact, upon certificates of officers of the Company,
provided that such counsel shall state that he believes that both the
Initial Purchasers and he is justified in relying upon such opinions
and certificates);
(ii) the Company is duly qualified and is in good
standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the
failure to be so qualified would not have a Material Adverse Effect
(such counsel being entitled to rely in respect of the opinion in this
clause upon opinions of local counsel, and in respect of matters of
fact, upon certificates of officers of the Company, provided that such
counsel shall state that he believes that both the Initial Purchasers
and he is justified in relying upon such opinions and certificates);
(iii) all the outstanding shares of capital stock of
the Company have been duly authorized and validly issued and are fully
paid, non-assessable and not subject to any preemptive or similar
rights;
(iv) all of the outstanding shares of capital stock
of each of the Significant Subsidiaries have been duly authorized and
validly issue and are fully paid and non-assessable, and are owned by
the Company, free and clear of any Lien, except as otherwise disclosed
in the Offering Memorandum under "Description of Credit Facility";
(v) neither the Company nor any of its subsidiaries
is (a) in violation of its respective charter or by-laws and, (b) to
the best of such counsel's actual knowledge, neither the Company nor
any of its subsidiaries is in default in the performance of any
obligation, agreement, covenant or condition contained in any
indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company and its subsidiaries, taken
as a whole, to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries or their respective
property is bound which default could reasonably be expected to have,
in the case of this clause (b), a Material Adverse Effect;
(vi) to the best of such counsel's actual knowledge,
such counsel does not know of any legal or governmental proceedings
pending or threatened to which the Company or any of its subsidiaries
is a party or to which any of their respective property is subject,
which would reasonably be expected to result, singly or in the
aggregate, in a Material Adverse Effect.
-28-
<PAGE>
(vii) to the best of such counsel's actual knowledge,
the Company has such Authorizations of, and has made all filings with
and notices to, all governmental or regulatory authorities and
self-regulatory organizations and all courts and other tribunals,
including without limitation, under any applicable Environmental Laws
(other than as described in the Offering Memorandum), as are necessary
to own, lease, license and operate its respective properties and to
conduct its business, except where the failure to have any such
Authorization or to make any such filing or notice would not, singly or
in the aggregate, have a Material Adverse Effect. To the best of such
counsel's actual knowledge, each such Authorization is valid and in
full force and effect and the Company is in compliance with all the
terms and conditions thereof and with the rules and regulations of the
authorities and governing bodies having jurisdiction with respect
thereto; and, to the best of such counsel's actual knowledge, no event
has occurred (including the receipt of any notice from any authority or
governing body) which allows or, after notice or lapse of time or both,
would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both,
would result in any other impairment of the rights of the holder of any
such Authorization; except where such failure to be valid and in full
force and effect or to be in compliance, the occurrence of any such
event or the presence of any such restriction would not, singly or in
the aggregate, have a Material Adverse Effect.
-29-
<PAGE>
EXHIBIT 4.5
GENERAL SEMICONDUCTOR, INC.,
Issuer,
and
THE BANK OF NEW YORK,
Trustee
-----------------
INDENTURE
Dated as of December 14, 1999
-----------------
$172,500,000
5.75% Convertible Subordinated Notes due 2006
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA INDENTURE SECTION SECTION
<S> <C>
310 (a) (1), (a) (2)..............................................7.10
(a) (3), (a) (4)..............................................N.A.
(a) (5).......................................................7.10
(b)................................................7.8, 7.10, 14.2
(c)...........................................................N.A.
311 (a), (b)......................................................7.11
(c)...........................................................N.A.
312 (a)............................................................2.5
(b), (c)......................................................14.3
313 (a)............................................................7.6
(b) (1).......................................................N.A.
(b) (2)........................................................7.6
(c)......................................................7.6, 14.2
(d)............................................................7.6
314 (a).................................................4.5, 4.6, 14.2
(b)...........................................................N.A.
(c) (1)..............................................2.2, 7.2 14.4
(c) (2)..................................................7.2, 14.4
(c) (3), (d)..................................................N.A.
(e)...........................................................14.5
(f)...........................................................N.A.
315 (a)........................................................7.1 (b)
(b)......................................................7.5, 14.2
(c).........................................................7.1(a)
(d)..............................................2.8, 6.11, 7.1(c)
(e)...........................................................6.13
316 (a) (last sentence)............................................2.9
(a) (1) (A)...................................................6.11
(a) (1) (B)...................................................6.12
(a) (2).......................................................N.A.
(b) ................................................6.7, 6.8, 6.12
(c)............................................................1.1
317 (a) (1)........................................................6.3
(a) (2)........................................................6.4
(b)............................................................2.4
318 (a)...........................................................14.1
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I.DEFINITIONS AND INCORPORATION BY REFERENCE..............................................................1
SECTION 1.1. Definitions........................................................................1
SECTION 1.2. Incorporation by Reference of TIA..................................................9
SECTION 1.3. Rules of Construction.............................................................10
ARTICLE II.THE SECURITIES ..................................................................................10
SECTION 2.1. Form and Dating...................................................................10
SECTION 2.2. Execution and Authentication......................................................11
SECTION 2.3. Registrar and Paying Agent........................................................11
SECTION 2.4. Paying Agent to Hold Assets in Trust..............................................12
SECTION 2.5. Securityholder Lists..............................................................12
SECTION 2.6. Transfer and Exchange.............................................................12
SECTION 2.7. Replacement Securities............................................................19
SECTION 2.8. Outstanding Securities............................................................19
SECTION 2.9. Treasury Securities...............................................................20
SECTION 2.10. Temporary Securities..............................................................20
SECTION 2.11. Cancellation......................................................................20
SECTION 2.12. Defaulted Interest................................................................21
SECTION 2.13. CUSIP Numbers.....................................................................22
SECTION 2.14. Deposit of Moneys.................................................................22
ARTICLE III.REDEMPTION ..................................................................................22
SECTION 3.1. Right of Redemption...............................................................22
SECTION 3.2. Notices to Trustee................................................................22
SECTION 3.3. Selection of Securities to Be Redeemed............................................23
SECTION 3.4. Notice of Redemption..............................................................23
SECTION 3.5. Effect of Notice of Redemption....................................................24
SECTION 3.6. Deposit of Redemption Price.......................................................24
SECTION 3.7. Securities Redeemed in Part.......................................................25
ARTICLE IV.COVENANTS ..................................................................................25
SECTION 4.1. Payment of Securities.............................................................25
SECTION 4.2. Maintenance of Office or Agency...................................................25
SECTION 4.3. Corporate Existence...............................................................25
SECTION 4.4. Payment of Taxes and Other Claims.................................................26
SECTION 4.5. Compliance Certificate; Notice of Default.........................................26
SECTION 4.6. Reports...........................................................................27
SECTION 4.7. Rule 144A Information Requirement.................................................27
SECTION 4.8. Further Instruments and Acts......................................................27
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE V.SUCCESSOR CORPORATION..................................................................................27
SECTION 5.1. Limitation on Merger, Sale or Consolidation.......................................27
SECTION 5.2. Successor Corporation Substituted.................................................28
ARTICLE VI.EVENTS OF DEFAULT AND REMEDIES........................................................................28
SECTION 6.1. Events of Default.................................................................28
SECTION 6.2. Acceleration of Maturity Rescission and Annulment.................................30
SECTION 6.3. Collection of Indebtedness and Suits for Enforcement by Trustee...................31
SECTION 6.4. Trustee May File Proofs of Claim..................................................32
SECTION 6.5. Trustee May Enforce Claims Without Possession of Securities.......................33
SECTION 6.6. Priorities........................................................................33
SECTION 6.7. Limitation on Suits...............................................................34
SECTION 6.8. Unconditional Right of Holders to Receive Principal,
Premium, and Interest.............................................................34
SECTION 6.9. Rights and Remedies Cumulative....................................................35
SECTION 6.10. Delay or Omission Not Waiver......................................................35
SECTION 6.11. Control by Holders................................................................35
SECTION 6.12. Waiver of Default.................................................................35
SECTION 6.13. Undertaking for Costs.............................................................36
SECTION 6.14. Restoration of Rights and Remedies................................................36
ARTICLE VII.TRUSTEE ..................................................................................36
SECTION 7.1. Duties of Trustee.................................................................36
SECTION 7.2. Rights of Trustee.................................................................38
SECTION 7.3. Individual Rights of Trustee......................................................39
SECTION 7.4. Trustee's Disclaimer..............................................................39
SECTION 7.5. Notice of Default.................................................................39
SECTION 7.6. Reports by Trustee to Holders.....................................................40
SECTION 7.7. Compensation and Indemnity........................................................40
SECTION 7.8. Replacement of Trustee............................................................41
SECTION 7.9. Successor Trustee by Merger, Etc..................................................42
SECTION 7.10. Eligibility; Disqualification.....................................................42
SECTION 7.11. Preferential Collection of Claims Against Company.................................42
SECTION 7.12. Other Capacities..................................................................42
ARTICLE VIII.SATISFACTION AND DISCHARGE..........................................................................43
SECTION 8.1. Satisfaction and Discharge of Indenture...........................................43
SECTION 8.2. Repayment to the Company..........................................................43
ARTICLE IX.AMENDMENTS, SUPPLEMENTS AND WAIVERS...................................................................43
SECTION 9.1. Supplemental Indentures Without Consent of Holders................................43
SECTION 9.2. Amendments, Supplemental Indentures and
Waivers with Consent of Holders...................................................44
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
SECTION 9.3. Compliance with TIA...............................................................45
SECTION 9.4. Revocation and Effect of Consents.................................................45
SECTION 9.5. Notation on or Exchange of Securities.............................................46
SECTION 9.6. Trustee to Sign Amendments, Etc...................................................46
ARTICLE X.MEETINGS OF HOLDERS ..................................................................................46
SECTION 10.1. Purposes for Which Meetings May Be Called.........................................46
SECTION 10.2. Manner of Calling Meetings........................................................46
SECTION 10.3. Calling of Meetings by the Company or Holders.....................................47
SECTION 10.4. Who May Attend and Vote at Meetings...............................................47
SECTION 10.5. Regulations May Be Made by Company; Conduct of the Meeting;
Voting Rights; Adjournment........................................................47
SECTION 10.6. Voting at the Meeting and Record to Be Kept.......................................48
SECTION 10.7. Exercise of Rights of Trustee or Holders May Not Be Hindered
or Delayed by Call of Meeting.....................................................48
ARTICLE XI.RIGHT TO REQUIRE REPURCHASE UPON A CHANGE OF CONTROL..................................................49
SECTION 11.1. Repurchase of Securities at Option of the Holder
Upon a Change of Control..........................................................49
SECTION 11.2. Rescission of Change of Control Determination.....................................51
ARTICLE XII.SUBORDINATION........................................................................................51
SECTION 12.1. Securities Subordinated to Senior Indebtedness....................................51
SECTION 12.2. No Payment on Securities in Certain Circumstances.................................52
SECTION 12.3. Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution Liquidation or Reorganization.........................53
SECTION 12.4. Holders to Be Subrogated to Rights of Holders
of Senior Indebtedness............................................................54
SECTION 12.5. Obligations of the Company Unconditional..........................................55
SECTION 12.6. Trustee and Other Agents Entitled to Assume Payments
Not Prohibited in Absence of Notice...............................................55
SECTION 12.7. Subordination Rights Not Impaired by Acts or Omissions of the
Company or Holders of Senior Indebtedness.........................................56
SECTION 12.8. Holders Authorize Trustee to Effectuate Subordination of Securities...............56
SECTION 12.9. Right of Trustee to Hold Senior Indebtedness......................................56
SECTION 12.10. Article XII Not to Prevent Events of Default......................................57
SECTION 12.11. No Duty of Trustee and Other Agents to Holders of Senior
Indebtedness......................................................................57
ARTICLE XIII.CONVERSION OF SECURITIES............................................................................57
SECTION 13.1. Conversion Privilege..............................................................57
SECTION 13.2. Exercise of Conversion Privilege..................................................58
SECTION 13.3. Fractional Interests..............................................................59
SECTION 13.4. Conversion Price..................................................................59
SECTION 13.5. Adjustment of Conversion Price....................................................59
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 13.6. Continuation of Conversion Privilege in Case of Reclassification,
Change, Merger, Consolidation or Sale of Assets...................................66
SECTION 13.7. Notice of Certain Events..........................................................67
SECTION 13.8. Taxes on Conversion...............................................................68
SECTION 13.9. Company to Provide Stock..........................................................68
SECTION 13.10. Disclaimer of Responsibility for Certain Matters..................................69
SECTION 13.11. Return of Funds Deposited for Redemption of Converted Securities..................69
ARTICLE XIV.MISCELLANEOUS ..................................................................................70
SECTION 14.1. TIA Controls......................................................................70
SECTION 14.2. Notices...........................................................................70
SECTION 14.3. Communications by Holders with Other Holders......................................71
SECTION 14.4. Certificate and Opinion as to Conditions Precedent................................71
SECTION 14.5. Statements Required in Certificate or Opinion.....................................71
SECTION 14.6. Rules by Trustee, Paying Agent, Registrar.........................................72
SECTION 14.7. Legal Holidays....................................................................72
SECTION 14.8. Governing Law.....................................................................72
SECTION 14.9. No Adverse Interpretation of Other Agreements.....................................73
SECTION 14.10. No Recourse Against Others........................................................73
SECTION 14.11. Successors........................................................................73
SECTION 14.12. Duplicate Originals...............................................................73
SECTION 14.13. Severability......................................................................73
SECTION 14.14. Table of Contents, Headings, Etc..................................................74
SECTION 14.15. Qualification of Indenture........................................................74
SECTION 14.16. Benefits of Indenture.............................................................74
</TABLE>
Exhibit A - FORM OF SECURITY
Exhibit B - 5.75% CONVERTIBLE SUBORDINATED NOTES DUE 2006
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF NOTES(1)
Re: 5.75% CONVERTIBLE SUBORDINATED NOTES DUE 2006
Exhibit C - FORM OF CONVERSION NOTICE
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(1) This Certificate shall be included only for the Transfer Restricted Notes.
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INDENTURE, dated as of December 14, 1999, between General
Semiconductor, Inc., a Delaware corporation (the "Company"), and The Bank of New
York, as Trustee. Each party hereto agrees as follows for the benefit of each
other party and for the equal and ratable benefit of the Holders of the
Company's 5.75% Convertible Subordinated Notes due 2006:
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION I.1. DEFINITIONS.
"Acceleration Notice" shall have the meaning specified in Section 6.2.
"Affiliate" means any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company. For
purposes of this definition, the terms "control," "controlling" and "controlled"
mean the power to direct the management and policies of a person, directly or
through one or more intermediaries, whether through the ownership of voting
securities, by contract, or otherwise.
"Agent" means the Trustee and any Registrar, Paying Agent,
co-Registrar, authenticating agent or Securities Custodian.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal,
state or foreign law for the relief of debtors.
"Beneficial Owner" for purposes of the definition of Change of Control
has the meaning attributed to it in Rules 13d-3 and 13d-5 under the Exchange
Act, whether or not applicable, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficially Owns" and "Beneficially Owned" shall have a corresponding meaning.
"Blockage Notice" shall have the meaning specified in Section 12.2(b).
"Board of Directors" means, with respect to any person, the Board of
Directors of such person or any committee of the Board of Directors of such
person authorized, with respect to any particular matter, to exercise the power
of the Board of Directors of such person.
"Board Resolution" means, with respect to any person, a duly adopted
resolution of the Board of Directors of such person.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
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"Capitalized Lease Obligation" means, as to any Person, the obligation
of such Person to pay rent or other amounts under a lease to which such Person
is a party that is required to be classified and accounted for as a capital
lease obligation under GAAP.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
indebtedness), warrants, options, participation or other equivalents of or
interests (however designated) in stock issued by that Person.
"Cash" means such coin or currency of the United States of America as
at the time of payment shall be legal tender for the payment of public and
private debts.
"Change of Control" means the occurrence of any of the following: (i)
the direct or indirect sale, transfer, conveyance of other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the properties or assets of the
Company and its Subsidiaries taken as a whole to any "person" (as that term is
used in Section 13(d)(3) of the Exchange Act); (ii) the adoption of a plan
relating to the liquidation or dissolution of the Company; (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above)
becomes the Beneficial Owner, directly or indirectly, of more than 50% of the
Voting Stock of the Company, measured by the total voting power of all classes
of voting stock rather than number of shares; or (iv) the first day on which a
majority of the members of the Board of Directors of the Company are not
Continuing Directors.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commodity Price Protection Agreement" means any forward contract,
commodity swap, commodity option or other similar financial arrangement or
arrangement relating to, or the value of which is dependent upon, fluctuations
in commodity prices.
"Common Stock" means the Company's common stock, $.01 par value per
share, or as such stock may be reconstituted from time to time.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to the Indenture, and thereafter means such
successor.
"Continuing Director" means, at any date of determination, any member
of the Board of Directors of the Company (i) who was a member of such Board of
Directors on the date of this Indenture or (ii) who was nominated for election
or elected to such Board of Directors by at least a majority of the directors
who were such Continuing Directors at the time of such nomination or election or
whose election to the Company's Board of Directors was recommended or endorsed
by at least a majority of the directors who were such Continuing Directors at
the time of such nomination or election.
"Conversion Price" shall have the meaning specified in Section 13.4.
"Conversion Shares" shall have the meaning specified in Section
13.5(1).
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"Credit Agreement" means that certain Credit Agreement dated as of July
23, 1997, as amended as of December 31, 1998 and June 30, 1999, by and among the
Company and the lenders party thereto from time to time and The Chase Manhattan
Bank, as Administrative Agent, and the other financial institutions named
therein as Co-Agents, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, restated, modified, increased, renewed, refunded, replaced
or refinanced from time to time, whether or not with the same parties.
"Currency Hedging Agreements" means any spot or forward foreign
exchange agreements and currency swap, currency option or other similar
financial agreements or arrangements entered into by any Person or any of its
Subsidiaries in the ordinary course of business and designed to protect against
or manage exposure to fluctuations in foreign currency exchange rates.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Date of Conversion" shall have the meaning specified in Section 13.2.
"Default" means any event or condition that is, or after notice or
passage of time or both would be, an Event of Default.
"Defaulted Interest" shall have the meaning specified in Section 2.12.
"Definitive Securities" means Securities that are in the form of
Security attached hereto as Exhibit A that do not include the information called
for by footnotes 1 and 3 thereof.
"Depositary" means, with respect to the Securities issuable or issued
in whole or in part in global form, the person specified in Section 2.3 as the
Depositary with respect to the Securities, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter "Depositary" shall mean or include such successor.
"Designated Senior Indebtedness" means (i) Senior Indebtedness
outstanding under the Credit Agreement and (ii) any other Senior Indebtedness
the principal amount of which is $10 million or more; provided that such other
Senior Indebtedness has been designated by the Company in the instrument or
agreement creating or evidencing the same as "Designated Senior Indebtedness."
"Distribution Date" shall have the meaning specified in Section
13.5(1).
"DTC" shall have the meaning specified in Section 2.3.
"Event of Default" shall have the meaning specified in Section 6.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
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"Expiration Time" shall have the meaning specified in Section 13.5(f).
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession which are in effect in the United States; provided,
however, that for purposes of determining compliance with covenants in the
Indenture, "GAAP" means such generally accepted accounting principles which are
in effect as of the Issue Date.
"Global Security" means a Security that contains the paragraph referred
to in footnote 1 and the additional schedule referred to in footnote 4 to the
form of Security attached hereto as Exhibit A.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements; (ii) other agreements
or arrangements designed solely to protect such Person against fluctuations in
interest rates; and (iii) Commodity Price Protection Agreements and Currency
Hedging Agreements.
"Holder" or "Securityholder" means the person in whose name a Security
is registered on the Registrar's books.
"Indebtedness" of any Person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of any such Person, (i) in
respect of borrowed money (whether or not the lender has recourse to all or any
portion of the assets of such Person), (ii) evidenced by credit or loan
agreements, bonds, notes, debentures or similar instruments (including, without
limitation, notes or similar instruments given in connection with the
acquisition of any business, properties or assets of any kind), (iii) evidenced
by bankers' acceptances or similar instruments issued or accepted by banks, (iv)
for the payment of money relating to a Capitalized Lease Obligation or (v)
evidenced by a letter of credit, bank guarantee or a reimbursement obligation of
such Person with respect to any letter of credit; (b) all obligations of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business); (c) all net obligations of such Person under
Hedging Obligations; (d) all liabilities of others of the kind described in the
preceding clauses (a), (b) or (c) that such Person has guaranteed or that is
otherwise its legal liability, or which is secured by a Lien on property of such
Person; and (e) any and all deferrals, renewals, extensions, modifications,
replacements, restatements, refinancings and refundings (whether direct or
indirect) of, or any indebtedness or obligation issued in exchange for, any
liability of the kind described in any of the preceding clauses (a), (b), (c) or
(d), or this clause (e), whether or not between or among the same parties. The
term "Indebtedness" shall not include the incurrence of any indebtedness in
respect of bid, performance or surety bonds issued for the account of the
Company or any of its Subsidiaries in the ordinary course of business, including
guarantees or obligations of the Company or any Subsidiary thereof with respect
to letters of credit (other than letters of credit issued under the Credit
Agreement) supporting such bid, performance or surety
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obligations, and guarantees made in the ordinary course of business by the
Company or any of its Subsidiaries of performance of any contractual obligation
by the Company, a Subsidiary or any other entity in which the Company or a
Subsidiary owns an equity interest (in each case other than for an obligation
for money borrowed).
"Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"Initial Purchasers" means Donaldson, Lufkin & Jenrette Securities
Corporation, Morgan Stanley & Co. Incorporated and Chase Securities Inc.
"Interest Payment Date" means the stated due date of an installment of
interest on the Securities.
"Issue Date" means the date of first issuance of the Securities under
this Indenture.
"Junior Securities" means non-mandatorily redeemable Capital Stock in
the Company and any Indebtedness of the Company, in each case that (a) is
authorized and issued pursuant to a plan of reorganization of the Company (which
authorization states that it gives effect to the subordination of such Junior
Securities to all Senior Indebtedness) as long as such plan of reorganization is
approved by the holders of Senior Indebtedness under the Credit Agreement, (b)
is subordinated to all Senior Indebtedness (and any debt securities issued in
exchange for Senior Indebtedness) to substantially the same extent as, or to a
greater extent than, the Securities are subordinated to Senior Indebtedness
pursuant to this Indenture and has a stated maturity at least one year after
(and does not provide for principal payments prior to) the stated maturity of
any Senior Indebtedness and any debt securities issued in exchange for Senior
Indebtedness, and (c) contains terms, provisions, covenants and default
provisions not more beneficial to the Holders of the Securities as compared to
the holders of Senior Indebtedness on the issue date of the Securities.
"Last Sale Price" shall have the meaning specified in Section 13.3.
"Legal Holiday" shall have the meaning specified in Section 14.7.
"Lien" means any mortgage, lien, pledge, charge, security interest or
other encumbrance of any kind, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement and any lease deemed to constitute a security interest and
any option or other agreement to give any security interest).
"Liquidated Damages" shall have the meaning specified in the
Registration Rights Agreement.
"non-electing share" shall have the meaning specified in Section 13.6.
"Non-Payment Default" shall have the meaning specified in Section
12.2(b).
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"Non-Recourse Debt" means Indebtedness of a Person to the extent that
under the terms thereof and pursuant to applicable law, no personal recourse
could be had against such Person for the payment of the principal of or interest
or premium or any other amounts with respect to such Indebtedness or for any
claim based on such Indebtedness and that enforcement of obligations on such
Indebtedness is limited solely to recourse against interests in specified
assets.
"Notice of Default" shall have the meaning specified in Section 6.1(4),
(5) or (6).
"Offer" shall have the meaning specified in Section 13.5(f).
"Offering Memorandum" means the final Offering Memorandum, dated
December 9, 1999, in connection with which the Securities were offered and sold
by the Company.
"Officer" means, with respect to the Company, the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer, the
Treasurer, the Controller, or the Secretary or any Assistant Secretary of the
Company.
"Officers' Certificate" means, with respect to the Company, a
certificate signed by two Officers of the Company (one of whom shall be the
principal executive, financial or accounting officer of the Company) and
otherwise complying with the requirements of Section 2.2, if applicable, and
Sections 14.4 and 14.5.
"Opinion of Counsel" means a written opinion from legal counsel (who
can be counsel to the Company or an employee of the Company) who is reasonably
acceptable to the Trustee and which complies with the requirements of Sections
14.4 and 14.5.
"Paying Agent" shall have the meaning specified in Section 2.3.
"Payment Blockage Period" shall have the meaning specified in Section
12.2(b).
"Payment Default" shall have the meaning specified in Section 12.2(a).
"Person" or "person" means any corporation, individual, limited
liability company, joint stock company, joint venture, partnership,
unincorporated association, governmental regulatory entity, country, state or
political subdivision thereof, trust, municipality or other entity.
"principal" of any Indebtedness means the principal of such
Indebtedness plus, without duplication, any applicable premium, if any, on such
Indebtedness.
"property" means any right or interest in or to property or assets of
any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Purchase Agreement" means that certain Purchase Agreement, dated
December 8, 1999, by and among the Company and the Initial Purchasers.
"Purchased Shares" shall have the meaning specified in Section 13.5(f).
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"Record Date" means a record date specified in the Securities whether
or not such record date is a Business Day.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to Article III of
this Indenture and Paragraph 5 in the form of Security attached hereto as
Exhibit A.
"Redemption Price," when used with respect to any Security to be
redeemed, means the redemption price for such redemption pursuant to Paragraph 5
in the form of Security attached hereto as Exhibit A, which shall include,
without duplication, in each case, accrued and unpaid interest and Liquidated
Damages, if any, to but excluding, the Redemption Date.
"Registrar" shall have the meaning specified in Section 2.3.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof, by and among the Initial Purchasers and the
Company, as such agreement may be amended, modified or supplemented from time to
time in accordance with the terms thereof.
"Repurchase Date" shall have the meaning specified in Section 11.1(a).
"Repurchase Offer" shall have the meaning specified in Section 11.1(b).
"Repurchase Offer Period" shall have the meaning specified in Section
11.1(b).
"Repurchase Price" shall have the meaning specified in Section 11.1(a).
"Repurchase Put Date" shall have the meaning specified in Section
11.1(b).
"Restricted Security" means a Security, unless or until it has been (i)
disposed of in a transaction effectively registered under the Securities Act or
(ii) distributed to the public pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities" means, collectively, the 5.75% Convertible Subordinated
Notes due 2006, as supplemented from time to time in accordance with the terms
hereof, issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Securities Custodian" means the Trustee, as custodian with respect to
the Securities in global form, or any successor entity thereto.
"Senior Indebtedness" means all obligations of the Company to pay the
principal of, premium, if any, interest (including all interest accruing
subsequent to the commencement of any bankruptcy or similar proceeding, whether
or not a claim for post-petition interest is allowed as a claim in any such
proceeding) and rent payable on or in connection with, and all letters of
credit,
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reimbursement obligations and fees, costs, expenses and other amounts and
liabilities accruing or payable on or in connection with, and Hedging
Obligations issued by parties to (and their affiliates), the Credit Agreement
and any other Indebtedness of the Company, whether outstanding on the date of
this Indenture or thereafter created, incurred, assumed, guaranteed or in effect
guaranteed by the Company, unless the instrument creating or evidencing such
Indebtedness expressly provides that such Indebtedness is not senior or superior
in right of payment to the Securities or is pari passu with, or subordinated to,
the Securities; provided that in no event shall Senior Indebtedness include (a)
Indebtedness of the Company owed to any Subsidiary of the Company, (b)
Indebtedness of the Company representing any trade account payable incurred in
the ordinary course of business, (c) any liability for taxes owed or owing by
the Company or any Subsidiary of the Company or (d) the Securities.
"Shelf Registration Statement" shall have the meaning specified in the
Registration Rights Agreement.
"Significant Subsidiary" means as of any date of determination, (i) any
Subsidiary of the Company that has aggregate total assets in an amount in excess
of 10% of the consolidated total assets of the Company and its Subsidiaries at
such date of determination and (ii) any Subsidiary of the Company for which the
net income of such Subsidiary and its Subsidiaries, determined on a consolidated
basis in accordance with generally accepted accounting principals, during the
four fiscal quarters most recently ended preceding the date of determination,
exceeded 10% of the net income of the Company and its Subsidiaries during such
period.
"Special Record Date" for payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 2.12.
"Stated Maturity," when used with respect to any Security, means
December 15, 2006.
"Subordinated Obligations" shall have the meaning set forth in Article
XII.
"Subsidiary" with respect to any Person, means (i) a corporation a
majority of whose Capital Stock with voting power normally entitled to vote in
the election of directors is at the time, directly or indirectly, owned by such
Person, by such Person and one or more Subsidiaries of such Person or by one or
more Subsidiaries of such Person, (ii) a partnership in which such Person or a
Subsidiary of such Person is, at the time, a general partner and owns alone or
together with one or more Subsidiaries of such Person a majority of the
partnership interests, or (iii) any other Person (other than a corporation) in
which such Person, one or more Subsidiaries of such Person, or such Person and
one or more Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof, has at least majority ownership interest.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
SECTIONS 77aaa-77bbbb) as in effect on the date of the execution of this
Indenture, except as provided by Section 9.3 hereof pursuant to which the term
"TIA" will mean such Trust Indenture Act as amended through and including the
date specified by such Section 9.3 for purposes thereof.
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"Trading Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday, other than any day on which securities are not traded on the New York
Stock Exchange (or, if the Common Stock is not listed thereon, on the principal
national securities exchange or any national automated quotation system on which
the Common Stock is listed or admitted to trading).
"Transfer Restricted Securities" means Securities that (i) bear or are
required to bear the legend set forth in Section 2.6 hereof and (ii) contain the
paragraph referred to in footnote 2 to the form of security attached hereto as
Exhibit A and the paragraph referred to in footnotes 4 and 5 to the certificate
attached hereto as Exhibit B.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Trust Officer" means any officer within the corporate trust department
(or any successor group) of the Trustee including any vice president, assistant
vice president, assistant secretary, assistant treasurer, trust officer or any
other officer of the Trustee customarily performing functions similar to those
performed by the Persons who at that time shall be such officers, and also
means, with respect to a particular corporate trust matter, any other officer of
the Trustee to whom such trust matter is referred because of his knowledge of
and familiarity with the particular subject and who shall have direct
responsibility for the administration of this Indenture.
"U.S. Government Obligations" means direct noncallable obligations of,
or noncallable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Wholly Owned Subsidiary" of any specified Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person and one
or more Wholly Owned Subsidiaries of such Person.
SECTION I.2. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"Indenture securities" means the Securities.
"Indenture securityholder" means a Holder or a Securityholder.
"Indenture to be qualified" means this Indenture.
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"Indenture trustee" or "institutional trustee" means the Trustee.
"Obligor" on the indenture securities means the Company and any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them thereby.
SECTION I.3. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions;
(6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision; and
(7) references to Sections or Articles means reference to such Section
or Article in this Indenture, unless stated otherwise.
ARTICLE II.
THE SECURITIES
SECTION II.1. FORM AND DATING.
The Securities and the Trustee's certificate of authentication, in
respect thereof, shall be substantially in the form of Exhibit A hereto, which
Exhibit is part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage. The Company shall
approve, with the consent of the Trustee, the form of the Securities and any
notation, legend or endorsement on them. Any such notations, legends or
endorsements not contained in the form of Security attached as Exhibit A hereto
shall be delivered in writing to the Trustee. Each Security shall be dated the
date of its authentication. The terms and provisions contained in the forms of
Securities shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
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If any term or provision of a Security limits, qualifies or conflicts with the
terms of this Indenture, the terms of this Indenture shall control.
SECTION II.2. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Security for the Company by manual or
facsimile signature. The Company's seal may be, but is not required to be,
impressed, affixed, imprinted or reproduced on the Securities and may be in
facsimile form. If an Officer whose signature is on a Security was an Officer at
the time of such execution but no longer holds that or any office at the time
the Trustee authenticates the Security, the Security shall be valid nevertheless
and the Company shall nevertheless be bound by the terms of the Securities and
this Indenture. A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
Such signature shall be conclusive evidence, and the only evidence, that the
Security has been authenticated pursuant to the terms of this Indenture. The
Trustee shall authenticate the Securities for original issue in the aggregate
principal amount of up to $172,500,000 upon a written order of the Company. The
order shall specify (i) the amount of Securities to be authenticated and (ii)
the date on which the Securities are to be authenticated. The aggregate
principal amount of Securities outstanding at any time may not exceed
$172,500,000 except as provided in Section 2.7; provided, that Securities in
excess of $150,000,000 shall not be issued other than pursuant to the
over-allotment option granted by the Company to the Initial Purchasers thereof.
Upon the written order of the Company in the form of an Officers' Certificate,
the Trustee shall authenticate Securities in substitution of Securities
originally issued to reflect any name change of the Company. The Trustee may
appoint an authenticating agent acceptable to the Company to authenticate
Securities. Unless otherwise provided in the appointment, an authenticating
agent may authenticate Securities whenever the Trustee may do so. Each reference
in this Indenture to authentication by the Trustee includes authentication by
such agent. An authenticating agent has the same rights as an Agent to deal with
the Company, any Affiliate of the Company or any of their respective
Subsidiaries, and has the same protections under the Indenture. Securities shall
be issuable only in registered form without coupons in denominations of $1,000
and any integral multiple thereof.
SECTION II.3. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency in New York, New York,
where Securities may be presented for registration of transfer or for exchange
("Registrar") and an office or agency where Securities may be presented for
payment ("Paying Agent") and where notices and demands to or upon the Company in
respect of the Securities may be served. The Company may act as Registrar or
Paying Agent, except that, for the purposes of Articles III, VIII and XI and as
otherwise specified in the Indenture, neither the Company nor any Affiliate of
the Company shall act as Paying Agent. The Registrar shall keep a register of
the Securities and of their transfer and exchange. The Company may have one or
more co-Registrars and one or more additional Paying Agents. The term "Paying
Agent" includes any additional Paying Agent. The Company hereby initially
appoints the Trustee as Registrar and Paying Agent, and the Trustee hereby
initially agrees so to act. The Company may change any Paying Agent or Registrar
without notice to any Holder. The Company shall enter into an appropriate
written agency
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agreement with any Agent not a party to this Indenture, which agreement shall
implement the provisions of this Indenture that relate to such Agent. The
Company shall promptly notify the Trustee in writing of the name and address of
any such Agent. If the Company fails to maintain a Registrar or Paying Agent,
the Trustee shall act as such and shall be entitled to appropriate compensation
therefor pursuant to Section 7.7. The Company initially appoints The Depository
Trust Company ("DTC") to act as Depositary with respect to the Global
Securities. The Company initially appoints the Trustee to act as Securities
Custodian with respect to the Global Securities.
SECTION II.4. PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, premium, if any, interest on or Liquidated Damages with respect
to, the Securities (whether such assets have been distributed to it by the
Company or any other obligor on the Securities), and shall notify the Trustee in
writing of any Default in making any such payment. If either of the Company or a
Subsidiary of the Company acts as Paying Agent, it shall segregate such assets
and hold them as a separate trust fund for the benefit of the Holders or the
Trustee. The Company at any time may require a Paying Agent to distribute all
assets held by it to the Trustee and account for any assets disbursed and the
Trustee may at any time during the continuance of any Payment Default, upon
written request to a Paying Agent, require such Paying Agent to distribute all
assets held by it to the Trustee and to account for any assets distributed. Upon
distribution to the Trustee of all assets that shall have been delivered by the
Company to the Paying Agent, the Paying Agent (if other than the Company or an
Affiliate of the Company) shall have no further liability for such assets.
SECTION II.5. SECURITYHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee on or before the fourth Business Day preceding each Interest Payment
Date and at such other times as the Trustee may request in writing a list in
such form and as of such date as the Trustee reasonably may require of the names
and addresses of Holders.
SECTION II.6. TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF DEFINITIVE SECURITIES.
When Definitive Securities are presented to the Registrar or a
co-Registrar with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal
principal amount of Definitive Securities of other authorized denominations;
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the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Securities surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company and the
Registrar or co-Registrar, duly executed by the Holder thereof or his attorney
duly authorized in writing; and
(ii) in the case of Transfer Restricted Securities that are
Definitive Securities, shall be accompanied by the following additional
information and documents, as applicable:
(A) if such Transfer Restricted Security is being
delivered to the Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to that effect (in
substantially the form set forth on the reverse of the Security); or
(B) if such Transfer Restricted Security is being
transferred to a "qualified institutional buyer" (as defined in Rule 144A under
the Securities Act) that is aware that any sale of securities to it will be made
in reliance on Rule 144A under the Securities Act and that is acquiring such
Transfer Restricted Security for its own account or for the account of another
such "qualified institutional buyer," a certification from such Holder to that
effect (in substantially the form set forth on the reverse of the Security);
(C) if such Transfer Restricted Security is being
transferred to an institutional investor that is an "accredited investor" within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act, a
certification to that effect (in substantially the form set forth on the reverse
of the Security) accompanied by a certificate in the form of Exhibit B to the
Indenture to the Trustee and if either the Trustee or the Company so requests,
an Opinion of Counsel satisfactory to the requesting party to the effect that
such transfer is in compliance with the Securities Act; or
(D) if such Transfer Restricted Security is being
transferred in reliance on another exemption from the registration requirements
of the Securities Act and with all applicable securities laws of the states of
the United States, a certification to that effect (in substantially the form set
forth on the reverse of the Security) and if either the Trustee or the Company
so requests, an Opinion of Counsel satisfactory to the requesting party to the
effect that such transfer is in compliance with the Securities Act.
(b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE SECURITY FOR A
BENEFICIAL INTEREST IN A GLOBAL SECURITY.
A Definitive Security may not be exchanged for a beneficial interest in
a Global Security, except upon satisfaction of the requirements set forth below.
Upon receipt by the Trustee of a Definitive Security, duly endorsed or
accompanied by appropriate instruments of transfer in form
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reasonably satisfactory to the Company and the Registrar or Co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing,
together with:
(i) if such Definitive Security is a Transfer Restricted
Security, certification, substantially in the form set forth on the Security,
that such Definitive Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act) in accordance with
Rule 144A under the Securities Act; and
(ii) whether or not such Definitive Security is a Transfer
Restricted Security, written instructions directing the Trustee to make, or to
direct the Securities Custodian to make, an endorsement on the Global Security
to reflect an increase in the aggregate principal amount of the Securities
represented by the applicable Global Security; then the Trustee shall cancel
such Definitive Security and cause, or direct the Securities Custodian to cause,
in accordance with the standing instructions and procedures existing between the
Depositary and the Securities Custodian, the aggregate principal amount of
Securities represented by the appropriate Global Security to be increased
accordingly. If no Global Securities are then outstanding, the Company shall
issue and the Trustee, upon receipt of the authentication order of the Company
in the form of an Officers' Certificate, shall authenticate an appropriate new
Global Security in the appropriate principal amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES.
The transfer and exchange of Global Securities or beneficial interests
therein shall be effected through the Depositary, in accordance with this
Indenture (including the restrictions on transfer set forth herein) and the
procedures of the Depositary therefor.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL SECURITY FOR
A DEFINITIVE SECURITY.
(i) Any Person having a beneficial interest in a Global
Security may upon request exchange such beneficial interest for a Definitive
Security. Upon receipt by the Trustee of written instructions or such other form
of instructions as is customary for the Depositary from the Depositary or its
nominee on behalf of any Person having a beneficial interest in a Global
Security and upon receipt by the Trustee of a written instruction or such other
form of instructions as is customary for the Depositary or the Person designated
by the Depositary as having such a beneficial interest in a Transfer Restricted
Security only, the following additional information and documents (all of which
may be submitted by facsimile):
(A) if such beneficial interest is being transferred to
the Person designated by the Depositary as being the beneficial owner, a
certification from such person to that effect (in substantially the form set
forth on the reverse of the Security);
(B) if such beneficial interest is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the Securities
Act) that is aware that any sale of Securities to it will be made in reliance on
Rule 144A under the Securities Act and that is acquiring such beneficial
interest in the Transfer Restricted Security for its own account or the
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account of another "qualified institutional buyer," a certification to that
effect from the transferor (in substantially the form set forth on the reverse
of the Security);
(C) if such Definitive Security is being transferred to
an institutional investor that is an "accredited investor" within the meaning of
Rule 501(a)(1), (2), (3) or (7) under the Securities Act, a certification to
that effect (in substantially the form set forth on the reverse of the Security)
accompanied by a certificate in the form of Exhibit B to the Indenture to the
Trustee and if either the Trustee or the Company so requests, an Opinion of
Counsel satisfactory to the requesting party to the effect that such transfer is
in compliance with the Securities Act; or
(D) if such beneficial interest is being transferred
in reliance on another exemption from the registration requirements of the
Securities Act and in accordance with all applicable securities laws of the
states of the United States, a certification to that effect from the
transferor (in substantially the form set forth on the reverse of the
Security) and if either the Trustee or the Company so requests, an Opinion of
Counsel satisfactory to the requesting party to the effect that such transfer
is in compliance with the Securities Act;
then the Trustee or the Securities Custodian, at the direction of the
Trustee, will cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of the applicable Global Security to be reduced
and, following such reduction, the Company will execute and, upon receipt of
an authentication order in the form of an Officers' Certificate, the Trustee
will authenticate and deliver to the transferee a Definitive Security.
(ii) Definitive Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section 2.6(d) shall be
registered in such names and in such authorized denominations as the Depositary,
pursuant to instructions from its direct or indirect participants or otherwise,
shall instruct the Trustee. The Trustee shall make such Definitive Securities
available for delivery to the persons in whose names such Securities are so
registered.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL
SECURITIES.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.6), a Global Security
may not be transferred as a whole except (i) by the Depositary to a nominee of
the Depositary, (ii) by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or (iii) by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) AUTHENTICATION OF DEFINITIVE SECURITIES IN ABSENCE OF
DEPOSITARY.
If at any time:
(1) the Depositary for the Securities notifies the Company and
the Company notifies the Trustee in writing that the Depositary is no longer
willing or able to continue as
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Depositary for the Global Securities and a successor Depositary for the Global
Securities is not appointed by the Company within 90 days after delivery of such
notice; or
(2) the Company, in its sole discretion, notifies the Trustee
in writing that it elects to cause the issuance of Definitive Securities under
this Indenture;
then the Company will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Definitive Securities,
will, or its authenticating agent will, authenticate and deliver Definitive
Securities, in an aggregate principal amount equal to the principal amount of
the Global Securities, in exchange for such Global Securities.
(g) LEGENDS.
(1) Except as permitted by the following paragraph (ii), each
Security certificate evidencing the Global Securities and the Definitive
Securities (and all Securities issued in exchange therefor or substitution
thereof) shall bear a legend in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY (OR THEIR PREDECESSOR) HAVE
NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS
ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED THESE
SECURITIES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT RESELL
OR OTHERWISE TRANSFER THESE SECURITIES EXCEPT (A) TO THE
COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (C) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (D) TO
AN IAI THAT, PRIOR TO SUCH TRANSFER,
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FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF
THESE SECURITIES (THE FORM OF WHICH CAN BE OBTAINED FROM THE
TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
PRINCIPAL AMOUNT OF SECURITIES LESS THAN $250,000, AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT, (E) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH
THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THESE SECURITIES
OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. THE INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
THESE SECURITIES IN VIOLATION OF THE FOREGOING."
(2) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act or an effective
registration statement under the Securities Act:
(i) in the case of any Transfer Restricted Security that
is a Definitive Security, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a Definitive Security that does
not bear the legend set forth above and rescind any restriction on the transfer
of such Transfer Restricted Security (1) in the case of a sale or transfer
pursuant to Rule 144 under the Securities Act, after delivery of a customary
Opinion of Counsel satisfactory to the Company to the effect that such transfer
is in compliance with the Securities Act or (2) in the case of a sale or
transfer pursuant to an effective registration statement under the Securities
Act; and
(ii) any such Transfer Restricted Security represented by
a Global Security shall not be subject to the provisions set forth in (i) above
(such sales or transfers being subject only to the provisions of Section 2.6(c)
hereof); provided, however, that with respect to any request for an exchange of
a Transfer Restricted Security that is represented by a Global Security for a
Definitive Security that does not bear a legend, which request is made in
reliance upon Rule 144, the Holder thereof shall certify in writing to the
Registrar that such request is
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being made pursuant to Rule 144 (such certification to be substantially in the
form set forth on the reverse of the Security).
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL SECURITY.
At such time as all beneficial interests in a Global Security have
either been exchanged for Definitive Securities, redeemed, repurchased or
canceled, such Global Security shall be returned to or retained and canceled by
the Trustee. At any time prior to such cancellation, if any beneficial interest
in a Global Security is exchanged for Definitive Securities, redeemed,
repurchased or canceled, the principal amount of Securities represented by such
Global Security shall be reduced and an endorsement shall be made on such Global
Security, by the Trustee or the Securities Custodian, at the written direction
of the Trustee, to reflect such reduction.
(i) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF
DEFINITIVE SECURITIES.
(1) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee or any authenticating agent of the
Trustee, upon receipt of the authentication order of the Company in the form of
an Officers' Certificate, shall authenticate Definitive Securities and Global
Securities at the Registrar's or co-Registrar's written request.
(2) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax, assessments or similar governmental charge payable in
connection therewith (other than any such transfer taxes, assessments, or
similar governmental charge payable upon exchanges or transfers pursuant to
Section 2.2 (fourth paragraph), 2.10, 3.7, 9.5 or 11.1 (final paragraph)).
(3) The Registrar or co-Registrar shall not be required to
register the transfer of or exchange of (a) any Definitive Security selected for
redemption in whole or in part pursuant to Article III, except the unredeemed
portion of any Definitive Security being redeemed in part, or (b) any Security
for a period beginning 15 Business Days before the mailing of a notice of an
offer to repurchase pursuant to Article XI hereof or the mailing of a notice of
redemption of Securities pursuant to Article III hereof and ending at the close
of business on the day of such mailing.
(j) GENERAL.
The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Security (including any transfers between or among Depositary
participants or beneficial owners of interests in any Global Security) other
than to require delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and when expressly
required by the terms of, this Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements hereof.
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SECTION II.7. REPLACEMENT SECURITIES.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims and submits an affidavit or other evidence, satisfactory to
the Trustee and the Company, to the effect that the Security has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee, upon
receipt of the authentication order of the Company in the form of an Officers'
Certificate, shall authenticate a replacement Security if the Trustee's
requirements are met. If required by the Trustee or the Company, such Holder
must provide an indemnity bond or other indemnity, sufficient in the judgment of
both the Company and the Trustee, to protect the Company, the Trustee or any
Agent from any loss which any of them may suffer if a Security is replaced. The
Company and the Trustee may charge such Holder for their expenses in replacing a
Security.
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.
Every new Security issued pursuant to this Section 2.7 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 2.7 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 II.8. OUTSTANDING SECURITIES.
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee (including any Security represented by a
Global Security) except those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Security effected by
the Trustee hereunder and those described in this Section 2.8 as not
outstanding. A Security does not cease to be outstanding because the Company or
an Affiliate of the Company holds the Security, except as provided in Section
2.9. If a Security is replaced or paid pursuant to Section 2.7 (other than a
mutilated Security surrendered for replacement), the replaced or paid Security
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced or paid Security is held by a bona fide purchaser. A mutilated
Security ceases to be outstanding upon surrender of such Security and
replacement thereof pursuant to Section 2.7. Securities for whose payment or
redemption money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company or its Affiliates) in trust
or set aside and segregated in trust by the Company or one of its Subsidiaries
(if the Company or one of its Subsidiaries shall act as the Paying Agent) for
the Holders of such Securities shall be deemed
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to be no longer outstanding on and after the date for such payment or redemption
and shall cease to accrue interest.
SECTION II.9. TREASURY SECURITIES.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, amendment, supplement, waiver or
consent, Securities owned by the Company or an Affiliate of the Company shall be
disregarded, except that, for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, amendment, supplement,
waiver or consent, only Securities that a Trust Officer of the Trustee actually
knows are so owned shall be disregarded. The Company shall notify the Trustee,
in writing, when the Company or an Affiliate of the Company repurchases or
otherwise acquires Securities and of the principal amount of such Securities so
repurchased or otherwise acquired. Notwithstanding the foregoing, Securities
that are to be acquired by the Company or any Affiliate of the Company pursuant
to an exchange offer, tender offer or other agreement shall not be deemed to be
owned by the Company or such Affiliate until legal title to such Securities has
passed to such entity.
SECTION II.10. TEMPORARY SECURITIES.
Until Definitive Securities are ready for delivery, the Company may
prepare and the Trustee (upon written request from the Company) shall
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of Definitive Securities but may have variations that the Company
reasonably and in good faith considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate Definitive Securities in exchange for temporary Securities. Until
so exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as permanent Securities authenticated and
delivered hereunder.
SECTION II.11. CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent
(other than the Company or an Affiliate of the Company), and no one else, shall
cancel all Securities surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.7, the Company may not issue new Securities
to replace Securities that have been paid or delivered to the Trustee for
cancellation. No Securities shall be authenticated in lieu of or in exchange for
any Securities canceled as provided in this Section 2.11, except as expressly
permitted in the form of Securities and as permitted by this Indenture. All
cancelled Securities shall be destroyed (subject to the record retention
requirements of the Exchange Act) and certification of their destruction
delivered to the Company, unless the Company shall direct in writing that
cancelled Securities be returned to it.
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SECTION II.12. DEFAULTED INTEREST.
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 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 plus, to the extent lawful, any interest payable on
the defaulted interest (collectively, herein called "Defaulted Interest") shall
forthwith cease to be payable to the registered holder on the relevant Record
Date, and such Defaulted Interest shall be paid by the Company, at its election
in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the persons in whose names the 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 and the date of the
proposed payment. Thereupon the Trustee shall fix a special record date for the
payment of such Defaulted Interest which shall be not more than 15 Business Days
and not less than 10 Business Days prior to the date of the proposed payment and
not less than 10 Business Days after the receipt by the Trustee of the notice of
the proposed payment ("Special Record Date"). The Trustee shall promptly notify
the Company in writing of such Special Record Date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at such Holder's address as it
appears in the registry books of the Registrar not less than 10 Business Days
prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the persons in whose names
the Securities (or their respective predecessor Securities) are registered on
such Special Record Date and shall no longer be payable pursuant to the
following clause (2). Prior to 12:00 noon New York time on the date on which the
Defaulted Interest is to be paid, the Company shall deposit with the Trustee an
amount of Cash equal to the aggregate amount proposed to be paid in respect of
such Defaulted Interest.
(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 written notice given by the Company to the Trustee
of the proposed payment pursuant to this clause, such manner shall be deemed
practicable by the Trustee. Subject to the foregoing provisions of this Section
2.12, each Security delivered under this Indenture upon 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.
Notwithstanding the foregoing, any interest which is paid prior to the
expiration of the grace period provided in Section 6.1 shall be paid to the
Holders of the Securities as of the regular Record Date for such Interest
Payment Date for which interest has not been paid.
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SECTION II.13. CUSIP NUMBERS.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers. The Company will promptly notify
the Trustee of any change in the "CUSIP" numbers.
SECTION II.14. DEPOSIT OF MONEYS.
Prior to noon New York time on each Interest Payment Date, Redemption
Date and Repurchase Date, and on the Stated Maturity Date, the Company shall
have deposited with the Paying Agent such amounts in immediately available funds
sufficient to make Cash payments, if any, due on such Interest Payment Date,
Redemption Date, Repurchase Date or Stated Maturity Date, as the case may be, in
a timely manner which permits the Paying Agent to remit payment to the Holders
on such Interest Payment Date, Redemption Date, Repurchase Date or Stated
Maturity Date.
ARTICLE III.
REDEMPTION
SECTION III.1. RIGHT OF REDEMPTION.
Redemption of Securities, as permitted by any provision of this
Indenture, shall be made in accordance with Paragraph 5 of the Securities and
this Article III. The Company will not have the right to redeem any Securities
prior to December 15, 2002. On or after December 15, 2002, the Company will have
the right to redeem all or any part of the Securities at the Redemption Prices
specified in Paragraph 5 therein under the caption "Redemption," in each case
including accrued and unpaid interest and Liquidated Damages, if any, to, but
excluding, the Redemption Date.
SECTION III.2. NOTICES TO TRUSTEE.
If the Company elects to redeem Securities pursuant to Paragraph 5 of
the Securities, it shall notify the Trustee in writing of the Redemption Date,
the principal amount of Securities to be redeemed, the Redemption Price and
whether it wants the Trustee, on behalf of the Company, to give notice of
redemption to the Holders. If the Company elects to reduce the principal amount
of Securities to be redeemed pursuant to Paragraph 5 of the Securities by
crediting against any such redemption Securities it has not previously delivered
to the Trustee for cancellation, it shall so notify the Trustee in writing of
the amount of the reduction and deliver such Securities with such notice. The
Company shall give each notice to the Trustee provided for in this Section 3.2
at least 45 days but not more than 75 days before the Redemption Date (unless a
shorter notice period shall be satisfactory to the Trustee) together with an
Officers' Certificate
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stating that such redemption will comply with the conditions contained herein.
Any such notice to the Trustee may be canceled at any time prior to notice of
such redemption being mailed to any Holder and shall thereby be void and of no
effect.
SECTION III.3. SELECTION OF SECURITIES TO BE REDEEMED.
If less than all of the Securities are to be redeemed pursuant to
Paragraph 5 thereof, the Trustee shall select the Securities to be redeemed on a
pro rata basis, by lot or by such other method as the Trustee shall determine to
be fair and appropriate and in such manner as complies with any applicable
depositary, legal and stock exchange or automated quotation system requirements.
The Trustee shall make the selection from the Securities outstanding and not
previously called for redemption and shall promptly notify the Company in
writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to be
redeemed. Securities in denominations of $1,000 may be redeemed only in whole.
The Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Securities that have denominations larger
than $1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption.
SECTION III.4. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption by first-class mail, postage
prepaid, to the Trustee and each Holder whose Securities are to be redeemed at
such Holder's address as it appears on the security register maintained by the
Registrar. At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. Each notice of
redemption shall identify the Securities to be redeemed and shall state: (1) the
Redemption Date, and that the Securities called for redemption may not be
converted after the Business Day immediately prior to the Redemption Date; (2)
the Redemption Price, including the amount of accrued and unpaid interest and
Liquidated Damages, if any, to be paid upon such redemption; (3) the name,
address and telephone number of the Paying Agent; (4) that Securities called for
redemption must be surrendered to the Paying Agent at the address specified in
such notice to collect the Redemption Price plus accrued interest; (5) that,
unless (a) the Company defaults in its obligation to deposit Cash with the
Paying Agent in accordance with Section 3.6 hereof or (b) such redemption
payment is prohibited pursuant to Article XII hereof or otherwise, interest on,
and Liquidated Damages with respect to, Securities called for redemption ceases
to accrue on and after the Redemption Date and the only remaining right of the
Holders of such Securities is to receive payment of the Redemption Price,
including accrued and unpaid interest and Liquidated Damages, if any, to, but
excluding the Redemption Date, upon surrender to the Paying Agent of the
Securities called for redemption and to be redeemed; (6) if any Security is
being redeemed in part, the portion of the principal amount, equal to $1,000 or
any integral multiple thereof, of such Security to be redeemed and that, on or
after the Redemption Date, upon surrender of such Security, a new Security or
Securities in aggregate principal amount equal to the unredeemed portion thereof
will be issued; (7) if less than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be redeemed,
as well as the
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aggregate principal amount of such Securities to be redeemed and the aggregate
principal amount of Securities to be outstanding after such partial redemption;
(8) the CUSIP number of the Securities to be redeemed; and (9) that the notice
is being sent pursuant to this Section 3.4 and pursuant to the redemption
provisions of Paragraph 5 of the Securities. The notice, if mailed in the manner
herein provided, shall be conclusively presumed to have been given, whether or
not the Holder receives such notice.
SECTION III.5. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.4,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price, including accrued and unpaid interest and
Liquidated Damages, if any, to, but excluding, the Redemption Date. Upon
surrender to the Trustee or Paying Agent, such Securities called for redemption
shall be paid at the Redemption Price, including accrued and unpaid interest and
Liquidated Damages, if any, to, but excluding, the Redemption Date; provided
that if the Redemption Date is after a regular Record Date and on or prior to
the corresponding Interest Payment Date, the accrued interest and Liquidated
Damages, if any, shall be payable to the Holder of the redeemed Securities
registered on the relevant Record Date; and provided, further, that if a
Redemption Date is a Legal Holiday, payment shall be made on the next succeeding
Business Day and no interest shall accrue for the period from such Redemption
Date to such succeeding Business Day. Notices mailed as provided in this Article
III shall be conclusively presumed to have been given whether or not a given
Holder receives the Notice.
SECTION III.6. DEPOSIT OF REDEMPTION PRICE.
Prior to 12:00 noon New York time on the Redemption Date, the Company
shall deposit with the Paying Agent (other than the Company or an Affiliate of
the Company) Cash sufficient to pay the Redemption Price of, including accrued
and unpaid interest on, and Liquidated Damages, if any, with respect to, all
Securities to be redeemed on such Redemption Date (other than Securities or
portions thereof called for redemption on that date that have been delivered by
the Company to the Trustee for cancellation). The Paying Agent shall promptly
return to the Company any Cash so deposited which is not required for that
purpose upon the written request of the Company. If the Company complies with
the preceding paragraph and the other provisions of this Article III and payment
of the Securities called for redemption is not prohibited under Article XII or
otherwise, interest on the Securities to be redeemed will cease to accrue on and
after the applicable Redemption Date, whether or not such Securities are
presented for payment. Notwithstanding anything herein to the contrary, if any
Security surrendered for redemption in the manner provided in the Securities
shall not be so paid upon surrender for redemption because of the failure of the
Company to comply with the preceding paragraph, interest shall continue to
accrue and be paid from the Redemption Date until such payment is made on the
unpaid principal, and, to the extent lawful, on any interest not paid on such
unpaid principal, in each case at the rate and in the manner provided in Section
4.1 hereof and the Security.
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SECTION III.7. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is to be redeemed in part, the
Company shall execute and the Trustee, upon receipt of a written order of the
Company in the form of an Officers' Certificate, shall thereafter authenticate
and make available for delivery to the Holder, without service charge to the
Holder, a new Security or Securities equal in principal amount to the unredeemed
portion of the Security surrendered.
ARTICLE IV.
COVENANTS
SECTION IV.1. PAYMENT OF SECURITIES.
The Company shall pay the principal of, interest on, and Liquidated
Damages with respect to, the Securities on the dates and in the manner provided
in this Indenture and the Securities, as applicable. An installment of principal
of, interest on, or Liquidated Damages with respect to, the Securities shall be
considered paid on the date it is due if the Trustee or Paying Agent (other than
the Company or an Affiliate of the Company) holds for the benefit of the
Holders, on or before 12:00 noon New York time on that date, Cash deposited and
designated for and sufficient to pay the installment. The Company shall pay
interest on overdue principal and on overdue installments of interest at the
rate specified in the Securities compounded semi-annually, to the extent lawful.
SECTION IV.2. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in New York, New York, an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange and for conversion
and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company shall give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the address of the Trustee set forth in Section 14.2. The Company
may also from time to time designate one or more other offices or agencies where
the Securities may be presented or surrendered for any or all such purposes and
may from time to time rescind such designations; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in New York, New York, for such
purposes. The Company shall give prior written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency. The Company hereby initially designates the corporate trust
office of the Trustee in New York, New York, as the office contemplated by this
Section 4.2.
SECTION IV.3. CORPORATE EXISTENCE.
Subject to Article V, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence in accordance with its
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organizational documents and the rights (charter and statutory) and corporate
franchises of the Company; provided, however, that the Company shall not be
required to preserve, with respect to itself, any right or franchise, if the
Company shall, in good faith, reasonably determine that the preservation thereof
is no longer necessary or desirable in the conduct of the business of such
entity and the loss thereof is not adverse in any material respect to the
Holders.
SECTION IV.4. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall, and shall cause each of its Subsidiaries to, pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, all material taxes, assessments and governmental charges (including
withhold withholding taxes and any penalties, interest and additions to taxes)
levied or imposed upon the Company or any of its Subsidiaries or any of their
respective properties and assets; provided, however, that neither the Company
nor any Subsidiary shall be required to pay or discharge or cause to be paid or
discharged any such tax, assessment or charge whose amount, applicability or
validity is being contested in good faith by appropriate proceedings and for
which disputed amounts adequate reserves have been established in accordance
with GAAP.
SECTION IV.5. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(a) The Company shall deliver to a Trust Officer of the
Trustee within 120 days after the end of its fiscal year an
Officers' Certificate complying with Section 314(a)(4) of the
TIA and stating that a review of its activities and the
activities of its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing
Officers with a view to determining, without regard to notice
periods or periods of grace, whether the Company has kept,
observed, performed and fulfilled its obligations under this
Indenture and further stating, as to each such Officer signing
such certificate, whether or not the signer knows of any
failure by the Company or any Subsidiary of the Company to
comply with any conditions or covenants in this Indenture and,
if such signor does know of such a failure to comply, the
certificate shall describe such failure with reasonable
particularity. The Officers' Certificate shall also notify the
Trustee should the relevant fiscal year end on any date other
than the current fiscal year end date.
(b) The Company shall, so long as any of the Securities are
outstanding, deliver to a Trust Officer of the Trustee,
promptly upon becoming aware of any Default, Event of Default
or fact which would prohibit the making of any payment to or
by the Trustee in respect of the Securities, an Officers'
Certificate specifying such Default, Event of Default or fact
and what action the Company is taking or proposes to take with
respect thereto. The Trustee shall not be deemed to have
knowledge of any Default, any Event of Default or any such
fact unless one of its Trust Officers receives written notice
thereof from the Company or any of the Holders.
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SECTION IV.6. REPORTS.
Whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee within 15 days after it is or would have been required to file such with
the SEC, annual and quarterly consolidated financial statements substantially
equivalent to financial statements that would have been included in reports
filed with the SEC if the Company were subject to the requirements of Section 13
or 15(d) of the Exchange Act, including, with respect to annual information
only, a report thereon by the Company's certified independent public accountants
as such would be required in such reports to the SEC and, in each case, together
with a management's discussion and analysis of financial condition and results
of operations which would be so required. Delivery of such reports, information
and documents to the Trustee is for informational purposes only and the
Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
SECTION IV.7. RULE 144A INFORMATION REQUIREMENT.
If at any time there are Transfer Restricted Securities outstanding and
the Company shall cease to have a class of equity securities registered under
Sections 12(b) or 12(g) of the Exchange Act or shall cease to be subject to
Section 15(d) of the Exchange Act, the Company shall furnish, within a
reasonable period of time, to the Holders or beneficial holders of the
Securities or the underlying Common Stock and prospective purchasers of
Securities or the underlying Common Stock designated by the Holders of Transfer
Restricted Securities, upon their written request, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act until such
time as the Shelf Registration Statement has become effective under the
Securities Act. The Company shall also furnish such information during the
pendency of any suspension of effectiveness of the Shelf Registration Statement.
SECTION IV.8. FURTHER INSTRUMENTS AND ACTS.
Upon the request of the Trustee, the Company will execute and deliver
such further instruments and do such further acts as may be reasonably necessary
or proper to carry out more effectively the purpose of this Indenture.
ARTICLE V.
SUCCESSOR CORPORATION
SECTION V.1. LIMITATION ON MERGER, SALE OR CONSOLIDATION.
(a) The Company shall not, directly or indirectly, consolidate
with or merge with or into another Person or sell, lease or
otherwise dispose of all or substantially all of its assets
(on a consolidated basis), whether in a single transaction or
a series of related transactions, to another Person or group
of affiliated Persons (other than to
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its Wholly Owned Subsidiaries), unless (i) either (a) in the
case of a merger or consolidation, the Company is the
surviving entity or (b) the resulting, surviving Person in
such merger or consolidation (if not the Company), or
transferee entity (in the case of a sale, lease or other
disposition of assets) is a corporation organized under the
laws of the United States, any state thereof or the District
of Columbia and expressly assumes by supplemental indenture
all of the obligations of the Company in connection with the
Securities and the Indenture; (ii) no Default or Event of
Default shall exist or shall occur immediately before or after
giving effect on a pro forma basis to such transaction; and
(iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and, if a supplemental
indenture is required, such supplemental indenture comply with
the Indenture and that all conditions precedent in the
Indenture relating to such transactions have been satisfied.
(b) For purposes of clause (a) of this Section 5.1 and Section
13.6, the sale, assignment, lease or other disposition of all
or substantially all of the properties and assets of one or
more Subsidiaries of the Company, which properties and assets,
if held by the Company instead of such Subsidiaries, would
constitute all or substantially all of the properties and
assets of the Company on a consolidated basis, shall be deemed
to be the transfer of all or substantially all of the
properties and assets of the Company, unless such disposition
is to the Company or a Wholly Owned Subsidiary of the Company.
SECTION V.2. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any permitted consolidation or merger or any permitted sale, lease
or other disposition of all or substantially all of the assets of the Company in
accordance with the foregoing, the successor corporation formed by such
consolidation or into which the Company is merged or to which such sale, lease
or other disposition is made, shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture with the same
effect as if such successor corporation had been named therein as the Company,
and when a successor corporation duly assumes all of the obligations of the
Company pursuant hereto and pursuant to the Securities, the predecessor shall be
released from such obligations.
ARTICLE VI.
EVENTS OF DEFAULT AND REMEDIES
SECTION VI.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 caused voluntarily or involuntarily or effected, without limitation, 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):
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(1) failure by the Company to pay any installment of interest
on, or Liquidated Damages with respect to, the Securities as and when the same
becomes due and payable and the continuance of such failure for a period of 30
days, whether or not such payment is prohibited by Article XII;
(2) failure by the Company to pay all or any part of the
principal of, or premium, if any on the Securities when and as the same become
due and payable at maturity, redemption, by acceleration or otherwise,
including, without limitation, failure to pay all or any part of the Repurchase
Price on the Repurchase Date in accordance with Article XI, whether or not such
payment is prohibited by Article XII;
(3) failure of the Company to perform its covenants and
agreements in accordance with Article XIII and the continuance of any such
failure for 30 days;
(4) failure by the Company to observe or perform any covenant
or agreement contained in the Securities or this Indenture (other than a default
in the performance of any covenant or agreement which is specifically dealt with
elsewhere in this Section 6.1), and continuance of such failure 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 Holders of at least
25% in aggregate principal amount of the then outstanding Securities, a written
notice specifying the nature of the purported default, and that the same, if not
cured, would constitute an Event of Default under this Indenture;
(5) failure to make any payment at final stated maturity,
including any applicable grace period, in respect of Indebtedness of the Company
(other than Non-Recourse Debt) in an amount in excess of $10,000,000, and
continuance of such failure for 30 days after written notice is given to the
Company by the Trustee or to the Company and the Trustee by the Holders of at
least 25% in aggregate principal amount of Securities outstanding specifying the
nature of the purported default, and that the same, if not cured, would
constitute an Event of Default under this Indenture;
(6) default with respect to any Indebtedness of the Company,
which default results in the acceleration of Indebtedness (other than
Non-Recourse Debt) in an amount in excess of $10,000,000 without such
Indebtedness having been discharged or such acceleration having been rescinded
or annulled for 30 days after written notice is given to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25% in
aggregate principal amount of Securities outstanding specifying the nature of
the purported default, and that the same, if entered, would constitute an Event
of Default under this Indenture;
(7) a decree, judgment, or order by a court of competent
jurisdiction shall have been entered adjudging the Company or any of its
Significant Subsidiaries as bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization of the Company or any of its Significant
Subsidiaries under any bankruptcy or similar law, and such decree or order shall
have continued undischarged and unstayed for a period of 45 days; or a decree or
order of a court of competent jurisdiction over the appointment of a receiver,
liquidator, trustee, or assignee in
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bankruptcy or insolvency of the Company, any of its Significant Subsidiaries, or
of the property of any such Person, or for the winding up or liquidation of the
affairs of any such Person, shall have been entered, and such decree, judgment,
or order shall have remained in force undischarged and unstayed for a period of
45 days;
(8) the Company or any of its Significant Subsidiaries shall
institute proceedings to be adjudicated a voluntary bankrupt, or shall consent
to the filing of a bankruptcy proceeding against it, or shall file a petition or
answer or consent seeking reorganization under any bankruptcy or similar law or
similar statute, or shall consent to the filing of any such petition, or shall
consent to the appointment of a Custodian, receiver, liquidator, trustee, or
assignee in bankruptcy or insolvency of it or any of its assets or property, or
shall make a general assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts generally as they become due, or shall,
within the meaning of any Bankruptcy Law, become insolvent, fail generally to
pay its debts as they become due, or take any corporate action in furtherance of
or to facilitate, conditionally or otherwise, any of the foregoing; or
(9) final unsatisfied judgments not covered by insurance,
aggregating in excess of $5,000,000 (net of any insurance or indemnity payments
actually received in respect thereof prior to or within 60 days from the date of
such final judgment) at any one time shall have been rendered against the
Company or any of its Significant Subsidiaries and not have been stayed, bonded
or discharged for a period (during which execution shall not be effectively
stayed) of 60 days after the right to appeal such judgment has expired (or, in
the case of any such final judgment which provides for payment over time, which
shall so remain unstayed, unhanded or undischarged beyond any applicable payment
date provided therein).
Notwithstanding the 60-day period and notice requirement contained in
Section 6.1(4) above, with respect to a default under Article XI the 60-day
period referred to in Section 6.1(4) shall be deemed to have begun as of the
date the Change of Control notice is required to be sent in the event that the
Company has not complied with the provisions of Section 11.1 and the Trustee or
Holders of at least 25% in principal amount of the outstanding Securities
thereafter give the Notice of Default referred to in Section 6.1(4) to the
Company and, if applicable, the Trustee; provided, however, that if the breach
or default is a result of a default in the payment when due of the Repurchase
Price on the Repurchase Date, such Event of Default shall be deemed, for
purposes of this Section 6.1, to arise no later than on the final Repurchase
Date.
SECTION VI.2. ACCELERATION OF MATURITY RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default specified in
Section 6.1(7) or (8) relating to the Company) occurs and is continuing, then in
every such case, unless the principal of all of the Securities shall have
already become due and payable, either the Trustee or the Holders of at least
25% in aggregate principal amount of then outstanding Securities, by a notice in
writing to the Company (and to the Trustee if given by Holders) (an
"Acceleration Notice"), may declare all unpaid principal, premium, if any,
accrued interest and Liquidated Damages, if any, of the Securities (or the
Repurchase Price if the Event of Default includes failure to pay the Repurchase
Price, determined as set forth below), with respect thereto, to be due and
payable
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immediately without any other declaration or act on the part of the Trustee or
the Holders. If an Event of Default specified in Section 6.1(7) or (8) relating
to the Company occurs, all principal, premium, if any, accrued interest and
Liquidated Damages on or with respect thereto will be immediately due and
payable on all outstanding Securities without any declaration or other act on
the part of Trustee or the Holders.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article VI, the Holders of no less
than a majority in aggregate principal amount of then outstanding Securities, by
written notice to the Company and the Trustee, may rescind, on behalf of all
Holders, any such declaration of acceleration if:
(1) the Company has paid or deposited with the Trustee Cash
sufficient to pay
(A) the principal of (and premium, if any, applicable to)
any Securities which would then be due otherwise than by such declaration of
acceleration, and interest thereon at the rate borne by the Securities,
(B) to the extent that payment of such interest is lawful,
interest upon overdue interest and Liquidated Damages at the rate borne by the
Securities,
(C) all sums paid or advanced by the Trustee hereunder and
the compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, and
(2) all Events of Default, other than the non-payment of the
principal of, premium, if any, interest on and Liquidated Damages with respect
to Securities that have become due solely by such declaration of acceleration,
have been cured or waived as provided in Section 6.12, including, if applicable,
any Event of Default relating to the covenants contained in Section 11.1.
Notwithstanding the previous sentence of this Section 6.2, no waiver shall be
effective against any Holder for any Event of Default or event which with notice
or lapse of time or both would be an Event of Default with respect to any
covenant or provision which cannot be modified or amended without the consent of
the Holder of each outstanding Security affected thereby, unless all such
affected Holders agree, in writing, to waive such Event of Default or other
event. No such waiver shall cure or waive any subsequent Default or Event of
Default or impair any right consequent thereon. If any Designated Senior
Indebtedness is outstanding at the time of any acceleration of the Securities,
the Company will not make any payment with respect to the Securities until five
Business Days after the holders of such Designated Senior Indebtedness have
received notice of such acceleration.
SECTION VI.3. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
The Company covenants that if an Event of Default in payment of
principal, premium, interest or Liquidated Damages specified in clause (1) or
(2) of Section 6.1 occurs and is continuing, the Company shall, upon demand of
the Trustee, pay to it, for the benefit of the Holders of such Securities, the
whole amount then due and payable on such Securities for
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principal, premium (if any), interest, Liquidated Damages and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal (and premium, if any), Liquidated Damages and on any overdue
interest, at the rate borne by the Securities, and, in addition thereto, such
further amount as shall be sufficient to cover the costs, fees and expenses of
collection, including compensation to, and expenses, disbursements and advances
of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust in favor of the
Holders, 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 by such appropriate judicial proceedings as the Trustee shall deem most
effective 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 VI.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 their
creditors, the Trustee (which term as used in this Section shall include any
predecessor Trustee) (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal, interest or Liquidated
Damages) shall be entitled and empowered, by intervention in such proceeding or
otherwise to take any and all actions under the TIA, including
(1) to file and prove a claim for the whole amount of
principal (and premium, if any), interest and Liquidated Damages owing and
unpaid in respect of the Securities and to file such other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim under Section 7.7 for the compensation, fees, expenses,
disbursements and advances of the Trustee, its agent and counsel) and of the
Holders allowed in such judicial proceeding, and
(2) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same in
accordance with Section 6.6;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the
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Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the compensation, expenses, fees, disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under Section 7.7. To
the extent that the payment of such compensation, expenses, fees, disbursements
and advances of Trustee, its agents and counsel and any other amounts due to the
Trustee under Section 7.7 hereof out of the estate in any such judicial
proceeding shall be denied for any reason, payment of the same shall be secured
by a perfected first priority security interest in and lien on, and shall be
paid out of, any and all distributions, dividends, money securities and other
properties that the Holders may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise, and any such security interest and lien in favor of any predecessor
Trustee shall be senior to the security interest and lien in favor of the
current Trustee.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION VI.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 in favor of the Holders, and any recovery of
judgment shall, after provision for the payment of compensation to, and
expenses, fees, 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 such judgment has been recovered.
SECTION VI.6. PRIORITIES.
Any money collected by the Trustee pursuant to this Article VI 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), interest or Liquidated Damages, 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 Trustee (including any predecessor Trustee) in
payment of all amounts due pursuant to Section 7.7;
SECOND: To the holders of Senior Indebtedness of the Company
to the extent provided in Article XII;
THIRD: To the Holders in payment of the amounts then due and
unpaid for principal of, premium (if any), interest on and Liquidated Damages
with respect to, the Securities in respect or for the benefit of which such
money has been collected, ratably, without preference
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or priority of any kind, according to the amounts due and payable on such
Securities for principal, premium (if any), interest and Liquidated Damages,
respectively; and
FOURTH: To whomsoever may be lawfully entitled thereto, the
remainder, if any.
The Trustee may fix a Record Date and Payment Date for any payment to Holders
pursuant to this Section at least 15 days before such Record Date. The Trustee
shall mail to each Holder and the Company a notice stating the Record Date,
Payment Date and amount to be paid.
SECTION VI.7. LIMITATION ON SUITS.
No Holder of any Security shall have any right to order or direct the
Trustee to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(A) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(B) the Holders of not less than 25% in principal amount of
then 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;
(C) such Holder or Holders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities to
be incurred or reasonably probable to be incurred in compliance with such
request;
(D) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding; and
(E) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of then outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION VI.8. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM, AND
INTEREST.
Notwithstanding any other provision of this Indenture, the Holder of
any Security shall, subject to the provisions of Article XII, have the right,
which is absolute and unconditional, to receive payment of the principal of, and
premium (if any), and interest on, such Security when due (including, in the
case of redemption, the Redemption Price on the applicable Redemption Date,
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and in the case of the Repurchase Price, on the applicable Repurchase Date), to
convert such Security in accordance with Article XIII, and to institute suit for
the enforcement of any such payment and right to convert after such respective
dates, and such rights shall not be impaired without the consent of such Holder.
SECTION VI.9. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in Section 2.7, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION VI.10. DELAY OR OMISSION NOT WAIVER.
No delay or omission by the Trustee or by any Holder of any Security to
exercise any right or remedy arising upon any Event of Default shall impair the
exercise of any such right or remedy or constitute a waiver of any such Event of
Default. Every right and remedy given by this Article VI or by law to the
Trustee or to the Holders may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee or by the Holders, as the case may be.
SECTION VI.11. CONTROL BY HOLDERS.
The Holder or Holders of no less than a majority in aggregate principal
amount of then 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 upon the Trustee, provided
that
(1) such direction shall be made in writing to the Trustee and
shall not be in conflict with any rule of law or with this Indenture,
(2) the Trustee shall not have determined that the action so
directed would be unjustly prejudicial to the Holders not taking part in such
direction or would expose the Trustee to personal liability, and
(3) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION VI.12. WAIVER OF DEFAULT.
The Holder or Holders of not less than a majority in aggregate
principal amount of then outstanding Securities may, on behalf of all Holders,
prior to the declaration of acceleration of the maturity of the Securities,
waive any default hereunder and its consequences or compliance with any
provision of this Indenture or the Securities, except a default or compliance:
(A) in the
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payment of the principal of, premium, if any, interest on any Security not yet
cured as specified in clauses (1) and (2) of Section 6.1, or (B) in respect of a
covenant or provision hereof which, under Article IX, cannot be modified or
amended without the consent of the Holder of each outstanding 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 the exercise of any right arising therefrom.
SECTION VI.13. UNDERTAKING FOR COSTS.
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 in any suit against the Trustee for any action taken,
suffered or omitted to be taken by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in such suit, having
due regard to the merits and good faith of the claims or defenses made by such
party litigant; but the provisions of this Section 6.13 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 aggregate principal amount of then outstanding Securities, or
to any suit instituted by any Holder for enforcement of the payment of principal
of, premium (if any), interest on or Liquidated Damages with respect to, any
Security on or after the respective Stated Maturity of such Security (including,
in the case of redemption, on or after the Redemption Date).
SECTION VI.14. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, then and in every case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
ARTICLE VII.
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
SECTION VII.1. DUTIES OF TRUSTEE.
(a) If a Default or 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
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of care and skill in their exercise as a prudent Person would exercise or use
under the circumstances in the conduct of such Person's own affairs.
(b) Except during the continuance of a Default or an Event of Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture or the TIA and no others, and no
covenants or obligations shall be implied in or read into this Indenture which
are adverse to the Trustee.
(2) In the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However, 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 need not confirm or investigate the accuracy
of mathematical calculations or other facts purported to be stated therein).
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.1.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a written direction
received by it pursuant to Section 6.11.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any liability. The Trustee shall be
under no obligation to perform any of its rights or duties hereunder or to take
or omit to take any action under this Indenture or at the request, order or
direction of the Holders or in the exercise of any of its rights or powers
unless such Holders shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
(e) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), (c), (d) and (f) of this Section 7.1.
(f) The Trustee shall not be liable for interest on any assets received
by it except as the Trustee may agree in writing with the Company. Assets held
in trust by the Trustee need not be segregated from other assets except to the
extent required by law.
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SECTION VII.2. RIGHTS OF TRUSTEE.
Subject to Section 7.1:
(a) The Trustee may conclusively rely on and shall be protected in
acting or refraining from acting upon any document reasonably believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel of its selection and may require an Officers' Certificate or an
Opinion of Counsel. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on any such Officers' Certificate or
advice or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any attorney or agent (other
than an agent who is an employee of the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it reasonably believes to be authorized or within its
discretion, rights or powers conferred upon it by this Indenture.
(e) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
(f) Unless otherwise specifically provided for in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(g) Except with respect to Section 4.1, the Trustee shall have no duty
to inquire as to the performance of the Company's covenants in Article IV
hereof. In addition, the Trustee shall not be deemed to have knowledge of any
Default or Event of Default, except (i) any Event of Default occurring pursuant
to Sections 6.1(1) or 6.1(2), or (ii) any Default or Event of Default of which a
Trust Officer of the Trustee shall have received written notification or
obtained actual knowledge.
(h) No permissive right of the Trustee to act hereunder shall be
construed as a duty.
(i) If in the administration of this Indenture the Trustee deems it
desirable that a matter be proved or established prior to taking, suffering or
omitting to take any action hereunder, the Trustee (unless other evidence be
herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate, advice or Opinion of Counsel, or both.
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(j) The Trustee shall not be deemed to have notice or knowledge
(including actual knowledge) of any matter unless a Trust Officer has actual
knowledge thereof or unless written notice thereof is received by the Trustee at
the office specified in Section 14.2 and such notice references the Securities
generally, the Company or this Indenture.
(k) The Trustee may consult with counsel with respect to legal matters
relating to this Indenture or Securities and the advice or opinion of counsel
shall be full and complete authorization and protection from liability with
respect to any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.
(l) The rights, privileges, protections, immunities and benefits given
to the Trustee, including, without limitation, its rights to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its capacities
hereunder, and to each agent, custodian and other Person employed to act
hereunder.
SECTION VII.3. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company, any of
its Subsidiaries, or their respective Affiliates with the same rights it would
have if it were not Trustee. Any Agent may do the same with like rights.
However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION VII.4. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture, the Registration Rights Agreement, the Offering Memorandum or
the Securities and it shall not be accountable for the Company's use of the
proceeds from the Securities, and it shall not be responsible for any statement
in this Indenture or the Securities, other than the Trustee's certificate of
authentication, or the use or application of any funds received by a Paying
Agent other than the Trustee.
SECTION VII.5. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after the date the same is
known by the Trustee or the Trustee receives written notice of the occurrence of
such Default or Event of Default unless such Default is cured or waived. The
Trustee may withhold such notice if and so long as a Trust Officer in good faith
determines that withholding the notice is in the interest of the Holders, except
in the case of a Default in payment of principal (or premium, if any) of,
interest on or Liquidated Damages with respect to, any Security (including the
payment of the Repurchase Price on the Repurchase Date and the payment of the
Redemption Price on the Redemption Date).
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SECTION VII.6. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each December 15 beginning with the December 15
following the date of this Indenture, the Trustee shall, if required by law,
mail to each Holder a brief report dated as of such reporting date that complies
with TIA SECTION 313(a) if and to the extent required by such Section 313(a).
The Trustee also shall comply with TIA SECTIONS 313(b) and 313(c).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and, if required, filed with the SEC and each stock
exchange, if any, on which the Securities are listed.
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or automatic quotation system or
of any delisting thereof.
SECTION VII.7. COMPENSATION AND INDEMNITY.
The Company agrees to pay to the Trustee from time to time such
compensation for its services as the parties shall agree from time to time in
writing and, in the absence of such agreement, reasonable compensation for its
acceptance of this Indenture and services hereunder. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee upon request for all reasonable
disbursements, expenses, fees and advances incurred or made by it. Such expenses
shall include the reasonable compensation, disbursements, fees and expenses of
the Trustee's agents, accountants, experts and counsel.
The Company agrees to indemnify the Trustee (in its capacity as
Trustee) and each of its officers, directors, employees, attorneys-in-fact and
agents (each an "Indemnified Party") for, and hold them harmless against, any
and all claims, demands, expenses (including but not limited to reasonable
compensation, fees, disbursements and expenses of the Trustee's agents and
counsel), losses, damages or liabilities incurred by it without negligence, bad
faith or willful misconduct on the part of such Indemnified Party, arising out
of, related to, or in connection with the acceptance or administration of this
trust and its rights or duties hereunder, including the reasonable costs and
expenses, and the costs and expenses of enforcing this Indenture (including this
Section 7.7) against the Company and of defending itself against any claim
(whether asserted by the Company, or any Holder or any other person) or
liability in connection with the exercise or performance of any of its powers or
duties hereunder. An Indemnified Party shall notify the Company promptly of any
claim asserted against such Indemnified Party for which it may seek indemnity.
Failure by an Indemnified Party to so notify the Company shall not relieve the
Company of its obligations hereunder. The Company shall defend the claim and an
Indemnified Party shall provide reasonable cooperation at the Company's expense
in the defense. An Indemnified Party may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel; provided that (i)
the Company will not be required to pay such fees and expenses if it assumes the
Indemnified Party's defense and there is no conflict of interest between the
Company and the Indemnified Party in connection with such defense and (ii) the
Company shall not be obligated to pay the fees and expenses of more than one
counsel (plus local counsel, if any) in any one
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proceeding (or related proceedings), which counsel shall be selected by the
Trustee. The Company need not pay for any settlement made without its written
consent.
The Company need not reimburse any expense or indemnify against any
loss or liability to the extent attributable to the negligence, bad faith or
willful misconduct of the Trustee or any other Indemnified Party.
To secure the Company's payment obligations in this Section 7.7, the
Trustee and each predecessor Trustee shall have a perfected lien prior to the
Securities on all assets held or collected by the Trustee, in its capacity as
Trustee, except assets held in trust to pay principal and premium, if any, of or
interest or Liquidated Damages on particular Securities. Any lien in favor of a
predecessor Trustee shall be senior to any lien in favor of the current Trustee.
When the Trustee incurs expenses or fees or renders services after an Event of
Default specified in Section 6.1(7) or (8) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or state bankruptcy, insolvency or
other similar law. The Trustee shall comply with the provision of Section
313(b)(2) of the TIA, to the extent applicable. The Company's obligations under
this Section 7.7 and any lien arising hereunder shall survive indefinitely,
including upon the resignation or removal of the Trustee, the discharge of the
Company's obligations pursuant to Article VIII of this Indenture and any
rejection or termination of this Indenture under any Bankruptcy Law.
SECTION VII.8. REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company in writing. The
Holder or Holders of a majority in principal amount of then outstanding
Securities may remove the Trustee by so notifying the Company and the Trustee in
writing. The Company, by Board of Directors resolution, may remove the Trustee
if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged bankrupt or insolvent or an order for
relief is entered with respect to the Trustee under any bankruptcy law;
(c) a receiver, Custodian, or other public officer takes charge of the
Trustee or its property; or
(d) the Trustee becomes incapable of acting.
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 this Section 7.8. If the Trustee resigns or is
removed or if a vacancy exists in the office of Trustee for any reason, the
Company shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holder or Holders of a majority in principal
amount of then outstanding Securities may, with the Company's consent, appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
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A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately upon
delivery of such notice and provided that all sums owing to the retiring Trustee
provided for in Section 7.7 have been paid, the retiring Trustee shall transfer
all property held by it as trustee to the successor Trustee, subject to the lien
provided in Section 7.7, the resignation or removal of the retiring Trustee
shall become effective, and the successor Trustee shall have all the rights,
powers and duties of the Trustee under this Indenture. A successor Trustee shall
mail notice of its succession to each Holder.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holder or Holders of at least 10% in principal amount of then outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee, after written request by any Holder who has been a
Holder for at least six months, fails to comply with Section 7.10, any such
Holder may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's obligations under Section 7.7 shall continue indefinitely for
the benefit of the retiring Trustee.
SECTION VII.9. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
SECTION VII.10. ELIGIBILITY; DISQUALIFICATION.
The Trustee shall at all times satisfy the requirements of TIA SECTION
310(a)(1), (2) and (5). The Trustee and its direct parent or, in the case of a
corporation included in a bank holding company system, the related bank holding
company, shall have a combined capital and surplus of at least $50,000,000 as
set forth in its most recent published annual report of condition. The Trustee
shall comply with TIA SECTION 310(b).
SECTION VII.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA SECTION 311(a), excluding any
creditor relationship listed in TIA SECTION 311(b). A Trustee who has resigned
or been removed shall be subject to TIA SECTION 311(a) to the extent indicated.
SECTION VII.12. OTHER CAPACITIES.
All references in this Indenture to the Trustee shall be deemed to
refer to the Trustee in its capacity as Trustee and in its capacities as any
Agent, to the extent acting in such capacities, and every provision of this
Indenture relating to the conduct or affecting the liability or offering
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protection, immunity or indemnity to the Trustee shall be deemed to apply with
the same force and effect to the Trustee acting in its capacity as any Agent.
ARTICLE VIII.
SATISFACTION AND DISCHARGE
SECTION VIII.1. SATISFACTION AND DISCHARGE OF INDENTURE.
The Company may terminate its obligations under this Indenture (subject
to the provisions of this Article VIII and Section 7.7) when it shall have
delivered to the Trustee for cancellation all Securities theretofore
authenticated (other than any Securities which shall have been destroyed, lost
or stolen and which shall have been replaced or paid as provided in Article II
hereof) and the following conditions shall be satisfied:
(1) The Company has paid all sums payable under the Indenture;
and
(2) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel in the United States, each
stating that all conditions precedent have been complied with as contemplated by
this Section 8.1.
SECTION VIII.2. REPAYMENT TO THE COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, for the payment of the principal of, premium, if any, interest
on or Liquidated Damages with respect to any Security and remaining unclaimed
for two years after such principal, premium, if any, interest or Liquidated
Damages has become due and payable shall be paid to the Company on its written
request; and the Holder of such Security shall thereafter look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money shall thereupon cease.
ARTICLE IX.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION IX.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holder, the Company, when authorized by
Board Resolutions, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes: (1) to cure any ambiguity, defect,
or inconsistency; (2) to create additional covenants of the Company for the
benefit of the Holders, or to surrender any right or power herein conferred upon
the Company or to make any other change that does not materially adversely
affect the rights of any Holder; (3) to provide for collateral for or guarantors
of the Securities; (4) to evidence the succession of another Person to the
Company and the assumption by any such successor of the obligations of the
Company herein and in the Securities in accordance with Article V; (5) to comply
with the TIA; or (6) to provide for uncertificated Securities in addition to or
in place of
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certificated Securities. The Company shall deliver to the Trustee an Opinion of
Counsel stating that such amendment or supplement complies with this Section
9.1.
SECTION IX.2. AMENDMENTS, SUPPLEMENTAL INDENTURES AND WAIVERS WITH CONSENT OF
HOLDERS.
Subject to the last sentence of this paragraph, with the consent of the
Holders of not less than a majority in aggregate principal amount of the
Securities at the time outstanding, by written act of said Holders delivered to
the Company and the Trustee, the Company, when authorized by Board Resolutions,
and the Trustee may amend or supplement this Indenture or the Securities or
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 the Securities or of modifying in any manner the
rights of the Holders under this Indenture or the Securities. Subject to the
last sentence of this paragraph, the Holder or Holders of not less than a
majority in aggregate principal amount of then outstanding Securities may, in
writing, waive compliance by the Company with any provision of this Indenture or
the Securities. Notwithstanding any of the above, however, no such amendment,
supplemental indenture or waiver shall, without the consent of the Holder of
each outstanding Security affected thereby:
(1) change the Stated Maturity of any Security or reduce the
principal amount thereof or the rate (or extend the time for payment) of
interest thereon or any premium payable upon the redemption thereof, or change
the place of payment where, or the coin or currency in which, any Security or
any premium or the interest thereon with respect thereto is payable, or impair
the right to institute suit for the conversion of any Security or the
enforcement of any such payment on or after the due date thereof (including, in
the case of redemption, on or after the Redemption Date), or reduce the
Repurchase Price, or alter the Repurchase Offer (other than as set forth herein)
or redemption provisions in a manner adverse to the Holders;
(2) reduce the percentage in principal amount of the
outstanding Securities, the consent of whose Holders is required for any such
amendment, supplemental indenture or waiver provided for in the Indenture;
(3) adversely affect the right of such Holder to convert
Securities or the rights of any holder conferred by Article XIII; or
(4) reduce the percentage of the principal amount of
Securities whose Holders must consent to an amendment, supplement or waiver or
to provide that certain other provisions of the Indenture cannot be modified or
waived without the consent of the Holder of each outstanding Security affected
thereby.
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment, supplement
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
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After an amendment, supplement or waiver under this Section 9.2 becomes
effective, the Company shall mail to the Holders affected thereby at such
Holders' addresses as the same appear on the registry books of the Registrar a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture or
waiver.
After an amendment, supplement or waiver under this Section 9.2 or
Section 9.4 becomes effective, it shall bind each Holder.
In connection with any amendment, supplement or waiver under this
Article IX, the Company may, but shall not be obligated to, offer to any Holder
who consents to such amendment, supplement or waiver, or (at the option of the
Company) to all Holders, consideration for consent to such amendment, supplement
or waiver.
SECTION IX.3. COMPLIANCE WITH TIA.
Every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
SECTION IX.4. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of his Security by written notice to the
Company, the Trustee or the Person designated by the Company as the Person to
whom consents should be sent if such revocation is received by the Company or
such Person before the date on which the Trustee receives an Officers'
Certificate certifying that the Holders of the requisite principal amount of
Securities have consented (and not theretofore revoked such consent) to the
amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be the date so fixed by the
Company notwithstanding the provisions of the TIA. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those Persons who were Holders at such record date, and only those Persons (or
their duly designated proxies), shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date.
Notwithstanding the preceding paragraph, after an amendment, supplement
or waiver becomes effective, it shall bind every Holder, unless it makes a
change described in any of clauses (1) through (4) of Section 9.2, in which
case, the amendment, supplement or waiver shall bind only each Holder of a
Security who has consented to it and every subsequent Holder of a Security
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or portion of a Security that evidences the same debt as the consenting Holder's
Security unless consent of all Holders has been obtained pursuant to clauses (1)
through (4) of Section 9.2.
SECTION IX.5. NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee
or require the Holder to put an appropriate notation on the Security. The
Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms. Any
failure to make the appropriate notation or to issue a new Security shall not
affect the validity of such amendment, supplement or waiver.
SECTION IX.6. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article IX; provided that the Trustee may, but shall
not be obligated to, execute any such amendment, supplement or waiver which
affects the Trustee's own rights, duties or immunities under this Indenture. The
Trustee shall be entitled to receive, and shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that the
execution of any amendment, supplement or waiver authorized pursuant to this
Article IX is authorized or permitted by this Indenture.
ARTICLE X.
MEETINGS OF HOLDERS
SECTION X.1. PURPOSES FOR WHICH MEETINGS MAY BE CALLED.
A meeting of Holders may be called at any time and from time to time
pursuant to the provisions of this Article X for any of the following purposes:
(a) to give any notice to the Company or to the Trustee, or to give any
directions to the Trustee, or to waive or to consent to the waiving of any
Default or Event of Default hereunder and its consequences, or to take any other
action authorized to be taken by Holders pursuant to any of the provisions of
Article VI; (b) to remove the Trustee or appoint a successor Trustee pursuant to
the provisions of Article VII; (c) to consent to an amendment, supplement or
waiver pursuant to provisions of Section 9.2; or (d) to take any other action
(i) authorized to be taken by or on behalf of the Holder or Holders of any
specified aggregate principal amount of the Securities under any other provision
of this Indenture, or authorized or permitted by law or (ii) which the Trustee
deems necessary or appropriate in connection with the administration of this
Indenture.
SECTION X.2. MANNER OF CALLING MEETINGS.
The Trustee may at any time call a meeting of Holders to take any
action specified in Section 10.1, to be held at such time and at such place in
New York, New York or elsewhere as the Trustee shall determine. Notice of every
meeting of Holders, setting forth the time and place
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of such meeting and in general terms the action proposed to be taken at such
meeting, shall be mailed at the Company's expense by the Trustee, first-class
postage prepaid, to the Company and to the Holders at their last addresses as
they shall appear on the registration books of the Registrar, not less than 10
nor more than 60 days prior to the date fixed for a meeting.
Any meeting of Holders shall be valid without notice if the Holders of
all Securities then outstanding are present in Person or by proxy, or if notice
is waived before or after the meeting by the Holders of all Securities
outstanding, and if the Company and the Trustee are either present by duly
authorized representatives or have, before or after the meeting, waived notice.
SECTION X.3. CALLING OF MEETINGS BY THE COMPANY OR HOLDERS.
In case at any time the Company or the Holders of not less than 10% in
aggregate principal amount of the Securities then outstanding, shall have
requested the Trustee to call a meeting of Holders to take any action specified
in Section 10.1, 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 20 days after receipt of such written
request, then the Company or the Holders of Securities in the amount above
specified may determine the time and place in New York, New York or elsewhere
for such meeting and may call such meeting for the purpose of taking such
action, by mailing or causing to be mailed notice thereof as provided in Section
10.2.
SECTION X.4. WHO MAY ATTEND AND VOTE AT MEETINGS.
To be entitled to vote at any meeting of Holders, a Person shall (a) be
a registered Holder of one or more Securities, or (b) be a Person appointed by
an instrument in writing as proxy for the registered Holder or Holders of
Securities. 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 and any representatives of the Trustee and its counsel and any
representatives of the Company, and its counsel.
SECTION X.5. REGULATIONS MAY BE MADE BY COMPANY; CONDUCT OF THE MEETING; VOTING
RIGHTS; ADJOURNMENT.
Notwithstanding any other provision of this Indenture, the Company may
make such reasonable regulations as it may deem advisable for any action by or
any meeting of Holders, 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, and submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think appropriate. Such regulations may fix a
record date and time for determining the Holders of record of Securities
entitled to vote at such meeting, in which case those and only those Persons who
are Holders of Securities at the record date and time so fixed, or their
proxies, shall be entitled to vote at such meeting whether or not they shall be
such Holders at the time of the meeting.
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The Holders shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Holders as provided in Section 10.3, in which case the Company or
the Holders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the Holders of a majority in principal
amount of the Securities represented at the meeting and entitled to vote.
At any meeting each Securityholder or proxy shall be entitled to one
vote for each $1,000 principal amount of Securities held or represented by him,
in whole vote increments; provided, however, that no vote shall be cast or
counted at any meeting in respect of any Securities challenged as not
outstanding and ruled by the chairman of the meeting to be not then outstanding.
The chairman of the meeting shall have no right to vote other than by virtue of
Securities held by him or instruments in writing as aforesaid duly designating
him as the proxy to vote on behalf of other Holders. Any meeting of Holders duly
called pursuant to the provisions of Section 10.2 or Section 10.3 may be
adjourned from time to time by vote of the Holder or Holders of a majority in
aggregate principal amount of the Securities represented at the meeting and
entitled to vote, and the meeting may be held as so adjourned without further
notice.
SECTION X.6. VOTING AT THE MEETING AND RECORD TO BE KEPT.
The vote upon any resolution submitted to any meeting of Holders 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 amount of
the Securities voted by the ballot. The permanent chairman of the meeting shall
appoint two inspectors of votes, who shall count all votes cast at the meeting
for or against any resolution and who shall make and file with the secretary of
the meeting their verified written reports in duplicate of all votes cast at the
meeting. A record in duplicate of the proceedings of each meeting of Holders
shall be prepared by the secretary of the meeting and there shall be attached to
such 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
such notice was mailed as provided in Section 10.2 or published as provided in
Section 10.3. The record shall be signed and verified by the affidavits of the
permanent chairman and the secretary of the meeting and one of the duplicates
shall be delivered to the Company and the other to the Trustee to be preserved
by the Trustee, the latter to have attached thereto the ballots voted at the
meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
SECTION X.7. EXERCISE OF RIGHTS OF TRUSTEE OR HOLDERS MAY NOT BE HINDERED OR
DELAYED BY CALL OF MEETING.
Nothing contained in this Article X shall be deemed or construed to
authorize or permit, by reason of any call of a meeting of Holders or any rights
expressly or impliedly conferred hereunder to make such call, any hindrance or
delay in the exercise of any right or rights conferred
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upon or reserved to the Trustee or to the Holders under any of the provisions of
this Indenture or of the Securities.
ARTICLE XI.
RIGHT TO REQUIRE REPURCHASE UPON A CHANGE OF CONTROL
SECTION XI.1. REPURCHASE OF SECURITIES AT OPTION OF THE HOLDER UPON A CHANGE OF
CONTROL.
(a) Subject to Section 11.2, in the event that a Change of Control has
occurred, the Company shall offer, subject to the terms and conditions of this
Indenture, to purchase all or any part of each Holder's Securities (provided
that the principal amount of such Securities must be $1,000 or an integral
multiple thereof) on the date (the "Repurchase Date") fixed in the manner
provided in this Section 11.1 that is no later than 45 Business Days (except as
hereinafter provided) after the occurrence of such Change of Control or, at the
option of the Company, prior to such Change of Control, but after the public
announcement thereof, at a cash price (the "Repurchase Price") equal to 100% of
the principal amount thereof, together with accrued and unpaid interest and
Liquidated Damages, if any, to (but excluding) the Repurchase Date.
(b) In the event that, pursuant to this Section 11.1, the Company shall
be required to commence an offer to purchase Securities (a "Repurchase Offer"),
the Company shall follow the procedures set forth in this Section 11.1 as
follows:
(1) the Repurchase Offer shall commence on the date specified
by the Company that shall be within 25 Business Days following a Change of
Control;
(2) the Repurchase Offer shall remain open for 20 Business
Days following its commencement, except to the extent that a longer period is
required by applicable law (the "Repurchase Offer Period");
(3) upon the expiration of a Repurchase Offer, the Company
shall purchase all Securities tendered in response to the Repurchase Offer;
(4) if the Repurchase Date is on or after an interest payment
Record Date and on or before the related Interest Payment Date, any accrued
interest and Liquidated Damages will be paid to the Person in whose name a
Security is registered at the close of business on such Record Date, and no
additional interest or Liquidated Damages will be payable to Holders who tender
Securities pursuant to the Repurchase Offer;
(5) the Company shall provide the Trustee with written notice
of the Repurchase Offer at least 5 Business Days before the commencement of any
Repurchase Offer (or such shorter period that is satisfactory to the Trustee);
and
(6) on or before the commencement of any Repurchase Offer, the
Company or the Trustee (upon the request and at the expense of the Company)
shall send, by first-class mail, a
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notice to each of the Holders, which (to the extent consistent with this
Indenture) shall govern the terms of the Repurchase Offer and shall state:
(i) that the Repurchase Offer is being made pursuant to
such notice and this Section 11.1 and that all Securities, or portions thereof,
tendered will be accepted for payment;
(ii) the Repurchase Price (including the amount of accrued
and unpaid interest and Liquidated Damages, if any), the Repurchase Date and the
Repurchase Put Date;
(iii) that any Security, or portion thereof, not tendered
and accepted for payment will continue to accrue interest and Liquidated
Damages, if any;
(iv) that, unless the Company defaults in depositing Cash
with the Paying Agent in accordance with the last paragraph of this clause (b)
or such payment is prevented pursuant to Article XII, any Security, or portion
thereof, accepted for payment pursuant to the Repurchase Offer shall cease to
accrue interest after the Repurchase Date;
(v) that Holders electing to have a Security, or portion
thereof, purchased pursuant to a Repurchase Offer will be required to surrender
the Security, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Security completed, to the Paying Agent (which may not for
purposes of this Section 11.1, notwithstanding anything in this Indenture to the
contrary, be the Company or any Affiliate of the Company) at the address
specified in the notice prior to the close of business on the earlier of (a) the
third Business Day prior to the Repurchase Date and (b) the third Business Day
following the expiration of the Repurchase Offer (such earlier date being the
"Repurchase Put Date");
(vi) that Holders will be entitled to withdraw their
election, in whole or in part, if the Paying Agent (which may not for purposes
of this Section 11.1, notwithstanding anything in this Indenture to the
contrary, be the Company or any Affiliate of the Company) receives, up to the
close of business on the Repurchase Put Date, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Securities the
Holder is withdrawing and a statement that such Holder is withdrawing his
election to have such principal amount of Securities purchased; and
(vii) a brief description of the events resulting in such
Change of Control.
Any notice of a Repurchase Offer mailed in accordance with the
foregoing provisions shall be conclusively presumed to have been duly given
whether or not a given Holder receives the same.
Any such Repurchase Offer shall comply with all applicable provisions
of federal and state laws, including those regulating tender offers, if
applicable, and any provisions of this Indenture which conflict with such laws
shall be deemed to be superseded by the provisions of such laws.
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On or before the Repurchase Date, the Company shall, to the extent
lawful, (i) accept for payment Securities or portions thereof properly tendered
pursuant to the Repurchase Offer on or before the Repurchase Put Date, (ii)
deposit with the Paying Agent Cash sufficient to pay the Repurchase Price
(together with accrued and unpaid interest and Liquidated Damages, if any) of
all Securities or portions thereof so tendered and (iii) deliver or cause to be
delivered to the Trustee the Securities so accepted together with an Officers'
Certificate listing the Securities or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to Holders of Securities so
accepted payment in an amount equal to the Repurchase Price (together with
accrued and unpaid interest and Liquidated Damages, if any), and the Trustee
will promptly authenticate and mail or deliver to such Holders a new Security or
Securities equal in principal amount to any unpurchased portion of the
Securities surrendered. Any Securities not so accepted shall be promptly mailed
or delivered by the Company to the Holder thereof. The Company shall publicly
announce the results of the Repurchase Offer on or as soon as practicable after
the Repurchase Date.
SECTION XI.2. RESCISSION OF CHANGE OF CONTROL DETERMINATION.
At any time prior to the close of business on the Business Day
immediately preceding the Repurchase Date, the Holders of more than 66-2/3% in
aggregate principal amount of the then outstanding Securities, by written act of
said Holders delivered to the Company and the Trustee, may determine that the
event giving rise to the Change of Control shall not be treated as a Change of
Control for purposes of Section 11.1, in which event:
(1) the provisions of Section 11.1(a) shall not apply;
(2) if a Repurchase Offer has been made by the Company
pursuant to Section 11.1(b), such Repurchase Offer shall be deemed revoked; and
(3) if any Securities have been tendered in response to the
revoked Repurchase Offer, such tenders shall be deemed rescinded and the
Securities promptly returned to the Holders thereof.
Following a determination by the Holders pursuant to this Section 11.2,
the Company shall mail to all Holders a notice briefly describing such
determination. Any failure of the Company to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such determination. An effective determination under this Section 11.2 shall be
binding on all holders.
ARTICLE XII.
SUBORDINATION
SECTION XII.1. SECURITIES SUBORDINATED TO SENIOR INDEBTEDNESS.
The Company and each Holder, by its acceptance of Securities, agree
that (a) the payment of the principal of, premium, if any, and interest on and
Liquidated Damages with respect to, the Securities and (b) any other payment in
respect of the Securities, including on account of the
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acquisition, defeasance or redemption of the Securities by the Company (but
specifically excluding payments to the Trustee for its own benefit in its
capacity as such), is subordinated, to the extent and in the manner provided in
this Article XII, to the prior payment in full in cash of all Senior
Indebtedness of the Company, whether outstanding at the date of this Indenture
or thereafter created, incurred, assumed or guaranteed, and that these
subordination provisions are for the benefit of the holders of Senior
Indebtedness.
This Article XII shall constitute a continuing offer to all Persons
who, in reliance upon such provisions, become holders of, or continue to hold,
Senior Indebtedness, and such provisions are made for the benefit of the holders
of Senior Indebtedness, and such holders are made obligees hereunder and any one
or more of them may enforce such provisions. In addition, the payment of cash,
property or securities (other than Junior Securities) upon conversion of a
Security pursuant to Article XIII will constitute payment on a Security and
therefore will be subject to the subordination provisions contained in this
Indenture.
SECTION XII.2. NO PAYMENT ON SECURITIES IN CERTAIN CIRCUMSTANCES.
(a) No payment or distribution (by setoff or otherwise) may be made by
or on behalf of the Company, directly or indirectly through any Subsidiary, on
account of the principal of, premium, if any, interest on, or Liquidated Damages
or any other obligations under or with respect to, the Securities, or to
acquire, redeem or defease any of the Securities (including repurchases of
Securities at the option of the Holder) for cash, securities or property (other
than Junior Securities), or on account of the redemption provisions of the
Securities (collectively, the "Subordinated Obligations"), (i) upon the maturity
of any Senior Indebtedness by lapse of time, acceleration (unless waived) or
otherwise, unless and until all principal of, premium, if any, and interest on,
and fees, charges, expenses, indemnifications and all other amounts payable in
respect of Senior Indebtedness are first paid in full in cash, or (ii) in the
event of default in the payment of any principal of, premium, if any, or
interest in respect of any Designated Senior Indebtedness when it becomes due
and payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise (collectively, a "Payment Default"), unless and until
such Payment Default has been cured or waived or otherwise has ceased to exist.
(b) Upon (i) the happening of an event of default (other than a Payment
Default) that permits, or would permit, with (w) the passage of time, (x) the
giving of notice, (y) the making of any payment of the Securities then required
to be made, or (z) any combination thereof (collectively, a "Non-Payment
Default"), the holders of any Designated Senior Indebtedness or their
representative immediately to accelerate its maturity and (ii) written notice of
such Non-Payment Default being given to the Company and the Trustee by the
holders of such Designated Senior Indebtedness or their representative (a
"Blockage Notice"), then, unless and until such Non-Payment Default has been
cured or waived or otherwise has ceased to exist, no payment or distribution (by
set-off or otherwise), redemption, defeasance or acquisition may be made by or
on behalf of the Company directly or through any Subsidiary on account of the
Subordinated Obligations. Notwithstanding the foregoing, on the first to occur
of (i) the date that is 179 days after the Blockage Notice is delivered as set
forth above (the "Payment Blockage Period"), and (ii) the date on which all
Payment Defaults and Non-Payment Defaults have been cured or
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waived, the Company shall be required to pay to the Holders of the Securities
all regularly scheduled payments on the Securities that were not paid to the
Holders of the Securities during the Payment Blockage Period due to the
foregoing prohibitions (and upon the making of such payments any acceleration of
the Securities made or other remedies commenced during the Payment Blockage
Period shall be of no further force or effect) and to resume all other payments
as and when due on the Securities, provided that no Payment Default shall have
occurred and be continuing. Not more than one Blockage Notice may be given in
any consecutive 365-day period, irrespective of the number of defaults with
respect to Senior Indebtedness during such period. In no event, however, may the
total number of days during which any Payment Blockage Period is or Payment
Blockage Periods are in effect exceed 179 days in the aggregate during any
consecutive 365-day period.
(c) In furtherance of the provisions of Article XII, in the event that,
notwithstanding the foregoing provisions of this Section 12.2, any payment or
distribution of assets or securities of the Company or any Subsidiary of the
Company (other than Junior Securities) shall be received by the Holders or the
Trustee on behalf of the Holders or any Paying Agent for the benefit of the
Holders at a time when such payment or distribution is prohibited by the
provisions of this Section 12.2 (or, if the Company or any Affiliate of the
Company is acting as its own Paying Agent, money for any such payment or
distribution shall be segregated or held in trust), such payment or distribution
(subject to the provisions of Sections 12.6 and 12.9) shall be held in trust for
the benefit of the holders of Senior Indebtedness, and shall be paid or
delivered by such Holders or the Trustee or such Paying Agent, as the case may
be, to the holders of Senior Indebtedness of the Company remaining unpaid or
their representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of such Senior
Indebtedness of the Company may have been issued, ratably according to the
aggregate amounts remaining unpaid on account of the Senior Indebtedness of the
Company held or represented by each, for application to the payment of all
Senior Indebtedness of the Company (including cash collateralization of
outstanding letters of credit) in full in cash after giving effect to any
concurrent payment and distribution to the holders of such Senior Indebtedness.
SECTION XII.3. SECURITIES SUBORDINATED TO PRIOR PAYMENT OF ALL SENIOR
INDEBTEDNESS ON DISSOLUTION LIQUIDATION OR REORGANIZATION.
Upon any distribution of assets or securities of the Company upon any
dissolution, winding up, total or partial liquidation or reorganization of the
Company, whether voluntary or involuntary, in bankruptcy, insolvency,
receivership or a similar proceeding or upon assignment for the benefit of
creditors or any marshaling of assets or liabilities:
(a) the holders of all Senior Indebtedness of the Company shall first
be entitled to receive payments in full in cash (including cash
collateralization of outstanding letters of credit) before the Holders are
entitled to receive any payment or distribution (other than Junior Securities)
on account of the Subordinated Obligations;
(b) any payment or distribution of assets or securities of the Company
of any kind or character, whether in cash, property or securities (other than
Junior Securities) to which the
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Holders or the Trustee on behalf of the Holders would be entitled (by setoff or
otherwise), except for the provisions of this Article XII, shall be paid by the
liquidating trustee or agent or other Person making such a payment or
distribution directly to the holders of Senior Indebtedness or their
representative to the extent necessary to make payment in full in cash of all
Senior Indebtedness remaining unpaid, after giving effect to any concurrent
payment or distribution or provision therefor, to the holders of Senior
Indebtedness (but this Section 12.3(b) shall not apply to payments or
distributions to the Trustee for its own benefit in its capacity as such); and
(c) in the event that, notwithstanding the foregoing, any payment or
distribution of assets or securities of the Company or any Subsidiary of any
kind or character, whether in cash, property or securities (other than Junior
Securities as aforesaid), shall be received by the Trustee for the benefit of
the Holders or the Holders or any Paying Agent for the benefit of the Holders
(or, if the Company or any Affiliate of the Company is acting as its own Paying
Agent, money for any such payment or distribution shall be segregated or held in
trust) on account of Subordinated Obligations before all Senior Indebtedness is
paid in full in cash, such payment or distribution (subject to the provisions of
Sections 12.6 and 12.9) shall be held in trust for the benefit of the holders of
Senior Indebtedness, and shall be paid or delivered by such Holders or the
Trustee or such Paying Agent, as the case may be, to the holders of Senior
Indebtedness of the Company remaining unpaid or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Indebtedness of the Company
may have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness of the Company held or represented
by each, for application to the payment of all Senior Indebtedness of the
Company (including cash collateralization of outstanding letters of credit) in
full in cash after giving effect to any concurrent payment and distribution to
the holders of such Senior Indebtedness.
SECTION XII.4. HOLDERS TO BE SUBROGATED TO RIGHTS OF HOLDERS OF SENIOR
INDEBTEDNESS.
Subject to the payment in full in cash of all Senior Indebtedness of
the Company as provided herein, the Holders of Securities shall be subrogated to
the rights of the holders of such Senior Indebtedness to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness
until all amounts owing on the Securities shall be paid in full, and for the
purpose of such subrogation no such payments or distributions to the holders of
such Senior Indebtedness by the Company, or by or on behalf of the Holders by
virtue of this Article XII, which otherwise would have been made to the Holders
shall, as between the Company and the Holders, be deemed to be payment by the
Company or on account of such Senior Indebtedness, it being understood that the
provisions of this Article XII are and are intended solely for the purpose of
defining the relative rights of the Holders, on the one hand, and the holders of
such Senior Indebtedness, on the other hand. If any payment or distribution to
which the Holders would otherwise have been entitled but for the provisions of
this Article XlI shall have been applied, pursuant to the provisions of this
Article XII, to the payment of amounts payable under Senior Indebtedness of the
Company, then the Holders shall be entitled to receive from the holders of such
Senior Indebtedness any payments or distributions received by such holders of
Senior Indebtedness in excess of the amount sufficient to pay all amounts
payable under or in respect of such Senior Indebtedness in full in cash.
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SECTION XII.5. OBLIGATIONS OF THE COMPANY UNCONDITIONAL.
Nothing contained in this Article XII or elsewhere in this Indenture or
in the Securities is intended to or shall impair as between the Company and the
Holders, the obligation of each such Person, which is absolute and
unconditional, to pay to the Holders the principal of, premium, if any, and
interest on, and Liquidated Damages, if any, with respect to, the Securities as
and when the same shall become due and payable in accordance with their terms,
or is intended to or shall affect the relative rights of the Holders and
creditors of the Company other than the holders of the Senior Indebtedness, nor
shall anything herein or therein prevent the Trustee or any Holder from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article XII, of the
holders of Senior Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy. Notwithstanding anything
to the contrary in this Article XII or elsewhere in this Indenture or in the
Securities, upon any distribution of assets or securities of the Company
referred to in this Article XII, the Trustee, subject to the provisions of
Sections 7.1 and 7.2, and the Holders shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending, or a
certificate of the liquidating trustee or agent or other Person making any
distribution to the Trustee or to the Holders for the purpose of ascertaining
the Persons entitled to participate in such distribution, the holders of the
Senior Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article XII so long as such court has been
apprised of the provisions of, or the order, decree or certificate makes
reference to, the provisions of this Article XII. Nothing in this Section 12.5
shall apply to the claims of, or payments to, the Trustee under or pursuant to
Section 7.7 or otherwise for its own benefit in its capacity as such.
SECTION XII.6. TRUSTEE AND OTHER AGENTS ENTITLED TO ASSUME PAYMENTS NOT
PROHIBITED IN ABSENCE OF NOTICE.
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 by virtue of the operation of this Article
XII, but failure to give such notice shall not affect the subordination of the
Securities pursuant to this Article XII. The Trustee and all other Agents shall
not at any time be charged with knowledge of the existence of any facts which
would prohibit the making of any payment to or by the Trustee unless and until a
Trust Officer of the Trustee or any Paying Agent shall have actually received,
no later than one Business Day prior to such payment, written notice thereof in
compliance with Section 14.2 from the Company or from one or more holders of
Senior Indebtedness or from any representative therefor and, prior to the
receipt of any such written notice, the Trustee, subject to the provisions of
Sections 7.1 and 7.2, shall be entitled in all respects conclusively to assume
that no such fact exists.
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SECTION XII.7. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS OF THE
COMPANY OR HOLDERS OF SENIOR INDEBTEDNESS.
No right of any present or future holders of any Senior Indebtedness to
enforce subordination provisions contained in this Article XII shall at any time
in any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms of this Indenture,
regardless of any knowledge thereof which any such holder may have or be
otherwise charged with. Without the consent of or notice to the Trustee or the
Holders, the holders of Senior Indebtedness may extend, renew, modify or amend
the terms of the Senior Indebtedness or any security therefor and release, sell
or exchange such security and otherwise deal freely with the Company, all
without impairing the liabilities and obligations of the parties to this
Indenture or the Holders.
SECTION XII.8. HOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE SUBORDINATION OF
SECURITIES.
Each Holder of the Securities by his acceptance thereof authorizes the
Trustee on his behalf to take such action as may be necessary or appropriate to
effectuate the subordination provisions contained in this Article XII pursuant
to this Indenture, and appoints the Trustee his attorney-in-fact for such
purpose, including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors of the Company),
the immediate filing of a claim for the unpaid balance of his Securities in the
form required in said proceedings and cause said claim to be approved. If the
Trustee does not file a proper claim or proof of debt in the form required in
such proceeding prior to 30 days before the expiration of the time to file such
claim or claims, then the holders of the Senior Indebtedness or their
representative are or is hereby authorized to have the right to file and are or
is hereby authorized to file an appropriate claim for and on behalf of the
Holders of said Securities. Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Senior Indebtedness or their
representative to authorize or consent to or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee or the holders of Senior Indebtedness or their
representative to vote in respect of the claim of any Securityholder in any such
proceeding.
SECTION XII.9. RIGHT OF TRUSTEE TO HOLD SENIOR INDEBTEDNESS.
The Trustee and any Agent shall be entitled to all of the rights set
forth in this Article XII in respect of any Senior Indebtedness at any time held
by it to the same extent as any other holder of Senior Indebtedness, and nothing
in this Indenture shall be construed to deprive the Trustee or any Agent of any
of its rights as such holder.
Nothing in this Article XII shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 7.7.
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SECTION XII.10. ARTICLE XII NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment on account of principal of, premium, if
any, interest on, or Liquidated Damages with respect to, the Securities by
reason of any provision of this Article XII shall not be construed as preventing
the occurrence of a Default or an Event of Default under Section 6.1 or in any
way prevent the Holders from exercising any right hereunder other than the right
to receive payment on the Securities.
SECTION XII.11. NO DUTY OF TRUSTEE AND OTHER AGENTS TO HOLDERS OF SENIOR
INDEBTEDNESS.
The Trustee and the other Agents shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness, and shall not be liable to
any such holders (other than for its willful misconduct or negligence) if it
shall in good faith mistakenly pay over or distribute to the Holders of
Securities or the Company or any other Person, cash, property or securities to
which any holders of Senior Indebtedness shall be entitled by virtue of this
Article XII or otherwise (subject to Section 12.6). Nothing in this Section
12.12 shall affect the obligation of any other such Person receiving such
payment or distribution from the Trustee or any other Agent to hold such payment
for the benefit of, and to pay such payment over to, the holders of Senior
Indebtedness or their representative.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants or obligations as
are specifically set forth in this Article XII and no implied covenants or
obligations with respect to holders of Senior Indebtedness shall be read into
this Indenture as against the Trustee.
ARTICLE XIII.
CONVERSION OF SECURITIES
SECTION XIII.1. CONVERSION PRIVILEGE.
Subject to and upon compliance with the provisions of this Article
XIII, at the option of the Holder thereof, any Security may at any time, be
converted, in whole, or in part in multiples of $1,000 principal amount, into
fully paid and non-assessable shares of Common Stock issuable upon conversion of
the Securities, at the conversion price in effect at the Date of Conversion,
until and including, but not after the close of business on the Stated Maturity,
unless such Security or some portion thereof shall have been called for
redemption or delivered for repurchase prior to such date and no default is made
in making due provision for the payment of the Redemption Price in accordance
with the terms of this Indenture, in which case, with respect to such Security
or portion thereof as has been so called for redemption or delivered for
repurchase, such Security or portion thereof may be so converted until and
including, but not after, the close of business two Business Days immediately
prior to the Redemption Date or Repurchase Date, as applicable, for such
Security, unless the Company subsequently fails to pay the applicable Redemption
Price or Repurchase Price, as the case may be.
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SECTION XIII.2. EXERCISE OF CONVERSION PRIVILEGE.
In order to exercise the conversion privilege, the Holder of any
Security to be converted shall surrender such Security to the Company at any
time during usual business hours at its office or agency maintained for the
purpose as provided in this Indenture, accompanied by a fully executed written
notice, in substantially the form and manner set forth on the reverse of the
Security, that the Holder elects to convert such Security or a stated portion
thereof constituting a multiple of $1,000 principal amount, and, if such
Security is surrendered for conversion during the period between the close of
business on any Record Date and the opening of business on the next following
Interest Payment Date and has not been called for redemption on a Redemption
Date or repurchase on a Repurchase Date which occurs within such period,
accompanied (except in the case of the Interest Payment Date occurring on
December 15, 2002) 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 the Security being surrendered
for conversion, notwithstanding such conversion and the interest payable in
respect of such Security on such Interest Payment Date shall be paid to the
Holder of such Security (or predecessor security) as of the Record Date.
Interest payable in respect of a Security surrendered for conversion on or after
an Interest Payment Date shall be paid to the Holder of such Security as of the
next preceding Record Date, notwithstanding the exercise of the right of
conversion. Such notice of conversion shall also state the name or names (with
address) in which the certificate or certificates for shares of Common Stock
shall be issued. Securities surrendered for conversion shall (if reasonably
required by the Company or the Trustee) be duly endorsed by, or be accompanied
by a written instrument or instruments of transfer in form satisfactory to the
Company duly executed by, the Holder or his attorney duly authorized in writing,
with appropriate signature guarantee. As promptly as practicable after the
receipt of such notice and the surrender of such Security as aforesaid, the
Company shall, subject to the provisions of Section 13.8 hereof, issue and
deliver at such office or agency to such Holder, or on his written order, a
certificate or certificates for the number of full shares of Common Stock
issuable on such conversion of Securities in accordance with the provisions of
this Article XIII and Cash, as provided in Section 13.3 hereof, in respect of
any fraction of a share of Common Stock otherwise issuable upon such conversion.
Such conversion shall be deemed to have been effected immediately prior to the
close of business on the date (herein called the "Date of Conversion") on which
such Security shall have been surrendered as aforesaid, and the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become on the Date of Conversion the holder or holders of record of the shares
represented thereby; provided, however, that any such surrender on any date when
the stock transfer books of the Company shall be closed shall cause the person
or persons in whose name or names the certificate or certificates for such
shares are to be issued to be deemed to have become the record holder or holders
thereof for all purposes at the opening of business on the next succeeding day
on which such stock transfer books are open but such conversion shall
nevertheless be at the conversion price in effect at the close of business on
the date when such Security shall have been so surrendered with the conversion
notice. In the case of conversion of a portion, but less than all, of a
Security, the Company shall as promptly as practicable execute, and the Trustee
shall thereafter authenticate and deliver to the Holder
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thereof, at the expense of the Company, a Security or Securities in the
aggregate principal amount of the unconverted portion of the Security
surrendered. Except as otherwise expressly provided in this Indenture, no
payment or adjustment shall be made for interest accrued on any Security (or
portion thereof) converted or for dividends or distributions on any Common Stock
issued upon conversion of any Security.
SECTION XIII.3. FRACTIONAL INTERESTS.
No fractions of shares or scrip representing fractions of shares shall
be issued upon conversion of 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 (or specified portion thereof) of the
Securities so surrendered. If any fraction of a share of Common Stock would,
except for the foregoing provisions of this Section 13.3, be issuable on the
conversion of any Security or Securities, the Company shall make payment in lieu
thereof in an amount of Cash equal to the value of such fraction computed on the
basis of the last sale price of the Common Stock as reported on the New York
Stock Exchange (or if not listed for trading thereon, then on the principal
national securities exchange or on the principal automated quotation system on
which the Common Stock is listed or admitted to trading) at the close of
business on the Date of Conversion or if no such sale takes place on such day,
the last sale price for such day shall be the average of the closing bid and
asked prices regular way on the New York Stock Exchange (or if not listed for
trading thereon, on the principal national securities exchange or on the
principal automated quotation system on which the Common Stock is listed or
admitted to trading) for such day (any such last sale price being hereinafter
referred to as the "Last Sale Price"). If on the Date of Conversion, the Common
Stock is not quoted by any such organization, the fair value of such Common
Stock on such day, as reasonably determined in good faith by the Board of
Directors of the Company, shall be used.
SECTION XIII.4. CONVERSION PRICE.
The conversion price per share of Common Stock issuable upon conversion
of the Securities (as such price may be adjusted, herein called the "Conversion
Price") shall initially be $15.55 (which reflects a conversion rate of 64.3087
shares of Common Stock per $1,000 in principal amount of Securities).
SECTION XIII.5. ADJUSTMENT OF CONVERSION PRICE.
The Conversion Price shall be subject to adjustment from time to time
as follows:
(a) In case there shall be made or paid a dividend or made a
distribution in shares of Common Stock on any class of Capital Stock of the
Company, the Conversion Price in effect immediately following the record date
fixed for the determination of shareholders entitled to receive such dividend or
other distribution shall be reduced by multiplying such Conversion Price by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on such date and the denominator shall be
the sum of such number of
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shares and the total number of shares constituting such dividend or other
distribution on the outstanding shares of such class of Capital Stock. An
adjustment made pursuant to this subsection (a) shall become effective
immediately, except as provided in subsection (i) and (j) below, after such
record date. For the purposes of this subsection (a), 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.
(b) In case the Company shall (1) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of shares or (2)
combine or reclassify its outstanding shares of Common Stock into a smaller
number of shares, the Conversion Price in effect immediately following the
effectiveness of such action shall be adjusted by multiplying such Conversion
Price by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding immediately prior to such subdivision, combination or
reclassification and the denominator shall be the number of shares outstanding
immediately after giving effect to such subdivision, combination or
reclassification. An adjustment made pursuant to this subsection (b) shall
become effective immediately, except as provided in subsection (i) and (j)
below, after the effective date of a subdivision, combination or
reclassification.
(c) In case there shall be an issuance of rights, options or warrants
("Stockholder Rights") to all or substantially all holders of outstanding Common
Stock entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the then current market price per share of the Common
Stock (as determined pursuant to subsection (g) below) on the record date fixed
for determination of the shareholders entitled to receive such rights, option or
warrants, the Conversion Price in effect immediately following such record date
shall be adjusted to a price, computed to the nearest cent, so that the same
shall equal the price determined by multiplying:
(i) such Conversion Price by a fraction, of which
(ii) the numerator shall be (A) the number of shares of Common
Stock outstanding on such record date plus (B) the number of shares which the
aggregate offering price of the total number of shares so offered for
subscription or purchase would purchase at such current market price (determined
by multiplying such total number of shares by the exercise price of such rights,
options or warrants and dividing the product so obtained by such current market
price), and of which
(iii) the denominator shall be (A) the number of shares of
Common Stock outstanding on such record date plus (B) the number of additional
shares of Common Stock which are so offered for subscription or purchase.
Such adjustment shall become effective immediately, except as provided
in subsection (i) and (j) below, after the record date for the determination of
holders entitled to receive such rights, options or warrants; provided, however,
that if any such rights, options or warrants issued by the
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Company as described in this subsection (c) are only exercisable upon the
occurrence of certain triggering events, then the Conversion Price will not be
adjusted as provided in this subsection (c) until the earliest of such
triggering event occurs. Upon the expiration or termination of any rights,
options or warrants without the exercise of such rights, options or warrants,
the Conversion Price then in effect shall be adjusted immediately to the
Conversion Price which would have been in effect at the time of such expiration
or termination had such rights, options or warrants, to the extent outstanding
immediately prior to such expiration or termination, never been issued.
(d) In case there shall be a distribution to all or substantially all
holders of Common Stock, of any assets, evidences of indebtedness, cash or
securities (other than (w) dividends or distributions exclusively in cash, (x)
any dividend or distribution for which an adjustment is required to be made in
accordance with subsection (a) or (c) above and in mergers and consolidations to
which Section 13.6 applies, (y) any distribution of rights or warrants subject
to subsection (1) below or any distribution in connection with a liquidation,
dissolution or winding up of the Company or (z) Rights (as defined below)) then
in each such case the Conversion Price in effect immediately following the
record date fixed for the determination of the shareholders entitled to such
distribution shall be adjusted so that the same shall equal the price determined
by multiplying such Conversion Price by a fraction of which the numerator shall
be the then current market price per share of the Common Stock (determined as
pro vided in subsection (g) below) on such record date less the then fair market
value (as reasonably determined in good faith by the Board of Directors of the
Company whose determination shall be conclusive and described in a resolution of
the Board of Directors) of the portion of the evidences of indebtedness,
securities, cash or assets so distributed applicable to one share of Common
Stock, and of which the denominator shall be such current market price per share
of the Common Stock (determined as provided in subsection (g) below). Such
adjustment shall become effective immediately, except as provided in subsection
(i) and (j) below, after the record date for the determination of shareholders
entitled to receive such distribution. If the Board of Directors determines the
fair market value of any distribution for purposes of this subsection (d) by
reference to the actual or when issued trading market for any securities
comprising such distribution, it must in doing so consider, among any other
facts or advice it deems relevant, the prices in such market over the same
period used in computing the current market price per share pursuant to
subsection (g) of this Section.
(e) In case there shall be made any distribution consisting exclusively
of cash (excluding any cash portion of distributions for which an adjustment is
required to be made in accordance with subsection (d) above, or cash distributed
upon a merger or consolidation to which Section 13.6 applies) to all or
substantially all holders of Common Stock in an aggregate amount that, combined
together with (i) all other such all-cash distributions made within the 12
months immediately preceding the record date fixed for determination of the
shareholders entitled to
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such distribution in respect of which no adjustment pursuant to this subsection
(e) or (f) has been made and (ii) any cash and the fair market value (as
reasonably determined by the Board of Directors whose determination shall be
conclusive and described in a resolution of the Board of Directors), at the time
of payment, of other consideration paid or payable in respect of any tender
offer by the Company or any of its Subsidiaries for Common Stock concluded
within the 12 months immediately preceding the record date fixed for determining
the shareholders entitled to such distribution in respect of which no adjustment
pursuant to this subsection (e) or (f) has been made, exceeds 15.0% of the
Company's market capitalization (defined as being the product of the then
current market price of the Common Stock (determined as provided in subsection
(g) below) times the number of shares of Common Stock then outstanding) on the
record date fixed for the determination of the shareholders entitled to such
distribution, in each such case the Conversion Price immediately following such
record date shall be adjusted so that the same shall equal the price determined
by multiplying such Conversion Price by a fraction of which the numerator shall
be the then current market price per share of the Common Stock (determined as
provided in subsection (g) below) on such record date less the amount of the
cash and/or fair market value (as reasonably determined in good faith by the
Board of Directors of the Company whose determination shall be conclusive and
described in a resolution of the Board of Directors) of other consideration so
distributed applicable to one share of Common Stock, and of which the
denominator shall be such current market price per share of the Common Stock.
Such adjustment shall become effective immediately prior to the opening of
business on the later of (x) the date following the date fixed for the payment
of such distribution and (y) the date 20 days after the notice relating to such
distribution is given., except as provided in subsection (i) and (j) below,
after the record date for the determination of shareholders entitled to receive
such distribution.
(f) In case the Company or any Subsidiary of the Company shall complete
a tender offer for all or any portion of the Common Stock (any such tender offer
being referred to as an "Offer") that involves an aggregate consideration having
a fair market value (as reasonably determined by the Board of Directors whose
determination shall be conclusive and described in a resolution of the Board of
Directors), at the last time tenders may be made pursuant to such Tender Offer
(as it may be amended or extended) as of the expiration of such Offer (the
"Expiration Time") that, together with (i) any cash and the fair market value
(as reasonably determined by the Board of Directors whose determination shall be
conclusive and described in a resolution of the Board of Directors) of any other
consideration paid (at the time of payment) in respect of any other tender
offer, as of the expiration of such other tender offer, expiring within the 12
months preceding the expiration of such Offer and in respect of which no
Conversion Price adjustment pursuant to this subsection (f) has been made and
(ii) the aggregate amount of any all-cash distributions referred to in
subsection (e) of this Section 13.5 to all holders of Common Stock within the 12
months preceding the expiration of such Offer for which no conversion price
adjustment pursuant to such subsection (e) has been made, exceeds 15.0% of the
product of the then current market price per share (determined as provided in
subsection (g) below) of the Common Stock at the Expiration Time times the
number of shares of Common Stock outstanding (including any tendered shares) at
the Expiration Time, the Conversion Price in effect immediately following such
Expiration Time shall be reduced by multiplying such Conversion Price by a
fraction of which the numerator shall be (i) the product of the then current
market price per share (determined as provided in subsection (g) below) of the
Common Stock at the Expiration Time times the number of shares of Common Stock
outstanding (including any tendered shares) at the Expiration Time minus (ii)
the fair market value (determined as aforesaid) of the aggregate consideration
payable to shareholders based on the acceptance (up to any maximum specified in
the terms of the Offer) of all shares validly tendered and not withdrawn as of
the Expiration Time (the shares deemed so accepted being referred to as the
"Purchased Shares") and the denominator
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shall be the product of (i) such current market price per share at the
Expiration Time times (ii) such number of outstanding shares at the Expiration
Time less the number of Purchased Shares, such reduction to become effective
immediately prior to the opening of business on the day following the Expiration
Time; provided, that if the number of purchased shares or the aggregate
consideration payable therefor have not been finally determined by such opening
of business, the adjustment required by this subsection (f) shall, pending such
final determination, be made based upon the preliminary results of such tender
offer announced by the Company, and, after such final determination shall have
been made, the adjustment required by this subsection (f) shall be made based
upon the number of purchased shares and the aggregate consideration payable
therefor as so finally determined, effective immediately prior to the opening of
business on the day immediately following the day such final determination shall
have been made. For purposes of this subsection (f), the fair market value of
any consideration with respect to an Offer shall be reasonably determined in
good faith by the Board of Directors of the Company and described in a Board
Resolution.
(g) For the purpose of any computation under subsections (c), (d) and
(e) and (f) above of this Section, the current market price per share of Common
Stock on the date fixed for determination of the stockholders entitled to
receive the issuance or distribution requiring such computation (the
"Determination Date") shall be deemed to be the average of the Closing Prices
for the five consecutive Trading Days selected by the Company commencing not
more than 20 Trading Days before, and ending not later than the Determination
Date, provided, however, that (i) if the "ex" date for any event (other than the
issuance or distribution requiring such computation) that requires an adjustment
to the conversion price pursuant to subsections (a), (b), (c), (d), (e) or (f)
above occurs on or after the 20th Trading Day prior to the Determination Date
and prior to the "ex" date for the issuance or distribution requiring such
computation, the Closing Price for each Trading Day prior to the "ex" date for
such other event shall be adjusted by multiplying such Closing Price by the same
fraction by which the conversion price is so required to be adjusted as a result
of such other event, (ii) if the "ex" date for any event (other than the
issuance or distribution requiring such computation) that requires an adjustment
to the conversion price pursuant to subsections (a), (b), (c), (d), (e) or (f)
above occurs on or after the "ex" date for the issuance or distribution
requiring such computation and on or prior to the Determination Date, the
Closing Price for each Trading Day on and after the "ex" date for such other
event shall be adjusted by multiplying such Closing Price by the reciprocal of
the fraction by which the conversion price is so required to be adjusted as a
result of such other event, and (iii) if the "ex" date for the issuance or
distribution requiring such computation is on or prior to the Determination
Date, after taking into account any adjustment required pursuant to clause (ii)
of this proviso, the Closing Price for each Trading Day on and after the "ex"
date shall be adjusted by adding thereto the amount of any cash and the fair
market value (as determined by the Board Directors in a manner consistent with
any determination of such value for the purposes of subsection (d) or (e) of
this Section, whose determination shall be conclusive and described in a
Resolution of the Board of Directors) of the evidences of indebtedness, shares
of capital stock or other securities or assets being distributed (in the
distribution requiring such computation) applicable to one share of Common Stock
as of the close of business on the day before such "ex" date. For the purpose of
any computation under subsection (f) of this Section, the current market
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price per share of Common Stock at the Expiration Time for the tender offer
requiring such computation shall be deemed to be the average of the Closing
Prices for the 5 consecutive Trading Days selected by the Company commencing on
or after the latest (the "Commencement Date") of (i) the date 20 Trading Days
before the Expiration Time, (ii) the date of commencement of such tender offer
and (iii) the date of the last amendment, if any, of such tender offer involving
a change in the maximum number of shares for which tenders are sought or a
change in the consideration offered, and ending not later than the Expiration
Time of such tender offer; provided, however, that if the "ex" date for any
event (other than the tender offer requiring such computation) that request an
adjustment to the conversion price pursuant to subsection (a), (b), (c), (d),
(e) or (f) above occurs on or after the Commencement Date and prior to the
Expiration Time for the tender offer requiring such computation, the Closing
Price for each Trading Day prior to the "ex" date for such other event shall be
adjusted by multiplying such Closing Price by the same fraction by which the
conversion price is so required to be adjusted as a result of such other event.
For purposes of this subsection, the term "ex" date, (i) when used with respect
to any issuance or distribution, means the first date on which the Common Stock
trades regular way on the relevant exchange or in the relevant market from which
the Closing Price was obtained without the right to receive such issuance or
distribution, (ii) when used with respect to any subdivision or combination of
shares of Common Stock, means the first date on which the Common Stock trades
regular way on such exchange or in such market after the time at which such
subdivision or combination becomes effective, and (iii) when used with respect
to any tender offer means the first date on which the Common Stock trades
regular way on such exchange or in such market after the Expiration Time of such
tender offer (as it may be amended or extended). Notwithstanding the foregoing,
if the fraction by which the conversion price is required to be adjusted as a
result of any event (other than the issuance, distribution or tender offer, as
the case may be, requiring such computation) cannot be determined for any
Trading Day during the period of 20 Trading Days contemplated by the first
sentence of this subsection and clause (i) of the second sentence of this
subsection, then the 5 consecutive Trading Days selected by the Company shall,
in the case of the first sentence of this subsection and clause (i) of the
second sentence of this subsection, commence not more than 25 Trading Days
before such Determination Date or Expiration Time, as the case may be, instead
of 20 Trading Days before such Determination Date or Expiration Time, as the
case may be, as provided above.
(h) In addition to the foregoing adjustments in subsections (a), (b),
(c), (d), (e) and (f) above, the Company, from time to time and to the extent
permitted by law, may reduce the Conversion Price by any amount for at least 20
Business Days, if the Board of Directors has made a determination, which
determination shall be conclusive, that such reduction would be in the best
interests of the Company. The Company shall give notice to the Trustee and cause
notice of such reduction to be mailed to each Holder of Securities at such
Holder's address as the same appears on the registry books of the Registrar, at
least 15 days prior to the date on which such reduction commences. The Company
may, at its option, also make such reductions in the Conversion Price in
addition to those set forth above, as the Board of Directors deems advisable to
avoid or diminish any income tax to holders of shares of Common Stock resulting
from any dividend or distribution of stock (or rights to acquire stock) or from
any event treated as such for United States federal income tax purposes.
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(i) In any case in which this Section 13.5 shall require that an
adjustment be made immediately following a record date, the Company may elect to
defer the effectiveness of such adjustment (but in no event until a date later
than the effective time of the event giving rise to such adjustment), in which
case the Company shall, with respect to any Security converted after such record
date and on and before such adjustment shall have become effective (i) defer
paying any Cash payment pursuant to Section 13.3 hereof or issuing to the Holder
of such Security the number of shares of Common Stock and other capital stock of
the Company (or other assets or securities) issuable upon such conversion in
excess of the number of shares of Common Stock and other Capital Stock of the
Company issuable thereupon only on the basis of the Conversion Price prior to
adjustment, and (ii) not later than five Business Days after such adjustment
shall have become effective, pay to such Holder the appropriate Cash payment
pursuant to Section 13.3 hereof and issue to such Holder the additional shares
of Common Stock and other Capital Stock of the Company issuable on such
conversion. Notwithstanding the foregoing, no adjustment of the Conversion price
shall be made if the event giving rise to such adjustment does not occur.
(j) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1.0% of the
Conversion Price; provided that any adjustments which by reason of this
subsection (j) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this
Article XIII shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. In no event shall the
Conversion Price be less than or equal to zero or less than the par value of
a share of the Company's Common Stock, in which event the Conversion Price
shall be reduced to such par value, and if the Company's Common Stock is
without par value, the Conversion Price in such event would be reduced to
$.01 per share.
(k) Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly (i) file with the Trustee and each conversion agent an
Officers' Certificate setting forth the Conversion Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment and
showing in reasonable detail the facts upon which such adjustment is based,
which certificate shall be conclusive evidence of the correctness of such
adjustment, and (ii) mail or cause to be mailed a notice of such adjustment to
each Holder of Securities at such Holder's address as the same appears on the
registry books of the Registrar. Unless and until a Trust Officer has received
an Officers' Certificate setting forth an adjustment of the Conversion Price,
the Trustee may assume that no such adjustment has been made and that the last
Conversion Price for which the Trustee has received an Officers' Certificate is
the current Conversion Price. Neither the Trustee nor any Conversion Agent shall
be under any duty or responsibility with respect to any such Officers'
Certificate or the information and calculation contained therein, except to
exhibit the same to any Holder deserving inspection thereof, at its office
during normal business hours.
(l) In the event that the Company distributes rights, warrants or
options (other than those referred to in subsection (c) above and other than
Stockholder Rights ("Rights") to all holders of Common Stock) pro rata to
holders of Common Stock, so long as any such rights, warrants or options have
not expired or been redeemed by the Company, instead of making an adjustment in
the Conversion Price, the Company may make proper provision so that the Holder
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of any Security surrendered for conversion will be entitled to receive upon such
conversion, in addition to the shares of Common Stock issuable upon such
conversion (the "Conversion Shares"), a number of rights, warrants or options to
be determined as follows: (i) if such conversion occurs on or prior to the date
for the distribution to the holders of rights, warrants or options of separate
certificates evidencing such rights, warrants or options (the "Distribution
Date"), the same number of rights, warrants or options to which a holder of a
number of shares of Common Stock equal to the number of Conversion Shares is
entitled at the time of such conversion in accordance with the terms and
provisions of and applicable to the rights, warrants or options, and (ii) if
such conversion occurs after such Distribution Date, the same number of rights,
warrants or options to which a holder of the number of shares of Common Stock
into which the principal amount of such Security so converted was convertible
immediately prior to such Distribution Date would have been entitled on such
Distribution Date in accordance with the terms and provisions of and applicable
to the rights, warrants or options.
(m) For purposes of this Section, a tender offer shall not include
privately negotiated or open market purchases of Common Stock unless such
purchases are subject to Regulation 14D or Regulation 14E promulgated under the
Exchange Act, or any successor provisions thereto.
SECTION XIII.6. CONTINUATION OF CONVERSION PRIVILEGE IN CASE OF
RECLASSIFICATION, CHANGE, MERGER, CONSOLIDATION OR SALE OF ASSETS.
If there shall occur: (a) any reclassification or change of outstanding
shares of Common Stock issuable upon conversion of the Securities (other than a
change in par value, or from par value to no par value, or from no par value, to
par value, or as a result of a subdivision or combination), (b) any
consolidation or merger of the Company with or into any other Person, or the
consolidation or merger of any other Person with or into the Company (other than
a merger which does not result in any reclassification, change, conversion,
exchange or cancellation of outstanding shares of Common Stock) or (c) any sale,
transfer or conveyance of all or substantially all of the assets of the Company
(computed on a consolidated basis), then the Company, or such successor or
purchasing entity, as the case may be, shall, as a condition precedent to such
reclassification, change, consolidation, merger, sale or conveyance, execute and
deliver to the Trustee a supplemental indenture providing that the Holder of
each Security then outstanding shall have the right to convert such Security
only into the kind and amount of shares of stock and other securities and
property (including cash) receivable upon such reclassification, change,
consolidation, merger, sale, transfer or conveyance by a holder of the number of
shares of Common Stock issuable upon conversion of such Security immediately
prior to such reclassification, change, consolidation, merger, sale, transfer or
conveyance assuming such holder of Common Stock of the Company failed to
exercise his rights of an election, if any, as to the kind or amount of
securities, cash and other property receivable upon such reclassification,
change, consolidation, merger, sale, transfer or conveyance (provided that if
the kind or amount of securities, cash, and other property receivable upon such
reclassification, change, consolidation, merger, sale, transfer or conveyance is
not the same for each share of Common Stock of the Company held immediately
prior to such reclassification, change, consolidation, merger, sale, transfer or
conveyance in respect of which such rights of election shall not have been
exercised ("non-electing share"), then for the purpose of this Section 13.6 the
kind and amount of
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securities, cash and other property receivable upon such reclassification,
change, consolidation, merger, sale, transfer or conveyance by each non-electing
share shall be deemed to be the kind and amount so receivable per share by a
plurality of the non-electing shares). Such supplemental indenture shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article XIII. If, in the case of any such
consolidation, merger, sale or conveyance, the stock or other securities and
property (including cash) receivable thereupon by a holder of shares of Common
Stock includes shares of stock or other securities and property (including cash)
of a corporation other than the successor or purchasing corporation, as the case
may be, in such consolidation, merger, sale or conveyance, then such
supplemental indenture shall also be executed by such other corporation and
shall contain such additional provisions to protect the interests of the Holders
of the Securities as the Board of Directors of the Company shall reasonably
consider necessary by reason of the foregoing. The provisions of this Section
13.6 shall similarly apply to successive consolidations, mergers, sales or
conveyances.
Notice of the execution of each such supplemental indenture shall be
mailed to each Holder of Securities at such Holder's address as the same appears
on the registry books of the Registrar.
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 securities or property (including cash) receivable by Holders of
Securities upon the conversion of their Securities after any such
reclassification, change, consolidation, merger, sale or conveyance or to any
adjustment to be made with respect thereto, but, subject to the provisions of
Article VIII hereof, may accept as conclusive evidence of the correctness of any
such provisions, and shall be protected in relying upon, the Officers'
Certificate (which the Company shall be obligated to file with the Trustee prior
to the execution of any such supplemental indenture) with respect thereto.
SECTION XIII.7. NOTICE OF CERTAIN EVENTS.
In case:
(a) the Company shall declare a dividend (or any other distribution)
payable to the holders of Common Stock (other than cash dividends);
(b) the Company shall authorize the granting to all or substantially
all the holders of Common Stock of rights, warrants or options to subscribe for
or purchase any shares of stock of any class or of any other rights;
(c) the Company shall authorize any reclassification or change of the
Common Stock (including a subdivision or combination of its outstanding shares
of Common Stock), or any consolidation or merger to which the Company is a party
and for which approval of any shareholders of the Company is required, or the
sale or conveyance of all or substantially all the property or business of the
Company;
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(d) there shall be proposed any voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(e) the Company or any of its Subsidiaries shall complete an Offer, as
defined in Section 13.5;
then, the Company shall cause to be filed at the office or agency maintained for
the purpose of conversion of the Securities as provided in Section 13.2 hereof,
and shall cause to be mailed to each Holder of Securities, at such Holder's
address as it shall appear on the registry books of the Registrar, at least
10 days before the date hereinafter specified (or the earlier of the dates
hereinafter specified, in the event that more than one date is specified), a
notice stating the date on which (1) a record is expected to be taken for the
purpose of such dividend, distribution, rights, warrants or options or Offer, 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, warrants or
options or to participate in such Offer are to be determined, or (2) such
reclassification, change, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding-up is expected to become effective and the date, if any
is to be fixed, 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
or other property deliverable upon such reclassification, change, consolidation,
merger, sale, conveyance, dissolution, liquidation or winding-up.
SECTION XIII.8. TAXES ON CONVERSION.
The Company will pay any and all documentary, stamp or similar taxes
payable to the United States of America or any political subdivision or taxing
authority thereof or therein in respect of the issue or delivery of shares of
Common Stock on conversion of Securities pursuant thereto; provided, however,
that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issue or delivery of shares of Common
Stock in a name other than that of the Holder of the Securities to be converted
and no such issue or delivery shall be made unless and until the person
requesting such issue or delivery has paid to the Company the amount of any such
tax or has established, to the satisfaction of the Company, that such tax has
been paid. The Company extends no protection with respect to any other taxes
imposed in connection with conversion of Securities.
SECTION XIII.9. COMPANY TO PROVIDE STOCK.
The Company shall reserve, free from preemptive rights, out of its
authorized but unissued shares, sufficient shares to provide for the conversion
of the Securities from time to time as such Securities are presented for
conversion, provided that nothing contained in this Section 13.9 shall be
construed to preclude the Company from satisfying its obligations in respect of
the conversion of Securities by delivery of repurchased shares of Common Stock
which are held in the treasury of the Company.
If any shares of Common Stock to be reserved for the purpose of
conversion of Securities hereunder require registration with or approval of any
governmental authority under any Federal
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or state law before such shares may be validly issued or delivered upon
conversion, then the Company covenants that it will in good faith and as
expeditiously as possible use its reasonable efforts to secure such
registration or approval, as the case may be, provided, however, that nothing
in this Section 13.9 shall be deemed to limit in any way the obligations of
the Company provided in this Article XIII.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the Common Stock, the
Company will take all corporate action which may, in the Opinion of Counsel, be
necessary in order that the Company may validly and legally issue fully paid and
non-assessable shares of Common Stock at such adjusted Conversion Price. The
Company covenants that all shares of Common Stock which may be issued upon
conversion of Securities will upon issue be fully paid and non-assessable by the
Company and free of preemptive rights.
SECTION XIII.10. DISCLAIMER OF RESPONSIBILITY FOR CERTAIN MATTERS.
Neither the Trustee nor any agent of the Trustee shall 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
Price, or with respect to the Officers' Certificate referred to in Section 13.5
hereof, or with respect to the nature or extent of any such adjustment when
made, or with respect to the method employed, or herein or in any supplemental
indenture provided to be employed, in making the same. Neither the Trustee nor
any agent of the Trustee shall be accountable with respect to the validity or
value (or the kind or amount) of any shares of Common Stock, or of any
securities or property (including cash), which may at any time be issued or
delivered upon the conversion of any Security; and neither the Trustee nor any
conversion agent makes any representation with respect thereto. Neither the
Trustee nor any agent of the Trustee shall be responsible for any failure of the
Company to issue, register the transfer of or deliver any shares of Common Stock
or stock certificates or other securities or property (including cash) upon the
surrender of any Security for the purpose of conversion or, subject to
Article VIII hereof, to comply with any of the covenants of the Company
contained in this Article XIII.
SECTION XIII.11. RETURN OF FUNDS DEPOSITED FOR REDEMPTION OF CONVERTED
SECURITIES.
Any funds which at any time shall have been deposited by the Company or
on its behalf with the Trustee or any other Paying Agent for the purpose of
paying the principal of and interest on any of the Securities and which shall
not be required for such purposes because of the conversion of such Securities,
as provided in this Article XIII, shall promptly after such conversion be repaid
to the Company by the Trustee or such other Paying Agent in accordance with the
Company's written instructions.
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ARTICLE XIV.
MISCELLANEOUS
SECTION XIV.1. TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts with
the duties imposed by operation of the TIA, the imposed duties, whether or not
this Indenture has been qualified under the TIA, shall control. If any provision
of this Indenture modifies or excludes any provision of the TIA that may be so
modified or excluded, then the applicable TIA provision shall be deemed to apply
to this Indenture as so modified, or shall be excluded, as the case may be.
SECTION XIV.2. NOTICES.
Any notices or other communications to the Company or the Trustee
required or permitted hereunder shall be in writing, and shall be sufficiently
given if made by hand delivery, by recognized overnight courier, by telecopier
or registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Company:
General Semiconductor, Inc.
10 Melville Park Road
Melville, New York 11747
Attention: General Counsel
Telephone (631) 847-3000
Telecopy (631) 847-3209
if to the Trustee:
The Bank of New York
101 Barclay Street, 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Telephone: (212) 815-5783
Telecopy: (212) 815-5915
Any party by notice to each other party may designate additional or
different addresses as shall be furnished in writing by such party. Any notice
or communication to any party shall be deemed to have been given or made as of
the date so delivered, if personally delivered; when receipt is acknowledged, if
telecopied; the next Business Day after delivery to an overnight courier; and
five Business Days after mailing if sent by registered or certified mail,
postage prepaid (except that a notice of change of address shall not be deemed
to have been given until actually received by the addressee).
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Any notice or communication mailed to a Securityholder shall be mailed
to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is given in the manner provided above, it is duly
given, whether or not the addressee receives it except for notices and
communications to the Trustee which shall be effective only upon actual receipt
thereof.
SECTION XIV.3. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA SECTION 312(b) with other
Holders with respect to their rights under this Indenture or the Securities. The
Company, the Trustee, the Registrar and any other Person shall have the
protection of TIA SECTION 312(c).
SECTION XIV.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action (other than the original issuance of the Securities pursuant to this
Indenture) under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied or complied with; and
(2) upon the Trustee's request, an Opinion of Counsel (in form
and substance reasonably satisfactory to the Trustee) stating that, in the
opinion of such counsel, all such conditions precedent and covenants have been
satisfied or complied with.
SECTION XIV.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each Officers' Certificate or Opinion of Counsel with respect to
compliance with or satisfaction of with a condition or covenant provided for in
this Indenture shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he or she
has made such examination or investigation as is necessary to enable him or her
to express an informed opinion as to whether or not such covenant or condition
has been satisfied or complied with; and
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(4) a statement as to whether or not, in the opinion of each
such Person, such condition or covenant has been satisfied or complied with;
provided, however, that with respect to matters of fact an Opinion of Counsel
may rely on an Officers' Certificate or certificates of public officials. Any
certificate or opinion of an Officer of the Company may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless such Officer knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
the matters upon which his certificate or opinion is based are erroneous, and
provided that any such certificate or opinion names the Trustee as an addressee
and is furnished to the Trustee at the time of delivery of such certificate or
opinion. Any such certificate or Opinion of Counsel may be based, insofar as it
relates to factual matters, upon a certificate or opinion of, or representations
by, an officer or officers of the Company stating the information with respect
to such factual matters is in the possession of the Company, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Opinions of Counsel required to be delivered to the Trustee may have
qualifications customary for opinions of the type required and counsel
delivering such Opinions of Counsel may rely on certificates of the Company or
government or other officials customary for opinions of the type required,
including certificates certifying as to matters of fact, including that various
financial covenants have been complied with.
SECTION XIV.6. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION XIV.7. LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday or any day that is not a
Business Day. If a payment date is a Legal Holiday at such place, payment may be
made at such place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.
SECTION XIV.8. GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK. THE COMPANY HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND THE SECURITIES,
AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
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APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT
OF THE TRUSTEE OR ANY SECURITYHOLDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE COMPANY IN ANY OTHER JURISDICTION.
SECTION XIV.9. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION XIV.10. NO RECOURSE AGAINST OTHERS.
No direct or indirect partner, employee, shareholder, director or
officer, as such, past, present or future of the Company or any successor
corporation, shall have any personal liability in respect of the obligations of
the Company under the Securities or this Indenture (or for any claim based on,
or in respect of, or by reason of, such obligations or their creation) by reason
of his, her or its status as such partner, shareholder, employee, director or
officer. Each Securityholder by accepting a Security waives and releases all
such liability. Such waiver and release are part of the consideration for the
issuance of the Securities.
SECTION XIV.11. SUCCESSORS.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor and assigns.
SECTION XIV.12. DUPLICATE ORIGINALS.
All parties may sign any number of copies or counterparts of this
Indenture. Each signed copy or counterpart shall be an original, but all of them
together shall represent the same agreement.
SECTION XIV.13. SEVERABILITY.
In case any one or more of the provisions in this Indenture or in the
Securities shall be 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 shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
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SECTION XIV.14. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and headings of the
Articles and the Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION XIV.15. QUALIFICATION OF INDENTURE.
The Company shall qualify this Indenture under the TIA in accordance
with the terms and conditions of the Registration Rights Agreement and shall pay
all costs, fees and expenses (including attorneys' fees and expenses for the
Company and the Trustee) incurred in connection therewith, including, but not
limited to, costs, fees and expenses of qualification of the Indenture and the
Securities and printing this Indenture and the Securities. The Trustee shall be
entitled to receive from the Company any such Officers' Certificates, Opinions
of Counsel or other documentation as it may reasonably request in connection
with any such qualification of this Indenture under the TIA.
SECTION XIV.16. BENEFITS OF INDENTURE.
Nothing in this Indenture or the Securities, express or implied, shall
give to any Person other than the parties hereto, the holders of Senior
Indebtedness (subject to Article XII), the persons contemplated by Section 7.7
and the Holders, any benefits or any legal or equitable right, remedy or claim
under this Indenture or the Securities.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the date first written above.
GENERAL SEMICONDUCTOR, INC.,
a Delaware corporation
By: /s/ Andrew M. Caggia
--------------------------------
Name: Andrew M. Caggia
Title: Senior Vice President and
Chief Financial Officer
The Bank of New York,
as Trustee
By: /s/ Mary LaGumina
---------------------------------
Name: Mary LaGumina
Title: Assistant Vice President
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EXHIBIT A
[FORM OF SECURITY]
GENERAL SEMICONDUCTOR, INC.
5.75% CONVERTIBLE SUBORDINATED NOTES DUE 2006
No. CUSIP No. 370787AA1
$150,000,000
GENERAL SEMICONDUCTOR, INC., a Delaware corporation (hereinafter called
the "Company," which term includes any successors under the Indenture
hereinafter referred to), for value received, hereby promises to pay to Cede &
Co., or registered assigns, the principal sum of One Hundred and Fifty Million
Dollars, on December 15, 2006.
Interest Payment Dates: June 15 and December 15; commencing June 15,
2000.
Record Dates: June 1 and December 1.
Reference is made to the further provisions of this Note hereinafter
set forth, which will, for all purposes, have the same effect as if set forth at
this place.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
GENERAL SEMICONDUCTOR, INC.,
a Delaware corporation
By: _________________________________
Name:
Title:
By: _________________________________
Name:
Title:
Certificate of Authentication:
This is one of the Notes described in the within-mentioned Indenture.
Dated: December 14, 1999
The Bank of New York, as Trustee
By:__________________________________
Authorized Signatory
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GENERAL SEMICONDUCTOR, INC.
5.75% Convertible Subordinated Notes due 2006
Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by The
Depository Trust Company, a New York corporation ("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. Unless this
certificate is presented by an authorized representative of the Depository 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 the Depositary (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of the Depositary), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.(2)
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN
THE NEXT SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST
HEREIN, THE HOLDER (1) REPRESENTS THAT EITHER (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A
"QIB"), OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO
THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE
SECURITIES ACT, (C) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (D) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE TRANSFER OF THIS NOTE (A FORM OF WHICH CAN BE OBTAINED FROM THE
TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF
NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT
SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (E) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF
- --------
(2) This paragraph should only be added if the Note is issued in global form.
-3-
<PAGE>
COUNSEL ACCEPTABLE TO THE COMPANY) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST
HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.(3)
1. INTEREST.
General Semiconductor, Inc., a Delaware corporation (hereinafter called
the "Company," which term includes any successors under the Indenture
hereinafter referred to), promises to pay interest on the principal amount of
this Note at the rate of 5.75% per annum. To the extent it is lawful, the
Company promises to pay interest on any interest payment due but unpaid on such
principal amount at a rate of 5.75% per annum compounded semi-annually.
The Company will pay interest semi-annually in cash in arrears on
June 15 and December 15 of each year (each, an "Interest Payment Date"),
commencing June 15, 2000. Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid
on the Notes, from December 9, 1999. Interest will be computed on the basis
of a 360-day year consisting of twelve 30-day months.
2. METHOD OF PAYMENT.
The Company shall pay interest on the Notes (except defaulted interest)
to the Persons who are the registered Holders at the close of business on the
Record Date immediately preceding the Interest Payment Date. Any such interest
not so punctually paid, and defaulted interest relating thereto, may be paid to
the Persons who are registered Holders at the close of business on a Special
Record Date for the payment of such defaulted interest, as more fully provided
in the Indenture referred to below. Holders must surrender Notes to a Paying
Agent to collect principal payments. Except as provided below, the Company shall
pay principal and interest in such coin or currency of the United States of
America as at the time of payment shall be legal tender for payment of public
and private debts ("U.S. Legal Tender"). The Notes will be payable as to
principal, premium, interest and Liquidated Damages at the office or agency of
the Company maintained for such purpose within or without New York, New York, or
at the option of the Company, payment of principal, premium, interest and
Liquidated Damages may be made by check mailed to the Holders at their addresses
set forth in the registry of Holders, and provided that, upon the request of The
Depository Trust Company, a New York corporation (the "Depositary"), payment by
wire transfer to an account within the United States of immediately available
funds will be required with respect to principal of, premium and interest on and
Liquidated Damages with respect to Global Notes and all other Notes held of
record by the
- --------
(3) This paragraph should be included only for Transfer Restricted Securities.
-4-
<PAGE>
Depositary, or its nominee, if the Depositary shall have provided wire transfer
instructions to the Company or the Paying Agent.
3. PAYING AGENT AND REGISTRAR.
Initially, The Bank of New York (the "Trustee") will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or
co-Registrar without notice to the Holders. The Company or any of its
Subsidiaries may, subject to certain exceptions, act as Paying Agent, Registrar
or co-Registrar.
4. INDENTURE.
The Company issued the Notes under an Indenture, dated as of
December 14, 1999 (as amended or supplemented from time to time the
"Indenture"), between the Company and the Trustee. Capitalized terms herein
are used as defined in the Indenture unless otherwise defined herein. The
terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act, as in effect on the
date of the Indenture. The Notes are subject to all such terms, and Holders
of Notes are referred to the Indenture and said Act for a statement of them.
The Notes are general unsecured obligations of the Company limited in
aggregate principal amount to $172,500,000.
5. REDEMPTION.
The Notes may be redeemed in whole or from time to time in part at any
time on and after December 15, 2002, at the option of the Company, at the
Redemption Price (expressed as a percentage of principal amount) set forth below
with respect to the indicated Redemption Date, in each case, plus any accrued
but unpaid interest and Liquidated Damages to, but excluding the Redemption
Date. The Notes may not be so redeemed prior to December 15, 2002.
<TABLE>
<CAPTION>
If redeemed during
the 12-month period
beginning on December 15 Redemption Price
------------------------ ----------------
<S> <C>
2002............................................... 103.286%
2003............................................... 102.464%
2004............................................... 101.643%
2005 and thereafter................................ 100.821%
</TABLE>
Any such redemption will comply with Article III of the Indenture.
6. NOTICE OF REDEMPTION.
Notice of redemption will be sent by first class mail, at least 30 days
and not more than 60 days prior to the Redemption Date to the Holder of each
Note to be redeemed at such Holder's last address as then shown upon the
registry books of the Registrar. Notes may be redeemed in part in integral
multiples of $1,000 only.
-5-
<PAGE>
Except as set forth in the Indenture, from and after any Redemption
Date, if monies for the redemption of the Notes called for redemption shall have
been deposited with the Paying Agent on such Redemption Date and payment of the
Notes called for redemption is not prohibited under Article XII of the
Indenture, the Notes called for redemption will cease to bear interest and the
only right of the Holders of such Notes will be to receive payment of the
Redemption Price, plus any accrued and unpaid interest and Liquidated Damages,
if any, to the Redemption Date.
7. DENOMINATIONS; TRANSFER; EXCHANGE.
The Notes are in registered form, without coupons, in denominations of
$1,000 and integral multiples of $1,000. A Holder may register the transfer of
or exchange Notes in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any Notes
selected for redemption.
8. PERSONS DEEMED OWNERS.
The registered Holder of a Note may be treated as the owner of it for
all purposes, subject to the provisions of the Indenture and the Notes with
respect to record dates.
9. UNCLAIMED MONEY.
If money for the payment of principal, interest or Liquidated Damages
remains unclaimed for one year, the Trustee and the Paying Agent(s) will pay the
money back to the Company at its written request. After that, all liability of
the Trustee and such Paying Agent(s) with respect to such money shall cease.
10. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to specified exceptions, the Indenture or the Notes may be
amended or supplemented, and any existing Default or Event of Default or
compliance with any provision may be waived, with the written consent of the
Holders of a majority in aggregate principal amount of the Notes then
outstanding. Without notice to or consent of any Holder, the parties thereto may
amend or supplement the Indenture or the Notes to, among other things, cure any
ambiguity, defect or inconsistency, or make any other change that does not
materially adversely affect the rights of any Holder of a Note.
11. CONVERSION RIGHTS.
Subject to the provisions of the Indenture, the Holders have the right
to convert the principal amount of the Notes into fully paid and nonassessable
shares of Common Stock of the Company at an office or agency maintained for such
purpose as provided in the Indenture at the initial conversion price per share
of Common Stock of $15.55 (which reflects a conversion rate of approximately
64.3087 shares of Common Stock per $1,000 in principal amount of Notes), or at
the adjusted conversion price then in effect, if adjustment has been made as
provided in the
-6-
<PAGE>
Indenture, upon surrender of the Note to the Company, together with a fully
executed notice in substantially the form attached hereto and, if required by
the Indenture, an amount equal to accrued interest payable on such Note.
12. RANKING.
Payment of principal, premium, if any, interest on and Liquidated
Damages and other amounts with respect to the Notes is subordinated, in the
manner and to the extent set forth in the Indenture, to the prior payment in
full of all Senior Indebtedness.
13. REPURCHASE AT OPTION OF HOLDER UPON A CHANGE OF CONTROL.
If there is a Change of Control, the Company shall, subject to certain
exceptions, be required, subject to the provisions of the Indenture, to offer to
purchase on the Repurchase Date all outstanding Notes at a purchase price equal
to 100% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to, but excluding, the Repurchase Date. Holders of
Notes will receive a Repurchase Offer from the Company prior to any related
Repurchase Date and may elect to have such Notes purchased by completing the
form entitled "Option of Holder to Elect Purchase" appearing below.
14. SUCCESSORS.
When a successor assumes all the obligations of its predecessor under
the Notes and the Indenture, the predecessor will be released from those
obligations.
15. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing (other than an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization),
then in every such case, unless the principal of all of the Notes shall have
already become due and payable, either the Trustee or the Holders of 25% in
aggregate principal amount of Notes then outstanding may declare all the Notes
to be due and payable immediately in the manner and with the effect provided in
the Indenture. Holders of Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. The Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Notes. Subject to
certain limitations, Holders of a majority in aggregate principal amount of the
Notes then outstanding may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of Notes notice of any continuing
Default or Event of Default (except a Default in payment of principal, interest
or Liquidated Damages), if it determines that withholding notice is in their
interest.
16. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
-7-
<PAGE>
17. NO RECOURSE AGAINST OTHERS.
No direct or indirect partner, shareholder, director, officer or
employee, as such, past, present or future, of the Company or any successor
corporation shall have any personal liability in respect of the obligations of
the Company under the Notes or the Indenture, or for any claim based on, in
respect of, or by reason of, such obligations or their creation, by reason of
his, her or its status as such partner, shareholder, director, officer or
employee. Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
18. AUTHENTICATION.
This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on this Note.
19. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a Holder of a Note
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
20. GOVERNING LAW.
THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF NEW YORK. THE COMPANY HEREBY IRREVOCABLY SUBMITS
TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF
MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF
MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF
THE AFORESAID COURTS. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT
MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY SECURITYHOLDER TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
-8-
<PAGE>
21. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Notes as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
22. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED NOTES.
In addition to the rights provided to Holders of Notes under the
Indenture, Holders of Notes shall have all the rights set forth in the
Registration Rights Agreement.
23. COPIES OF AGREEMENTS.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement. Request
may be made to:
General Semiconductor, Inc.
10 Melville Park Road
Melville, New York 11747
Attention: Secretary
-9-
<PAGE>
FORM OF ASSIGNMENT
I or we assign this Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
Please insert Social Note or other identifying number of assignee
and irrevocably appoint __________________ agent to transfer this Note on the
books of the Company. The agent may substitute another to act for him.
Dated:_________________________ Signed:_____________________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guaranty:_________________________
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guaranty program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
-10-
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Article XI of the Indenture, check the box: |_|
If you want to elect to have only part of this Note purchased by the
Company pursuant to Article XI of the Indenture, state the amount you want to be
purchased: $___________________
Dated:_________________________ Signed:______________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guaranty:___________________
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guaranty program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
-11-
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES(4)
The following exchanges of a part of this Global Note for Definitive
Notes have been made:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Date of Amount of decrease Amount of increase Signature of
Exchange in Principal Amount in Principal Amount Principal Amount of authorized Signatory
of this Global Note of this Global Note this Global Note of Trustee or Note
following such decrease Custodian
(or increase)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- --------
(4) This Schedule should only be added if the Note is issued in global form.
-12-
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF NOTES(5)
Re: 5.75% CONVERTIBLE SUBORDINATED NOTES DUE 2009
OF GENERAL SEMICONDUCTOR, INC.
This Certificate relates to $__________ principal amount of Notes held
in __________ book-entry or ____________ definitive form by
____________________________ (the "Transferor").
1. The Transferor (check applicable box):
/_/ (a) has requested the Trustee by written order to deliver in
exchange for its beneficial interest in the Global Note held by the Depositary a
Note or Notes in definitive, registered form of authorized denominations and an
aggregate principal amount equal to its beneficial interest in such Global Note
(or the portion thereof indicated above); or
/_/ (b) has requested the Trustee by written order to exchange or
register the transfer of a Note or Notes.
2. In connection with any such request and in respect of each such
Note, the Transferor does hereby certify that Transferor is familiar with the
Indenture relating to the above-captioned Notes and as provided in Section 2.6
of such Indenture, the transfer of this Note does not require registration under
the Securities Act because (check applicable box):
/_/ (a) Such Note is being acquired for the Transferor's own
account, without transfer (in satisfaction of Section 2.6(a)(ii)(A) or
Section 2.6(d)(i)(A) of the Indenture).
/_/ (b) Such Note is being transferred to a person who the
Transferor reasonably believes is a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) purchasing for its own account or for the
account of a qualified institutional buyer over which it exercises sole
investment discretion that is aware that the transfer is being made in reliance
on Rule 144A (in satisfaction of Section 2.6(a)(ii)(B), Section 2.6(b)(i)(x) or
Section 2.6(d)(i)(B) of the Indenture). /4/ This Certificate shall be included
only for the Transfer Restricted Notes.
/_/ (c) Such Note is being transferred to an institutional investor
that is an "accredited investor" within the meaning of Rule 501(a)(1),(2),(3)
or (7) under the Securities Act which delivers a certificate in the form
of Exhibit B to the Indenture to the Trustee (in satisfaction of
Section 2.6(a)(ii)(C) or Section 2.6(d)(i)(C) of the Indenture), and delivers an
opinion of counsel, if the Company or the Trustee so requests.
- --------
(5) This Certificate shall be included only for the Transfer Restricted Notes.
-1-
<PAGE>
/_/ (d) Such Note is being transferred in reliance on and in
compliance with another exemption from the registration requirements of the
Securities Act. If requested by either the Company, an Opinion of Counsel to the
effect that such transfer does not require registration under the Securities Act
accompanies this Certificate (in satisfaction of Section 2.6(a)(ii)(D) or
Section 2.6(d)(i)(D) of the Indenture).
- ------------------------------------------
INSERT NAME OF TRANSFEROR
By:_______________________________________
Date:_________
3. Affiliation with the Company check if applicable:
/_/ (a) The undersigned represents and warrants that it is, or at some
time during which it held this Note was, an Affiliate of the Company.
/_/ (b) If 3(a) above is checked and if the undersigned was not an
Affiliate of the Company at all times during which it held this Note, indicate
the periods during which the undersigned was an Affiliate of the Company:
/_/ (c) If 3(a) above is checked and if the Transferee will not
pay the full purchase price for the transfer of this Note on or prior to the
date of transfer indicate when such purchase price will be paid:
TO BE COMPLETED BY TRANSFEREE IF 2(b) ABOVE IS CHECKED AND THE TRANSFEROR IS NOT
A QUALIFIED INSTITUTIONAL BUYER:(6)
The undersigned represents and warrants that it is a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act of 1933,
as amended, and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information.
Dated:___________________________________________________
NOTICE: To be executed by an officer.
- --------
(6) This Certificate shall be included only for the Transfer Restricted Notes.
-2-
<PAGE>
EXHIBIT C
FORM OF CONVERSION NOTICE
TO: GENERAL SEMICONDUCTOR, INC.
The undersigned owner of this Note hereby: (i) irrevocably exercises
the option to convert this Note, or the portion hereof below designated, for
shares of Common Stock of General Semiconductor, Inc. in accordance with the
terms of this Indenture referred to in this Security and (ii) directs that such
shares of Common Stock deliverable upon the conversion, together with any check
in payment for fractional shares and any Note(s) representing any unconverted
principal amount hereof, be issued and delivered to the registered holder hereof
unless a different name has been indicated below. The undersigned acknowledges
that if such shares of Common Stock have not yet been registered with the
Securities and Exchange Commission, such shares may be required to bear a
restrictive legend. If shares are to be delivered registered in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and deliver the Certificate to be delivered upon
Exchange or Registration of Transfer of Notes. Any amount required to be paid by
the undersigned on account of interest accompanies this Note.
Dated:__________
---------------------------------------------
Signature
Fill in for registration of shares if to be delivered, and of Notes if to be
issued, otherwise than to and in the name of the registered holder.
- ----------------------------------------------------
Social Security or other Taxpayer Identifying Number
- ----------------------------------------------------
(Name)
- ----------------------------------------------------
(Street Address)
- ----------------------------------------------------
(City, State and Zip Code)
(Please print name and address)
Principal amount to be converted (if less than all)
-1-
<PAGE>
EXHIBIT 4.6
5.75% CONVERTIBLE SUBORDINATED NOTES DUE 2006
REGISTRATION RIGHTS AGREEMENT
Dated as of December 14, 1999
by and among
General Semiconductor, Inc.
and
Donaldson, Lufkin & Jenrette
Securities Corporation
Chase Securities Inc.
Morgan Stanley & Co. Incorporated
<PAGE>
This Registration Rights Agreement (this "AGREEMENT") is made and entered
into as of December 14, 1999, by and among General Semiconductor, Inc., a
Delaware corporation (the "COMPANY"), and Donaldson, Lufkin & Jenrette
Securities Corporation, Chase Securities Inc. and Morgan Stanley & Co.
Incorporated (each an "INITIAL PURCHASER" and, collectively, the "INITIAL
PURCHASERS"), each of whom has agreed to purchase the Company's 5.75%
Convertible Subordinated Notes due 2006 (the "NOTES") pursuant to the Purchase
Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
December 8, 1999 (the "PURCHASE AGREEMENT"), by and among the Company and the
Initial Purchasers. In order to induce the Initial Purchasers to purchase the
Notes, the Company has agreed to provide the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the obligations of the Initial Purchasers set forth in the Purchase Agreement.
Capitalized terms used herein and not otherwise defined shall have the meaning
assigned to them the Indenture, dated December 14, 1999, between the Company and
The Bank of New York, as Trustee, relating to the Notes (the "INDENTURE").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
CERTIFICATED SECURITIES: Definitive Notes, as defined in the Indenture.
CLOSING DATE: The date hereof.
COMMON STOCK: Common Stock, $.01 par value per share, of
the Company.
COMMISSION: The Securities and Exchange Commission.
EFFECTIVENESS DEADLINE: As defined in Section 3(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as
amended.
EXEMPT RESALES: The transactions in which the Initial
Purchasers propose to sell the Notes to certain
"qualified institutional buyers," as such term is
defined in Rule 144A under the Act.
FILING DEADLINE: As defined in Section 3(a) hereof.
HOLDERS: As defined in Section 2 hereof.
LIQUIDATED DAMAGES: As defined in Section 4 hereof.
1
<PAGE>
NOTES: The up to $172,500,000 aggregate principal amount
of Convertible Subordinated Notes being issued
pursuant to the Purchase Agreement.
PROSPECTUS: The prospectus included in a Registration
Statement at the time such Registration Statement
is declared effective, as amended or supplemented
by any prospectus supplement and by all other
amendments thereto, including post-effective
amendments, all material incorporated by reference
into such Prospectus and any information
previously omitted in reliance upon Rule 430A of
the Act.
RECOMMENCEMENT DATE: As defined in Section 5(b) hereof.
REGISTRATION DEFAULT: As defined in Section 4 hereof.
REGISTRATION DEFAULT PERIOD: As defined in Section 4 hereof.
RULE 144: Rule 144 promulgated under the Act.
SHELF REGISTRATION STATEMENT: As defined in Section 3
hereof.
SUSPENSION NOTICE: As defined in Section 5(b) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the
Indenture.
TRANSFER RESTRICTED SECURITIES: The Notes and the shares of
Common Stock into which the Notes are
convertible,upon original issuance
thereof, and at all times subsequent
thereto, until, in the case of any such
Notes or shares of Common Stock, (a) the
date on which such Notes or shares of
Common Stock have been disposed of in
accordance with a Shelf Registration
Statement, (b) the date on which such
Notes or shares of Common Stock are
distributed to the public pursuant to
Rule 144 or are saleable pursuant to
Rule 144 (or similar provisions then
in effect) under the Act or (c) the date
on which such Notes or shares of Common
Stock cease to be outstanding.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "HOLDER") whenever such Person owns Transfer Restricted Securities.
SECTION 3. SHELF REGISTRATION
(a) SHELF REGISTRATION. As soon as practicable after the Closing Date
but in no event later than 90 days after the Closing Date (such 90th day,
"FILING DEADLINE"), the Company shall file with the Commission a shelf
registration statement pursuant to Rule 415 under the Act (the "SHELF
REGISTRATION STATEMENT"), relating to all Transfer Restricted Securities, and
shall use its best efforts to cause such Shelf Registration Statement to become
effective on or prior to 180 days after the Closing Date (such 180th day, the
"EFFECTIVENESS DEADLINE").
The Company shall use its best efforts to keep any Shelf Registration
Statement required by this Section 3(a) continuously effective, supplemented and
amended as required by and subject to the provisions of Section 5(a) hereof to
the extent necessary to ensure that it is available for sales of Transfer
Restricted
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Securities by the Holders thereof entitled to the benefit of this Section 3(a),
and to ensure that it conforms with the requirements of this Agreement, the Act
and the policies, rules and regulations of the Commission as announced from time
to time, for the shorter of (i) two years (as extended pursuant to Section 5(b)
following the Closing Date) or (ii) the date on which all Transfer Restricted
Securities covered by such Shelf Registration Statement have been sold pursuant
thereto.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH
THE SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 4 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 4. LIQUIDATED DAMAGES
If (i) the Shelf Registration Statement is not filed with the
Commission on or prior to the Filing Deadline, (ii) such Shelf Registration
Statement has not been declared effective by the Commission on or prior to the
Effectiveness Deadline or (iii) such Shelf Registration Statement required by
this Agreement is filed and declared effective but shall thereafter cease to be
effective or fail to be usable for its intended purpose without being succeeded
immediately by a post-effective amendment to such Shelf Registration Statement
that cures such failure and that is itself declared effective immediately (each
such event referred to in clauses (i) through (iii), a "REGISTRATION DEFAULT"
and each period during which a Registration Default has occurred and is
continuing, a "REGISTRATION DEFAULT PERIOD") then the Company hereby agrees to
pay to each Holder of Transfer Restricted Securities affected thereby liquidated
damages ("LIQUIDATED DAMAGES") in an amount (and if such Transfer Restricted
Securities are comprised of Common Stock, such amount shall be calculated on the
basis of the principal amount of Notes from which such Transfer Restricted
Securities had been converted) which shall accrue at a per annum rate of 0.25%
for the first 90 days of the Registration Default Period, at a per annum rate of
0.50% for the second 90 days of the Registration Default Period, at a per annum
rate of 0.75% for the third 90 days of the Registration Default Period and at a
per annum rate of 1.00% thereafter for the remaining portion of the Registration
Default Period. Notwithstanding anything to the contrary set forth herein, (1)
upon filing of the Shelf Registration Statement, in the case of (i) above, (2)
upon the effectiveness of this Shelf Registration Statement, in the case of (ii)
above, or (3) upon the filing of a post-effective amendment to the Shelf
Registration Statement that causes the Shelf Registration Statement to again be
declared effective or made usable, in the case of (iii) above, or (4) once the
Transfer Restricted Securities are eligible for resale under Rule 144(k) of the
Act, the Liquidated Damages payable with respect to the Transfer Restricted
Securities as a result of such clause (i), (ii) or (iii), as applicable, shall
cease, at which time the interest rate shall be restored to its initial rate.
All accrued Liquidated Damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date as more fully set forth in the Indenture and the
Notes. Notwithstanding the fact that any Notes and/or shares of Common Stock for
which Liquidated Damages are due cease to be Transfer Restricted Securities, all
obligations of the Company to pay Liquidated Damages with respect to any such
Notes and/or shares of Common Stock shall survive until such time as all such
obligations shall have been satisfied in full.
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SECTION 5. SHELF REGISTRATION PROCEDURES
(a) PROCEDURES. In connection with the Shelf Registration Statement,
the Company shall:
(i) use its best efforts to effect such registration to permit
the sale of the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 3(b) hereof), and
pursuant thereto the Company will prepare and file with the Commission a Shelf
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof (including, without limitation, one or more underwritten
offerings) within the time periods and otherwise in accordance with the
provisions hereof. The Company shall not be permitted to include in the Shelf
Registration Statement any securities other than the Transfer Restricted
Securities;
(ii) use its best efforts to contact all Holders of Transfer
Restricted Securities and notify each Holder of its right to include its
Transfer Restricted Securities in such Shelf Registration Statement;
(iii) use its best efforts to keep such Shelf Registration
Statement continuously effective and provide all requisite financial statements
for the period specified in Section 3 of this Agreement. Upon the occurrence of
any event that would cause any such Shelf Registration Statement or the
Prospectus contained therein (A) to contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein
not misleading or (B) not to be effective and usable for resale of Transfer
Restricted Securities during the period required by this Agreement, the Company
shall file promptly an appropriate amendment to such Shelf Registration
Statement curing such defect, and, if Commission review is required, use its
best efforts to cause such amendment to be declared effective as soon as
practicable. Notwithstanding the foregoing, the Company may suspend the offering
and sales under the Shelf Registration Statement for up to 60 days in each year
during which such Shelf Registration Statement is required to be effective and
usable hereunder (measured from the date of effectiveness of such Shelf
Registration Statement to successive anniversaries thereof) if (A) either (y)(1)
the Company shall be engaged in a material acquisition or disposition and
(2)(aa) such acquisition or disposition is required to be disclosed in the Shelf
Registration Statement, the related Prospectus, or any amendment or supplement
thereto, or the failure by the Company to disclose such transaction in the Shelf
Registration Statement or related Prospectus, or any amendment or supplement
thereto, as then amended or supplemented, would cause such Shelf Registration
Statement, Prospectus or amendment or supplement thereto, to contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statement therein not misleading, in light of the circumstances
under which they were made, (bb) information regarding the existence of such
acquisition or disposition has not then been publicly disclosed by or on behalf
of the Company and (cc) a majority of the Board of Directors of the Company
determines in the exercise of its good faith judgment that disclosure of such
acquisition or disposition would not be in the best interest of the Company and
would have a material adverse effect on the consummation of such acquisition or
disposition or (z) a majority of the Board of Directors of the Company
determines in the exercise of its good faith judgment that compliance with the
disclosure obligations set forth in this Section 5(a)(iii) would otherwise have
a material adverse effect on the Company and its subsidiaries, taken as a whole,
and (B) the Company notifies the Holders within two business days after such
Board of Directors makes the relevant determination set forth in clause (A);
provided, however, that in each such case the applicable period specified in
Section 3 hereof during with the applicable Shelf Registration Statement is
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required to be kept effective and usable shall be extended by the number of days
during which such effectiveness was suspended pursuant to the foregoing and
Liquidated Damages shall not apply during any period in which the Company is
permitted to suspend offerings and sales under this sentence;
(iv) prepare and file with the Commission such amendments and
post-effective amendments to the Shelf Registration Statement as may be
necessary to keep such Shelf Registration Statement effective for the applicable
period set forth in Section 3 hereof, cause the Prospectus to be supplemented by
any required Prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 under the Act, and to comply fully with Rules 424, 430A and 462, as
applicable, under the Act in a timely manner; and comply with the provisions of
the Act with respect to the disposition of all Transfer Restricted Securities
covered by such Shelf Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the sellers
thereof set forth in such Shelf Registration Statement or supplement to the
Prospectus;
(v) advise the Holders and underwriters, if any, promptly and,
if requested by such Persons, confirm such advice in writing, (A) when the
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to any Shelf Registration Statement or any
post-effective amendment thereto, when the same has become effective, (B) of any
request by the Commission for amendments to the Shelf Registration Statement or
amendments or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement under the Act
or of the suspension by any state securities commission of the qualification of
the Transfer Restricted Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes, and (D) of
the existence of any fact or the happening of any event that makes any statement
of a material fact made in the Shelf Registration Statement, the Prospectus, any
amendment or supplement thereto or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes in
the Shelf Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes in the
Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of the Shelf
Registration Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under state securities or
Blue Sky laws, the Company shall use its best efforts to obtain the withdrawal
or lifting of such order at the earliest possible time;
(vi) subject to Section 5(a)(iii), if any fact or event
contemplated by Section 5(v)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Shelf Registration Statement or
related Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers of
Transfer Restricted Securities, the Prospectus will not contain 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;
(vii) furnish to each Holder named in any Shelf Registration
Statement or Prospectus, who shall certify to the Company that they have a
present intention to sell Transfer Restricted Securities, and underwriter, if
any, in connection with such sale before filing with the Commission, copies of
any Shelf Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Shelf Registration Statement or Prospectus
(including all documents incorporated by reference after the initial filing of
such Shelf Registration Statement), except that the foregoing provision will not
apply to
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regular periodic reports filed with the Commission on Forms 10-Q or 10-K or
Current Reports on Form 8-K (or any similar successor forms), or exhibits to any
such documents unless requested, which documents will be subject to the review
and comment of such Persons in connection with such sale, if any, for a period
of at least five Business Days, and the Company will not file any such Shelf
Registration Statement or Prospectus or any amendment or supplement to any such
Shelf Registration Statement or Prospectus (including all such documents
incorporated by reference) to which such Persons shall reasonably object within
five Business Days after the receipt thereof;
(viii) promptly prior to the filing of any document that is to
be incorporated by reference into a Shelf Registration Statement or Prospectus,
provide copies of such document to the Holders except that the foregoing
provision will not apply to regular periodic reports filed with the Commission
on Forms 10-Q or 10-K or Current Reports on Form 8-K (or any similar successor
forms), or exhibits to any such documents unless requested, and underwriters, if
any, in connection with such sale, make the Company's representatives available
for discussion of such document and other customary due diligence matters, and
include such information in such document prior to the filing thereof as such
Holders may reasonably request;
(ix) make available at reasonable times for inspection by the
Holders and underwriters, if any, and any attorney or accountant retained by
such Holders, who shall certify to the Company that they have a present
intention to sell Transfer Restricted Securities, or underwriters, if any, all
financial and other records, pertinent corporate documents of the Company and
cause the Company's officers, directors and employees to supply all information
reasonably requested by any such Holder, underwriters, if any, attorney or
accountant in connection with such Shelf Registration Statement or any
post-effective amendment thereto subsequent to the filing thereof and prior to
its effectiveness which, in the reasonable judgment of counsel for the Company,
are necessary to conduct a reasonable investigation within the meaning of
Section 11 of the Act; PROVIDED, HOWEVER, that each such party shall be required
to maintain in confidence and not disclose to any other person any information
or records designated in writing by the Company as being confidential, until
such time as (A) such information becomes a matter of public record (whether by
virtue of its inclusion in such registration statement or otherwise), or (B)
such person shall be required, or shall deem it advisable, so to disclose such
information pursuant to a subpoena or order of any court or other governmental
agency or body having jurisdiction over the matter (subject to the requirements
of such order, and only after such person shall have given the Company prior
written notice thereof), or (C) such information is required to be set forth in
such registration statement or the prospectus included therein or in an
amendment to such registration statement or an amendment or supplement to such
prospectus in order that such registration statement, prospectus, amendment or
supplement, as the case may be, does not contain an untrue statement of a
material fact or omit to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing;
(x) if requested by any Holders or underwriters, if any, in
connection with such sale, promptly include in any Shelf Registration Statement
or Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such Holders or underwriters, if any, may
reasonably request to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Transfer Restricted
Securities; and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is notified of
the matters to be included in such Prospectus supplement or post-effective
amendment;
(xi) furnish to each Holder and underwriter, if any, without
charge, at least one copy of the Shelf Registration Statement, as first filed
with the Commission, and of each amendment thereto,
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including, at the request of such Holder, all documents incorporated by
reference therein and all exhibits (including, at the request of such Holder,
exhibits incorporated therein by reference);
(xii) deliver to each Holder and underwriter, if any, without
charge, as many copies of the Prospectus (including each preliminary prospectus)
and any amendment or supplement thereto as such Persons reasonably may request;
the Company hereby consents to the use (in accordance with law) of the
Prospectus and any amendment or supplement thereto by each Holder and each
underwriter, if any, in connection with the offering and the sale of the
Transfer Restricted Securities covered by the Prospectus or any amendment or
supplement thereto;
(xiii) upon the request of Holders of 25% or more in principal
amount (or number of shares, as the case may be) of Transfer Restricted
Securities or an initial purchaser in the case where an initial purchaser holds
Transfer Restricted Securities acquired as part of its initial placement, if
any, enter into such agreements (including underwriting agreements) and make
such representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of the
Transfer Restricted Securities pursuant to any Shelf Registration Statement
contemplated by this Agreement as may be reasonably requested by such Person in
connection with any sale or resale pursuant to any applicable Shelf Registration
Statement and in such connection, the Company shall:
(A) furnish (or in the case of paragraphs (2), (3) and (4) below, use
its best efforts to cause to be furnished) to each Holder or
underwriter, if any, upon the effectiveness of the Shelf
Registration Statement:
(1) a certificate, dated such date, signed on behalf of the
Company by (x) the President or any Vice President and (y) a
principal financial or accounting officer of the Company,
confirming, as of the date thereof, the matters set forth in
Sections 6(aa), 9(a) and 9(b) of the Purchase Agreement and
such other similar matters as the Holders may reasonably
request;
(2) an opinion, dated the date effectiveness of the Shelf
Registration Statement, of outside counsel for the Company
covering matters similar to those set forth in Exhibit A of
the Purchase Agreement and such other matters as the selling
Holders may reasonably request, including the ultimate
paragraph of Exhibit A relating to the Shelf Registration
Statement;
(3) an opinion, dated the date effectiveness of the Shelf
Registration Statement, of general counsel for the Company
covering matters similar to those set forth in Exhibit B of
the Purchase Agreement and such other matter as the selling
Holders may reasonably request; and
(4) a customary comfort letter, dated as of the date of
effectiveness of the Shelf Registration Statement from the
Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters to underwriters in connection with underwritten
offerings, and affirming the matters set forth in the comfort
letters delivered pursuant to Section 9(g) of the Purchase
Agreement, provided, however, the Company is not obligated to
pay the costs and expenses of counsel for the selling
shareholders; and
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(B) deliver such other documents and certificates as may be reasonably
requested by the Holders and underwriters, if any, to evidence
compliance with the matters set forth in clause (A) above and with
any customary conditions contained in any agreement entered into by
the Company pursuant to this clause (xiii) which satisfy the above
requirement;
(xiv) prior to any public offering of Transfer Restricted
Securities, cooperate with the Holders, underwriters, if any, and their
respective counsel in connection with the registration and qualification of the
Transfer Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as such Persons may request and do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions of
the Transfer Restricted Securities covered by the applicable Registration
Statement; PROVIDED, HOWEVER, that the Company shall not be required to register
or qualify as a foreign corporation where it is not now so qualified but for the
requirement of this clause (xiv) or to take any action that would subject it to
the service of process in suits or to taxation, other than as to matters and
transactions relating to the Shelf Registration Statement, in any jurisdiction
where it is not now so subject, or make any changes to its certificate of
incorporation or by-laws or any agreement between the Company and its
stockholders;
(xv) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and to register
such Transfer Restricted Securities in such denominations and such names as the
Holders may request at least two Business Days prior to such sale of Transfer
Restricted Securities;
(xvi) (A) list all shares of Common Stock covered by such Shelf
Registration Statement on any securities exchange on which the Common Stock is
then listed or (B) authorize for quotation on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or the National Market
System of NASDAQ all shares of Common Stock covered by such Shelf Registration
Statement if the Common Stock is then so authorized for quotation;
(xvii) use its best efforts to cause the disposition of the
Transfer Restricted Securities covered by the Shelf Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the seller or sellers thereof to consummate the
disposition of such Transfer Restricted Securities, subject to the proviso
contained in clause (xiv) above;
(xviii) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Shelf Registration Statement
covering such Transfer Restricted Securities and provide the Trustee under the
Indenture with printed certificates for the Transfer Restricted Securities which
are in a form eligible for deposit with the Depository Trust Company;
(xix) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally available
to its security holders with regard to any applicable Registration Statement, as
soon as practicable, a consolidated earnings statement meeting the requirements
of Rule 158 (which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term is defined
in paragraph (c) of Rule 158 under the Act), provided that the obligations of
this clause (xix) shall be satisfied by the timely filing of quarterly and
annual reports on Forms 10-Q and 10-K under the Exchange Act;
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(xx) if underwritten, make appropriate officers of the Company
available to the underwriters for meetings with prospective purchasers of the
Transfer Restricted Securities and prepare and present to potential investors
customary "road show" material in a manner consistent with other new issuances
of other securities similar to the Transfer Restricted Securities;
(xxi) cause the Indenture to be qualified under the TIA not
later than the effective date of the Shelf Registration Statement required by
this Agreement and, in connection therewith, cooperate with the Trustee and the
Holders 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 TIA; and
execute and use its best 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; and
(xxii) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(xxiii) the Company may require each seller of Transfer
Restricted Securities as to which any registration is being effected to furnish
to it such information regarding such seller as may be required by the staff of
the Commission to be included in the Shelf Registration Statement; the Company
may exclude from such registration the Transfer Restricted Securities of any
seller who unreasonably fails to furnish such information within a reasonable
period of time after receiving such request; and the Company shall have no
obligation to register under the Securities Act the Transfer Restricted
Securities of any seller who fails to furnish such information as provided in
this paragraph.
(b) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 5(a)(v)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 5(a)(v)(D) hereof (in each case, a "SUSPENSION
NOTICE"), such Holder will forthwith discontinue disposition of Transfer
Restricted Securities pursuant to the applicable Registration Statement until
(i) such Holder's has received copies of the supplemented or amended Prospectus
contemplated by Section 5(a)(vi) hereof, or (ii) such Holder is advised in
writing by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus (in each case, the "RECOMMENCEMENT DATE"). Each
Holder receiving a Suspension Notice hereby agrees that it will either (i)
destroy any Prospectuses, other than permanent file copies, then in such
Holder's possession which have been replaced by the Company with more recently
dated Prospectuses or (ii) deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the Prospectus covering such Transfer Restricted Securities that was current at
the time of receipt of the Suspension Notice. The time period regarding the
effectiveness of the Shelf Registration Statement set forth in Section 3 hereof,
shall be extended by a number of days equal to the number of days in the period
from and including the date of delivery of the Suspension Notice to the date of
delivery of the Recommencement Date.
SECTION 6. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a Shelf
Registration Statement required by this Agreement becomes effective, including
without limitation: (i) all registration and filing fees and expenses; (ii) all
fees and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all
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expenses of printing (including printing certificates for the Common Stock to be
issued upon conversion of the Notes and printing of Prospectuses), messenger and
delivery services and telephone; (iv) all fees and disbursements of counsel for
the Company and the reasonable fees and disbursements of not more than one
counsel chosen by the Holders of a majority in principal amount (number of
shares, if applicable) of the Transfer Restricted Securities for whose benefit
the Shelf Registration Statement is being prepared; (v) all application and
filing fees in connection with listing the Common Stock on a national securities
exchange or automated quotation system pursuant to the requirements hereof; and
(vi) all fees and disbursements of independent certified public accountants of
the Company (including the expenses of any special audit and comfort letters
required by or incident to such performance). Notwithstanding the foregoing, the
Holders of Transfer Restricted Securities being registered shall pay all agency
fees and commissions and underwriting discounts and commissions and transfer
taxes, if any, attributable to the sale of such Transfer Restricted Securities.
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
(b) In connection with any Shelf Registration Statement required by this
Agreement, the Company will reimburse the Initial Purchasers and the Holders
selling Transfer Restricted Securities pursuant to the "Plan of Distribution"
contained in the Shelf Registration Statement, for the reasonable fees and
disbursements of not more than one counsel chosen by the Holders of a majority
in principal amount (number of shares, if applicable) of the Transfer Restricted
Securities for whose benefit such Shelf Registration Statement is being
prepared.
SECTION 7. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Holder, its
directors, its officers and each Person, if any, who controls such Holder
(within the meaning of Section 15 of the Act and Section 20 of the Exchange
Act), from and against any and all losses, claims, damages, liabilities or
judgments, (including without limitation, any reasonable legal or other expenses
incurred in connection with investigating or defending any matter, including any
action that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in any Shelf Registration Statement, preliminary
prospectus or Prospectus (or any amendment or supplement thereto) provided by
the Company to any Holder or any prospective purchaser of registered Notes or
registered shares of Common Stock or caused by any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities or judgments are caused by an untrue statement or
omission or alleged untrue statement or omission that is based upon information
relating to any of the Holders furnished in writing to the Company by any of the
Holders or such untrue statement or omission or alleged untrue statement or
omission is contained in the preliminary Prospectus and is corrected in the
final Prospectus.
(b) Each Holder of Transfer Restricted Securities agrees, severally and not
jointly, to indemnify and hold harmless the Company and its directors and
officers, and each person, if any, who controls (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) the Company, to the same extent
as the foregoing indemnity from the Company set forth in Section 7(a) above, but
only with reference to information relating to such Holder furnished in writing
to the Company by such Holder expressly for use
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in any Registration Statement. In case any action or proceeding shall be brought
against the Company, or any of its directors or officers or any such controlling
person in respect of which indemnity may be sought against a Holder of Transfer
Restricted Securities, such Holder shall have the rights and duties given the
Company pursuant to this Section 7, and the Company, its directors or such
controlling person shall have the rights and duties given to each Holder by the
preceding paragraph of this Section 7. In no event shall any Holder, its
directors, its officers or any Person, if any, who controls such Holder be
liable or responsible for any amount in excess of the amount by which the total
amount received by such Holder with respect to its sale of Transfer Restricted
Securities pursuant to a Shelf Registration Statement exceeds (i) the amount
paid by such Holder for such Transfer Restricted Securities and (ii) the amount
of any damages that such Holder, its directors, its officers or any Person, if
any, who controls such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 7(a) or 7(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 7(a) and 7(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 7(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses, to the extent
reasonable, shall be reimbursed as they are incurred. Such firm shall be
designated in writing by a majority of the Holders, in the case of the parties
indemnified pursuant to Section 7(a), and by the Company, in the case of parties
indemnified pursuant to Section 7(b). The indemnifying party shall not be
obligated to indemnify and hold harmless any indemnified party from and against
any losses, claims, damages, liabilities and judgments by reason of any
settlement of any action effected without the indemnifying party's written
consent. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement or compromise of, or consent to the
entry of judgment with respect to, any pending or threatened action in respect
of which the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action 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 the indemnified party.
11
<PAGE>
(d) To the extent that the indemnification provided for in this Section 7
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the Holders, on the other hand, from their sale of Transfer Restricted
Securities or (ii) if the allocation provided by clause 7(d)(i) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 7(d)(i) above but also the relative
fault of the Company on the one hand, and of the Holders, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company, on the one hand,
and of the Holders, on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or by the Holders, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company and each Holder agree that it would not be just and equitable
if contribution pursuant to this Section 7(d) were determined by pro rata
allocation (even if the 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 the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action that
could have given rise to such losses, claims, damages, liabilities or judgments.
Notwithstanding the provisions of this Section 7, no Holder or its related
Indemnified Holders shall be required to contribute, in the aggregate, any
amount in excess of the amount by which the total received by such Holder with
respect to the sale of its Transfer Restricted Securities pursuant to a
Registration Statement exceeds (i) the amount paid by such Holder for such
Transfer Restricted Securities and (ii) the amount of any damages which such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 7(d) are several in proportion to the respective principal amount of
Transfer Restricted Securities held by each of the Holders hereunder and not
joint.
SECTION 8. RULE 144A AND RULE 144
The Company agrees with each Holder, for so long as any Transfer Restricted
Securities remain outstanding and during any period in which the Company (i) is
not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon
request of any Holder of Transfer Restricted Securities, to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of Transfer Restricted Securities
designated by such Holder or beneficial owner, the information required by Rule
144(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15(d) of
the Exchange Act, to make all filings required thereby in a timely manner in
order to permit resales of such Transfer Restricted Securities pursuant to Rule
144.
12
<PAGE>
SECTION 9. UNDERWRITTEN REGISTRATIONS
(a) If any of the Transfer Restricted Securities covered by any Shelf
Registration Statement are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in amount
of such Transfer Restricted Securities included in such offering, subject to the
consent of the Company (which will not be unreasonably withheld or delayed).
No Holder of Transfer Restricted Securities may participate in any
underwritten registration hereunder unless such Holder (i) agrees to sell its
Transfer Restricted Securities on the basis reasonably provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
(b) Each Holder of Transfer Restricted Securities agrees, if requested
(pursuant to a timely written notice) by the managing underwriters in an
underwritten offering made pursuant to a Shelf Registration Statement, not to
effect any private sale or distribution (including a sale pursuant to Rule
144(k) and Rule 144A, but excluding non-public sales to any of its affiliates,
officers, directors, employees and controlling persons) of any of the Notes, in
the case of an underwritten offering of the Notes, or the Common Stock, in the
case of an underwritten offering of shares of Common Stock constituting Transfer
Restricted Securities, during the period beginning 10 days prior to, and ending
90 days after, the closing date of such underwritten offering.
The foregoing provisions of Section 9(b) shall not apply to any Holder of
Transfer Restricted Securities if such Holder is prevented by applicable statute
or regulation from entering into any such agreement.
(c) If any of the Transfer Restricted Securities covered by any Shelf
Registration are to be sold in an underwritten offering, the underwriters, their
controlling persons and their respective officers, directors, employees,
representatives and agents shall be entitled to indemnity (substantially similar
to the indemnity set forth in Section 7 of the Agreement) from the Company and
the Holders, which indemnity may be set forth in an underwriting agreement.
SECTION 10. MISCELLANEOUS
(a) REMEDIES. The Company acknowledges and agrees that any failure by the
Company to comply with its obligations under Section 3 hereof may result in
material irreparable injury to the Initial Purchasers or the Holders for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of any such failure,
the Initial Purchasers or any Holder may obtain such relief as may be required
to specifically enforce the Company's obligations under Section 3 hereof. The
Company further agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company will not, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not previously
entered into any agreement (which has not expired or been terminated) granting
any registration rights with respect to its securities to any Person. The rights
granted to the Holders hereunder do not in any
13
<PAGE>
way conflict with and are not inconsistent with the rights granted to the
holders of the Company's securities under any agreement in effect on the date
hereof.
(c) NO PIGGYBACKS ON SHELF REGISTRATION STATEMENT. The Company shall not
grant to any of its security holders (other than the holders of Transfer
Restricted Securities in such capacity) the right to include any of its
securities in any Shelf Registration Statement provided for in this Agreement
other than the Transfer Restricted Securities.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 4
hereof and this Section 10(d)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount (and
shares, if applicable) of Transfer Restricted Securities (excluding Transfer
Restricted Securities held by the Company or its Affiliates).
(e) THIRD PARTY BENEFICIARY. The Holders shall be third party beneficiaries
to the agreements made hereunder between the Company, on the one hand, and the
Initial Purchasers, on the other hand, and shall have the right to enforce such
agreements directly to the extent they may deem such enforcement necessary or
advisable to protect its rights or the rights of Holders hereunder.
(f) NOTICES. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company:
General Semiconductor, Inc
Ten Melville Park Road
Melville, New York 11747
Telecopier No.: (516) 847-3209
Attention: Stephen B.Paige, Esq.
With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Telecopier No.: (212) 859-8587
Attention: Lois Herzeca, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
14
<PAGE>
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; PROVIDED, that nothing herein shall
be deemed to permit any assignment, transfer or other disposition of Transfer
Restricted Securities in violation of the terms hereof or of the Purchase
Agreement or the Indenture. If any transferee of any Holder shall acquire
Transfer Restricted Securities in any manner, whether by operation of law or
otherwise, such Transfer Restricted Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Transfer Restricted
Securities such Person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement, including
the restrictions on resale set forth in this Agreement and, if applicable, the
Purchase Agreement, and such Person shall be entitled to receive the benefits
hereof.
(h) 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.
(i) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(k) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(l) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
GENERAL SEMICONDUCTOR, INC.
By: /s/ Ronald A. Ostertag
------------------------------
Name: Ronald A. Ostertag
Title: Chairman, President and
Chief Financial Officer
DONALDSON, LUFKIN & JENRETTE
15
<PAGE>
SECURITIES CORPORATION
CHASE SECURITIES INC.
MORGAN STANLEY & CO. INCORPOTATED
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ William Wilson
---------------------
Name: William Wilson
Title: Vice President
<PAGE>
Exhibit 5.1
[LETTERHEAD OF FRIED FRANK HARRIS SHRIVER & JACOBSON]
212-859-8076
(FAX: 212-859-4000)
January 12, 2000
General Semiconductor, Inc.
10 Melville Park Road
Melville, New York 11747
Ladies and Gentlemen:
We are acting as special counsel to General Semiconductor, Inc., a
Delaware corporation (the "Company"), in connection with the Registration
Statement on Form S-3 (the "Registration Statement") under the Securities Act of
1933, as amended, covering the registration of $172,500,000 in aggregate
principal amount of the Company's 5.75% Convertible Subordinated Notes due 2006
(the "Notes") issued pursuant to the Indenture, dated as of December 14, 1999
(the "Indenture"), by and between the Company and The Bank of New York, as
trustee (the "Trustee"). The Notes are convertible into shares (the "Shares") of
common stock, par value $.01 per share, of the Company.
With your permission, all assumptions and statements of reliance herein
have been made without any independent investigation or verification on our part
except to the extent otherwise expressly stated, and we express no opinion with
respect to the subject matter or accuracy of such assumptions or items relied
upon.
In connection with this opinion, we have (i) investigated such
questions of law, (ii) examined originals or certified, conformed or
reproduction copies of such agreements, instruments, documents and records of
the Company, such certificates of public officials and such other documents, and
(iii) received such information from officers and representatives of the Company
as we have deemed necessary or appropriate for the purposes of this opinion.
In all such examinations, we have assumed the legal capacity of all
natural persons executing documents, the genuineness of all signatures, the
authenticity of original and certified documents and the conformity to original
or certified documents of all copies submitted to us as conformed or
reproduction copies. As to various questions of fact relevant to the opinions
expressed herein, we have relied upon, and assume the accuracy of,
representations and warranties contained in the documents and certificates and
oral or written statements and other information of or from representatives of
the Company and
<PAGE>
others and assume compliance on the part of all parties to the documents with
their covenants and agreements contained therein.
To the extent it may be relevant to the opinions expressed herein, we
have assumed that the Trustee has the power and authority to enter into and
perform the Indenture and to consummate the transactions contemplated thereby,
and that the Indenture has been duly authorized, executed and delivered by, and
constitutes a valid and binding obligation of, the Trustee.
Based upon the foregoing, and subject to the limitations,
qualifications and assumptions set forth herein, we are of the opinion that:
(1) The Notes constitute valid and binding obligations of the
Company; and
(2) The Shares have been duly authorized and, when issued and
delivered upon conversion of the Notes in accordance with the terms of the
Indenture and as contemplated in the Registration Statement, will be
validly issued, fully paid and non-assessable.
The opinion in paragraph (1) above is subject to the following:
(i) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other laws affecting creditors'
rights and remedies generally; and
(ii) general principles of equity, including, without
limitation, standards of materiality, good faith, fair dealing and
reasonableness, equitable defenses and limits as to the
availability of equitable remedies, whether such principles are
considered in a proceeding at law or in equity.
The opinions expressed herein are limited to the laws of the State of
New York and, to the extent relevant to the opinions expressed herein, the
Delaware General Corporation Law, as currently in effect. The opinions expressed
herein are given as of the date hereof, and we undertake no obligation to
supplement this letter if any applicable laws change after the date hereof or if
we become aware of any facts that might change the opinions expressed herein
after the date hereof or for any other reason.
-2-
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this firm under the caption
"Validity of the Securities" in the Prospectus forming a part of the
Registration Statement. In giving such consent, we do not hereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By: /s/ Lois Herzeca
-------------------------------------
Lois Herzeca
-3-
<PAGE>
EXHIBIT 12.01
GENERAL SEMICONDUCTOR, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Nine Months
Fiscal Years Ended Ended
------------------------------------------------------------------- ----------------------------
December 31, December 31, December 31, December 31, December 31, September 30, September 30,
1998 1997 1996 1995 1994 1999 1998
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Income before income
taxes and restructuring 39,414(1) 54,321(2) 67,171 88,043 40,008 20,758 32,272
Add total fixed charges
deducted from earnings 21,826 15,453 11,363 10,194 14,183 18,192 16,413
------ ------ ------ ------ ------ ------ ------
Earnings available for
payment of fixed charges 61,240 69,774 78,534 98,237 54,191 38,950 48,685
------ ------ ------ ------ ------ ------ ------
Fixed charges:
Portion of minimum lease
rental deemed to be
interest 1,800 1,100 967 733 1,051 1,316 1,200
Interest expense 20,026 14,353 10,396 9,461 13,132 16,876 15,213
------ ------ ------ ------ ------ ------ ------
Total fixed charges 21,826 15,453 11,363 10,194 14,183 18,192 16,413
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
Ratio of earnings to
fixed charges 2.8 4.5 6.9 9.6 3.8 2.1 3.0
</TABLE>
(1) Includes pretax restructuring charges of $12,324.
(2) Includes pretax charges of $33,800 incurred in connection with the spin-off.
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of General
Semiconductor, Inc. on Form S-3 of our report dated February 3, 1999
(June 30, 1999 as to Note 18), appearing in the Prospectus, which is
part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in
such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Jericho, New York
January 10, 2000
<PAGE>
EXHIBIT 25
========================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) | |
----------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------------------------
GENERAL SEMICONDUCTOR, INC.
(Exact name of obligor as specified in its charter)
Delaware 13-3575653
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
10 Melville Park Road
Melville, New York 11747
(Address of principal executive offices) (Zip code)
-------------
5-3/4% Convertible Subordinated Notes due 2006
(Title of the indenture securities)
========================================================================
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street,
New York New York, N.Y. 10006, and
Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza,
New York, N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(D).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to
Form T-1 filed with Registration Statement No. 33-6215, Exhibits
1a and 1b to Form T-1 filed with Registration Statement No.
33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 4th day of January, 2000.
THE BANK OF NEW YORK
By: /s/ MICHAEL CULHANE
----------------------------------
Name: MICHAEL CULHANE
Title: VICE PRESIDENT
<PAGE>
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30,
1999, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
ASSETS Dollar Amounts
In Thousands
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency
and coin ........................................... $ 6,394,412
Interest-bearing balances .......................... 3,966,749
Securities:
Held-to-maturity securities ........................ 805,227
Available-for-sale securities ...................... 4,152,260
Federal funds sold and Securities purchased under
agreement to resell ................................ 1,449,439
Loans and lease financing receivables:
Loans and leases, net of unearned
income ........................................... 37,900,739
LESS: Allowance for loan and
lease losses ..................................... 572,761
LESS: Allocated transfer risk
reserve .......................................... 11,754
Loans and leases, net of unearned income,
allowance, and reserve ........................... 37,316,224
Trading Assets ........................................ 1,646,634
Premises and fixed assets (including capitalized
leases) ............................................ 678,439
Other real estate owned ............................... 11,571
Investments in unconsolidated subsidiaries and
associated companies ............................... 183,038
Customers' liability to this bank on acceptances
outstanding ........................................ 349,282
Intangible assets ..................................... 790,558
Other assets .......................................... 2,498,658
------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Total assets .......................................... $ 60,242,491
------------
------------
LIABILITIES
Deposits:
In domestic offices ................................ $ 26,030,231
Noninterest-bearing ................................ 11,348,986
Interest-bearing ................................... 14,681,245
In foreign offices, Edge and Agreement
subsidiaries, and IBFs ........................... 18,530,950
Noninterest-bearing ................................ 156,624
Interest-bearing ................................... 18,374,326
Federal funds purchased and Securities sold under
agreements to repurchase ........................... 2,094,678
Demand notes issued to the U.S.Treasury ............... 232,459
Trading liabilities ................................... 2,081,462
Other borrowed money:
With remaining maturity of one year or less ........ 863,201
With remaining maturity of more than one year
through three years .............................. 449
With remaining maturity of more than three years ... 31,080
Bank's liability on acceptances executed and
outstanding ........................................ 351,286
Subordinated notes and debentures ..................... 1,308,000
Other liabilities ..................................... 3,055,031
------------
Total liabilities ..................................... 54,578,827
------------
------------
EQUITY CAPITAL
Common stock .......................................... 1,135,284
Surplus ............................................... 815,314
Undivided profits and capital reserves ................ 3,759,164
Net unrealized holding gains (losses) on
available-for-sale securities ...................... (15,440)
Cumulative foreign currency translation adjustments (30,658)
------------
Total equity capital .................................. 5,663,664
------------
Total liabilities and equity capital .................. $ 60,242,491
------------
------------
</TABLE>
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the
-2-
<PAGE>
instructions issued by the Board of Governors of the Federal Reserve System and
is true to the best of my knowledge and belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Reyni Directors
Alan R. Griffith
Gerald L. Hassell
-3-
