<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1998.
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
--------------------------
HUTCHINSON TECHNOLOGY INCORPORATED
(Exact name of Registrant as specified in its charter)
MINNESOTA 41-0901840
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
40 WEST HIGHLAND PARK
HUTCHINSON, MINNESOTA 55350
(320)587-3797
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
------------------------------
WAYNE M. FORTUN
PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHIEF OPERATING OFFICER
HUTCHINSON TECHNOLOGY INCORPORATED
40 WEST HIGHLAND PARK
HUTCHINSON, MINNESOTA 55350
(320)587-3797
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
COPIES TO:
KRIS SHARPE, ESQ.
PEGGY STEIF ABRAM, ESQ.
Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /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
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
6% Convertible Subordinated Notes due 2005.. $150,000,000 100% $150,000,000 $44,250
Common Stock(2)............................. -- -- -- --
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(i) of the Securities Act of 1933 based upon the
proposed offering price of the convertible securities.
(2) Such currently undetermined number of shares of Common Stock as shall be
issuable from time to time upon conversion of the 6% Convertible
Subordinated Notes due 2005 being registered hereby.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED APRIL 15, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
$150,000,000
[LOGO]
6% CONVERTIBLE SUBORDINATED NOTES DUE 2005
------------------
THIS PROSPECTUS RELATES TO THE PUBLIC OFFERING AND SALES FROM TIME TO TIME
BY THE HOLDERS (THE "SELLING HOLDERS") OF $150,000,000 AGGREGATE PRINCIPAL
AMOUNT OF 6% CONVERTIBLE SUBORDINATED NOTES DUE 2005 (THE "NOTES") OF HUTCHINSON
TECHNOLOGY INCORPORATED, A MINNESOTA CORPORATION (THE "COMPANY"), AND THE SHARES
OF COMMON STOCK, $.01 PAR VALUE PER SHARE, OF THE COMPANY (THE "COMMON STOCK")
INTO WHICH THE NOTES ARE CONVERTIBLE. THE NOTES ARE CONVERTIBLE, AT THE OPTION
OF THE HOLDER (AS DEFINED HEREIN), INTO SHARES OF COMMON STOCK AT ANY TIME PRIOR
TO THEIR STATED MATURITY (AS DEFINED HEREIN), UNLESS PREVIOUSLY REDEEMED OR
REPURCHASED, AT A CONVERSION PRICE OF $28.35 PER SHARE, SUBJECT TO ADJUSTMENTS
IN CERTAIN EVENTS. SEE "DESCRIPTION OF NOTES--CONVERSION RIGHTS." THE COMMON
STOCK IS QUOTED ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL "HTCH." ON APRIL
14, 1998, THE LAST REPORTED SALE PRICE OF THE COMMON STOCK ON THE NASDAQ
NATIONAL MARKET WAS $29.50 PER SHARE. SEE "PRICE RANGE OF COMMON STOCK."
INTEREST ON THE NOTES IS PAYABLE ON MARCH 15 AND SEPTEMBER 15 OF EACH YEAR,
COMMENCING ON SEPTEMBER 15, 1998. THE NOTES ARE REDEEMABLE, IN WHOLE OR IN PART,
AT THE COMPANY'S OPTION AT ANY TIME ON OR AFTER MARCH 20, 2001 AT THE REDEMPTION
PRICES SET FORTH HEREIN, PLUS ACCRUED AND UNPAID INTEREST AND LIQUIDATED
DAMAGES, IF ANY. IF A REPURCHASE EVENT (AS DEFINED HEREIN) OCCURS, EACH HOLDER
OF NOTES WILL HAVE THE RIGHT, SUBJECT TO CERTAIN CONDITIONS AND RESTRICTIONS, TO
REQUIRE THE COMPANY TO REPURCHASE ALL OR ANY PART OF SUCH HOLDER'S NOTES AT 100%
OF THEIR PRINCIPAL AMOUNT, PLUS ACCRUED AND UNPAID INTEREST AND LIQUIDATED
DAMAGES, IF ANY. THE NOTES ARE GENERAL UNSECURED OBLIGATIONS OF THE COMPANY,
SUBORDINATED TO ALL EXISTING AND FUTURE SENIOR INDEBTEDNESS (AS DEFINED HEREIN)
OF THE COMPANY. IN ADDITION, THE NOTES WILL BE EFFECTIVELY SUBORDINATED TO ALL
INDEBTEDNESS AND OTHER OBLIGATIONS OF THE COMPANY'S SUBSIDIARIES. AT FEBRUARY
22, 1998, THE COMPANY HAD APPROXIMATELY $75 MILLION OF SENIOR INDEBTEDNESS
OUTSTANDING. THE INDENTURE (AS DEFINED HEREIN) GOVERNING THE NOTES DOES NOT
LIMIT OR PROHIBIT THE INCURRENCE OF ADDITIONAL INDEBTEDNESS, INCLUDING SENIOR
INDEBTEDNESS, BY THE COMPANY OR ITS SUBSIDIARIES. SEE "DESCRIPTION OF NOTES" FOR
A MORE COMPLETE DESCRIPTION OF THE INDENTURE'S PROVISIONS.
PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE NOTES. THE
COMPANY DOES NOT INTEND TO APPLY FOR LISTING OF THE NOTES ON ANY SECURITIES
EXCHANGE OR FOR QUOTATION OF THE NOTES THROUGH ANY AUTOMATED QUOTATION SYSTEM.
PRIOR TO THIS OFFERING, THE NOTES WERE DESIGNATED FOR TRADING ON THE PRIVATE
OFFERING, RESALE AND TRADING THROUGH AUTOMATED LINKAGES ("PORTAL") MARKET. THE
NOTES ARE NOT EXPECTED TO REMAIN ELIGIBLE FOR TRADING ON THE PORTAL MARKET.
THERE CAN BE NO ASSURANCE THAT ANY TRADING MARKET WILL DEVELOP FOR THE NOTES.
THE NOTES WERE ISSUED BY THE COMPANY IN MARCH 1998 AND WERE SOLD IN
TRANSACTIONS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE NOTES WERE ISSUED IN THE FORM OF GLOBAL
NOTES (AS DEFINED HEREIN), AND SO LONG AS THE NOTES REMAIN IN SUCH FORM, THE
COMPANY'S OBLIGATIONS TO PAY INTEREST AND PRINCIPAL WILL BE SATISFIED WHEN THE
COMPANY PAYS THE RECORD HOLDER, CEDE & CO. SEE "DESCRIPTION OF NOTES."
THE SELLING HOLDERS, DIRECTLY OR THROUGH UNDERWRITERS, DEALERS OR AGENTS,
MAY SELL THE NOTES, OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES,
OFFERED HEREBY FROM TIME TO TIME ON TERMS TO BE DETERMINED AT THE TIME OF SALE.
SUCH NOTES, OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES, MAY BE
SOLD AT MARKET PRICES PREVAILING AT THE TIME OF SALE OR AT NEGOTIATED PRICES.
THE COMPANY WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE BY THE SELLING
HOLDERS OF NOTES, OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES. SEE
"SELLING HOLDERS" AND "PLAN OF DISTRIBUTION."
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS IN CONNECTION WITH AN
INVESTMENT IN THE NOTES OFFERED HEREBY.
THE SELLING HOLDERS ARE ENTITLED TO REGISTRATION OF THEIR NOTES, AND THE
COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES, PURSUANT TO A SHELF
REGISTRATION AGREEMENT (AS DEFINED HEREIN) AND THIS OFFER IS INTENDED TO SATISFY
THE RIGHTS GRANTED BY THE SHELF REGISTRATION AGREEMENT. THE COMPANY HAS AGREED
TO PAY SUBSTANTIALLY ALL OF THE EXPENSES OF THE OFFERING OF THE NOTES, AND THE
COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES, BY THE SELLING HOLDERS OTHER
THAN UNDERWRITING DISCOUNTS AND COMMISSIONS, IF ANY. THE COMPANY HAS AGREED TO
INDEMNIFY THE SELLING HOLDERS AND CERTAIN OTHER PERSONS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT. SEE "PLAN OF
DISTRIBUTION."
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS, INCLUDING THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN,
CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF
THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"). SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON THE
BELIEFS OF THE COMPANY'S MANAGEMENT AS WELL AS ON ASSUMPTIONS MADE BY AND
INFORMATION CURRENTLY AVAILABLE TO THE COMPANY AT THE TIME SUCH STATEMENTS WERE
MADE. WHEN USED IN THIS PROSPECTUS, THE WORDS "ANTICIPATE," "BELIEVE,"
"ESTIMATE," "EXPECT," "INTEND" AND SIMILAR EXPRESSIONS, AS THEY RELATE TO THE
COMPANY, ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. ALTHOUGH THE
COMPANY BELIEVES THESE STATEMENTS ARE REASONABLE, PROSPECTIVE PURCHASERS OF THE
NOTES SHOULD BE AWARE THAT ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
PROJECTED BY SUCH FORWARD-LOOKING STATEMENTS AS A RESULT OF THE RISK FACTORS SET
FORTH BELOW UNDER THE CAPTION "RISK FACTORS" OR OTHER FACTORS. PROSPECTIVE
PURCHASERS OF THE NOTES SHOULD CONSIDER CAREFULLY THE FACTORS UNDER THE CAPTION
"RISK FACTORS," AS WELL AS THE OTHER INFORMATION AND DATA CONTAINED IN, OR
INCORPORATED BY REFERENCE INTO, THIS PROSPECTUS, IN EVALUATING AN INVESTMENT IN
THE NOTES. THE COMPANY CAUTIONS THE READER, HOWEVER, THAT SUCH LIST OF FACTORS
UNDER THE CAPTION "RISK FACTORS" MAY NOT BE EXHAUSTIVE AND THAT THOSE OR OTHER
FACTORS, MANY OF WHICH ARE OUTSIDE OF THE COMPANY'S CONTROL, COULD HAVE A
MATERIAL ADVERSE EFFECT ON THE COMPANY AND ITS ABILITY TO SERVICE ITS
INDEBTEDNESS, INCLUDING PRINCIPAL AND INTEREST PAYMENTS ON AND LIQUIDATED
DAMAGES, IF ANY, WITH RESPECT TO THE NOTES. ALL FORWARD-LOOKING STATEMENTS
ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS SET FORTH UNDER THE
CAPTIONS "RISK FACTORS" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION."
i
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN, OR INCORPORATED BY
REFERENCE INTO, THIS PROSPECTUS. CERTAIN CAPITALIZED TERMS IN THIS SUMMARY ARE
DEFINED ELSEWHERE IN THIS PROSPECTUS. AS USED HEREIN, REFERENCES TO THE
"COMPANY" REFER TO THE COMPANY COLLECTIVELY WITH ITS SUBSIDIARIES. UNLESS
OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS HAS BEEN ADJUSTED TO REFLECT
A THREE-FOR-ONE STOCK SPLIT THAT WAS DISTRIBUTED ON FEBRUARY 11, 1997 TO HOLDERS
OF RECORD ON JANUARY 31, 1997 (THE "STOCK SPLIT").
THE COMPANY
The Company is the world's leading supplier of suspension assemblies for
hard disk drives. The Company estimates that it produces approximately 70% of
all suspension assemblies sold to disk drive manufacturers and their suppliers,
including recording head manufacturers, worldwide. Suspension assemblies are
critical components of hard disk drives that hold the recording heads in
position above the spinning magnetic disks. The Company's suspension assemblies
are manufactured with proprietary technology and processes to uniform and
precise specifications that are critical to maintaining the necessary
microscopic clearance between the head and disk. During the fiscal year ended
September 28, 1997, the Company shipped approximately 719 million suspension
assemblies of all types. The Company is a supplier to nearly all domestic and
many foreign-based users of suspension assemblies, including Applied Magnetics,
IBM, Maxtor, Quantum, Read-Rite, Samsung, Seagate Technology, TDK/SAE Magnetics,
Toshiba, Western Digital and Yamaha. The Company developed its leadership
position in suspension assemblies through research, development and design
activities coupled with a substantial investment in manufacturing technologies
and equipment, and has maintained this position through multiple technological
transitions in the disk drive industry over the past decade.
In an October 1997 report, International Data Corporation ("IDC") estimated
that total revenue in the disk drive industry (defined as unit shipments
multiplied by the midyear average unit price paid by OEMs for quantity 1000+
contracts) would surpass $28 billion in 1997 and grow to over $40 billion in
1999. Disk drive industry growth has been driven by such factors as the growing
use of desktop PCs, workstations, portable computers and enterprise computing
and storage, the increasing amount of memory required for software program
storage and the continuing accumulation of data. In its October 1997 report, IDC
stated that desktop PCs and multiuser systems are expected to grow at 12% and
14% compound annual growth rates, respectively, from 1997 to 2001. Moreover,
unit growth rates for disk drives and disk drive components are expected to
exceed unit growth rates for desktop PCs and multiuser systems due to a variety
of factors, including the rapidly increasing demand for additional storage
capacity. IDC's report estimates that hard disk drive unit shipments will grow
at a compound annual growth rate of 19% from 1997 to 2001. Each disk drive
contains one or more (up to thirteen) disks. Typically two recording heads (one
for each side of the disk), and therefore two suspension assemblies, are used
with each disk in the disk drive.
The disk drive industry is highly cyclical and is characterized by periods
of increasing demand and rapid growth followed by periods of oversupply and
subsequent contraction. Following a period of rapid growth in sales of disk
drive components, the disk drive industry recently has experienced a significant
downturn which began in the summer of 1997. In the current downturn, demand for
and shipments of disk drive components, including the Company's conventional
suspension assemblies, have been adversely affected as most of the Company's
major customers have delayed or cancelled component orders as they have sought,
the Company believes, to lower excess inventory that accumulated during the
preceding period of rapid growth. Total shipments of the Company's suspension
assembly units have decreased from a peak of approximately 201 million shipped
in the thirteen weeks ended March 30, 1997 to approximately 135 million shipped
in the thirteen weeks ended December 28, 1997. The Company believes that demand
for its conventional suspension assemblies will increase when disk drive
inventory levels are reduced, as the
1
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Company does not believe there has been a significant slowdown in end user
demand for storage capacity or a fundamental shift in technology away from disk
drive storage.
Hard disk drive storage capacity increases as areal density increases.
Improvements in areal density have been attained by lowering the fly height of
the recording head, using smaller recording heads with advanced air bearing
designs, improving other components such as motors and media and using new
recording head types such as those of magneto-resistive (MR) design. As drive
manufacturers transition to smaller pico-sized MR heads, the current process of
bonding fine electrical wires to the recording head and to the rest of the
drive's electronic circuitry is becoming more difficult and costly, and the
wires themselves interfere with the head's flying performance. The Company
believes that demand for increased storage capacity and the move to smaller
pico-sized MR heads, which require more electrical leads and are more sensitive
to mechanical variation, will require manufacturers to use advanced wireless
suspensions, such as the Company's TSA suspension assemblies.
The Company's TSA suspension assemblies are designed to satisfy both the new
electrical connectivity requirements of the disk drive industry as well as the
changing market demands and performance standards required by its customers. TSA
suspensions incorporate thin electrical conductors in the suspension itself
which replace the fine wires used to connect the recording head to the drive's
electronic circuitry. The Company anticipates continuing acceptance by the disk
drive industry of its TSA suspensions during the next two years, as TSA
suspensions offer customers opportunities to enhance drive performance by
eliminating wires that interfere with the recording head's flying performance.
During the first fiscal year of volume manufacturing of its TSA suspension
assemblies (the fiscal year ended September 28, 1997), the Company shipped
approximately 8 million TSA suspensions (approximately 4 million of which were
shipped in the fiscal 1997 fourth quarter), and in the thirteen weeks ended
December 28, 1997, the Company shipped approximately 7 million TSA suspensions.
For the first eight weeks of the fiscal 1998 second quarter, the Company shipped
approximately 7 million TSA suspensions. Demand for and shipments of the
Company's TSA suspensions continue to rise and, the Company believes, have not
been affected by the recent downturn in component demand. TSA suspensions are
currently in use in five customer disk drive programs in production and have
been designed-in on a total of seventeen programs. The Company believes its TSA
suspensions, and related follow-on features currently in development, will
become a disk drive industry standard platform onto which multiple features can
be integrated.
STRATEGY
The Company intends to maintain its position at the forefront of industry
technology transitions, as it has over the past decade, by delivering industry
standard solutions to industry-wide technological challenges. The Company
designs and develops suspension assemblies which meet the increasingly higher
performance specifications of disk drive manufacturers, and is committed to
reliably producing its suspension assemblies in high volume, with specialized
design, expanded functionality and greater precision. The Company has
increasingly emphasized assisting disk drive manufacturers in reducing their
time to market with new drives by designing and developing suspension
assemblies, and the processes to manufacture them, in advance of market needs.
Key elements of the Company's strategy include:
DELIVER INDUSTRY STANDARD SOLUTIONS. As the disk drive industry transitions
to smaller pico-sized MR heads, the Company is leading a parallel technological
transition among industry component suppliers by developing a product platform
that it believes will significantly enhance drive performance. The Company's TSA
suspensions offer customers a wireless solution to industry-wide manufacturing
problems posed by smaller pico-sized MR heads. The Company believes TSA
suspensions enable customers to improve yields and throughput, eliminate
manufacturing steps and adopt automated assembly processes, all of which can
lower their overall costs of production and improve production efficiencies. The
Company believes that its TSA suspensions will provide an industry standard
component platform onto which multiple features that enhance hard disk drive
performance can be integrated.
2
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MAINTAIN TECHNOLOGY LEADERSHIP WITH CUSTOMER-FOCUSED ENGINEERING. The
Company's engineers and sales force work closely with the engineering staffs of
its customers as a design team to develop suspension assemblies that address
individual customer requirements. Through its customer relationships, the
Company derives substantial insight into industry trends. This insight enables
the Company to provide advanced designs which position it well to have its
suspension assemblies designed into future generations of disk drives.
MANUFACTURE HIGH VOLUME PRECISION PRODUCTS. In addition to its design
expertise, the Company believes its leadership position is based on its volume
production capability and the precision of its suspension assemblies. In order
to provide assemblies in high volumes and with the precision required by its
customers, the Company has increasingly invested in developing advanced process
and measurement systems in connection with the design of its automated
production equipment. The Company has adopted an integrated and flexible
manufacturing approach that closely couples design, tooling and manufacturing.
This integrated approach has enabled the Company to respond rapidly to changes
in the volume and product mix demands of its customers.
LEAD INDUSTRY TECHNOLOGY TRANSITIONS. The Company has been at the forefront
of multiple technological transitions in the disk drive industry over the past
decade and intends to remain a technological leader by identifying emerging
industry trends and responding with solutions in advance of market needs. In
prior industry transitions, such as the rapid move from micro- to the smaller
nano-sized heads in 1993, and in the current more gradual move from nano- to
even smaller pico-sized heads, the Company has developed innovative design and
manufacturing solutions in advance of its competitors. Although many drive
manufacturers are just now making the transition to pico-sized heads, the
Company's technological leadership is evidenced by its current qualification in
nineteen pico-design drive programs, having been initially qualified in a pico
program in 1994. In addition, to continue to lead industry technology
transitions, the Company has already begun to develop follow-on features for its
TSA suspension assemblies which should enable drive manufacturers to continue to
achieve improved drive performance and increased data storage capacity.
The Company was incorporated under the laws of the State of Minnesota in
1965. The Company's principal office is located at 40 West Highland Park,
Hutchinson, Minnesota 55350 and its telephone number is (320) 587-3797.
RECENT DEVELOPMENTS
In March 1998, the Company issued and sold $150,000,000 aggregate principal
amount of the Notes to NationsBanc Montgomery Securities LLC and First Chicago
Capital Markets, Inc. (together, the "Initial Purchasers"), which resold the
Notes in transactions exempt from registration under the Securities Act. The net
proceeds to the Company from the sale of the Notes (after deducting the Initial
Purchasers' discount and estimated offering expenses payable by the Company)
were approximately $145,000,000.
3
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THE NOTES
<TABLE>
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Securities Offered................ $150,000,000 aggregate principal amount of 6%
Convertible Subordinated Notes due 2005 (the "Notes").
See "Plan of Distribution."
Interest Payment Dates............ March 15 and September 15, commencing September 15,
1998.
Stated Maturity................... March 15, 2005.
Interest.......................... 6% per annum.
Conversion Rights................. The Notes are convertible, at the option of the Holder,
into Common Stock at any time prior to their Stated
Maturity, unless previously redeemed or repurchased, at
a conversion price of $28.35 per share (initially
equivalent to a conversion rate of 35.273 shares per
$1,000 principal amount of Notes), subject to
adjustments in certain events. See "Description of
Notes-- Conversion Rights."
Optional Redemption............... The Notes are redeemable, in whole or in part, at the
Company's option at any time on or after March 20, 2001
upon not less than 30 nor more than 60 days' notice, at
the redemption prices set forth in "Description of
Notes--Optional Redemption," in each case together with
accrued and unpaid interest and liquidated damages, if
any.
Repurchase Events................. Upon the occurrence of any Repurchase Event occurring
prior to the Stated Maturity of the Notes, each Holder
will have the right, at such Holder's option, to require
the Company to repurchase all or any part of such
Holder's Notes at 100% of the principal amount thereof,
subject to adjustment in certain events, together with
accrued and unpaid interest and liquidated damages, if
any. See "Description of Notes--Certain Rights to
Require Repurchase of Notes." There can be no assurance
that the Company will have the financial resources
necessary to repurchase the Notes upon a Repurchase
Event.
Subordination..................... The Notes are general unsecured obligations of the
Company, subordinated in right of payment to all
existing and future Senior Indebtedness of the Company.
In addition, the Notes will be effectively subordinated
to all current and future liabilities of the Company's
subsidiaries. At February 22, 1998, the Company had
approximately $75 million of Senior Indebtedness
outstanding. The Indenture governing the Notes does not
limit or prohibit the incurrence of additional
indebtedness, including Senior Indebtedness, by the
Company or its subsidiaries. See "Description of
Notes--Subordination," "Description of Certain
Indebtedness and Other Financing Agreements" and
"Management's Discussion and Analysis of Results of
Operations and Financial Condition--Liquidity and
Capital Resources."
Use of Proceeds................... The Company will not receive any of the proceeds from
the sale by the Selling Holders of Notes or the Common
Stock issuable upon conversion thereof. See "Use of
Proceeds."
</TABLE>
4
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<TABLE>
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Registration Rights; Liquidated
Damages......................... The Company is required, pursuant to a Shelf
Registration Agreement dated as of March 18, 1998
entered into among the Company and the Initial
Purchasers (the "Shelf Registration Agreement"), to file
with the Securities and Exchange Commission (the
"Commission"), and to use its best efforts to have
declared effective, a shelf registration statement (the
"Shelf Registration Statement") to register resales of
the Notes and the Common Stock issuable upon conversion
thereof and to keep such Shelf Registration Statement
effective for two years from the effective date thereof.
This offer is intended to satisfy the rights granted by
the Shelf Registration Agreement. The Company is
permitted to suspend the use of this prospectus (that is
a part of the Shelf Registration Statement) during
certain periods under certain circumstances. If this
prospectus is unavailable for an aggregate period in
excess of 60 days in any 12-month period, the Company
will be required to pay liquidated damages to the
Holders of the Notes or the underlying Common Stock, as
the case may be. See "Description of Notes--Registration
Rights; Liquidated Damages."
Trading........................... The Company does not intend to apply for listing of the
Notes on any securities exchange or for quotation of the
Notes through any automated quotation system. Prior to
this offering, the Notes were designated for trading on
the PORTAL Market. The Notes are not expected to remain
eligible for trading on the PORTAL Market. The Common
Stock is quoted on the Nasdaq National Market under the
symbol "HTCH."
Issuance and Sale of the Notes.... In March 1998, the Company issued and sold $150,000,000
aggregate principal amount of the Notes to the Initial
Purchasers in transactions exempt from registration
under the Securities Act. The Initial Purchasers resold
the Notes to "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act) ("QIBs")
and a limited number of institutional accredited
investors (as defined in Rule 501(a)(1), (2), (3) and
(7) under the Securities Act) (the "Institutional
Accredited Investors") in transactions exempt from
registration under the Securities Act.
Book Entry; Form and Transfer..... The Notes were issued in the form of, and currently are
represented by, one or more Global Notes (as defined
herein) deposited with the Trustee as custodian for, and
registered in the name of a nominee of, The Depository
Trust Company ("DTC"). Notes sold to investors that so
request will be issued in the form of Definitive Notes
(as defined herein) and such interest in the Notes will
not be represented by the Global Notes. See "Description
of Notes--Form, Denomination and Registration."
Risk Factors...................... See "Risk Factors" for a discussion of factors to be
considered before purchasing the Notes offered hereby.
</TABLE>
5
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SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED FISCAL YEARS ENDED(1)
---------------------- --------------------------------------
DEC. 28, DEC. 29, SEPT. 28, SEPT. 29, SEPT. 24,
1997 1996 1997 1996 1995
---------- ---------- ---------- ---------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales........................................ $ 88,982 $ 106,906 $ 453,232 $ 353,186 $ 299,998
Income (loss) from operations.................... (15,926) 14,455 52,716 18,203 28,921
Net income (loss)................................ (11,474) 11,117 41,909 13,802 21,078
Basic earnings (loss) per common share........... $ (0.58) $ 0.68 $ 2.29 $ 0.84 $ 1.31
Diluted earnings (loss) per common share......... $ (0.58) $ 0.65 $ 2.21 $ 0.82 $ 1.28
Weighted average common shares outstanding....... 19,629 16,361 18,272 16,350 16,074
Weighted average common and diluted shares
outstanding.................................... 19,629 17,120 18,978 16,806 16,479
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 28, 1997
--------------------------
ACTUAL AS ADJUSTED(2)
---------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and securities available for sale.............................. $ 55,490 $ 200,490
Working capital....................................................................... 108,676 253,676
Total assets.......................................................................... 427,179 577,179
Long-term debt, including current maturities.......................................... 76,854 226,854
Total shareholders' investment........................................................ 271,734 271,734
</TABLE>
- ------------------------
(1) The Company operates on a 52 or 53 week fiscal year ending on the last
Sunday in September in each year. Fiscal 1997 and 1995 contained 52 weeks
and fiscal 1996 contained 53 weeks.
(2) Adjusted to give effect to the sale of the Notes by the Company in March
1998 and the application of the estimated net proceeds therefrom. See "Use
of Proceeds."
------------------------
On February 26, 1998 the Company announced a net loss of $0.56 per share on
net sales of $52 million for the eight-week period ended February 22, 1998,
compared with net earnings of $0.91 per share on net sales of $124 million for
the thirteen-week fiscal 1997 second quarter. For the first eight weeks of the
fiscal 1998 second quarter, the Company shipped a total of 64 million
suspensions compared to a total of 135 million for the thirteen-week fiscal 1998
first quarter. See "Risk Factors--Fluctuations in Operating Results; Liquidity
Needs."
6
<PAGE>
RISK FACTORS
PROSPECTIVE PURCHASERS OF THE NOTES SHOULD CONSIDER CAREFULLY THE SPECIFIC
RISK FACTORS SET FORTH BELOW AS WELL AS THE OTHER INFORMATION CONTAINED IN, OR
INCORPORATED BY REFERENCE INTO, THIS PROSPECTUS BEFORE DECIDING TO INVEST IN THE
NOTES OFFERED HEREBY. IN PARTICULAR, PROSPECTIVE PURCHASERS SHOULD REVIEW
"DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS" PRECEDING THE PROSPECTUS
SUMMARY.
FLUCTUATIONS IN OPERATING RESULTS; LIQUIDITY NEEDS
The Company's historical operating results have been, and the Company
expects that its future quarterly and annual operating results will continue to
be, subject to substantial variations based upon a wide variety of factors,
including: the cyclical nature of the hard disk drive industry and the
associated changes in demand; the ability to develop and implement new
manufacturing process technologies; the ability to introduce new products and to
achieve cost-effective and timely high volume production; changes in product mix
and selling prices; the availability and efficient utilization of the Company's
production capacity; the ability to control infrastructure costs; manufacturing
yields; prolonged disruptions of operations at any of the Company's plants for
any reason; changes in the cost of or limitations on availability of materials
and labor; and increases in production and engineering costs associated with
initial production of new suspension assembly products.
The Company recently has experienced significant reductions in demand for
and shipments of its conventional suspension assemblies because of a slowdown in
the disk drive industry's demand for disk drive components due, the Company
believes, to excess inventory held by drive and recording head manufacturers.
The Company's operating results have been adversely affected by this slowdown,
and operating activities consequently have not provided the cash needed to help
fund planned capital expenditures that are necessary to meet rising demand for
the Company's TSA suspension assemblies. In addition, cost-effective high volume
production of TSA suspensions has not yet been achieved by the Company in
connection with its ramp-up of TSA suspension capacity. These production
inefficiencies have further adversely affected operating results. The Company
announced a net loss of $0.56 per share on net sales of $52 million for the
eight-week period ended February 22, 1998, compared with net earnings of $0.91
per share on net sales of $124 million for the thirteen-week fiscal 1997 second
quarter.
The combination of these factors required the Company to raise significant
additional capital to fund its immediate short-term operating and capital
expenditure requirements. The Company did so through its sale of the Notes in
March 1998. Following the sale of the Notes by the Company in March 1998, the
Company's principal future liquidity needs will be for debt service requirements
under the Notes and other outstanding indebtedness (which rank senior to the
Notes), and to fund operations and capital expenditures. Although the Company
believes the net proceeds from its sale of the Notes in March 1998, plus
anticipated future revenue and cash flow from operations, will be sufficient to
meet its operating expenses, debt service and capital expenditure requirements
through fiscal 1999, there can be no assurances in this regard.
The Company anticipates that continued significant capital expenditures will
be necessary in fiscal 1999 and 2000 for continued expansion of its TSA
suspension production capacity as the Company transitions from conventional
suspension assembly production to high volume TSA suspension assembly
production, and to accommodate anticipated market growth. In that regard, beyond
fiscal 1999 the Company expects it will require significant additional external
financing to fund operations, debt service and capital expenditures. The Company
has no commitments for additional sales of equity, and is uncertain whether it
will have access to additional capital or borrowing arrangements on terms
economically favorable to the Company, if at all. If cash flow is not sufficient
to fund operations, debt service and capital expenditures and the Company is
unable to find alternative sources of financing in a timely manner, the Company
will be required to curtail capital equipment expenditures, slow plant
construction and expansion, reduce research and development investment or pursue
alternative financing strategies, any of
7
<PAGE>
which could materially adversely affect the Company's business, results of
operations and ability to service its indebtedness (including the Notes). The
Company is a party to a number of financing agreements that contain restrictive
financial covenants that require the Company to maintain certain financial
ratios, and a payment or other default under certain of these agreements that
causes acceleration of the underlying obligation will constitute an Event of
Default (as defined in the Indenture) under the Notes. See "Increased Leverage;
Financial Covenants" below.
The Company typically allows its customers to change or cancel orders
without penalty up until approximately two weeks before scheduled shipment. The
Company therefore plans its production and inventory based on forecasts of
customer demand which often fluctuate substantially. These factors, among
others, create an environment where component demand and shipments can vary
significantly from week to week. In the current downturn, demand for and
shipments of disk drive components, including the Company's conventional
suspension assemblies, have been adversely affected as most of the Company's
major customers have delayed or cancelled component orders as they have sought,
the Company believes, to lower excess inventory that accumulated during the
preceding period of rapid growth. As a result of this downturn, the Company
experienced sharp drops in operating cash flow and net income in the fourth
quarter of fiscal 1997, the first quarter of fiscal 1998, and the first eight
weeks of the second quarter of fiscal 1998, in each case compared with
comparable periods in fiscal 1996 and 1997. Results of operations continue to be
adversely impacted by the current downturn in the disk drive industry's demand
for disk drive components and could be materially adversely impacted by future
industry slowdowns. In the event that one or more major customers reduce, delay
or cancel orders, the Company's business, results of operations and ability to
service its indebtedness (including the Notes) could be materially adversely
affected.
The selling prices for the Company's products are subject to pricing
pressure from its customers, market pressure from its competitors, pricing
strategies of the Company and product life cycle influences. Selling prices also
are affected by overall demand, product mix and product development and
introduction. A typical life cycle for the Company's products begins with higher
pricing in the introduction stage, decreasing prices during maturity and
slightly increasing pricing during phase-out. To offset price decreases during a
product's life, the Company relies primarily on higher sales volume and
obtaining yield improvements and corresponding cost reductions in the
manufacture of existing products. To the extent that cost reductions do not
occur in a timely manner, the Company's business, results of operations and
ability to service its indebtedness (including the Notes) could be materially
adversely affected.
A large portion of the Company's products are shipped overseas, specifically
to the Pacific Rim region, and qualify for the benefit of the Company's Foreign
Sales Corporation. Should the Company stop shipping products overseas or should
the tax laws be changed to eliminate the benefit of having a Foreign Sales
Corporation, the Company's business, results of operations and ability to
service its indebtedness (including the Notes) could be materially adversely
affected.
DEPENDENCE ON HARD DISK DRIVE INDUSTRY
Virtually all of the Company's sales are dependent on the hard disk drive
industry. Sales of suspension assemblies accounted for 99%, 99%, 98% and 97% of
net sales, respectively, for the thirteen weeks ended December 28, 1997 and for
fiscal 1997, 1996 and 1995. The hard disk drive industry is characterized by
intense competition, rapid technological change and significant fluctuations in
product demand. The hard disk drive industry is also highly cyclical and has
experienced periods of increased demand and rapid growth followed by periods of
oversupply and subsequent contraction. The impact of cyclical trends on
suppliers to this industry has been compounded by the tendency of hard disk
drive manufacturers to order components in excess of their needs during growth
periods, followed by sharp reductions in demand for components during periods of
contraction. In the current downturn, demand for and shipments of disk drive
components, including the Company's conventional suspension assemblies, have
been adversely affected as most of the Company's major customers have delayed or
cancelled component orders as they
8
<PAGE>
have sought, the Company believes, to lower excess inventory that accumulated
during the preceding period of rapid growth. Total shipments of the Company's
suspension assembly units have decreased from a peak of approximately 201
million shipped in the thirteen weeks ended March 30, 1997 to approximately 135
million shipped in the thirteen weeks ended December 28, 1997. The Company's
business, results of operations and ability to service its indebtedness
(including the Notes) could be materially adversely affected in the event of
continuing and future slowdowns of sales of components in the hard disk drive
industry.
Future technological innovations may reduce demand for disk drives. Data
storage alternatives that compete with disk drive-based data storage do exist,
including semiconductor (flash) memory, tape memory and laser (optical and CD)
drives. Although the current core technology for hard disk drive data storage
has been the predominant technology in the industry for many years, this
technology could be replaced by an alternate technology in the future. There can
be no assurance that the Company's products will be adaptable to any successor
technology. The Company's business, results of operations and ability to service
its indebtedness (including the Notes) could be materially adversely affected by
the adoption of a technology that replaces disk drives as a computer data
storage medium.
PRODUCT DEVELOPMENT AND INTRODUCTION
The Company's continued success depends upon its ability to develop and
rapidly bring to volume production new product platforms or suspension
assemblies having increasingly higher performance specifications. A number of
risks are inherent in this process. Increasingly higher performance
specifications, as well as transitions to new product platforms, initially can
have the effect of lowering the Company's overall yields and manufacturing
efficiencies. This in turn can cause product shipments to be delayed or missed.
Higher manufacturing costs also may be incurred. Manufacturing processes may
need to be changed, new processes developed and equipment replaced, modified or
designed, built and installed, thus requiring additional capital. Increased
research and development and engineering expenses also may be required to
support technological advances and the introduction and manufacture of new
product platforms. In the event that the Company were to fail to introduce
successfully new products on a regular and timely basis, demand for the
Company's existing products could decline, which could have a material adverse
effect on the Company's business, results of operations and ability to service
its indebtedness (including the Notes). If a competitor were to introduce a new
suspension assembly design to which the Company could not effectively respond,
and if such a new design were to gain wide acceptance by the disk drive
industry, the Company's business, results of operations and ability to service
its indebtedness (including the Notes) could be materially adversely affected.
The Company is investing a substantial amount of financial, management,
engineering and manufacturing resources in its TSA suspension assemblies and has
only recently begun volume production of its TSA suspensions. If continuing
market acceptance and/or production of the Company's TSA suspension assemblies
were delayed for any reason or if widespread market acceptance of the TSA
product platform is not achieved, the Company's business, results of operations
and ability to service its indebtedness (including the Notes) could be
materially adversely affected. Furthermore, if the Company fails to transition
to cost-effective high volume production of TSA suspensions and determines that
TSA suspension assemblies cannot be produced profitably in the quantities and to
the specifications required by customers, the Company's business, results of
operations and ability to service its indebtedness (including the Notes) could
be materially adversely affected.
The Company must qualify its products with its customers. The customer
qualification process for disk drive products can be lengthy, complex and
difficult. The Company is now making the transition from conventional suspension
assembly production to high volume TSA suspension assembly production. There can
be no assurance that the Company's TSA suspensions will continue to be selected
for design into its customers' products. In the event that the Company is unable
to obtain additional customer qualifications leading to production quantities of
TSA suspensions in a timely manner, or at all, the Company's business,
9
<PAGE>
results of operations and ability to service its indebtedness (including the
Notes) could be materially adversely affected.
The Company believes certain of its customers are considering development of
or are using wireless interconnection technologies that compete with its TSA
suspension assemblies. There can be no assurance that the Company's TSA
suspensions will gain market acceptance over other wireless interconnection
technologies that are alternatives to conventional wiring, such as deposition
circuitry and flexible circuitry, or that market acceptance of such competitive
technologies will not adversely affect the Company's business, results of
operations and ability to service its indebtedness (including the Notes).
CAPITAL NEEDS
The Company believes that, in order to achieve its long-term strategic
objectives and maintain and enhance its competitive position, it will need
significant additional financial resources over the next several years to fund
operations, debt service and capital expenditures. The Company's business is
highly capital intensive, particularly as the Company transitions from
conventional suspension assembly production to high volume TSA suspension
assembly production. The Company has made a substantial investment in
sophisticated manufacturing technologies and automated production equipment and
has added significant manufacturing capacity and increased its fixed costs over
the past two years, while constructing plants in Eau Claire, Wisconsin and Sioux
Falls, South Dakota and expanding its plant in Hutchinson, Minnesota. The
Company's fiscal 1997 capital expenditures totaled approximately $83 million.
The Company also leased approximately $29 million of production and other
equipment through operating leases in fiscal 1997. The Company currently
anticipates fiscal 1998 capital expenditures of approximately $200 million, of
which approximately $57 million were incurred in the first fiscal quarter. In
addition, the Company plans to enter into lease financings for approximately $50
million of production and other equipment in fiscal 1998.
The Company's ability to execute its long-term strategy may depend to a
significant degree on its ability to obtain additional long-term debt and equity
capital. The Company anticipates that continued significant capital expenditures
will be necessary in fiscal 1999 and 2000 for continued expansion of its TSA
suspension production capacity and to accommodate anticipated market growth. In
that regard, beyond fiscal 1999 the Company expects it will require significant
additional external financing to fund operations, debt service and capital
expenditures. The Company is uncertain whether it will have access to additional
capital or borrowing arrangements on terms economically favorable to the
Company, if at all. If cash flow is not sufficient to fund operations, debt
service and capital expenditures and the Company is unable to find alternative
sources of financing in a timely manner, the Company will be required to curtail
capital equipment expenditures, slow plant construction and expansion, reduce
research and development investment or pursue alternative financing strategies,
any of which could materially adversely affect the Company's business, results
of operations and ability to service its indebtedness (including the Notes). See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources."
INCREASED LEVERAGE; FINANCIAL COVENANTS
In connection with the sale of the Notes by the Company in March 1998, the
Company incurred $150 million in additional indebtedness which increased the
ratio of total debt (as used herein "total debt" refers to long-term debt
including current maturities) to total capitalization from 22.3%, at February
22, 1998, to 46.3%, on an as adjusted basis. As a result of this increased
leverage, the Company's interest obligations have increased substantially. The
degree to which the Company is leveraged could adversely affect the Company's
ability to obtain additional financing to fund operations, debt service and
future capital expenditures, and could make it more vulnerable to general
economic downturns and competitive pressures. In addition, the Indenture
governing the Notes does not restrict the ability of the Company or its
subsidiaries to incur additional indebtedness, including Senior Indebtedness.
Additional indebtedness of the Company may rank senior or PARI PASSU with the
Notes in certain circumstances. See "Description of
10
<PAGE>
Notes." The Company's ability to satisfy its obligations will be dependent upon
its future performance, which is subject to prevailing economic conditions and
financial, business and other factors, including factors beyond the Company's
control. To the extent that a substantial portion of the Company's cash flow
from operations is used to pay the principal of, and interest on, its
indebtedness, such cash flow will not be available to fund future operations and
capital expenditures. There is no assurance that the Company's operating cash
flow will be sufficient to meet its debt service requirements or to repay the
Notes at maturity or upon a Repurchase Event. See "Capitalization," "Selected
Consolidated Financial Data" and "Management's Discussion and Analysis of
Results of Operations and Financial Condition--Liquidity and Capital Resources."
The Company is a party to a number of financing agreements that contain
restrictive financial covenants that require the Company to maintain certain
financial ratios, and a payment or other default under certain of these
agreements that causes acceleration of the underlying obligation will constitute
an Event of Default under the Notes. The Company's approximately $75 million of
outstanding Private Placement Notes (as defined herein), Master Lease Agreement
with General Electric Capital Corporation ("GE"), Old Credit Facility (as
defined herein) relating to the letter of credit supporting its outstanding
variable rate demand note, and the Subordination, Non-Disturbance and Attornment
Agreement relating to the lease of the Company's Eau Claire, Wisconsin assembly
plant each contain restrictive financial covenants that require the Company to
maintain certain minimum financial ratios, including, in certain cases, fixed
charge coverage, interest coverage and total debt to total capitalization
ratios. The ability of the Company to comply with these covenants depends upon
its future operating performance. The Company's ability to achieve its required
operating performance depends, in part, on general industry conditions and other
factors outside of the Company's control, and there can be no assurance that the
Company will be able to comply with these covenants. A default under some or all
of the foregoing agreements may allow acceleration of amounts outstanding
thereunder. In such event, the Company may have to pursue alternative financing
arrangements. See "Description of Certain Indebtedness and Other Financing
Agreements."
MANAGEMENT OF GROWTH
Growth in the Company's net sales depends, in part, on the successful
expansion by the Company of its manufacturing capacity, manufacturing workforce
and corporate infrastructure. The Company currently anticipates spending
approximately $200 million during fiscal 1998 for expansion of production
capacity, primarily related to expansion of TSA suspension capacity, including
manufacturing and support equipment, construction of the Company's Sioux Falls,
South Dakota plant and expansion of the Company's Hutchinson, Minnesota plant.
The Company anticipates that continued significant capital expenditures will be
necessary in fiscal 1999 and 2000 for continued expansion of its TSA suspension
production capacity, and to accommodate expected market growth. The Company
continues to make substantial investments in its corporate infrastructure to
support growth, including investments in equipment and facilities, research and
development, selling, general and administrative support and manufacturing
support. These expansion plans involve a number of risks. The Company faces the
task of identifying, recruiting, training and integrating a large number of new
employees quickly enough to keep pace with its growth. The Company's growth also
may strain the Company's management, manufacturing, information systems,
financial and other resources. Any failure to expand these areas in an efficient
or timely manner could have a material adverse effect on the Company's business,
results of operations and ability to service its indebtedness (including the
Notes). The Company has significantly expanded its operations to support
increased production, including the hiring of additional personnel, and has made
and expects to continue to make substantial investments in research, development
and engineering to support product development. There can be no assurance that
the Company will be able to achieve a rate of growth or operating results in any
future period commensurate with its level of expenses.
11
<PAGE>
In an effort to enable the Company's business to grow with the market, the
Company has invested at times in additional capacity and infrastructure to
support anticipated demand for its suspension assemblies. Anticipated demand,
however, has not always materialized as rapidly as expected, resulting in
periodic underutilization of resources, decreased profitability and net losses.
Accurate capacity planning for market demand is complicated by the pace of
technological change, the effects of variable manufacturing yields, and the fact
that most of the Company's plant and equipment expenditures have long lead
times, thus requiring major commitments well in advance of actual requirements.
The Company's underestimation or overestimation of its capacity requirements, or
failure to successfully and timely put in place the proper technologies and
infrastructure, could have a material adverse effect on the Company's business,
results of operations and ability to service its indebtedness (including the
Notes).
MANUFACTURING RISKS
The Company manufactures a wide variety of suspension assemblies having
different selling prices and manufacturing costs. The product mix varies from
week to week as market demand changes. Any substantial variation in product mix
can lead to changes in utilization of equipment and tooling, inventory
obsolescence and overstaffing in certain areas, all of which could adversely
impact the Company's business, results of operations and ability to service its
indebtedness (including the Notes).
Rapid technological change within the disk drive industry has led to
numerous suspension assembly design changes and tighter performance
specifications. The resulting suspension assemblies initially are more difficult
to manufacture and typically require additional capital expenditures and
increased development and support expenses. Manufacturing yields and
efficiencies also vary from product to product. Newer products typically have
lower initial manufacturing yields and efficiencies as the Company commences
volume manufacturing and thereafter ramps to full production. The Company's TSA
suspension assembly production recently has moved from prototype and
pre-production volumes to production volumes. In fiscal 1997, the Company
shipped approximately 8 million TSA suspensions (approximately 4 million of
which were shipped in the fiscal 1997 fourth quarter), and in the thirteen weeks
ended December 28, 1997, the Company shipped approximately 7 million TSA
suspensions. For the first eight weeks of the fiscal 1998 second quarter, the
Company shipped approximately 7 million TSA suspensions. Cost-effective high
volume production of TSA suspensions, however, has not yet been achieved by the
Company in connection with its ramp-up of TSA suspension capacity. There can be
no assurance that the Company will attain its output goals and related
profitability with regard to TSA suspension production.
As the Company grows, production of certain suspension assemblies may need
to be transferred from one manufacturing site to another. At times, this
transfer has lowered initial yields and/or manufacturing efficiencies, resulting
in higher manufacturing costs. The Company's manufacturing plants are located in
Minnesota, South Dakota and Wisconsin, all of which can experience severe
weather. Severe weather has at times resulted in lower production and decreased
Company shipments.
The Company's ability to conduct business would be impaired if its work
force were to be unionized or if a significant number of its specialized
employees were to leave and could not be replaced by comparable personnel. The
locations of the Company's plants and the broad span and technological
complexity of the Company's products and processes limit the number of
satisfactory engineering and other candidates for key positions.
The Company's production processes require the storage, use and disposal of
a variety of chemicals which are considered hazardous under applicable federal
and state laws. Accordingly, the Company is subject to a variety of regulatory
requirements for the handling of such materials. If an accident were to result
in significant personal injury or environmental damage, the Company's business,
results of operations and ability to service its indebtedness (including the
Notes) could be materially adversely affected.
12
<PAGE>
SUBORDINATION
The Notes are general unsecured obligations of the Company, subordinated in
right of payment to all existing and future Senior Indebtedness of the Company.
In addition, the Notes are effectively subordinated to all current and future
liabilities of the Company's subsidiaries. At February 22, 1998, the Company had
approximately $75 million of indebtedness outstanding that would have
constituted Senior Indebtedness. As a result of such subordination, in the event
of bankruptcy, liquidation or reorganization of the Company, or upon
acceleration of the Notes due to an Event of Default, the assets of the Company
will be available to pay obligations on the Notes only after the administrative
expenses of the bankruptcy and all Senior Indebtedness, if any, have been paid
in full. There may not be sufficient assets remaining to pay amounts due on any
or all of the Notes then outstanding. The Indenture does not limit or prohibit
the incurrence of additional indebtedness, including Senior Indebtedness, by the
Company or its subsidiaries. The incurrence of such additional indebtedness
could materially adversely affect the Company's ability to pay its obligations
under the Notes. The Company anticipates that it will incur additional
indebtedness in the future. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition--Liquidity and Capital Resources,"
"Description of Certain Indebtedness and Other Financing Agreements" and
"Description of Notes--Subordination."
CUSTOMER CONCENTRATION
While the Company is a supplier to nearly all domestic and many
foreign-based manufacturers of hard disk drives and recording heads used in hard
disk drives, the Company's sales have remained concentrated within a small
customer base. Sales to the Company's five largest customers constituted 87%,
86%, 87% and 86% of net sales, respectively, for the thirteen weeks ended
December 28, 1997 and for fiscal 1997, 1996 and 1995. Over the years, the disk
drive industry has experienced numerous consolidations. This has resulted in
fewer, but larger, customers for the Company's products. The loss of one or more
of the Company's major customers for any reason, including the development by
any one customer of the capability to produce suspension assemblies in high
volume for its own products, or the failure of a customer to pay its account
balance with the Company, could have a material adverse effect on the Company's
business, results of operations and ability to service its indebtedness
(including the Notes).
INTELLECTUAL PROPERTIES
Although the Company attempts to protect its intellectual property rights
through patents, copyrights, trade secrets and other measures, there can be no
assurance that the Company will be able to protect its technology adequately or
that competitors will not be able to develop similar technology independently.
The Company's success depends in large part on trade secrets relating to its
proprietary manufacturing processes. The Company seeks to protect these trade
secrets and its other proprietary technology in part by requiring each of its
employees to enter into a non-disclosure agreement in which the employee agrees
to maintain the confidentiality of all proprietary information of the Company
and, subject to certain exceptions, to assign to the Company all rights in any
proprietary information or technology made or contributed by the employee during
his or her employment. In addition, the Company regularly enters into
non-disclosure agreements with third parties, such as consultants, suppliers and
customers. There can be no assurance that these agreements will not be breached,
that the Company will have adequate remedies for any such breach, or that the
Company's trade secrets will not otherwise become known or independently
developed by the Company's competitors.
The Company believes that although the patents it holds and may obtain will
be of value, they will not independently determine the Company's success.
Moreover, patents may not be issued with respect to the Company's pending patent
applications, and its issued patents may not be sufficiently broad to protect
the Company's technology. The Company competes in an industry characterized by
rapid development and technological innovation. There can be no assurance that
the Company's future technology will be protectable, or that any patent issued
to the Company will not be challenged, invalidated, circumvented or
13
<PAGE>
infringed. In addition, the Company has only limited patent rights outside the
United States, and the laws of certain foreign countries may not protect the
Company's intellectual property rights to the same extent as do the laws of the
United States.
The Company and certain users of the Company's products have from time to
time received, and may in the future receive, communications from third parties
asserting patents against the Company or its customers which may relate to
certain of the Company's manufacturing equipment or products or to products
which include the Company's products as a component. Although the Company to
date has not been a party to any material intellectual property litigation,
certain of its customers have been sued on patents having claims closely related
to products sold by the Company. In the event that any third party were to make
a valid infringement claim and a license were not available on terms acceptable
to the Company, the Company's business, results of operations and ability to
service its indebtedness (including the Notes) could be adversely affected. The
Company expects that, as the number of patents issued continues to increase, and
as the Company grows, the volume of intellectual property claims could increase.
Litigation may be necessary to enforce patents issued or licensed to the
Company, to protect trade secrets or know-how owned by the Company or to
determine the enforceability, scope and validity of the proprietary rights of
others. The Company could incur substantial costs in seeking enforcement of its
issued or licensed patents against infringement or the unauthorized use of its
trade secrets and proprietary know-how by others or in defending itself against
claims of infringement by others, which could have a material adverse effect on
the Company's business, results of operations and ability to service its
indebtedness (including the Notes). See "Business--Intellectual Properties."
AVAILABILITY OF CERTAIN MATERIALS
Certain types of photoresist, a liquid compound used in the photoetching
process, and the stainless steel, copper and polyimide materials that meet the
Company's strict specifications, are each currently available from only one
supplier. The supplier of stainless steel periodically resets the price of its
product based on fluctuations in the value of the Japanese yen which may
increase the Company's costs for raw materials. If for any reason the Company
were unable to continue to obtain these materials in the necessary quantities
and at reasonable prices, the Company's business, results of operations and
ability to service its indebtedness (including the Notes) could be materially
adversely affected.
VOLATILITY OF NOTES AND STOCK PRICE
The market prices for securities of companies in the disk drive industry
(including those of the Company) are subject to significant volatility. If
revenue or earnings in any fiscal quarter fail to meet the investment
community's expectations for any reason, there could be an immediate adverse
impact on the market price of the Company's securities. The market, in addition,
has from time to time experienced significant price and volume fluctuations that
are unrelated to the operating results of the Company. Future announcements
concerning the Company, as well as general market conditions, may have a
significant effect on the market price of the Notes and the Common Stock into
which they are convertible. In addition, future trading prices of the Notes will
depend on other factors, such as prevailing interest rates, perceptions of the
Company's creditworthiness and the market for similar securities, and the Notes
may trade at a discount from the principal amount based on such factors. Such
volatility may limit the Company's ability in the future to raise additional
capital.
LIMITATIONS ON REPURCHASE UPON REPURCHASE EVENT
In the event of a Repurchase Event, which includes a Change in Control and a
Termination of Trading (each as defined herein), occurring prior to the maturity
of the Notes, each Holder of the Notes has the right, at such Holder's option,
to require the Company to repurchase all or any part of such Holder's Notes at a
purchase price equal to 100% of the principal amount thereof, subject to
adjustment in certain events, together with accrued and unpaid interest and
liquidated damages, if any, to, but excluding, the repurchase date. Future
agreements relating to other indebtedness (including other Senior Indebtedness)
to which the
14
<PAGE>
Company becomes a party may contain restrictions or prohibitions on the
repurchase of the Notes by the Company. In the event a Repurchase Event occurs
at a time when the Company is prohibited from repurchasing the Notes, the
Company could seek the consent of its lenders to the repurchase of the Notes or
could attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such consent or repay such borrowings, the Company would
remain prohibited from repurchasing the Notes. In such case, the Company's
failure to repurchase the Notes would constitute an Event of Default under the
Indenture whether or not payment of the Repurchase Price (as defined herein) is
permitted by the subordination provisions of the Indenture. Any such default
may, in turn, cause a default under Senior Indebtedness of the Company.
Moreover, the occurrence of a Repurchase Event in and of itself may constitute
an event of default under the Senior Indebtedness of the Company. As a result,
in either case, payment of the repurchase price of the Notes would, absent a
waiver, be prohibited under the subordination provisions of the Indenture until
the Senior Indebtedness is paid in full. Further, the ability of the Company to
repurchase the Notes upon a Repurchase Event will be dependent on the
availability of sufficient funds and compliance with applicable securities laws.
Accordingly, there can be no assurance that the Company will be able to
repurchase the Notes upon a Repurchase Event. The term "Repurchase Event" is
limited to certain specified transactions and may not include other events that
might adversely affect the financial condition of the Company or result in a
downgrade of the credit rating, if any, of the Notes, nor would the requirement
that the Company repurchase the Notes upon a Repurchase Event necessarily afford
the Holders of the Notes protection in the event of a highly leveraged
reorganization, merger or similar transaction involving the Company. See
"Description of Notes--Certain Rights to Require Repurchase of Notes."
ABSENCE OF PUBLIC MARKET
Prior to this offering, there has been no public market for the Notes. The
Company does not intend to apply for listing of the Notes on any securities
exchange or for quotation of the Notes through any automated quotation system.
There can be no assurance as to the liquidity of any markets that may develop
for the Notes, the ability of the Holders to sell their Notes or the price at
which the Holders of the Notes may be able to sell such Notes. Future trading
prices of the Notes will depend upon many factors including, among other things,
prevailing interest rates, the Company's operating results, the price of the
Common Stock and the market for similar securities. The Initial Purchasers have
informed the Company that they intend to make a market in the Notes offered
hereby; however, the Initial Purchasers are not obligated to do so, and any such
market making may be discontinued at any time without notice to the Holders of
the Notes. See "Description of Notes--Registration Rights; Liquidated Damages."
Prior to this offering, the Notes were designated for trading on the PORTAL
Market. The Notes are not expected to remain eligible for trading on the PORTAL
Market.
YEAR 2000 ISSUES
Certain of the Company's business systems may require updating to continue
to function properly beyond 1999. The Company believes that adequate resources
have been allocated for this purpose and does not expect to incur significant
expenditures to address this issue. However, there can be no assurance that the
Company will identify all Year 2000 compliance problems in its systems in
advance of their occurrence or that the Company will be able to remedy
successfully any problems that are discovered. The expenses of the Company's
efforts to address such problems, or the expenses or liabilities to which the
Company may become subject as a result of such problems, could have a material
adverse effect on the Company's business, results of operations and ability to
service its indebtedness (including the Notes). In addition, the revenue stream
and financial stability of existing customers may be adversely impacted by Year
2000 compliance problems, which could cause fluctuations in the Company's
revenue and operating results. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition-- Liquidity and Capital
Resources."
15
<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale by the
Selling Holders of Notes or the Common Stock issuable upon conversion thereof.
The net proceeds to the Company from the issuance and sale by the Company in
March 1998 of the Notes (after deducting the Initial Purchasers' discount and
estimated offering expenses payable by the Company) were approximately
$145,000,000. The net proceeds are being used for general corporate purposes,
primarily related to expansion of TSA suspension capacity, including
manufacturing and support equipment, construction of the Company's Sioux Falls,
South Dakota assembly plant and the expansion of the Company's Hutchinson,
Minnesota plant. Pending such uses, the Company has invested the net proceeds in
short-term income-producing investments. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition--Liquidity and Capital
Resources," "Business--Manufacturing" and "--Facilities."
CAPITALIZATION
The following table sets forth the unaudited cash, cash equivalents and
securities available for sale and capitalization of the Company at December 28,
1997 on an actual basis and as adjusted to give effect to the sale of the Notes
by the Company in March 1998 (after deducting the Initial Purchasers' discount
and estimated offering expenses payable by the Company). This table should be
read in conjunction with the Consolidated Financial Statements of the Company
and the notes thereto incorporated herein by reference to the Company's Annual
Report on Form 10-K, as amended, for the fiscal year ended September 28, 1997.
<TABLE>
<CAPTION>
DECEMBER 28, 1997
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash, cash equivalents and securities available for sale................................. $ 55,490 $ 200,490
---------- -----------
---------- -----------
Long-term debt, including current maturities(1):
Senior unsecured notes, 7.85%, payable in varying annual installments through July
2003................................................................................. $ 25,000 $ 25,000
Senior unsecured note, 8.07%, payable in varying annual installments
through November 2006................................................................ 25,000 25,000
Senior unsecured notes, 7.46%, payable in varying semi-annual installments through
February 2004........................................................................ 24,375 24,375
Other long-term debt................................................................... 2,479 2,479
6% Convertible Subordinated Notes due 2005............................................. -- 150,000
---------- -----------
Total long-term debt, including current maturities................................... 76,854 226,854
---------- -----------
Shareholders' investment:
Common Stock, $.01 par value; 45,000,000 shares authorized; 19,638,568 shares issued
and outstanding(2)................................................................... 196 196
Additional paid-in capital............................................................. 150,926 150,926
Retained earnings...................................................................... 120,612 120,612
---------- -----------
Total shareholders' investment....................................................... 271,734 271,734
---------- -----------
Total capitalization............................................................... $ 348,588 $ 498,588
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) For further description of the Company's long-term debt, see "Description of
Certain Indebtedness and Other Financing Agreements" included elsewhere in
this prospectus and the Notes to Consolidated Financial Statements of the
Company incorporated herein by reference to the Company's Annual Report on
Form 10-K, as amended, for the fiscal year ended September 28, 1997.
(2) Excludes 1,897,006 shares issuable upon exercise of options outstanding
under the Company's stock option plans as of December 28, 1997 and the
5,290,995 shares of Common Stock issuable upon conversion of the Notes. See
"Selling Holders."
16
<PAGE>
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Stock. The
Company currently intends to retain any earnings for use in its business and
does not anticipate paying cash dividends in the foreseeable future. Certain of
the Company's financing agreements contain restrictive covenants which, among
other things, impose limitations on the payment of dividends. See "Description
of Certain Indebtedness and Other Financing Agreements" and the Notes to
Consolidated Financial Statements of the Company incorporated herein by
reference to the Company's Annual Report on Form 10-K, as amended, for the
fiscal year ended September 28, 1997.
PRICE RANGE OF COMMON STOCK
The Common Stock of the Company trades on the Nasdaq National Market under
the symbol "HTCH." The following table sets forth for the periods indicated the
range of high and low closing sale prices of the Common Stock as reported on the
Nasdaq National Market, which prices reflect the Stock Split.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
FISCAL 1996
Quarter ended December 24, 1995.............................................................. $ 21.83 $ 15.17
Quarter ended March 24, 1996................................................................. 17.16 12.17
Quarter ended June 23, 1996.................................................................. 19.46 12.75
Quarter ended September 29, 1996............................................................. 14.38 10.25
FISCAL 1997
Quarter ended December 29, 1996.............................................................. 26.79 12.75
Quarter ended March 30, 1997................................................................. 38.38 25.17
Quarter ended June 29, 1997.................................................................. 35.00 23.44
Quarter ended September 28, 1997............................................................. 35.88 24.00
FISCAL 1998
Quarter ended December 28, 1997.............................................................. 35.44 19.38
Quarter ended March 29, 1998................................................................. 26.44 20.13
Quarter ended June 28, 1998 (through April 14)............................................... 29.50 25.56
</TABLE>
On April 14, 1998, the last reported sale price of the Common Stock on the
Nasdaq National Market was $29.50 per share.
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data as of September 28, 1997,
September 29, 1996, September 24, 1995, September 25, 1994 and September 26,
1993, and for the fiscal years then ended, has been derived from the Company's
Consolidated Financial Statements which have been audited by Arthur Andersen
LLP. The information as of December 28, 1997 and December 29, 1996, and for the
thirteen weeks then ended, is unaudited. However, in the opinion of management
of the Company, such unaudited financial data includes all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the Company's results of operations for the periods then ended and the Company's
financial position as of such dates. Operating results for the thirteen weeks
ended December 28, 1997 are not necessarily indicative of the results that may
be expected for the entire fiscal year. The selected consolidated financial data
should be read in conjunction with the Consolidated Financial Statements of the
Company and the notes thereto incorporated herein by reference to the Company's
Annual Report on Form 10-K, as amended, for the fiscal year ended September 28,
1997, and "Management's Discussion and Analysis of Results of Operations and
Financial Condition" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
THIRTEEN WEEKS
ENDED FISCAL YEARS ENDED(1)
-------------------- -----------------------------------------------------
DEC. 28, DEC. 29, SEPT. 28, SEPT. 29, SEPT. 24, SEPT. 25, SEPT. 26,
1997 1996 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales....................................... $ 88,982 $ 106,906 $ 453,232 $ 353,186 $ 299,998 $ 238,794 $ 198,734
Cost of sales................................... 89,478 75,794 335,953 273,616 226,235 199,548 154,311
--------- --------- --------- --------- --------- --------- ---------
Gross profit (loss)........................... (496) 31,112 117,279 79,570 73,763 39,246 44,423
Research and development expenses............... 5,161 5,739 20,185 27,651 15,041 8,626 9,846
Selling, general and administrative expenses.... 10,269 10,918 44,378 33,716 29,801 22,840 24,616
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations................. (15,926) 14,455 52,716 18,203 28,921 7,780 9,961
Other income, net............................... 567 306 4,143 1,158 1,462 1,171 1,403
Interest expense................................ (147) (858) (3,143) (2,108) (2,636) (995) (254)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes............. (15,506) 13,903 53,716 17,253 27,747 7,956 11,110
Provision (benefit) for income taxes............ (4,032) 2,786 11,807 3,451 6,669 2,076 2,556
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)............................. $ (11,474) $ 11,117 $ 41,909 $ 13,802 $ 21,078 $ 5,880 $ 8,554
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Basic earnings (loss) per common share.......... $ (0.58) $ 0.68 $ 2.29 $ 0.84 $ 1.31 $ 0.37 $ 0.54
Diluted earnings (loss) per common share........ $ (0.58) $ 0.65 $ 2.21 $ 0.82 $ 1.28 $ 0.36 $ 0.53
Weighted average common shares outstanding...... 19,629 16,361 18,272 16,350 16,074 15,997 15,869
Weighted average common and diluted shares
outstanding................................... 19,629 17,120 18,978 16,806 16,479 16,337 16,226
OPERATING DATA:
Ratio of earnings to fixed charges(2)........... -- 7.3x 5.9x 3.8x 6.7x 2.9x 5.2x
</TABLE>
<TABLE>
<CAPTION>
DEC. 28, DEC. 29, SEPT. 28, SEPT. 29, SEPT. 24, SEPT. 25, SEPT. 26,
1997 1996 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents....................... $ 36,069 $ 54,482 $ 98,340 $ 22,884 $ 30,479 $ 18,570 $ 4,860
Working capital................................. 108,676 92,743 173,156 62,102 54,284 51,996 26,238
Total assets.................................... 427,179 289,532 429,839 238,983 190,898 151,148 116,639
Current liabilities............................. 80,120 62,117 70,190 46,563 36,208 18,829 17,870
Long-term debt, including current maturities.... 76,854 82,605 78,194 58,945 37,700 40,080 12,460
Total shareholders' investment.................. 271,734 145,037 282,958 133,684 119,745 94,619 88,689
</TABLE>
- --------------------------
(1) The Company operates on a 52 or 53 week fiscal year ending on the last
Sunday in September in each year. Fiscal 1997, 1995, 1994 and 1993 contained
52 weeks and fiscal 1996 contained 53 weeks.
(2) For the purpose of determining the ratio of earnings to fixed charges,
earnings are defined as income from continuing operations before income
taxes and fixed charges (exclusive of capitalized interest). Fixed charges
consist of interest (including capitalized interest) and amortization of
debt costs and the estimated interest portion of rents. Earnings were
inadequate to cover fixed charges by $17.0 million for the thirteen weeks
ended December 28, 1997.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
"SELECTED CONSOLIDATED FINANCIAL DATA" INCLUDED ELSEWHERE IN THIS PROSPECTUS AND
THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO
INCORPORATED HEREIN BY REFERENCE TO THE COMPANY'S ANNUAL REPORT ON FORM 10-K, AS
AMENDED, FOR THE FISCAL YEAR ENDED SEPTEMBER 28, 1997. THIS PROSPECTUS,
INCLUDING THE INFORMATION INCORPORATED HEREIN BY REFERENCE, CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. IN PARTICULAR,
PROSPECTIVE PURCHASERS SHOULD REVIEW "DISCLOSURE REGARDING FORWARD-LOOKING
STATEMENTS" PRECEDING THE PROSPECTUS SUMMARY. THE COMPANY'S ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED
ABOVE IN "RISK FACTORS," AND ELSEWHERE IN THIS PROSPECTUS.
GENERAL
The Company derives virtually all of its revenue from the sale of suspension
assemblies to a small number of customers. Suspension assemblies are a critical
component of hard disk drives and the Company's results of operations are highly
dependent on the hard disk drive industry. The hard disk drive industry is
intensely competitive and highly cyclical and the Company's results of
operations have been adversely affected from time to time during hard disk drive
industry slowdowns.
The Company recently has experienced significant reduction in demand for and
shipments of its conventional suspension assemblies because of a slowdown in the
disk drive industry's demand for disk drive components due, the Company
believes, to excess inventory held by drive and recording head manufacturers.
The Company's operating results have been adversely affected by this slowdown,
and operating activities consequently have not provided the cash needed to help
fund planned capital expenditures that are necessary to meet rising demand for
the Company's TSA suspension assemblies. In addition, cost-effective high-volume
production of TSA suspensions has not yet been achieved by the Company in
connection with its ramp-up of TSA suspension capacity. These production
inefficiencies have further adversely affected operating results. For the
eight-week period ended February 22, 1998, the Company announced a net loss of
$0.56 per share on net sales of $52 million, compared with net earnings of $0.91
per share on net sales of $124 million for the thirteen-week fiscal 1997 second
quarter. The combination of these factors required the Company to raise
significant additional capital to fund its immediate short-term operating and
capital expenditure requirements, through its sale of the Notes in March 1998.
The Company's gross margins have fluctuated and will continue to fluctuate
quarterly and annually based upon a variety of factors such as the level of
utilization of the Company's production capacity, changes in demand, product
mix, selling prices and manufacturing yields, increases in production and
engineering costs associated with initial production of new products and changes
in the cost of or limitations on availability of materials. The Company's
ability to introduce new products on a timely basis is an important factor in
its continued success. New products initially have lower manufacturing yields
and are produced in lower quantities than more mature products. Manufacturing
yields generally improve as the product matures and production volumes increase.
Manufacturing yields also vary depending on the complexity and uniqueness of
product specifications. Because the Company's business is capital intensive and
requires a high level of fixed costs, gross margins are also extremely sensitive
to changes in volume. Assuming fixed product prices, small variations in
capacity utilization or manufacturing yields generally have a significant impact
on gross margins. The Company typically allows its customers to change or cancel
orders without penalty up until approximately two weeks before scheduled
shipment. Due to the absence of substantial noncancellable backlog, the Company
plans its production and inventory based on forecasts of customer demands, which
often fluctuate substantially. These factors, among others, create an
environment where demand can vary significantly from week to week.
19
<PAGE>
Growth in the Company's net sales depends, in part, on the successful
expansion by the Company of its manufacturing capacity, manufacturing workforce
and corporate infrastructure. The Company currently is constructing a new
assembly plant in Sioux Falls, South Dakota and is expanding its Hutchinson,
Minnesota plant. The Company currently anticipates spending approximately $200
million during fiscal 1998 for such construction and for expansion of TSA
suspension production capacity. The Company anticipates that continued
significant capital expenditures will be necessary in fiscal 1999 and 2000 for
continued expansion of its TSA suspension production capacity as the Company
transitions from conventional suspension assembly production to high volume TSA
suspension assembly production, and to accommodate anticipated market growth. If
the Company is not able to complete its current expansion plans in a timely
manner and within acceptable budgets, its quarterly and annual results of
operations will be materially and adversely affected.
RESULTS OF OPERATIONS
The following table sets forth the Company's consolidated statements of
operations as a percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED FISCAL YEARS ENDED
------------------------ -------------------------------------
DEC. 28, DEC. 29, SEPT. 28, SEPT. 29, SEPT. 24,
1997 1996 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales................................................... 100% 100% 100% 100% 100%
Cost of sales............................................... 101 71 74 77 75
----- ----- ----- ----- -----
Gross profit (loss)....................................... (1) 29 26 23 25
Research and development expenses........................... 5 5 4 8 5
Selling, general and administrative expenses................ 12 10 10 10 10
----- ----- ----- ----- -----
Income (loss) from operations............................. (18) 14 12 5 10
Other income, net........................................... 1 -- 1 -- --
Interest expense............................................ -- (1) (1) -- (1)
----- ----- ----- ----- -----
Income (loss) before income taxes......................... (17) 13 12 5 9
Provision (benefit) for income taxes........................ (4) 3 3 1 2
----- ----- ----- ----- -----
Net income (loss)......................................... (13)% 10% 9% 4% 7%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
THIRTEEN WEEKS ENDED DECEMBER 28, 1997 VS. THIRTEEN WEEKS ENDED DECEMBER 29,
1996
Net sales for the thirteen weeks ended December 28, 1997 were $88,982,000, a
decrease of $17,924,000 or 17% compared to the comparable period in fiscal 1997.
This decrease was primarily due to decreased suspension assembly sales volume.
Gross loss for the thirteen weeks ended December 28, 1997 was $496,000,
compared to a gross profit of $31,112,000 for the comparable period in fiscal
1997, and gross profit (loss) as a percent of net sales decreased from 29% to
(1)%, primarily due to lower conventional suspension assembly sales volume and
higher costs associated with TSA suspension assembly capacity expansion.
Research and development expenses for the thirteen weeks ended December 28,
1997 were $5,161,000 compared to $5,739,000 for the thirteen weeks ended
December 29, 1996. The prior year amount includes development expenses related
to production of TSA prototype suspensions.
Selling, general and administrative expenses for the thirteen weeks ended
December 28, 1997 were $10,269,000, a decrease of $649,000 or 6% compared to the
comparable period in fiscal 1997. The decreased expenses were due primarily to
decreased profit sharing and other incentive compensation costs of $2,744,000,
partially offset by an increase in labor expenses of $761,000, increased
recruitment and relocation of $560,000 and higher bad debt expense of $389,000.
As a percent of net sales, selling, general
20
<PAGE>
and administrative expenses increased from 10% in the first quarter of fiscal
1997 to 12% in the first quarter of fiscal 1998.
Other income for the thirteen weeks ended December 28, 1997 was $567,000, an
increase of $261,000 from the comparable period in fiscal 1997, primarily due to
an increase in interest income as a result of a higher average investment
balance.
Interest expense for the thirteen weeks ended December 28, 1997 decreased
$711,000 from the comparable period in fiscal 1997, primarily due to an increase
in capitalization of interest of $986,000, offset partially by higher average
outstanding debt.
The income tax benefit for the thirteen weeks ended December 28, 1997 was
based on an estimated effective tax rate for the fiscal year of 26% which was
below the statutory federal rate primarily due to the large portion of sales
that qualifies for the benefit of the Company's Foreign Sales Corporation.
Net loss for the thirteen weeks ended December 28, 1997 was $11,474,000,
compared to net income of $11,117,000 for the comparable period in fiscal 1997.
As a percent of net sales, net income (loss) decreased from 10% to (13)%
primarily due to the lower sales volume and higher fixed costs noted above.
YEAR ENDED SEPTEMBER 28, 1997 VS. YEAR ENDED SEPTEMBER 29, 1996
Net sales for 1997 were $453,232,000, an increase of $100,046,000 or 28%
compared to 1996. This increase was primarily due to increased suspension
assembly volume.
Gross profit for 1997 was $117,279,000, an increase of $37,709,000 or 47%
compared to 1996, and gross profit as a percent of net sales increased from 23%
to 26%. This increase was primarily due to higher sales volume and improved
manufacturing efficiencies.
Research and development expenses for 1997 were $20,185,000 compared to
$27,651,000 for fiscal 1996. The prior year amount includes a $5,500,000 charge
related to a technology sharing agreement with IBM and higher development
expenses related to production of TSA prototype suspensions.
Selling, general and administrative expenses for 1997 were $44,378,000, an
increase of $10,662,000 or 32% compared to 1996. The increased expenses were due
primarily to increased profit sharing and other incentive compensation costs of
$7,443,000 and a $1,855,000 increase in labor expenses. As a percent of net
sales, selling, general and administrative expenses remained at 10%.
Other income, net, for 1997 was $4,143,000, an increase of $2,985,000
compared to 1996. The increase is primarily due to an increase of $3,631,000 in
interest income as a result of a higher average investment balance, partially
offset by a $443,000 increase in royalties paid under licensing agreements.
Interest expense for 1997 was $3,143,000, an increase of $1,035,000 compared
to 1996, primarily due to higher average outstanding debt, offset by higher
capitalization of interest of $1,740,000.
The income tax provision for 1997 was based on an effective tax rate for the
year of 22% which was below the statutory federal rate primarily due to the
large portion of sales that qualifies for the benefit of the Company's Foreign
Sales Corporation.
Net income for 1997 was $41,909,000, an increase of $28,107,000 compared to
1996. As a percent of net sales, net income increased from 4% to 9% primarily
due to the higher sales volume and improved manufacturing efficiencies, noted
above.
21
<PAGE>
YEAR ENDED SEPTEMBER 29, 1996 VS. YEAR ENDED SEPTEMBER 24, 1995
Net sales for 1996 were $353,186,000, an increase of $53,188,000 or 18%
compared to 1995. This increase was attributable primarily to the Company
shipping approximately 36% more suspension assemblies during 1996 than 1995,
partially offset by a lower average selling price due to selling higher volumes
of lower-priced suspensions.
Gross profit for 1996 was $79,570,000, an increase of $5,807,000 or 8%
compared to 1995, and gross profit as a percent of net sales decreased from 25%
to 23%. In addition to the sales volumes of lower-priced suspensions noted
above, the decrease in gross profit as a percent of net sales was also due to
reduced shipments during the fourth quarter resulting in an increase in fixed
costs as a percent of sales.
Research and development expenses for 1996 were $27,651,000, an increase of
$12,610,000 or 84% compared to 1995. The majority of the higher expenses were
due to increased TSA suspension development efforts of approximately $7,100,000
and a charge of $5,500,000 related to a technology sharing agreement with IBM,
compared to a $2,500,000 charge for the technology sharing agreement during
1995.
Selling, general and administrative expenses for 1996 were $33,716,000, an
increase of $3,915,000 or 13% compared to 1995. The increased expenses were due
primarily to an increase in recruitment and relocation expenses of $1,722,000,
mainly related to the startup of the Eau Claire assembly manufacturing facility,
increases in professional services of $1,418,000 and labor of $1,141,000,
partially offset by reduced profit sharing expenses of $1,167,000. As a
percentage of net sales, selling, general and administrative expenses remained
at 10%.
The income tax provision for 1996 was based on an effective tax rate for the
year of 20% which was below the statutory federal rate primarily due to the
large portion of sales that qualifies for the benefit of the Company's Foreign
Sales Corporation.
Net income for 1996 was $13,802,000, a decrease of $7,276,000 compared to
1995. As a percent of net sales, net income decreased from 7% to 4% primarily
due to lower gross profit margins, noted above, and increased research and
development efforts.
22
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth unaudited consolidated quarterly financial
data for the periods indicated. This data is derived from unaudited consolidated
financial statements and, in the opinion of management, includes all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the financial results for such periods. Results of operations for any previous
fiscal quarter are not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------------------------------------------
DEC. 28, SEPT. 28, JUNE 29, MAR. 30, DEC. 29,
1997 1997 1997 1997 1996
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales............................................ $ 88,982 $ 100,354 $ 121,713 $ 124,259 $ 106,906
Cost of sales........................................ 89,478 86,046 88,534 85,579 75,794
---------- ---------- ---------- ---------- ----------
Gross profit (loss)................................ (496) 14,308 33,179 38,680 31,112
Research and development expenses.................... 5,161 5,028 4,671 4,747 5,739
Selling, general and administrative expenses......... 10,269 9,457 11,955 12,048 10,918
---------- ---------- ---------- ---------- ----------
Income (loss) from operations...................... (15,926) (177) 16,553 21,885 14,455
Other income, net.................................... 567 1,217 1,759 861 306
Interest expense..................................... (147) (517) (759) (1,009) (858)
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes.................. (15,506) 523 17,553 21,737 13,903
Provision (benefit) for income taxes................. (4,032) 112 3,855 5,054 2,786
---------- ---------- ---------- ---------- ----------
Net income (loss).................................. ($ 11,474) $ 411 $ 13,698 $ 16,683 $ 11,117
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Basic earnings (loss) per common share............... ($ 0.58) $ 0.02 $ 0.70 $ 0.95 $ 0.68
Diluted earnings (loss) per common share............. ($ 0.58) $ 0.02 $ 0.68 $ 0.91 $ 0.65
Weighted average common shares outstanding........... 19,629 19,585 19,531 17,610 16,361
Weighted average common and diluted shares
outstanding........................................ 19,629 20,334 20,276 18,415 17,120
AS A PERCENTAGE OF NET SALES:
Net sales............................................ 100% 100% 100% 100% 100%
Cost of sales........................................ 101 86 73 69 71
---------- ---------- ---------- ---------- ----------
Gross profit (loss)................................ (1) 14 27 31 29
Research and development expenses.................... 5 5 3 3 5
Selling, general and administrative expenses......... 12 9 10 10 10
---------- ---------- ---------- ---------- ----------
Income (loss) from operations...................... (18) 0 14 18 14
Other income, net.................................... 1 2 1 -- --
Interest expense..................................... -- (1) (1) (1) (1)
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes.................. (17) 1 14 17 13
Provision (benefit) for income taxes................. (4) 1 3 4 3
---------- ---------- ---------- ---------- ----------
Net income (loss).................................. (13)% 0% 11% 13% 10%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
Following a period of accelerated growth in demand for conventional
suspension assemblies which began in the first quarter of fiscal 1997, in the
most recent three fiscal quarters for which data is set forth above (commencing
in the last part of the third quarter of fiscal 1997) the Company has
experienced significantly declining sales of conventional suspension assemblies.
These declines are directly related to reduced demand from both disk drive and
recording head manufacturers, as drive manufacturers have sought, the Company
believes, to lower inventory levels and reduce the disk drive industry
oversupply that accumulated during the preceding period of growth. Demand for
and shipments of the Company's TSA
23
<PAGE>
suspension assemblies have increased steadily, however, during the most recent
three fiscal quarters for which data is set forth above. In order to meet
current and anticipated future demand for TSA suspension assemblies, the Company
is continuing its planned expansion of TSA production capacity, which has
required significantly increased levels of capital expenditures. The
simultaneous reduction in revenue associated with conventional suspension
assemblies and the increase in revenue associated with TSA suspension assemblies
has resulted in significantly declining gross margins. In contrast to the
Company's profitable conventional suspension production, TSA suspension
production only recently moved from prototype and pre-production volumes to
production volumes. The relatively early stage of volume production has resulted
in production inefficiencies and lower manufacturing yields, and therefore
profitability has not yet been achieved. Because of the significant level of
fixed costs inherent in the Company's business, earnings have historically risen
and declined in direct correlation to conventional suspension assembly sales.
The Company believes that demand for its conventional suspension assemblies will
increase when disk drive inventory levels are reduced, as the Company does not
believe there has been a significant slowdown in end user demand for storage
capacity or a fundamental shift in technology away from disk drive storage. See
"Risk Factors--Fluctuations in Operating Results; Liquidity Needs."
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are cash flow from operations,
cash balances and additional financing capacity. The Company's cash and cash
equivalents decreased to $36,069,000 at December 28, 1997 from $98,340,000 at
September 28, 1997 and as compared to $22,884,000 at September 29, 1996. The
Company used cash from operating activities of $1,852,000 for the thirteen weeks
ended December 28, 1997, as compared to cash generated from operating activities
of $76,816,000 in fiscal 1997, $39,904,000 in fiscal 1996 and $57,814,000 in
fiscal 1995.
Cash used for capital expenditures totaled $56,794,000 for the thirteen
weeks ended December 28, 1997, an increase of $48,303,000 from the comparable
period in fiscal 1997, and was $82,639,000 in fiscal 1997, $77,065,000 in fiscal
1996 and $44,472,000 in fiscal 1995. The expenditures for the first quarter of
fiscal 1998 were primarily related to expansion of TSA suspension capacity,
including manufacturing and support equipment, construction costs for the
Company's Sioux Falls, South Dakota plant and construction of an expansion to
the Company's Hutchinson, Minnesota plant. The expenditures in fiscal 1997 were
primarily for manufacturing and support equipment and construction costs of the
photoetch plant at the Company's Eau Claire site.
During the fourth quarter of fiscal 1996, the Company completed a
$50,000,000 private debt placement, of which $25,000,000 was issued in July 1996
as senior unsecured notes, having a fixed rate of 7.85%, annual principal
payments of $8,333,000 beginning on July 26, 2001 and maturing in July 2003. The
Company issued the remaining $25,000,000 during the first quarter of fiscal 1997
as a senior unsecured note having a fixed rate of 8.07%, annual principal
payments of $4,167,000 beginning on November 26, 2001 and maturing in November
2006. The Company's maturities of long-term debt for the five years subsequent
to September 28, 1997 are $5,332,000, $4,613,000, $3,995,000, $12,330,000 and
$16,499,000, respectively. The Company currently does not have available a
revolving credit or other similar borrowing facility. See "Risk
Factors--Increased Leverage; Financial Covenants" and "Description of Certain
Indebtedness and Other Financing Agreements--Old Credit Facility."
During the first quarter of fiscal 1997, the Company signed a Master Lease
Agreement for up to $25,000,000 with GE. The agreement provided for leasing of
manufacturing equipment in fiscal 1997. During the fourth quarter of fiscal
1997, the Company signed an amendment to the Master Lease Agreement with GE,
providing for leasing of up to an additional $30,000,000 of manufacturing
equipment in fiscal 1998. The Company serves as a purchasing agent on behalf of
GE. As such, amounts expended on GE's behalf, but not yet reimbursed, are
included on the accompanying consolidated balance sheet under GE lease
receivable.
24
<PAGE>
In March 1998, the Company issued and sold $150,000,000 aggregate principal
amount of the Notes to
the Initial Purchasers, which resold the Notes in transactions exempt from
registration under the Securities Act. Following the sale of the Notes by the
Company in March 1998, the Company's principal future liquidity requirements
will be for debt service requirements under the Notes and other outstanding
indebtedness, and to fund operations and capital expenditures. Historically, the
Company has funded its capital and operating requirements with a combination of
cash generated from operations and external debt or equity financings. The
Company has utilized these sources of capital to fund significant capital
expenditures, to fund operations and to service debt. The Company currently
anticipates fiscal 1998 capital expenditures of approximately $200 million,
primarily related to expansion of TSA suspension capacity, including
manufacturing and support equipment, construction of the Company's Sioux Falls
assembly plant and the expansion of the Company's Hutchinson plant. These
capital expenditures will support the Company's continued development of, and
capacity expansion for, TSA suspension assemblies. The Company believes the net
proceeds from the sale of the Notes by the Company in March 1998, any cash
generated from operations and anticipated future revenue will be sufficient to
meet its operating expenses, debt service and capital expenditure requirements
through fiscal 1999, as the Company continues to transition from conventional
suspension assembly production to high volume TSA suspension assembly
production. See "Risk Factors--Fluctuations in Operating Results; Liquidity
Needs" and "--Capital Needs."
The Company anticipates that continued significant capital expenditures will
be necessary in fiscal 1999 and 2000 for continued expansion of its TSA
suspension production capacity, and to accommodate anticipated market growth. In
that regard, beyond fiscal 1999 the Company expects it will require significant
additional external financing to fund operations, debt service and capital
expenditures. The Company's ability to fund its future liquidity needs depends
on its future performance and financial results, which, to a certain extent, are
subject to general conditions in the hard disk drive industry as well as general
economic, financial, competitive and other factors that are beyond its control.
If forecasted operating results do not meet the Company's expectations or if the
Company is unable to obtain adequate financing at such time or times as such
financing is required, the Company's future financial results and liquidity
could be materially adversely affected. There can be no assurance that the
Company's business will generate sufficient cash flow from operations, that
anticipated revenue growth and operating improvements will be realized or that
the Company will be able to obtain additional financing in an amount sufficient
to enable the Company to service its indebtedness (including the Notes), make
necessary capital expenditures or fund its operations. See "Risk
Factors--Capital Needs."
In connection with the sale of the Notes by the Company in March 1998, the
Company incurred $150 million in additional indebtedness which increased the
ratio of total debt to total capitalization from 22.3%, at February 22, 1998, to
46.3%, on an as adjusted basis. As a result of this increased leverage, the
Company's interest obligations increased substantially. To the extent that a
substantial portion of the Company's cash flow from operations is used to pay
the principal of, and interest on, its indebtedness, such cash flow will not be
available to fund future operations and capital expenditures. There is no
assurance that the Company's operating cash flow will be sufficient to meet its
debt service requirements or to repay the Notes at maturity or upon a Repurchase
Event. See "Risk Factors--Increased Leverage; Financial Covenants,"
"--Limitations on Repurchase Upon Repurchase Event," "Capitalization" and
"Selected Consolidated Financial Data."
The Company uses technology throughout its operations that will be affected
by Year 2000 issues. During fiscal 1997, the Company implemented remediation
steps to make the core business systems which are part of the Company's computer
systems Year 2000 compliant. The Company also has initiated a company-wide
project, to be completed in fiscal 1998, to identify and assess other Company
systems for Year 2000 compliance and the Year 2000 compliance status of its
critical suppliers. The expenses relating to Year 2000 compliance incurred in
fiscal 1997 and for the thirteen weeks ended December 28, 1997 were not
material, and the Company believes the amounts that may be required to be
incurred in the future for such compliance will not have a material impact on
its results of operations, liquidity and capital resources. See "Risk
Factors--Year 2000 Issues."
25
<PAGE>
BUSINESS
THE COMPANY
The Company is the world's leading supplier of suspension assemblies for
hard disk drives. The Company estimates that it produces approximately 70% of
all suspension assemblies sold to disk drive manufacturers and their suppliers,
including recording head manufacturers, worldwide. Suspension assemblies are
critical components of hard disk drives that hold the recording heads in
position above the spinning magnetic disks. The Company's suspension assemblies
are manufactured with proprietary technology and processes to uniform and
precise specifications that are critical to maintaining the necessary
microscopic clearance between the head and disk. During the fiscal year ended
September 28, 1997, the Company shipped approximately 719 million suspension
assemblies of all types. The Company is a supplier to nearly all domestic and
many foreign-based users of suspension assemblies, including Applied Magnetics,
IBM, Maxtor, Quantum, Read-Rite, Samsung, Seagate Technology, TDK/SAE Magnetics,
Toshiba, Western Digital and Yamaha. The Company developed its leadership
position in suspension assemblies through research, development and design
activities coupled with a substantial investment in manufacturing technologies
and equipment, and has maintained this position through multiple technological
transitions in the disk drive industry over the past decade.
The Company is focused on continuing to develop suspension assemblies which
address the rapidly changing requirements of the hard disk drive industry. The
Company's TSA suspension assemblies are designed to satisfy both the new
electrical connectivity requirements of the disk drive industry as well as the
changing market demands and performance standards required by its customers. TSA
suspensions incorporate thin electrical conductors in the suspension itself
which replace the fine wires used to connect the recording head to the drive's
electronic circuitry. The Company anticipates continuing acceptance by the disk
drive industry of its TSA suspensions during the next two years, as TSA
suspensions offer customers opportunities to enhance drive performance by
eliminating wires that interfere with the recording head's flying performance.
The Company believes TSA suspensions also enable customers to improve yields and
throughput, eliminate manufacturing steps and adopt automated assembly
processes, all of which can lower their overall costs of production and improve
production efficiencies. During the first fiscal year of volume manufacturing of
TSA suspension assemblies (the fiscal year ended September 28, 1997), the
Company shipped approximately 8 million TSA suspensions (approximately 4 million
of which were shipped in the fiscal 1997 fourth quarter), and in the thirteen
weeks ended December 28, 1997, the Company shipped approximately 7 million TSA
suspensions. For the first eight weeks of the fiscal 1998 second quarter, the
Company shipped 7 million TSA suspensions. TSA suspensions are currently in use
in five customer disk drive programs in production and have been designed-in on
a total of seventeen programs. The Company believes its TSA suspensions, and
related follow-on features currently in development, will become a disk drive
industry standard platform onto which multiple features can be integrated.
INDUSTRY BACKGROUND
In an October 1997 report, IDC estimated that total revenue in the disk
drive industry (defined as unit shipments multiplied by the midyear average unit
price paid by OEMs for quantity 1000+ contracts) would surpass $28 billion in
1997 and grow to over $40 billion in 1999. Disk drive industry growth has been
driven by such factors as the growing use of desktop PCs, workstations, portable
computers and enterprise computing and storage, the increasing amount of memory
required for software program storage and the continuing accumulation of data.
In its October 1997 report, IDC stated that desktop PCs and multiuser systems
are expected to grow at 12% and 14% compound annual growth rates, respectively,
from 1997 to 2001. Moreover, unit growth rates for disk drives and disk drive
components are expected to exceed unit growth rates for desktop PCs and
multiuser systems due to a variety of factors, including the rapidly increasing
demand for additional storage capacity. IDC's report estimates that hard disk
drive unit shipments will grow at a compound annual growth rate of 19% from 1997
to 2001.
26
<PAGE>
This demand for additional storage capacity is stimulated by the increasing
use of disk drives for non-computer applications such as voice mail and video
data, the expansion of storage-intensive data warehousing, Internet and intranet
applications, and the simultaneous use of multiple small disk drives, such as
systems using Redundant Arrays of Inexpensive Disks ("RAID"). According to its
October 1997 report, IDC estimated that annual shipments of disk drives would
reach 130.7 million in 1997 and grow to 190.5 million in 1999. This growth is
occurring for several reasons. First, the growth in demand for storage in PCs,
workstations and network servers has exceeded the rate of increase in the areal
density of storage capacity on disks. Therefore, to satisfy the increasing
demand for storage capacity, there has been an increase in the average number of
disks, recording heads and suspension assemblies shipped per disk drive. Second,
the demand for very high capacity disk drives, such as those used in network
servers, has been growing faster than the overall demand for disk drives. Drives
for such network servers each typically contain four to ten disks, and therefore
eight to twenty recording heads and suspension assemblies. Third, industry
transitions from thin film inductive recording heads to MR heads, which are
significantly more sensitive than thin film inductive heads in reading data from
disks with higher areal densities, and from nano heads to the smaller pico
heads, have reduced initial production yields of the head and disk drive
manufacturers. Because a significant portion of head yield reduction is
ascertained after the head is bonded onto the suspension assembly, low yields
often result in increased demand for suspension assemblies in order to achieve
desired disk drive shipment levels.
The disk drive industry, despite the rapid growth in recent years, is also
highly cyclical and from time to time experiences downturns. End user demand for
storage capacity, however, has not slowed significantly, as rapidly evolving
technology and computer applications continue to require storage devices with
increased capacity and functionality. Suspension assembly unit sales are
currently depressed due to the current slowdown in component demand which began
in the summer of 1997 due, the Company believes, to excess inventory held by
drive and recording head manufacturers. Total shipments of the Company's
suspension assembly units have decreased from a peak of approximately 201
million shipped in the thirteen weeks ended March 30, 1997 to approximately 135
million shipped in the thirteen weeks ended December 28, 1997. This decrease has
not affected industry demand for the Company's TSA suspensions, which continues
to rise. The Company believes that demand for its conventional suspension
assemblies will increase when disk drive inventory levels are reduced, as the
Company does not believe there has been a significant slowdown in end user
demand for storage capacity or a fundamental shift in technology away from disk
drive storage.
All hard disk drives incorporate the same basic technology. The principal
components of a hard disk drive are recording disk media, a motor assembly, the
control electronics and a head stack assembly. A head stack assembly consists of
multiple magnetic recording heads attached by suspension assemblies to the
actuator arm. Each disk drive contains one or more (up to thirteen) hard disks
attached to a motor assembly which rotates the disks at high speeds in extremely
close proximity to the magnetic recording heads, each of which is attached to a
suspension assembly. Typically two recording heads (one for each side of the
disk), and therefore two suspension assemblies, are used with each disk in the
disk drive.
Suspension assemblies are critical to disk drive performance and
reliability. The design of suspension assemblies is driven by the increasing
performance requirements of new disk drives, principally reduced data access
time, increased data storage density, smaller recording heads and technology
incorporated in the type of recording head used. Technological advances in disk
drives generally require suspension assemblies with specialized design, expanded
functionality and greater precision. One of the major determinants of disk drive
performance and data storage capacity is the microscopic height at which the
magnetic head "flies" above the disk. Suspension assemblies hold the magnetic
recording heads in position and are a significant factor in controlling the
critical flying height of the head above the disk and maintaining the position
of the head on the tracks of data. A typical nominal flying height is about one
millionth of an inch (a sheet of paper is approximately 3,000 millionths of an
inch thick).
27
<PAGE>
Hard disk drive storage capacity increases as areal density increases.
Improvements in areal density have been attained by lowering the fly height of
the recording head, using smaller recording heads with advanced air bearing
designs, improving other components such as motors and media and using new
recording head types such as those of MR design. As drive manufacturers
transition to smaller pico-sized MR heads, the current process of bonding fine
electrical wires to the recording head and to the rest of the drive's electronic
circuitry is becoming more difficult and costly, and the wires themselves
interfere with the head's flying performance.
DATA STORAGE ALTERNATIVES. Demand for data storage capacity is expected to
increase one hundredfold over the next ten years. Disk drives continue to be the
storage device of choice for applications requiring low access times, high
transfer rates and capabilities in excess of one gigabyte. The average cost per
megabyte of disk drive storage continues to decline and, at the end of 1997,
storage in large capacity drives was approximately 7 cents per megabyte, as
compared to approximately 10 cents at the end of 1996. In addition to disk
drives, several other methods of storing data are currently available, including
semiconductor (flash) memory, tape memory and laser (optical and CD) drives.
While use of flash "drives" has grown during the last year, its price is
typically in excess of $10.00 per megabyte and it is used primarily in
applications where its higher speed and durability and lower power usage
outweigh the cost disadvantage. Often mobile systems include the option of both
flash memory and disk drives, with a small amount of flash memory available for
very high-speed storage and the bulk of the data or programs stored on disk
drives. Both tape drives and optical drives can store data at lower cost than
disk drives, but their speeds of data access and transfer continue to be
considerably slower than those of disk drives because of technical limitations
that the Company believes are inherent in their operation. In addition, although
optical drives can store data inexpensively, the ability to write to CDs is very
expensive. These types of devices continue to be used, in addition to disk
drives, for the storage of very large amounts of data which does not require
fast access. Currently in development are new storage devices combining magnetic
and optical storage technologies. These new drives incorporate magneto-optical
recording heads which may have fly heights similar to disk drives, and thus
require suspension assemblies to control their fly height. Because these new
magneto-optical drives are in development, they still have many technical and
economic challenges to overcome before becoming commercially available.
The Company continually monitors technological developments in the data
storage arena. On an ongoing basis, the Company reviews technological threats to
the disk drive market and utilizes various universities, consortiums and
industry participants to provide additional third-party insights.
STRATEGY
The Company intends to maintain its position at the forefront of industry
technology transitions, as it has over the past decade, by delivering industry
standard solutions to industry-wide technological challenges. The Company
designs and develops suspension assemblies which meet the increasingly higher
performance specifications of disk drive manufacturers, and is committed to
reliably producing its suspension assemblies in high volume, with specialized
design, expanded functionality and greater precision. The Company has
increasingly emphasized assisting disk drive manufacturers in reducing their
time to market with new drives by designing and developing suspension
assemblies, and the processes to manufacture them, in advance of market needs.
Key elements of the Company's strategy include:
DELIVER INDUSTRY STANDARD SOLUTIONS. As the disk drive industry transitions
to smaller pico-sized MR heads, the Company is leading a parallel technological
transition among industry component suppliers by developing a product platform
that it believes will significantly enhance drive performance. The Company's TSA
suspensions offer customers a wireless solution to industry-wide manufacturing
problems posed by smaller pico-sized MR heads. The Company believes TSA
suspensions enable customers to improve yields and throughput, eliminate
manufacturing steps and adopt automated assembly processes, all of which can
lower their overall costs of production and improve production efficiencies. The
Company
28
<PAGE>
believes that its TSA suspensions will provide an industry standard component
platform onto which multiple features that enhance hard disk drive performance
can be integrated.
MAINTAIN TECHNOLOGY LEADERSHIP WITH CUSTOMER-FOCUSED ENGINEERING. The
Company's engineers and sales force work closely with the engineering staffs of
its customers as a design team to develop suspension assemblies that address
individual customer requirements. Through its customer relationships, the
Company derives substantial insight into industry trends. This insight enables
the Company to provide advanced designs which position it well to have its
suspension assemblies designed into future generations of disk drives.
MANUFACTURE HIGH VOLUME PRECISION PRODUCTS. In addition to its design
expertise, the Company believes its leadership position is based on its volume
production capability and the precision of its suspension assemblies. In order
to provide assemblies in high volumes and with the precision required by its
customers, the Company has increasingly invested in developing advanced process
and measurement systems in connection with the design of its automated
production equipment. The Company has adopted an integrated and flexible
manufacturing approach that closely couples design, tooling and manufacturing.
This integrated approach has enabled the Company to respond rapidly to changes
in the volume and product mix demands of its customers.
LEAD INDUSTRY TECHNOLOGY TRANSITIONS. The Company has been at the forefront
of multiple technological transitions in the disk drive industry over the past
decade and intends to remain a technological leader by identifying emerging
industry trends and responding with solutions in advance of market needs. In
prior industry transitions, such as the rapid move from micro- to the smaller
nano-sized heads in 1993, and in the current more gradual move from nano- to
even smaller pico-sized heads, the Company has developed innovative design and
manufacturing solutions in advance of its competitors. Although many drive
manufacturers are just now making the transition to pico-sized heads, the
Company's technological leadership is evidenced by its current qualification in
nineteen pico-design drive programs, having been initially qualified in a pico
program in 1994. In addition, to continue to lead industry technology
transitions, the Company has already begun to develop follow-on features for its
TSA suspension assemblies which should enable drive manufacturers to continue to
achieve improved drive performance and increased data storage capacity.
PRODUCTS
The Company manufactures suspension assemblies and certain other etched and
stamped components used in connection with or related to suspension assemblies.
During the fiscal year ended September 28, 1997 and for the thirteen weeks ended
December 28, 1997, the Company shipped approximately 719 million and 135 million
suspension assemblies of all types, respectively. The Company has developed
significant proprietary capabilities in the design and production of suspension
assemblies for both current and emerging disk drive designs. The Company has
been in the forefront of industry technology transitions by developing improved
suspension assemblies in anticipation of several market shifts to new
generations of smaller magnetic heads (mini-to-micro, micro-to-nano and
nano-to-pico). To help develop prototype suspensions, the Company maintains a
test laboratory and computerized systems to simulate and analyze suspension
designs. The Company's ability to predict and modify suspension assembly
performance is especially important in developing suspensions for high capacity
drives and drives with low access times.
CONVENTIONAL SUSPENSION ASSEMBLIES
The Company currently has the capacity to produce over 300 variations of
conventional suspension assemblies based on several standard designs for the
nano and pico platforms. This capability permits the Company to assist
customers' design efforts and to rapidly modify its standard designs to meet the
varied and changing requirements of specific customers. The Company believes
that its integrated manufacturing approach, closely coupling design, tooling and
manufacturing, gives it a competitive advantage in quickly
29
<PAGE>
supplying conventional suspension prototypes and commencing volume
manufacturing. This manufacturing approach also allows the Company to rapidly
shift tooling in its conventional suspension assembly production units to
respond to fluctuating product mix and thereby minimize the size of its finished
goods inventory.
TSA SUSPENSION ASSEMBLIES
The Company anticipates continuing acceptance by the disk drive industry of
its TSA suspensions during the next two years, which integrate into the
suspension thin electrical conductors that connect directly with the recording
head. The integral etched copper leads of the TSA suspension are pre-positioned
on the suspension assembly from the head region through the length of the
suspension and, in some cases, along the actuator. The Company believes that
this electrical integration will be a key feature of suspension assemblies as
disk drive manufacturers make the transition to smaller and more complex
recording heads. The current process of using fine electrical wires to attach
the smaller head to the rest of the drive's electronic circuitry is more
difficult and costly, involving greater risk of handling damage as well as
interference by the electrical wires with the head's performance.
Electrical integration, a key feature of the Company's TSA suspensions, can
reduce the manual labor required to attach heads to suspensions and thus
facilitates automated assembly. TSA suspensions also increase the consistency of
head flying by eliminating certain wires that can impart forces which adversely
affect the recording head's flying position. The Company believes that similar
benefits throughout the head gimbal assembly and head stack assembly processes
will result in improved yields and increased throughput for its customers, which
should translate into lower capital investment, reduced labor and lower overall
costs for such customers. TSA suspensions are particularly suited for MR heads,
which constitute a major portion of the new and smaller types of recording heads
that allow increased data storage density. MR heads require at least twice as
many electrical leads as conventional recording heads. For these reasons, TSA
suspensions command a higher sale price than the Company's conventional
suspensions.
The Company introduced TSA suspension assemblies to customers and began
shipping electrically functional engineering samples in the first half of fiscal
1996. The Company recently has moved into production volume of its TSA
suspension assemblies. In fiscal 1997, the Company shipped approximately 8
million TSA suspensions (approximately 4 million of which were shipped in the
fiscal 1997 fourth quarter), and in the thirteen weeks ended December 28, 1997,
the Company shipped approximately 7 million TSA suspensions. For the first eight
weeks of the fiscal 1998 second quarter, the Company shipped approximately 7
million TSA suspensions, which are currently designed-in on a total of seventeen
programs and are in use in five customer disk drive programs in production.
While TSA suspensions only accounted for approximately one percent of the
Company's fiscal 1997 unit shipments, the Company expects them to account for
half or more of its total output during fiscal 1999. To further assure customers
that the TSA suspensions they require for their products will be readily
available when and where they are needed, in fiscal 1998 the Company started
offering for sale to competitive suspension assembly manufacturers
component-level parts, such as load beams, base plates and flexures for both
conventional and TSA suspensions. As demand for TSA suspensions increases,
customers will now have an additional source of supply for critical suspension
assemblies.
TSA suspension assemblies are adaptable to future developments in disk drive
design and manufacturing. Variations of TSA suspension assemblies now in
development offer promising solutions to the challenges posed by increasing
areal density so as to increase disk drive capacity. As the number of data
tracks per disk increases to achieve increased areal density (tracks are
expected to increase from the current 5,000 per inch to 20,000 or more per inch
within the next few years), recording heads must be positioned above data tracks
with more precision than current disk drive technology allows. A TSA suspension
incorporating a second stage actuator could provide the required degree of
precision to properly position the head over a data track as track densities
increase. Similarly, an increase in areal density achieved by increasing the
number of data bits recorded per linear inch on each data track will
30
<PAGE>
require preamplification to overcome signal to noise problems that occur as bit
density increases. Electrical termination pads incorporated in a TSA suspension
provide a means of positioning a preamplifier closer to the recorded data to
reduce the signal to noise problem. Additional variations for other TSA
suspension products are also in development. The Company anticipates that its
development of TSA suspensions and these related follow-on features will result
in TSA products becoming a disk drive industry standard platform.
The Company continues to invest a substantial amount of financial,
management, engineering and manufacturing resources in the development of its
TSA suspension assemblies. If continuing market acceptance and/or production of
the Company's TSA suspension assemblies were delayed for any reason or if
widespread market acceptance of the TSA product platform is not achieved, the
Company's business, results of operations and ability to service its
indebtedness (including the Notes) could be materially adversely affected.
Furthermore, if the Company fails to transition to cost-effective high volume
production of TSA suspensions and determines that TSA suspension assemblies
cannot be produced profitably in the quantities and to the specifications
required by customers, the Company's business, results of operations and ability
to service its indebtedness (including the Notes) could be materially adversely
affected.
OTHER PRODUCTS
The Company manufactures a small amount of etched and stamped components
used in connection with or related to suspension assemblies. The Company also is
engaged in the development of product opportunities in the medical devices
market. In February 1998, the Company received FDA clearance for marketing in
the U.S. a monitor that measures the percentage of oxygenated blood in tissue,
and the monitor is now the subject of clinical trials at several hospitals. The
Company does not expect any medical-related revenue in fiscal 1998, and there
can be no assurance that the Company's efforts will result in marketable
products or that such products will ever generate significant revenue.
MANUFACTURING
The Company's manufacturing strategy focuses on enhancing its ability to
reliably produce suspension assemblies in high volume and with the precision
required by its customers, by investing in the development of advanced process
and measurement systems and the design of its automated production equipment, as
well as in additional manufacturing plants and equipment. The Company also has
adopted an integrated manufacturing approach that closely couples design,
tooling and manufacturing. This integrated approach has facilitated the
development, implementation and high-volume production of new suspension
assembly products. Effective use of this integrated approach, together with the
Company's equipment, has increased production yields and efficiency, and has
been an important factor in reducing the Company's manufacturing costs.
A suspension assembly consists of two or three components that are laser
welded together. TSA suspension assemblies also incorporate electrical leads
which provide electrical connection from the recording head to the disk drive's
electronic circuitry. Alignment, adjustment and freedom from imperfections and
contaminants are of critical importance. The Company's products require several
manufacturing processes, each dependent on different technical disciplines, to
ensure the high degree of precision and process control necessary to meet strict
customer tolerance and other requirements. The Company has developed
sophisticated proprietary manufacturing processes and controls, and related
equipment, which are essential to the precision and reliability of its products.
The manufacturing processes employed by the Company include photoetching,
stamping, plasma etching, plating, precision forming, laser welding and
ultra-cleaning. The photoetching of the components, the laser-welding operations
which fuse the components together and subsequent processing steps are subject
to stringent specifications and controls. The Company monitors and controls
these processes through real-time statistical process analysis, and continuously
tracks critical parameters and takes corrective action as required.
31
<PAGE>
The Company's critical raw material needs are available through multiple
sources of supply, with the following exceptions. Certain types of photoresist,
a liquid compound used in the photoetching process, and the stainless steel,
copper and polyimide materials that meet the Company's strict specifications,
are each currently available from only one supplier. To protect against the
adverse effect of a short-term supply disruption, the Company maintains several
weeks' supply of these materials. If for any reason the Company were unable to
continue to obtain these materials in the necessary quantities and at reasonable
prices, the Company's results of operations would be materially adversely
affected. See "Risk Factors-- Availability of Certain Materials."
The Company's production processes require the storage, use and disposal of
a variety of chemicals which are considered hazardous under applicable federal
and state laws. Accordingly, the Company is subject to a variety of regulatory
requirements for the handling of such materials. If an accident were to result
in significant personal injury or environmental damage, the Company's results of
operations could be materially adversely affected.
RESEARCH AND DEVELOPMENT
The Company participates in an industry that is subject to rapid
technological change, and its ability to remain competitive depends on, among
other things, its ability to anticipate such change and, in that regard, to
continue its close working relationships with the engineering staffs of its
customers. As a result, the Company has devoted and will continue to devote
substantial resources to product development and process engineering efforts. As
of December 28, 1997, the Company employed 986 engineers and technicians who are
responsible for implementing new technologies as well as process and product
development and improvements. Expenditures for these activities for the thirteen
weeks ended December 28, 1997 and for fiscal 1997, 1996 and 1995 amounted to
approximately $11,358,000, $48,204,000, $51,212,000 and $32,567,000,
respectively. Of those amounts, the Company classified approximately $5,161,000,
$20,185,000, $27,651,000 and $15,041,000, respectively, as research and
development expenses.
The Company's current research and development efforts are principally
directed to continuing the development of its TSA suspension assemblies and
related follow-on features to meet ongoing technological advances in the disk
drive industry, including changing head size, performance standards and
electrical connectivity requirements for disk drives.
The Company entered into a Technology Transfer and Development Agreement
(the "Technology Sharing Agreement") and a non-exclusive Patent License
Agreement (the "Patent License Agreement") with IBM during fiscal 1995. Under
the Technology Sharing Agreement, IBM made available to the Company the results
of many years of research by IBM into the new integrated lead suspension. The
Company itself had devoted substantial efforts independent of IBM to the
research and development of TSA suspensions, and contributed its existing TSA
suspension technology to the joint effort. As of February 1, 1998, the Company
had made payments totaling $5,500,000 to IBM and will make additional payments
over the next four fiscal quarters totaling $2,500,000, all of which have been
recorded as an expense by the Company. In addition, certain royalties have been
paid and may be payable in the future by the Company to IBM under the Technology
Sharing Agreement.
The Company also is engaged in the development of product opportunities in
the medical devices market, including a monitor that measures tissue oxygen
saturation. This monitor recently received FDA clearance for marketing in the
U.S., and is now the subject of clinical trials at several hospitals. For the
thirteen weeks ended December 28, 1997 and for fiscal 1997, 1996 and 1995,
research and development expenses allocated to such devices were approximately
$1,008,000, $2,725,000, $1,990,000 and $1,477,000, respectively. The Company
currently anticipates that research and development expenses allocated to such
product opportunities in fiscal 1998 will increase to approximately $5,000,000.
There can be no assurance that the Company's efforts will result in marketable
products or that such products will ever generate significant revenue.
32
<PAGE>
CUSTOMERS AND MARKETING
The Company's products are sold principally through its own ten-member
account management team operating primarily from its headquarters in Hutchinson,
Minnesota. The Company has one account manager in Europe and, through a
subsidiary, one account manager and four technical representatives in Asia. The
Company's products are sold to original equipment manufacturers for use in their
products and to subassemblers who sell to original equipment manufacturers. The
Company's account management team is organized by individual customer and
contacts are typically initiated with both the customer's purchasing agent and
its engineers. The Company's engineers and account management team together
actively participate in the selling process and in maintaining customer
relationships.
The Company is a supplier to nearly all domestic and many foreign-based
manufacturers of hard disk drives and recording heads used in such drives. The
following table shows the Company's five largest customers as a percentage of
net sales.
<TABLE>
<CAPTION>
THIRTEEN WEEKS FISCAL YEARS ENDED
ENDED ----------------------------
---------------------------- SEPT. 28, SEPT. 29,
DEC. 28, 1997 DEC. 29, 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Seagate Technology Incorporated................................ 17% 36% 33% 35%
Read-Rite Corporation.......................................... 19 13 14 13
Yamaha Corporation............................................. 12 14 14 16
TDK/SAE Magnetics, Ltd......................................... 27 13 13 14
IBM............................................................ 12 10 12 9
<CAPTION>
SEPT. 24,
1995
-------------
<S> <C>
Seagate Technology Incorporated................................ 36%
Read-Rite Corporation.......................................... 19
Yamaha Corporation............................................. 13
TDK/SAE Magnetics, Ltd......................................... 9
IBM............................................................ 9
</TABLE>
Sales to the Company's five largest customers constituted 87% and 86% of net
sales, respectively, for the thirteen weeks ended December 28, 1997 and December
29, 1996, and 86%, 87% and 86% of net sales, respectively, for fiscal 1997, 1996
and 1995. Significant portions of the Company's revenue may be indirectly
attributable to large manufacturers of disk drives, such as Quantum Corporation,
Toshiba Corporation and Western Digital Corporation, which may purchase
recording head assemblies from several different recording head manufacturers
that utilize the Company's suspension assemblies. TSA suspensions currently are
in production in drive programs at IBM, Quantum, Samsung and Toshiba.
The Company expects to continue to depend upon a limited number of customers
for a substantial majority of its sales, given the relatively small number of
hard disk drive and recording head manufacturers. The Company's results of
operations could be adversely affected by reduced requirements of its major
customers. See "Risk Factors--Customer Concentration."
Sales to foreign-based enterprises totaled $27,996,000, $88,471,000,
$63,898,000 and $46,075,000 for the thirteen weeks ended December 28, 1997 and
for fiscal 1997, 1996 and 1995, respectively. Sales to foreign subsidiaries of
U.S. corporations totaled $19,933,000, $83,753,000, $51,564,000 and $54,398,000
for the thirteen weeks ended December 28, 1997 and for fiscal 1997, 1996 and
1995, respectively. The majority of these sales were to the Pacific Rim region.
In addition, the Company has significant sales to U.S. corporations which use
the Company's products in their offshore manufacturing sites.
BACKLOG
The Company's sales are generally made pursuant to purchase orders rather
than long-term contracts. Such purchase orders may be changed or cancelled by
customers on short notice without penalty. In addition, the Company believes
that it is a common practice for disk drive manufacturers to place orders in
excess of their needs during growth periods. Accordingly, the Company does not
believe that backlog should be considered indicative of sales for any future
period. See "Risk Factors--Dependence on Hard Disk Drive Industry."
33
<PAGE>
COMPETITION
The Company believes that the principal factors of competition in the
suspension assembly market include time to market, product quality, design
expertise, reliability of volume supply and price. The Company estimates that it
produces approximately 70% of all suspension assemblies sold to disk drive
manufacturers and their suppliers, including recording head manufacturers,
worldwide. The Company's principal competitors are K. R. Precision Co.,
Magnecomp Corporation and Nippon Hatsujo Kogyo Co. Certain users of suspension
assemblies also have or may develop the ability to fabricate their own
suspension assemblies. In addition to competition in the conventional suspension
assembly market, the electrical interconnect features of the Company's new TSA
suspensions face competition from wireless interconnection technologies that are
alternatives to conventional wiring, such as deposition circuitry and flexible
circuitry which are also being considered for and used in drive production.
Although there can be no assurance that the number of competitors will not
increase in the future or that users of suspension assemblies will not develop
internal capabilities to manufacture suspension assemblies, the Company believes
that the number of entities that have the technical capability and capacity for
producing precision suspension assemblies in large volumes will remain small.
Other types of data storage systems, such as semiconductor (flash) memory,
tape memory and laser (optical and CD) drives, may become competitive with
certain hard disk drive applications, and thereby affect the demand for certain
of the Company's products. However, given the current state of the technologies,
flash memories are not expected to be price competitive with disk drives and
optical and tape memories are inherently much slower than disk drives.
Accordingly, the Company believes that such technologies will not materially
impact the market for hard disk drives in the near future. See "Industry
Background--Data Storage Alternatives" above.
INTELLECTUAL PROPERTIES
Certain equipment, processes, information and knowledge generated by the
Company and utilized in the manufacture of its products are regarded as
proprietary by the Company and are protectable under applicable trade secret,
copyright and unfair competition laws. In addition, if the Company believes it
has made inventions in manufacturing equipment, products and processes for
making products where patents might enhance the Company's position, patents have
been and will continue to be pursued in the U.S. and in other countries. As of
April 1, 1998, the Company held 42 U.S. patents and nine foreign patents, and
had 72 patent applications pending in the U.S. and 31 patent applications
pending in other countries. The Company believes that although the patents it
holds and may obtain will be of value, they will not independently determine the
Company's success, which depends in large part upon its engineering skills and
proprietary manufacturing processes. There can be no assurance that any patent
issued to the Company will not be challenged, invalidated, circumvented or
infringed or that the rights granted thereunder will provide adequate protection
to the Company's technology. Within the Company, intellectual property
protection of trade secrets is achieved through physical security measures at
the Company's facilities as well as through non-disclosure and non-competition
agreements with all employees and confidentiality agreements with consultants,
strategic suppliers and customers. There can be no assurance as to the degree of
protection afforded by these practices and laws.
In addition to the Technology Sharing Agreement and the Patent License
Agreement with IBM, the Company also has entered into other licensing and
cross-licensing agreements under the Company's patents and patent applications
allowing certain competitors to produce certain of the Company's products in
return for either royalty payments or cross-license rights.
The Company and certain users of the Company's products have from time to
time received, and may in the future receive, communications from third parties
asserting patents against the Company or its customers which may relate to
certain of the Company's manufacturing equipment or products or to products
which include the Company's products as a component. Although the Company to
date has not
34
<PAGE>
been a party to any material intellectual property litigation, certain of its
customers have been sued on patents having claims closely related to products
sold by the Company. In the event that any third party were to make a valid
infringement claim and a license were not available on terms acceptable to the
Company, the Company's results of operations could be adversely affected. The
Company expects that, as the number of patents issued continues to increase, and
as the Company grows, the volume of intellectual property claims could increase.
See "Risk Factors--Intellectual Properties."
EMPLOYEES
As of December 28, 1997, the Company had 7,324 regular employees, 3,948 of
whom were working at the Company's Hutchinson, Minnesota plant, 1,586 of whom
were working at the Company's Sioux Falls, South Dakota plant, 1,545 of whom
were working at the Company's Eau Claire, Wisconsin plant, 233 of whom were
working at the Company's Plymouth, Minnesota plant, and 12 of whom were working
overseas. The Company's ability to conduct its business would be impaired if a
significant number of its specialized employees were to leave and could not be
replaced by comparable personnel. However, turnover of specialized employees,
including key management personnel, historically has been low. The locations of
the Company's plants and the broad span and complexity of technology encompassed
by the Company's products and processes limit the number of qualified
engineering and other candidates for key positions. The Company expects that
internal training will continue to be the primary avenue for the development of
key employees.
None of the Company's employees is subject to a collective bargaining
agreement, and the Company has experienced no work stoppages. The Company
believes that its employee relations are good.
FACILITIES
The Company's executive offices, primary manufacturing plants and training
center are located in four buildings owned by the Company on a site of
approximately 163 acres in Hutchinson, Minnesota. The largest building has floor
area of approximately 480,000 square feet. The Company also leases a 20,000
square foot warehouse, 34,000 square feet of office space and a fabrication shop
of approximately 12,000 square feet near the Hutchinson site. The Company is
constructing a 178,000 square foot expansion to an existing 56,000 square foot
equipment build center in Hutchinson.
The Company operates a manufacturing plant in Sioux Falls, South Dakota, in
connection with which it leases a building of approximately 94,000 square feet,
a training center of 5,500 square feet and a warehouse of 4,800 square feet. The
Company is constructing a 295,000 square foot manufacturing plant in Sioux
Falls.
The Company also operates a manufacturing plant in Eau Claire, Wisconsin, in
connection with which it leases a building of approximately 156,000 square feet.
The Company has completed construction of a photoetching plant owned by the
Company of approximately 320,000 square feet in Eau Claire, which first produced
parts that were customer-qualified in October 1997.
The Company leases a building of approximately 100,000 square feet located
in Plymouth, Minnesota for stamping operations, office space and a logistic
center, and has leased approximately 45,000 square feet of space located in Eden
Prairie, Minnesota for offices and a communications and computer center. The
Company also leases sales offices in Singapore, the Netherlands and the People's
Republic of China.
The Company believes that its existing facilities, including the expansion
under construction in Hutchinson, Minnesota and the plant under construction in
Sioux Falls, South Dakota, will be adequate to meet its currently anticipated
requirements.
35
<PAGE>
LEGAL PROCEEDINGS
On February 27, 1998, the Company commenced a lawsuit, in McLeod County
District Court in Glencoe, Minnesota, against five former employees and their
newly-formed company. Four of the five former employees were managers or
supervisors and all were involved with the Company's TSA suspension program. The
lawsuit alleges, among other things, breach of non-compete, confidentiality and
assignment of inventions agreements. The Company seeks monetary damages in an
amount to be determined at trial, and an injunction preventing unlawful conduct
by the defendants. The Company has determined to pursue the lawsuit to prevent
the improper use and disclosure of trade secrets and other confidential
information.
The Company is a party to certain other claims arising in the ordinary
course of business. In the opinion of management, the outcome of such claims
will not materially affect the Company's current or future business or results
of operations.
36
<PAGE>
MANAGEMENT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------- --- ------------------------------------------------
<S> <C> <C>
Jeffrey W. Green...................... 57 Chairman of the Board and Director
Wayne M. Fortun....................... 49 President, Chief Executive Officer and Chief
Operating Officer and Director
John A. Ingleman...................... 52 Vice President, Chief Financial Officer and
Secretary
Rebecca A. Albrecht................... 44 Vice President of Human Resources
Beatrice A. Graczyk................... 49 Vice President of Disk Drive Component
Operations
Richard C. Myers...................... 57 Vice President of Administration
LeRoy E. Olson........................ 61 Vice President of Disk Drive Components
Operations Development
Richard J. Penn....................... 42 Vice President of Sales and Marketing
R. Scott Schaefer..................... 44 Vice President and Chief Technical Officer
W. Thomas Brunberg(1)................. 58 Director
Archibald Cox, Jr.(2)................. 57 Director
James E. Donaghy(1)................... 63 Director
Harry C. Ervin, Jr.(2)................ 69 Director
Steven E. Landsburg(2)................ 44 Director
Richard N. Rosett(1).................. 70 Director
</TABLE>
- ------------------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
MR. GREEN is a co-founder of the Company and has served as a director since
the Company's formation in 1965. Mr. Green has been Chairman of the Board since
January 1983, and served as the Company's Chief Executive Officer from January
1983 to May 1996.
MR. FORTUN was elected President and Chief Operating Officer in 1983 and
Chief Executive Officer in May 1996. He has served as a director of the Company
since 1983. He is also a director of G&K Services, Inc. and Excelsior-Henderson
Motorcycle Manufacturing Company. Mr. Fortun has been with the Company since
1975.
MR. INGLEMAN was elected Vice President in January 1982, Chief Financial
Officer in January 1988 and Secretary in January 1992. Previously he served as
the Company's Treasurer from January 1982 through January 1996. Mr. Ingleman has
been with the Company since 1977.
MS. ALBRECHT was elected Vice President in January 1995 and is now Vice
President of Human Resources. Previously she had been Director of Human
Resources since 1988. Ms. Albrecht has been with the Company since 1983.
MS. GRACZYK was elected Vice President in May 1990 and is now Vice President
of Disk Drive Components Operations. Previously she had been Director of
Component Operations since 1988. Ms. Graczyk has been with the Company since
1970.
37
<PAGE>
MR. MYERS was elected Vice President in January 1988 and is now Vice
President of Administration. In January 1995, he was elected Vice President of
Administration. Mr. Myers has been with the Company since 1977.
MR. OLSON was elected Vice President in May 1990 and is now Vice President
of Disk Drive Components Operations Development. Previously he had been Director
of Sioux Falls Operations since April 1988 when he joined the Company.
MR. PENN was elected Vice President in January 1996 and is now Vice
President of Sales and Marketing. Previously he had been Director of Sales and
Marketing since December 1994, Senior Manager responsible for Medical Business
Development from January 1994 to December 1994 and Marketing Manager since June
1990. Mr. Penn has been with the Company since 1981.
MR. SCHAEFER was elected Vice President in May 1990 and is now Vice
President and Chief Technical Officer. Previously he had been Vice President of
Medical Business Development since 1990 and Director of Engineering since 1988.
Mr. Schaefer has been with the Company since 1979.
MR. BRUNBERG became a director of the Company in 1975. He is a certified
public accountant and has been a shareholder in the Minneapolis accounting firm
of Brunberg Thoresen Diaby & Associates, Ltd. since March 1991.
MR. COX became a director of the Company in May 1996. Mr. Cox has been Vice
Chairman and President of Magnequench International, Inc., a manufacturer of
magnets and magnetic material, since October 1995. He has been Chairman of
Sextant Group, Inc., a financial advisory firm, since August 1993. Mr. Cox
served as President and Chief Executive Officer of The First Boston Corporation,
an investment banking firm, from July 1990 to August 1993, and as a Managing
Director of Tiger Management Company, an investment fund, from November 1993 to
June 1994.
MR. DONAGHY became a director of the Company in 1992. Since January 1991,
Mr. Donaghy has been the Chief Executive Officer and President and a director of
Sheldahl, Inc., a manufacturer of laminates, composite materials and flexible
electronic interconnects.
MR. ERVIN became a director of the Company in 1969. Mr. Ervin, who is now
retired, was a Vice President of Dain Bosworth Incorporated, an investment
banking firm, from April 1988 through June 1996.
MR. LANDSBURG became a director of the Company in March 1997. He has been an
Associate Professor of Economics at the University of Rochester since September
1991.
MR. ROSETT became a director of the Company in 1986. He has been a Professor
of Economics at the Rochester Institute of Technology ("RIT") since July 1990
and Director of Quality Cup Programs at RIT since July 1995. Mr. Rosett was Dean
of the College of Business at RIT from July 1990 to July 1996. Mr. Rosett is
also a director of Smith Corona Corp.
38
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS AND OTHER FINANCING AGREEMENTS
Set forth below is a summary description of the Private Placement Notes and
the Company's variable rate demand note (and related letter of credit) with the
City of Hutchinson, Minnesota, which constitute Senior Indebtedness for purposes
of the Notes offered hereby. Also described below are certain other financing
agreements that will not constitute Senior Indebtedness.
PRIVATE PLACEMENT NOTES
In July 1996 the Company entered into separate Note Purchase Agreements with
several insurance companies pursuant to which the Company issued, in July 1996,
senior unsecured notes in the aggregate original principal amount of $25,000,000
and, in November 1996, a senior unsecured note in the original principal amount
of $25,000,000. The notes issued in July 1996 bear interest at the fixed rate of
7.85% per annum. The principal of such notes is payable in 3 consecutive annual
installments of approximately $8,333,333 each commencing in July 2001 and
continuing until July 2003. The note issued in November 1996 bears interest at
the fixed rate of 8.07% per annum. The principal of such note is payable in 6
consecutive annual installments of approximately $4,166,667 each commencing in
November 2001 and continuing until November 2006. The notes are prepayable at
any time in whole or in part at the option of the Company at par plus a
make-whole premium. The Note Purchase Agreements contain certain covenants,
including covenants requiring the Company to maintain specified fixed charge
coverage and leverage ratios. The fixed charge coverage covenant requires the
Company to maintain, as of the end of each fiscal quarter, consolidated net
income available for fixed charges (I.E., income before income taxes, interest
and rental expense) of at least 150% of consolidated fixed charges (I.E.,
interest and rental expense) (i) if such date occurs at or before the end of the
Company's 1998 fiscal year, for a period consisting of any 4 fiscal quarters (no
more than three of which may be consecutive) selected by the Company from among
the 7 consecutive fiscal quarters ending on such date, and (ii) if such date
occurs after the end of the Company's 1998 fiscal year, for a period consisting
of any 4 fiscal quarters selected by the Company from among the 6 consecutive
fiscal quarters ending on such date. The leverage covenant requires the Company
to maintain total debt at no more than 55% of total capitalization. The Note
Purchase Agreements also contain, among other things, a covenant which requires
the Company to maintain a specified level of tangible net worth, certain
covenants which impose limitations on the ability of each of the Company and its
subsidiaries to incur additional indebtedness, grant liens, make investments,
pay dividends, enter into mergers, dispose of assets, enter into long-term
leases, guaranty obligations of others or change the nature of its business, and
customary events of default.
In April 1994 the Company entered into separate Note Purchase Agreements
with several insurance companies pursuant to which the Company issued senior
unsecured notes in the aggregate original principal amount of $30,000,000. The
notes bear interest at the fixed rate of 7.46% per annum. The principal of the
notes is payable in 16 consecutive semi-annual installments of $1,875,000 each
commencing in August 1996 and continuing until February 2004. The notes are
prepayable at any time in whole or in part at the option of the Company at par
plus a make-whole premium. The Note Purchase Agreements contain certain
covenants, including covenants requiring the Company to maintain specified fixed
charge coverage and leverage ratios. The fixed charge coverage covenant requires
the Company to maintain, as of the end of each fiscal quarter, consolidated net
income available for fixed charges of at least 150% of consolidated fixed
charges (i) for the period of 20 consecutive fiscal quarters ending on such
date, and (ii) for a period consisting of any 4 fiscal quarters selected by the
Company from among the 7 consecutive fiscal quarters ending on such date. The
leverage covenant requires the Company to maintain total debt at no more than
50% of total capitalization. The Note Purchase Agreements also contain, among
other things, covenants which require the Company to maintain a specified
current ratio and a specified level of tangible net worth, covenants which
impose limitations on the ability of each of the Company and its subsidiaries to
incur additional indebtedness, grant liens, make investments, pay dividends,
enter into mergers, dispose of assets, enter into long-term leases, engage in
sale leaseback transactions, guaranty obligations of others or change the nature
of its business, and customary events of default.
39
<PAGE>
In October 1988 the Company entered a Note Purchase Agreement with several
insurance companies pursuant to which the Company issued its senior unsecured
notes in the aggregate original principal amount of $10,000,000. The notes bear
interest at the fixed rate of 10.31% per annum. The principal of the notes is
payable in 7 consecutive annual installments of $1,340,000 each commencing in
October 1991 and continuing until October 1997, with a final installment equal
to the remaining unpaid principal amount of the notes due in October 1998. The
notes are prepayable at the option of the Company at par plus a make-whole
premium (i) in whole or in part on any principal or interest payment date, or
(ii) in whole at any time if the Company desires to effect a merger or sale of
assets which is prohibited by the note purchase agreement and which is not
consented to by the holders of the notes. The Note Purchase Agreement contains
certain covenants, including covenants requiring the Company to maintain
specified fixed charge coverage and leverage ratios. The fixed charge coverage
covenant requires the Company to maintain, as of the end of each fiscal quarter,
average consolidated net income available for fixed charges of at least 150% of
consolidated fixed charges (i) for the period of 20 consecutive fiscal quarters
ending on such date, and (ii) for a period consisting of any 4 fiscal quarters
selected by the Company from among the 7 consecutive fiscal quarters ending on
such date. The leverage covenant requires the Company to maintain total debt at
no more than 55% of total capitalization. The Note Purchase Agreement also
contains, among other things, covenants which require the Company to maintain a
specified current ratio and specified levels of tangible net worth and working
capital, covenants which impose limitations on the ability of each of the
Company and its subsidiaries to incur additional indebtedness, grant liens, make
investments, pay dividends, enter into mergers, dispose of assets, enter into
long-term leases, engage in sale leaseback transactions, guaranty obligations of
others or change the nature of its business, and customary events of default.
In March 1996 the Company entered into an agreement with the Wisconsin
Department of Development pursuant to which the department made a loan to the
Company in the amount of $1,000,000. The loan is secured by certain equipment of
the Company and is evidenced by two promissory notes, each in the original
principal amount of $500,000. The notes bear interest at the fixed rate of 4%
per annum (subject to increase by up to an additional 4% per annum in the event
the Company fails to comply with certain job creation and maintenance criteria).
The principal of the first such note is payable in 10 consecutive equal annual
installments commencing in March 1997 and continuing until March 2006. The
principal of the second such note is subject to reduction without payment in the
event the Company satisfies certain job creation and maintenance criteria, and
any portion of such principal which is not so reduced is payable in 6
consecutive equal annual installments commencing in March 2001 and continuing
until March 2006. The agreement with the Wisconsin Department of Development
contains customary covenants and events of default.
VARIABLE RATE DEMAND NOTE
In April 1993 the Company entered into an industrial development revenue
bond financing, the proceeds of which were used to refund existing bonds. In
connection with that financing, new tax-exempt bonds were issued by the City of
Hutchinson, Minnesota (the "City") in the original principal amount of
$2,000,000, and the proceeds of those bonds were loaned by the City to the
Company to effect the refunding pursuant to a Loan Agreement between the City
and the Company. The bonds are secured by a letter of credit which has been
issued by The First National Bank of Chicago (the "Bank") and which expires in
March 1999. The bonds, and the note evidencing the loan to the Company,
currently bear interest at a variable rate per annum, adjusted weekly, equal to
the lesser of (i) the interest rate necessary to enable the remarketing agent to
remarket the bonds at par, as determined by the remarketing agent, (ii) 18%,
(iii) the maximum rate specified in the letter of credit (currently 10%) or (iv)
the maximum rate permitted by law. The principal of the bonds and the note is
payable in 4 consecutive annual installments of $100,000 each commencing in June
1993 and continuing until June 1996, and 8 consecutive annual installments of
$200,000 each commencing in June 1997 and continuing until June 2004. In
addition, while the bonds are subject to a variable rate of interest, the
bondholders may tender the bonds for purchase at par on 7 days' notice, and upon
any such tender the Company is obligated to pay under the note an amount
40
<PAGE>
sufficient to pay the purchase price of the tendered bonds. As long as the bonds
are subject to a variable rate of interest, the bonds and the note may be
prepaid at any time in whole or in part at the option of the Company at par. The
bonds and the note are also subject to mandatory prepayment in certain events,
including, upon the expiration of the letter of credit, if the Company fails to
either extend the same or provide a substitute letter of credit. The Trust
Indenture governing the bonds and the Loan Agreement between the Company and the
City contain covenants and events of default customary for this type of
transaction. The letter of credit has been issued under the Old Credit Facility
(as defined below). Under the terms of the Old Credit Facility, the Company is
required to pay a fee on any undrawn portion of the letter of credit from time
to time outstanding equal to the greater of (i) $1,500 for each year or any part
thereof, or (ii) a rate per annum determined by reference to LIBOR plus 2%. The
Old Credit Facility contains certain covenants, including a leverage covenant
requiring the Company to maintain, as of the last day of each fiscal quarter
from and after the issuance of the Notes, total debt at no more than 50% of
total capitalization. The Old Credit Facility also contains, among other things,
covenants which require the Company to maintain specified levels of net worth
and earnings before interest, taxes, depreciation and amortization, covenants
which impose limitations on the ability of each of the Company and its
subsidiaries to incur additional indebtedness, grant liens, make investments and
acquisitions, pay dividends, enter into mergers, dispose of assets, sell
receivables, engage in sale leaseback transactions, make or commit to make
capital expenditures, guaranty obligations of others or change the nature of its
business, and customary events of default.
OLD CREDIT FACILITY
The Company has amended its existing credit facility with the Bank (the "Old
Credit Facility") solely to permit the letter of credit described above under
"--Variable Rate Demand Note" to remain outstanding. Under the terms of this
amendment, however, the Company is not permitted to incur any additional
borrowings under the Old Credit Facility, and is required to continue to comply
with the restrictive covenants described above under "--Variable Rate Demand
Note" as long as the letter of credit remains outstanding.
In March 1998 the Company entered into a commitment for a proposed new
credit facility with the Bank to permit unsecured borrowings of up to
$25,000,000. The Company paid a $1,000,000 arrangement fee in connection with
this commitment. The Company determined not to close this proposed new credit
facility and has no further obligations under the terms of such commitment.
The Company currently has no other commitments for, and is uncertain whether
it will have access to, additional capital or borrowing arrangements on terms
economically favorable to the Company, if at all. See "Risk
Factors--Fluctuations in Operating Results; Liquidity Needs" and "--Capital
Needs."
GE MASTER LEASE AGREEMENT
In December 1996 the Company entered into a Master Lease Agreement with GE,
as lessor. The Master Lease Agreement provided for the leasing by the Company of
certain assembly and etching equipment in fiscal 1997 with an aggregate
capitalized lessor's cost of up to $25,000,000, $15,400,000 of which was funded.
In June 1997 the Master Lease Agreement was amended to provide for the leasing
by the Company of additional assembly and etching equipment in fiscal 1998 with
an aggregate capitalized lessor's cost of up to $30,000,000. Commitments by the
lessor for the acquisition and leasing of additional equipment in each fiscal
year after fiscal 1998 are subject to the approval of the lessor and the payment
by the Company of a fee equal to .25% of the amount of the lessor's commitment
with respect to such fiscal year. Under the Master Lease Agreement, the lessor
has been granted the exclusive right to provide all lease financing requirements
of the Company with respect to assembly and/or etching equipment for a period of
three years after the date of the agreement (provided that the Company may
arrange for a third party to provide such lease financing requirements if the
lessor at any time fails to provide a commitment for the full amount requested
by the Company). The lessor may require the prepayment and cancellation of the
Master Lease Agreement in the event of certain changes in control of the
Company. The Master
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Lease Agreement contains, among other things, covenants which require the
Company to maintain specified fixed charge coverage, interest coverage and
leverage ratios, and customary events of default (including events of default if
the Company enters into certain mergers or conveyances of substantially all of
its assets). The fixed charge coverage covenant requires the Company to
maintain, as of the end of each fiscal quarter, a ratio of (i) earnings before
interest, taxes, depreciation, amortization and rentals for the most recently
ended 12-month period, to (ii) the sum of interest and rentals for the most
recently ended 12-month period plus current maturities of long-term debt as of
such fiscal quarter end, of not less than an amount which varies by quarter and
ranges from .64:1 to 3.99:1. The interest coverage covenant requires the Company
to maintain, as of the end of each fiscal quarter, a ratio of (i) earnings
before interest, taxes, depreciation and amortization for the most recently
ended 12-month period, to (ii) interest for the most recently ended 12-month
period, of not less than an amount which varies by quarter and ranges from
1.28:1 to 11.90:1. The leverage covenant requires the Company to maintain, as of
the end of each fiscal quarter, total debt at no more than 50% of total
capitalization.
WISCONSIN SALE-LEASEBACK TRANSACTION
In May 1996 the Company entered into a transaction with respect to its Eau
Claire, Wisconsin facility. As part of that transaction, the Company transferred
the facility to Meridian Eau Claire LLC, which concurrently leased the facility
back to the Company. In order to finance the purchase price of the facility, the
lessor borrowed $15,300,000 from an insurance company, which was secured by a
mortgage of the facility and an assignment of the lessor's interests under the
lease. Also as part of the transaction, the Company entered into a
Subordination, Non-Disturbance and Attornment Agreement with the lessor and the
insurance company. The term of the lease of the facility commences on the date
of the lease and ends 15 years thereafter, provided that the lease may be
renewed by the Company for 4 additional periods of 5 years each. The Company is
obligated to pay under the lease basic rent in the amount of $144,582 per month
and, as additional rent, all property taxes, insurance premiums, utility
charges, maintenance expenses and other costs, expenses and obligations relating
to the leased premises. Pursuant to the lease, the Company has been granted a
right of first refusal in the event of a proposed sale or other transfer by the
lessor of the leased premises. The lease contains customary events of default,
including cross defaults to the covenants contained in the Subordination,
Non-Disturbance and Attornment Agreement. The Subordination, Non-Disturbance and
Attornment Agreement contains certain covenants, including covenants requiring
the Company to maintain specified fixed charge coverage and leverage ratios. The
fixed charge coverage covenant requires the Company to maintain, as of the end
of each fiscal quarter, consolidated net income available for fixed charges of
at least 150% of consolidated fixed charges (i) for the period of 20 consecutive
fiscal quarters ending on such date, and (ii) for a period consisting of any 4
fiscal quarters selected by the Company from among the 7 consecutive fiscal
quarters ending on such date. The leverage covenant requires the Company to
maintain total debt at no more than 50% of total capitalization. The
Subordination, Non-Disturbance and Attornment Agreement also contains, among
other things, covenants which require the Company to maintain a specified level
of tangible net worth and covenants which impose limitations on the ability of
each of the Company and its subsidiaries to enter into mergers, dispose of
assets or engage in sale leaseback transactions. Pursuant to the Subordination,
Non-Disturbance and Attornment Agreement, the Company has the right to purchase
the note evidencing the insurance company's loan at any time at par plus the
make-whole premium provided for in the note.
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DESCRIPTION OF NOTES
The Notes were issued under an indenture dated as of March 18, 1998 (the
"Indenture") between the Company and U.S. Bank National Association, as trustee
(the "Trustee"), a copy of which has been filed with the Commission as an
exhibit to the Shelf Registration Statement of which this prospectus forms a
part. The following summaries of certain provisions of the Indenture and the
Shelf Registration Agreement do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all of the provisions of
the Indenture and the Shelf Registration Agreement, including the definition
therein of certain terms used below. 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 of 1939, as amended. Copies of the Indenture and the Shelf
Registration Agreement are available from the Company upon request. References
in this section to the "Company" are solely to Hutchinson Technology
Incorporated and not to its subsidiaries.
GENERAL
The Notes are general, unsecured subordinated obligations of the Company,
limited in aggregate principal amount to $150,000,000, and will mature on March
15, 2005 (the "Stated Maturity"). The Notes bear interest at the rate of 6% per
annum from the date of initial issuance of Notes pursuant to the Indenture, or
from the most recent Interest Payment Date to which interest has been paid or
provided for, payable semi-annually on March 15 and September 15 of each year,
commencing September 15, 1998, to the Person in whose name such Notes (or any
predecessor Notes) are registered (individually, a "Holder" and collectively,
the "Holders") at the close of business on the preceding March 1 or September 1,
as the case may be (whether or not a business day). Interest on the Notes is
paid on the basis of a 360-day year consisting of twelve 30-day months.
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, if any, interest and liquidated
damages, if any) be made by wire transfer of immediately available same day
funds to the accounts specified by the Holder of interests in such Global Note.
With respect to Definitive Notes, the Company will make all payments of
principal, premium, if any, interest and liquidated damages, if any, by wire
transfer of immediately available same day funds to the accounts specified by
the Holders thereof or, if no such account is specified, by mailing a check to
each such Holder's registered address. See "Same Day Settlement and Payment"
below.
The Notes have been issued in registered form, without coupons and in
denominations of $1,000 or any integral multiple thereof. No service charge will
be made for any transfer or exchange of the Notes, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge and
any other expenses (including the fees and expenses of the Trustee) payable in
connection therewith. The Company is not required (i) to issue or register the
transfer of or exchange of any Notes during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption and
ending at the close of business on the day of such mailing, (ii) to register the
transfer of or exchange of any Notes selected for redemption in whole or in
part, except the unredeemed portion of Notes being redeemed in part or (iii) to
register the transfer of or exchange of any Notes surrendered for conversion or
repurchase (and not withdrawn) upon the occurrence of a Repurchase Event.
All monies paid by the Company to the Trustee or any Paying Agent for the
payment of principal of, and premium and interest on, and liquidated damages, if
any, with respect to, any Notes which remain unclaimed for two years after such
principal, premium, interest or liquidated damages, if any, becomes due and
payable may be repaid to the Company. Thereafter, the Holder of such Notes may,
as an unsecured general creditor, look only to the Company for payment thereof.
The Indenture does not contain any provisions that would provide protection
to Holders of the Notes against a sudden and dramatic decline in credit quality
of the Company resulting from any takeover, recapitalization or similar
restructuring, except as described below under "Certain Rights to Require
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Repurchase of Notes" below. There can be no assurance that the Company will have
the financial resources necessary to repurchase the Notes upon a Repurchase
Event. See "Risk Factors--Fluctuations in Operating Results; Liquidity Needs"
and "--Limitations on Repurchase Upon Repurchase Event."
CONVERSION RIGHTS
The Notes are convertible into Common Stock prior to their Stated Maturity,
unless previously redeemed or repurchased, initially at the conversion price of
$28.35 per share (which is initially equivalent to a conversion rate of 35.273
shares per $1,000 of Notes). The right to convert Notes which have been called
for redemption will terminate at the close of business on the business day
immediately preceding the Redemption Date, unless the Company subsequently
defaults on payment of the Redemption Price. See "Optional Redemption" below. A
Note for which a Holder has delivered a Repurchase Event purchase notice
exercising the option of such Holder to require the Company to repurchase such
Note may be converted only if such notice is withdrawn by a written notice of
withdrawal delivered by the Holder to the Company prior to the close of business
on the business day immediately preceding the Repurchase Date, unless the
Company subsequently defaults on the payment of the Repurchase Price. See
"Certain Rights to Require Repurchase of Notes" below.
The conversion price is subject to adjustment, without duplication, upon the
occurrence of any one or more of the following events: (i) the subdivision,
combination or reclassification of outstanding shares of Common Stock; (ii) the
payment of a dividend or distribution on Common Stock in shares of Common Stock
or the payment of a dividend or distribution on any other class of capital stock
of the Company in shares of Common Stock; (iii) the issuance of rights or
warrants to all holders of Common Stock entitling them to acquire shares of
Common Stock (or securities convertible into Common Stock) at a price per share
less than the Current Market Price; (iv) the distribution to holders of Common
Stock of shares of capital stock (other than Common Stock), evidences of
indebtedness or assets (including securities and dividends or distributions paid
in part in cash, but excluding dividends or distributions paid exclusively in
cash and dividends, distributions, rights and warrants referred to above); (v)
the distribution to all or substantially all holders of Common Stock of rights
or warrants to subscribe for its securities (other than those referred to in
(iii) above); (vi) a distribution consisting exclusively of cash to all holders
of Common Stock in an aggregate amount that, together with (A) all other cash
distributions (excluding any cash distributions referred to in (iv) above) made
within the 12 months preceding the date fixed for determining the shareholders
entitled to such distribution and (B) any cash and the fair market value of
other consideration payable in respect of any tender offer by the Company or a
subsidiary of the Company for the Common Stock consummated within the 12 months
preceding such date of determination, exceeds 10% of the Company's market
capitalization (being the product of the Current Market Price times the number
of shares of Common Stock then outstanding) on such date of determination
entitled to such distribution; (vii) the consummation of a tender offer made by
the Company or any subsidiary of the Company for all or any portion of the
Common Stock which involves an aggregate consideration that, together with (X)
any cash and other consideration payable in respect of any tender offer by the
Company or a subsidiary of the Company for the Common Stock consummated within
the 12 months preceding the consummation of such tender offer and (Y) the
aggregate amount of all cash distributions (excluding any cash distributions
referred to in (iv) above) to all holders of the Common Stock within the 12
months preceding the consummation of such tender offer, exceeds 10% of the
product of the Current Market Price immediately prior to the date of
consummation of such tender offer times the number of shares of Common Stock
outstanding at the date of consummation of such tender offer; (viii) payment in
respect of a tender offer or exchange offer by a person other than the Company
or any subsidiary of the Company in which, as of the closing date of the offer,
the Board of Directors is not recommending rejection of the offer; and (ix) the
issuance of Common Stock or securities convertible into, or exchangeable for,
Common Stock at a price per share (or having a conversion or exchange price per
share) that is less than the then Current Market Price of the Common Stock (but
excluding, among other things, issuances: (a) pursuant to any bona fide plan for
the benefit of employees, directors or consultants of the Company now or
hereafter
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in effect; (b) to acquire all or any portion of a business in an arm's-length
transaction between the Company and an unaffiliated third party including, if
applicable, issuances upon exercise of options or warrants assumed in connection
with such an acquisition; (c) in a bona fide public offering pursuant to a firm
commitment underwriting or sales at the market pursuant to a continuous offering
stock program; (d) pursuant to the exercise of warrants, rights (including,
without limitation, earnout rights) or options, or upon the conversion of
convertible securities, which are issued and outstanding on the date hereof, or
which may be issued in the future at a fair value and with an exercise price or
conversion price at least equal to the Current Market Price of the Common Stock
at the time of issuance of such warrant, right, option or convertible security;
and (e) pursuant to a dividend reinvestment plan or other plan hereafter adopted
for the reinvestment of dividends or interest provided that such Common Stock is
issued at a price at least equal to 95% of the Current Market Price of the
Common Stock at the time of such issuance). The adjustment referred to in clause
(viii) of the preceding sentence will only be made if the tender offer or
exchange is for an amount which increases the offeror's ownership of Common
Stock to more than 25% of the total shares of Common Stock outstanding, and if
the cash and value of any other consideration included in such payment per share
of Common Stock exceeds the Current Market Price per share of Common Stock on
the business day next succeeding the last date on which tenders or exchanges may
be made pursuant to such tender or exchange offer. The adjustment referred to in
clause (viii) will generally not be made, however, if, as of the closing of the
offer, the offering documents with respect to such offer disclose a plan or an
intention to cause the Company to engage in a consolidation or merger of the
Company or a sale of all or substantially all of the Company's assets. No
adjustment of the conversion price is required to be made until cumulative
adjustments amount to at least one percent of the conversion price, as last
adjusted. Any adjustment that would not otherwise be sufficient to require a
change to be made pursuant to the immediately preceding sentence shall be
carried forward and taken into account in any subsequent adjustment.
The Indenture provides that if the Company implements a shareholders' rights
plan, such rights plan must provide that upon conversion of the Notes the
Holders will receive, in addition to the Common Stock issuable upon such
conversion, such rights whether or not such rights have separated from the
Common Stock at the time of such conversion.
In addition to the foregoing adjustments, the Company is permitted to reduce
the conversion price as it considers to be advisable in order that any event
treated for federal income tax purposes as a dividend of stock or stock rights
will not be taxable to the holders of the Common Stock or, if that is not
possible, to diminish any income taxes that are otherwise payable because of
such event. See "Certain United States Federal Income Tax Consequences."
In the case of any consolidation or merger of the Company with any other
Person (other than one in which no change is made in the Common Stock), or any
sale or transfer of all or substantially all of the assets of the Company, the
Holder of any Note then outstanding will, with certain exceptions, have the
right thereafter to convert such Note only into the kind and amount of
securities, cash and other property receivable upon such consolidation, merger,
sale or transfer by a Holder of the number of shares of Common Stock into which
such Note might have been converted immediately prior to such consolidation,
merger, sale or transfer, and adjustments will be provided for events subsequent
thereto that are as nearly equivalent as practical to the conversion price
adjustments described above.
In the case of any Note that has been converted into Common Stock after any
Regular Record Date, but on or before the next Interest Payment Date, interest,
the stated due date of which is on such Interest Payment Date, shall be payable
on such Interest Payment Date notwithstanding such conversion, and such interest
shall be paid to the Holder of such Note who is a Holder on such Regular Record
Date. Any Note converted after any Regular Record Date but on or before the next
Interest Payment Date (other than Notes called for redemption) must be
accompanied by payment of an amount equal to the interest payable on such
Interest Payment Date on the principal amount of Notes being surrendered for
conversion. Except as described in the two preceding sentences, no interest will
be payable by the Company on converted
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Notes with respect to any Interest Payment Date subsequent to the date of
conversion. No other payment or adjustment for interest or dividends will be
made upon conversion. Fractional shares of Common Stock will not be issued upon
conversion, but, in lieu thereof, the Company will pay a cash adjustment based
upon the Closing Price at the close of business on the day of conversion (or, if
such day is not a Trading Day, on the Trading Day immediately preceding such
day).
SUBORDINATION
The payment of the principal of, premium, if any, interest on, and
liquidated damages, if any, with respect to, the Notes is, to the extent set
forth in the Indenture, subordinated in right of payment to the prior payment in
full in cash of all Senior Indebtedness. If there is a payment or distribution
of assets to creditors upon any liquidation, dissolution, winding up,
reorganization, assignment for the benefit of creditors, marshaling of assets or
any bankruptcy, insolvency or similar proceedings of the Company, the holders of
all Senior Indebtedness will be entitled to receive payment in full in cash of
all obligations in respect of such Senior Indebtedness before the Holders of the
Notes will be entitled to receive any payment in respect of the principal of,
premium, if any, interest on, or liquidated damages, if any, with respect to the
Notes (other than in Junior Securities).
In the event of the acceleration of the maturity of the Notes, the holders
of all Senior Indebtedness will first be entitled to receive payment in full in
cash of all obligations due thereon before the Holders of the Notes will be
entitled to receive any payment for the principal of, premium, if any, interest
on, or liquidated damages, if any, with respect to the Notes (other than in
Junior Securities). The Indenture further requires that the Company promptly
notify holders of Senior Indebtedness if payment of the Notes is accelerated
because of an Event of Default.
The Company also may not make any payment (whether by redemption, purchase,
retirement, defeasance or otherwise) to the Holders upon or in respect of the
Notes (other than in Junior Securities) if (i) a default in the payment of the
principal of, or premium, if any, or interest on any Designated Senior
Indebtedness (a "Payment Default") occurs and is continuing beyond any
applicable grace period or (ii) any other default occurs and is continuing with
respect to any Designated Senior Indebtedness that permits holders of Designated
Senior Indebtedness as to which that default relates to accelerate its maturity
(a "Nonpayment Default" ) and the Trustee receives notice of such default (a
"Payment Blockage Notice") from (a) if such Nonpayment Default shall have
occurred under any Credit Facility, the representative of the Credit Facility,
(b) if such Nonpayment Default shall have occurred under the Private Placement
Notes, the holders thereof or their designated agents or (c) if such Nonpayment
Default shall have occurred with respect to any other issue of Designated Senior
Indebtedness, the holders, or a representative of the holders, of at least 20%
of such Designated Senior Indebtedness. The payments on or in respect of the
Notes shall be resumed (i) in the case of a Payment Default respecting
Designated Senior Indebtedness, on the date on which that default is cured or
waived or ceases to exist and (ii) in the case of a Nonpayment Default
respecting Designated Senior Indebtedness, the earliest of (a) the date on which
that Nonpayment Default is cured or waived or ceases to exist, (b) the date the
applicable Payment Blockage Notice is retracted by written notice to the Trustee
from a representative of the holders of the Designated Senior Indebtedness which
have given that Payment Blockage Notice and (c) 179 days after the date on which
the applicable Payment Blockage Notice is received by the Trustee, unless any
Payment Default has occurred and is continuing or an Event of Default of the
type referred to in clause (g) of the first sentence under "Events of Default"
below has occurred with respect to the Company. No new period of payment
blockage may be commenced unless and until (i) 365 days shall have elapsed since
the effectiveness of the immediately prior Payment Blockage Notice and (ii) all
scheduled payments of principal, premium, if any, interest on, and liquidated
damages, if any, with respect to, the Notes that have come due have been paid in
full in cash. No Nonpayment Default that existed or was continuing on the date
of delivery of any Payment Blockage Notice to the Trustee shall be, or be made,
the basis of a
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subsequent Payment Blockage Notice unless such default shall have been cured or
waived for a period of not less than 90 days.
The Indenture governing the Notes does not limit or prohibit the incurrence
of additional indebtedness, including Senior Indebtedness, by the Company or its
subsidiaries. In addition, the Notes are effectively subordinated to all current
and future liabilities of the Company's subsidiaries. At February 22, 1998, the
Company had approximately $75 million of Senior Indebtedness outstanding. The
indebtedness outstanding under the Private Placement Notes and the Company's
variable rate demand note (and related letter of credit) with the City of
Hutchinson constitute Senior Indebtedness.
By reason of the subordination provisions described above, in the event of
the Company's liquidation or insolvency, holders of Senior Indebtedness may
receive more, ratably, and Holders of the Notes may receive less, ratably, than
the other creditors of the Company. Such subordination will not prevent the
occurrences of any Event of Default under the Indenture.
The Notes are obligations exclusively of the Company. Because certain
operations of the Company are conducted through its subsidiaries, the cash flow
and consequent ability to service debt of the Company, including the Notes, may
depend, in part, upon the earnings of its subsidiaries and their ability to
distribute cash to the Company. The payment of dividends and the making of loans
and advances to the Company by its subsidiaries may be subject to statutory and
contractual restrictions, are dependent upon the earnings of those subsidiaries
and are subject to various business considerations. Any right of the Company to
receive assets of any of its subsidiaries upon their liquidation or
reorganization (and the consequent right of the Holders of the Notes to
participate in those assets) will be effectively subordinated to the claims of
that subsidiary's creditors (including trade creditors), except to the extent
that the Company is itself recognized as a creditor of such subsidiary, in which
case the claims of the Company would still be subordinate to any security
interests in the assets of such subsidiary and any indebtedness of such
subsidiary senior to that held by the Company.
In the event that, notwithstanding the foregoing, the Trustee or any Holder
receives any payment or distribution of assets of the Company of any kind in
contravention of any of the terms of the Indenture, whether in cash, property or
securities, including, without limitation, by way of set-off or otherwise, in
respect of the Notes before all Senior Indebtedness is paid in full in cash,
then such payment or distribution will be held by the recipient in trust for the
benefit of holders of Senior Indebtedness, and will be immediately paid over or
delivered to the holders of Senior Indebtedness or their representative or
representatives to the extent necessary to make payment in full of all Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution, or provision therefor, to or for the holders of Senior
Indebtedness.
OPTIONAL REDEMPTION
The Notes are redeemable, at the Company's option, in whole or from time to
time in part, at any time on or after March 20, 2001, upon a date (a "Redemption
Date") not less than 30 nor more than 60 days' notice mailed to each Holder of
Notes to be redeemed at its address appearing in the Security Register and prior
to the Stated Maturity at the following prices ("Redemption Prices") (expressed
as percentages of the principal amount) plus accrued and unpaid interest and
liquidated damages, if any, to the Redemption Date (subject to the right of
Holders on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date).
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If redeemed during the 12-month period beginning March 15 (beginning March
20 in the case of the first such period), the Redemption Price shall be:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---------------------------------------------------------------------------- ----------------
<S> <C>
2001........................................................................ 103.43%
2002........................................................................ 102.57
2003........................................................................ 101.71
2004........................................................................ 100.86
2005........................................................................ 100.00
</TABLE>
in each case together with accrued and unpaid interest and liquidated damages,
if any, to but excluding the Redemption Date.
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange or national market
system, if any, on which the Notes are listed, or, if the Notes are not so
listed, on a pro rata basis, by lot or by such other method as the Trustee shall
deem fair and appropriate; provided that no Notes of $1,000 principal amount or
less shall be redeemed in part. Notice of any redemption will be sent, by
first-class mail, at least 20 days and not more than 60 days prior to the date
fixed for redemption, 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 to be paid. Any notice that relates to a Note to be
redeemed in part only must state the portion of the principal amount equal to
the unredeemed portion thereof 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 portion 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.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that the Company will not consolidate with or merge
into any other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, and the Company will not permit any
Person to consolidate with or merge into the Company unless: (a) the Person
formed by such consolidation or into which the Company is merged or the Person
which acquires the properties and assets of the Company substantially as an
entirety is a corporation, partnership, trust, or limited liability company
organized and validly existing under the laws of the United States or any state
thereof or the District of Columbia and expressly assumes payment of the
principal of, premium, if any, interest on, and liquidated damages, if any, with
respect to, the Notes and performance and observance of each obligation of the
Company under the Indenture; (b) after consummating such consolidation, merger,
transfer or lease, no Default or Event of Default will occur and be continuing;
(c) such consolidation, merger, conveyance, transfer or lease does not adversely
affect the validity or enforceability of the Notes; and (d) the Company has
delivered to the Trustee an Officer's Certificate and an Opinion of Counsel,
each stating that such consolidation, merger, conveyance, transfer or lease
complies with the provisions of the Indenture.
CERTAIN RIGHTS TO REQUIRE REPURCHASE OF NOTES
In the event of any Repurchase Event occurring on or prior to the Stated
Maturity, each Holder of Notes will have the right, at the Holder's option, to
require the Company to repurchase all or any part of the Holder's Notes on the
date (the "Repurchase Date") that is 30 days after the date the Company gives
notice of the Repurchase Event as described below at a price (the "Repurchase
Price") equal to 100% of the principal amount thereof, together with accrued and
unpaid interest to but excluding the Repurchase
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Date. On or prior to the Repurchase Date, the Company shall deposit with the
Trustee or a Paying Agent an amount of money in same day funds sufficient to pay
the Repurchase Price of the Notes which are to be repaid on or promptly
following the Repurchase Date.
Failure by the Company to provide timely notice of a Repurchase Event, as
provided for below, or to repurchase the Notes when required under the preceding
paragraph will result in an Event of Default under the Indenture whether or not
such repurchase is permitted by the subordination provisions of the Indenture.
On or before the 15th day after the occurrence of a Repurchase Event, the
Company is obligated to mail to all Holders of Notes a notice of the occurrence
of such Repurchase Event and identifying the Repurchase Event, the Repurchase
Date, the date by which the repurchase right must be exercised, the Repurchase
Price for Notes (which shall equal 100% of the principal amount thereof,
together with accrued and unpaid interest and liquidated damages, if any, to but
excluding the Repurchase Date) and the procedures which the Holder must follow
to exercise this right. To exercise the repurchase right, the Holder of a Note
must deliver, prior to the close of business on the third business day preceding
the Repurchase Date, written notice to the Company (or an agent designated by
the Company for such purpose) of the Holder's exercise of such right, together
with the certificates evidencing the Notes with respect to which the right is
being exercised, duly endorsed for transfer.
There can be no assurance that the Company will have the financial resources
necessary to repurchase the Notes upon a Repurchase Event. See "Risk
Factors--Fluctuations in Operating Results; Liquidity Needs" and "--Limitations
on Repurchase Upon Repurchase Event." The Company's future Senior Indebtedness
may provide that a change in control of the Company would constitute an event of
default thereunder, the occurrence of which would cause any repurchase of the
Notes, absent a waiver, to be blocked by the subordination provisions of the
Notes. In addition, even if such event of default did not occur or was waived,
the right to require the Company to repurchase Notes as a result of the
occurrence of a Repurchase Event could create an event of default under Senior
Indebtedness of the Company, as a result of which any repurchase could, absent a
waiver, be blocked by the subordination provisions of the Notes. See
"Subordination" above. The Company's ability to pay cash to the Holders of Notes
upon a Repurchase Event may be limited by certain financial covenants contained
in the Company's Senior Indebtedness. Failure by the Company to repurchase the
Notes when required will result in an Event of Default with respect to the Notes
whether or not such repurchase is permitted by the subordination provisions
thereof.
In the event a Repurchase Event occurs and the Holders exercise their rights
to require the Company to repurchase Notes, the Company intends to comply with
applicable tender offer rules under the Exchange Act, including Rules 13e-4 and
14e-1, as then in effect, with respect to any such purchase.
The foregoing provisions would not necessarily afford Holders of the Notes
protection in the event of highly leveraged or other transactions involving the
Company that may adversely affect Holders. In addition, the foregoing provisions
may discourage open market purchases of the Common Stock or a non-negotiated
tender or exchange offer for such stock and, accordingly, may limit a
shareholder's ability to realize a premium over the market price of the Common
Stock in connection with any such transaction.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will furnish to the Trustee (i) all quarterly and annual financial information
that would be required to be contained in a filing with the Commission on Forms
10-Q and 10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and, with respect to the annual financial statements only, an audit
report thereon by the Company's independent public accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were
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required to file such reports. In addition, whether or not required by the rules
and regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability (unless the
Commission will not accept such a filing).
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to the
Notes: (a) default in the payment of the principal of, or the premium, if any,
on any Note when due (even if such payment is prohibited by the subordination
provisions of the Indenture); (b) default in the payment of any interest on, or
liquidated damages, if any, with respect to, any Note when due, which default
continues for 30 days (even if such payment is prohibited by the subordination
provisions of the Indenture); (c) failure to provide timely notice of a
Repurchase Event as required by the Indenture; (d) default in the payment of the
Repurchase Price in respect of any Note on the Repurchase Date therefor (even if
such payment is prohibited by the subordination provisions of the Indenture);
(e) default in the performance, or breach, of any other covenant or warranty of
the Company in the Indenture which continues for 60 days after written notice as
provided in the Indenture; (f) default under one or more bonds, notes or other
evidences of indebtedness for money borrowed by the Company or any subsidiary of
the Company or under one or more mortgages, indentures or instruments under
which there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company or any subsidiary of the Company,
whether such indebtedness now exists or shall hereafter be created, which
default individually or in the aggregate shall constitute a failure to pay the
principal of indebtedness in excess of $5.0 million when due and payable after
the expiration of any applicable grace period with respect thereto or shall have
resulted in indebtedness in excess of $5.0 million becoming or being declared
due and payable prior to the date on which it would otherwise have become due
and payable, without such indebtedness having been discharged, or such
acceleration having been rescinded or annulled; and (g) certain events in
bankruptcy, insolvency or reorganization of the Company or any subsidiary of the
Company.
If an Event of Default with respect to the Notes (other than as specified in
clause (g) in the immediately preceding paragraph with respect to the Company)
shall occur and be continuing, the Trustee or the Holders of not less than 25%
in aggregate principal amount of the outstanding Notes may declare the principal
of, and premium, if any, on all such Notes to be due and payable immediately,
but if the Company cures all Events of Default and has paid or deposited with
the Trustee a sum sufficient to pay all principal of, premium, if any, interest
on, and liquidated damages, if any, with respect to, Notes then due and certain
other conditions are met, such declaration may be canceled and past defaults may
be waived by the Holders of a majority in principal amount of outstanding Notes.
If an Event of Default shall occur as a result of an event of bankruptcy,
insolvency or reorganization of the Company, the principal of, premium, if any,
and any accrued and unpaid interest on, and liquidated damages, if any, with
respect to, the Notes shall automatically become due and payable. The Company is
required to furnish to the Trustee annually a statement as to the performance by
the Company of certain of its obligations under the Indenture and as to any
default in such performance. The Indenture provides that the Trustee may
withhold notice to the Holders of the Notes of any continuing default (except in
the payment of the principal of, premium, if any, interest on, or liquidated
damages, if any, with respect to, any Notes) if the Trustee considers it in the
interest of Holders of the Notes to do so.
MODIFICATION, AMENDMENTS AND WAIVERS
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of a majority in aggregate principal
amount of outstanding Notes; provided, however, that no such modification or
amendment may without consent of the Holder of each outstanding Note affected
thereby (i) change the Stated Maturity of the principal of, or any installment
of interest on, or liquidated damages, if any, with respect to, any Note; (ii)
reduce the principal amount of, or the premium or interest on, or liquidated
damages, if any, with respect to, any Note; (iii) change the place of
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payment where, or currency in which, any Note or any premium or interest or
liquidated damages, if any, thereon is payable; (iv) impair the right to
institute suit for the enforcement of any payment on or with respect to any
Note; (v) adversely affect the right to convert the Notes; (vi) adversely affect
the right to cause the Company to repurchase the Notes; (vii) modify the
subordination provisions in a manner adverse to the Holders of the Notes; or
(viii) reduce the above stated percentage of aggregate principal amount of
outstanding Notes necessary for waiver or compliance with certain provisions of
the Indenture or for waiver of certain defaults.
The Indenture may also be modified or amended without the consent of the
Holders: (i) to cause the Indenture to be qualified under the Trust Indenture
Act of 1939, as amended; (ii) to evidence the succession of another Person to
the Company as otherwise permitted by the Indenture; (iii) to add to the
covenants of the Company for the benefit of the Holders of the Notes or to
surrender any power conferred upon the Company; (iv) to add any Events of
Default; (v) to permit or facilitate the issuance of securities in
uncertificated form; (vi) to secure the Notes; (vii) to provide for successor
trustees; or (viii) to cure any ambiguity, to correct or supplement any
provision which may be inconsistent with any other provision or to make any
other provisions with respect to matters or questions arising under the
Indenture; provided such action shall not adversely affect the interest of
Holders of Notes in any material respect and the Trustee may rely upon the
opinion of counsel to that effect.
The Holders of a majority in aggregate principal amount of outstanding Notes
may waive compliance by the Company with certain restrictive provisions of the
Indenture. The Holders of a majority in aggregate principal amount of
outstanding Notes may waive any past default or right under the Indenture,
except (i) a default in payment of principal, premium or interest or liquidated
damages, if any, (ii) the right of a Holder to redeem or convert the Note, or
(iii) with respect to any covenant or provision of the Indenture that requires
the consent of the Holder of each outstanding Note affected.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
A "CHANGE IN CONTROL" shall occur when: (i) all or substantially all of the
Company's assets are sold as an entirety to any person or related group of
persons; (ii) there shall be consummated any consolidation or merger of the
Company (A) in which the Company is not the continuing or surviving corporation
(other than a consolidation or merger with a wholly owned subsidiary of the
Company in which all shares of Common Stock outstanding immediately prior to the
effectiveness thereof are changed into or exchanged for the same consideration)
or (B) pursuant to which the Common Stock would be converted into cash,
securities or other property, in each case, other than a consolidation or merger
of the Company in which the holders of the Common Stock immediately prior to the
consolidation or merger have, directly or indirectly, at least a majority of the
total voting power of all classes of Capital Stock entitled to vote generally in
the election of directors of the continuing or surviving Person immediately
after such consolidation or merger in substantially the same relative proportion
as their ownership of Common Stock immediately before such transaction; (iii)
any person, or any persons acting together which would constitute a "group" for
purposes of Section 13(d) of the Exchange Act, together with any affiliates
thereof, shall beneficially own (as defined in Rule 13d-3 under the Exchange
Act) at least 50% of the total voting power of all classes of capital stock of
the Company entitled to vote generally in the election of
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directors of the Company; (iv) at any time during any consecutive two-year
period, individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by such
Board of Directors or whose nomination for election by the shareholders of the
Company was approved by a vote of 66-2/3% of the directors then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office;
or (v) the Company is liquidated or dissolved or adopts a plan of liquidation or
dissolution.
"CREDIT FACILITY" means, with respect to the Company, any credit facility,
as the same may be amended, restated, modified, renewed, refunded, replaced or
refinanced in whole or in part from time to time.
"DESIGNATED SENIOR INDEBTEDNESS" means principal, interest, premiums, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing (i) indebtedness outstanding under the Old Credit
Facility, the Private Placement Notes and the Company's variable rate demand
note (and related letter of credit) with the City of Hutchinson, and (ii) any
other indebtedness (a) under any debt facility with banks or other lenders which
provides for revolving credit loans, term loans, receivables financing
(including through the sale of receivables) or letters of credit to the Company
or any of its subsidiaries and (b) any other Senior Indebtedness the principal
amount of which is $5 million or more and, in each case, that has been
designated by the Company as "Designated Senior Indebtedness."
"DISQUALIFIED CAPITAL STOCK" means, with respect to the Company, Capital
Stock of the Company that, by its terms or by the terms of any security into
which it is convertible, exercisable or exchangeable, is, or upon the happening
of an event or the passage of time would be, required to be redeemed or
repurchased (including at the option of the holder thereof) by the Company, in
whole or in part, on or prior to the Stated Maturity of the Notes, provided that
only the portion of such Capital Stock which is so convertible, exercisable,
exchangeable or redeemable or subject to repurchase prior to such Stated
Maturity shall be deemed to be Disqualified Capital Stock.
"JUNIOR SECURITIES" means any Qualified Capital Stock and any indebtedness
of the Company that is fully subordinated in right of payment to Senior
Indebtedness to the same extent as the Notes and has no scheduled installment of
principal due, by redemption, sinking fund payment or otherwise, on or prior to
the Stated Maturity of the Notes.
"PERSON" or "PERSON" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"PRIVATE PLACEMENT NOTES" means (i) the 7.46% Senior Notes due 2004 in the
original aggregate principal amount of $30,000,000 issued and sold pursuant to
the three separate note purchase agreements, each dated as of April 20, 1994,
between the Company and Teachers Insurance and Annuity Association of America,
Central Life Assurance Company and Modern Woodmen of America, respectively, (ii)
the 7.85% Senior Notes due 2003 in the original aggregate principal amount of
$25,000,000 and the 8.07% Senior Note due 2006 in the original aggregate
principal amount of $25,000,000 issued and sold pursuant to the three separate
note purchase agreements, each dated as of July 26, 1996, between the Company
and Metropolitan Life Insurance Company, Metropolitan Insurance and Annuity
Company and Teachers Insurance and Annuity Association of America, respectively,
(iii) the 10.31% Senior Notes due 1998 in the original aggregate principal
amount of $10,000,000 issued and sold pursuant to a note purchase agreement
dated October 28, 1988, between the Company and Northwestern National Life
Insurance Company, Northern Life Insurance Company, The North Atlantic Life
Insurance Company of America and American Investors Life Insurance Company, and
(iv) the Promissory Notes due 2006 in the original aggregate principal amount of
up to $1,000,000 issued pursuant to an agreement dated March 21, 1996 between
the Company and the Wisconsin Department of Development.
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"QUALIFIED CAPITAL STOCK" means any Capital Stock of the Company that is not
Disqualified Capital Stock.
"REGULATION S" means Regulation S under the Securities Act.
A "REPURCHASE EVENT" shall have occurred upon the occurrence of a Change in
Control (as defined above) or a Termination of Trading (as defined below).
"RULE 144A" means Rule 144A under the Securities Act.
"SENIOR INDEBTEDNESS" is defined in the Indenture as: (a) all indebtedness,
liabilities and obligations of the Company for money borrowed under the
Company's credit facilities (including, without limitation, the principal,
premium (if any), unpaid fees and interest in connection therewith and
reimbursement obligations under letters of credit issued pursuant to such credit
facilities) and any predecessor or successor credit facilities thereto, whether
outstanding on the date of execution of the Indenture or thereafter created,
incurred or assumed; (b) all present and future obligations under any agreement,
device or arrangement providing for payments which are related to fluctuations
of interest rates, exchange rates or forward rates, including, but not limited
to, dollar-denominated or cross-currency interest rate exchange agreements,
forward currency exchange agreements, interest rate swap or collar protection
agreements, forward rate currency or interest rate options, puts and warrants or
similar agreements, devices or arrangements of the Company ("Hedging
Agreements"), including all obligations of the Company, whether absolute or
contingent under any and all cancellations, buy backs, reversals, terminations
or assignments of any Hedging Agreement; (c) indebtedness of the Company for
money borrowed, whether outstanding on the date of execution of the Indenture or
thereafter created, incurred or assumed, except any such other indebtedness that
by the terms of the instrument or instruments by which such indebtedness was
created or incurred expressly provides that it (i) is junior in right of payment
to the Notes or (ii) ranks PARI PASSU in right of payment with the Notes; and
(d) any amendments, renewals, extensions, modifications, refinancings and
refundings of any of the foregoing. The term "indebtedness for money borrowed"
when used with respect to the Company is defined to mean (i) any obligation of,
or any obligation guaranteed by, the Company for the repayment of borrowed money
(including, without limitation, fees, penalties and other obligations in respect
thereof), whether or not evidenced by bonds, notes or other written instruments,
(ii) any deferred payment obligation of, or any such obligation guaranteed by,
the Company for the payment of the purchase price of property or assets
evidenced by a note or similar instrument; (iii) repurchase obligations or
liabilities of the Company with respect to accounts or notes receivable sold by
the Company or otherwise financed by the Company in a securitization or
structured receivables financing transaction; (iv) reimbursement obligations of
the Company in respect of letters of credit relating to indebtedness or other
obligations of the Company that qualify as indebtedness or obligations of the
kind referred to in clauses (i) through (iii) above; and (v) any obligation of,
or any such obligation guaranteed by, the Company for the payment of rent or
other amounts under a lease of property or assets which obligation is required
to be classified and accounted for as a capitalized lease on the balance sheet
of the Company under generally accepted accounting principles, in each such case
whether such indebtedness or obligations arise or accrue before or after the
commencement of any bankruptcy, insolvency or receivership proceedings and
whether they arise directly between the Company and any holder of such
indebtedness or obligation, or are acquired outright, conditionally or as
collateral security from another by any such holder, including, without
limitation, interest and fees accruing pre-petition or post-petition at the rate
or rates prescribed in the applicable credit agreements, notes or agreement
evidencing such Senior Indebtedness and costs, expenses and attorneys' and
paralegals' fees, whenever incurred (and whether or not such claims, interest,
costs, expenses or fees are allowed or allowable in any such proceeding).
"STATED MATURITY," when used with respect to the Notes, means March 15,
2005.
A "TERMINATION OF TRADING" shall occur if the Common Stock (or other common
stock into which the Notes are then convertible) is neither listed for trading
on a U.S. national securities exchange nor approved for trading on an
established automated over-the-counter trading market in the United States.
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SATISFACTION AND DISCHARGE
The Company may discharge its obligations under the Indenture, other than
its obligation to pay the principal of, premium and interest on, and liquidated
damages with respect to the Notes and certain other obligations (including its
obligation to deliver shares of Common Stock upon conversion of the Notes),
while Notes remain outstanding if (a) all outstanding Notes have become due and
payable or will become due and payable at their Stated Maturity within one year,
or (b) all outstanding Notes are scheduled for redemption within one year or are
delivered to the Trustee for conversion in accordance with the Indenture, and in
either case the Company has irrevocably deposited with the Trustee an amount
sufficient to pay and discharge all outstanding Notes on the date of their
Stated Maturity or the scheduled date of redemption.
FORM, DENOMINATION AND REGISTRATION
The Notes have been issued in fully registered form, without coupons, in
denominations of $1,000 in principal amount and integral multiples thereof.
GLOBAL NOTES; BOOK-ENTRY FORM. Notes held by QIBs are evidenced by a global
note (the "144A Global Note") which has been deposited with, or on behalf of,
DTC, New York, New York and registered in the name of Cede & Co. ("Cede") as
DTC's nominee. Notes sold to persons in offshore transactions (each, a "Non-U.S.
Person") in compliance with Regulation S will be evidenced initially by a global
note (the "Regulation S Global Note") which will be deposited with, or on behalf
of, DTC and registered in the name of Cede as DTC's nominee for the accounts
held through the Euroclear System ("Euroclear") operated by Morgan Guaranty
Trust Company of New York, Brussels office or Cedel, S.A. ("Cedel"). Notes held
by Institutional Accredited Investors (that have agreed in writing to comply
with the transfer restrictions and other conditions set forth in the Purchase
Agreement described herein) are evidenced by a global note (the "Institutional
Accredited Investor Global Note"), which has been deposited with, or on behalf
of, DTC and registered in the name of Cede as DTC's nominee.
The 144A Global Note, the Regulation S Global Note and the Institutional
Accredited Investor Global Note are hereinafter collectively referred to as the
Global Notes. Except as set forth above, the record ownership of the Global
Notes may be transferred, in whole or in part, only to another nominee of DTC or
to a successor of DTC or its nominee.
Beneficial interests in the Notes represented by the 144A Global Note may be
transferred (i) to another QIB, (ii) to a Non-U.S. Person who takes delivery in
the form of a beneficial interest in the Notes represented by the Regulation S
Global Note, only upon receipt by the Trustee from the transferor of a written
certificate to the effect that such transfer is being made in accordance with
Rule 903 or Rule 904 of Regulation S (a "Regulation S Transfer Certificate"), or
(iii) to a person who takes delivery in the form of a beneficial interest in the
Note represented by the Institutional Accredited Investor Global Note only upon
receipt by the Trustee from the transferee of a written certificate to the
effect that such transfer is being made to a person who the transferor
reasonably believes is purchasing for its own account or accounts as to which it
exercises sole investment discretion and that such person and each such account
is an Institutional Accredited Investor, in each case in a transaction meeting
the requirements of Regulation D and in accordance with any applicable
securities laws of any state of the United States or any other jurisdiction (an
"Institutional Accredited Investor Transfer Certificate"). Beneficial interests
in the Notes represented by the Institutional Accredited Investor Global Note
may be transferred (i) to a QIB who takes delivery in the form of a beneficial
interest in the Notes represented by the 144A Global Note only upon receipt by
the Trustee of a written certification (a "Rule 144A Transfer Certificate") to
the effect that such transfer is being made to a person whom the transferor
reasonably believes is purchasing for its own account or accounts as to which it
exercises sole investment discretion and that such person and each such account
is a QIB within the meaning of Rule 144A, in each case in a transaction meeting
the requirements of Rule 144A and in accordance with any applicable securities
laws of any state of the United States or any
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other jurisdiction, (ii) to a Non-U.S. Person who takes delivery in the form of
a beneficial interest in the Notes represented by the Regulation S Global Note,
only upon receipt by the Trustee of a Regulation S Transfer Certificate, or
(iii) to another Institutional Accredited Investor who takes delivery in the
form of a beneficial interest in the Notes represented by the Institutional
Accredited Investor Global Note.
Any beneficial interest in Notes represented by any of the Global Notes that
is transferred to a person who takes delivery in the form of a beneficial
interest in Notes represented by another Global Note will, upon transfer, cease
to be a beneficial interest in Notes represented by such former Global Note and
become a beneficial interest in Notes represented by the latter Global Note and,
accordingly, will thereafter be subject to all transfer restrictions and other
procedures applicable to beneficial interests in Notes represented by such
latter Global Note for as long as it retains such an interest.
No person other than a QIB may own a beneficial interest in the 144A Global
Note. Holders may hold their interest in their respective Global Note directly
through DTC if such Holders are participants in DTC or indirectly through
organizations that are participants in DTC (the "Participants"). Holders who are
not Participants may beneficially own interests in their respective Global Note
held by DTC only through Participants or certain banks, brokers, dealers, trust
companies and other parties that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants"). Owners of beneficial interests in the Global Notes will be
entitled to have certificates registered in their names and to receive physical
delivery of certificates in definitive form (a "Definitive Note").
Non-U.S. Persons may hold their interests in Notes represented by the
Regulation S Global Note through Cedel or Euroclear, if they are participants in
such systems, or indirectly through organizations that are participants in such
systems. Investors may also hold such beneficial interests through organizations
other than Euroclear and Cedel that are participants in the DTC system. Cedel
and Euroclear will hold interests in the Notes represented by the Regulation S
Global Note on behalf of their participants through customers' securities
accounts in Cedel's or Euroclear's respective names on the books of their
respective depositories, which in turn will hold such interests in Notes
represented by the Regulation S Global Note in customers' securities accounts in
the depositories' names on the books of DTC. Transfers between participants in
Euroclear and Cedel will be effected in the ordinary way in accordance with
their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the Notes
described herein, cross-market transfer between DTC, on the one hand, and
directly or indirectly through Euroclear or Cedel participants, on the other,
will be effected by DTC in accordance with DTC rules on behalf of Euroclear or
Cedel, as the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions to Euroclear or
Cedel, as the case may be, by the counterpart in such system in accordance with
its rules and procedures and within its established deadline (Brussels' time).
Euroclear or Cedel, as the case may be, will, if the transaction meets its
settlement requirements, deliver instructions to its respective depositary to
take action to effect final settlement on its behalf of delivering or receiving
beneficial interests in the relevant Global Note in DTC, and making or receiving
payment in accordance with normal procedures for same-day funds settlement
applicable to DTC. Cedel participants and participants in Euroclear may not
deliver instructions directly to the depositories for Cedel or Euroclear.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing a beneficial interest in a Global Note from a DTC
Participant will be credited during the securities settlement processing day
immediately following the DTC settlement date and such credit of any
transactions in beneficial interests in such Global Note settled during such
processing will be reported to the relevant Euroclear or Cedel participant on
such business day. Cash received in Euroclear or Cedel as a result of sales of
beneficial interests in a Global Note by or through a Euroclear or Cedel
participant to a DTC Participant will be received with value on the DTC
settlement date but will be available in the relevant Euroclear or Cedel cash
account only as of the business day following settlement in DTC.
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QIBs may hold their interests in the 144A Global Notes directly through DTC
if such Holder is a Participant, or indirectly through organizations which are
Participants. Transfers between Participants will be effected in the ordinary
way in accordance with DTC rules and will be settled in same day funds. Holders
of beneficial interests in the Regulation S Global Notes (a "Regulation S
Holder") may hold their interests in the Regulation S Global Notes directly
through Cedel or Euroclear, or indirectly through organizations that are
participants in Cedel or Euroclear. Cedel and Euroclear will hold interests in
the Regulation S Global Notes on behalf of their participants through their
respective depositaries at DTC. Transfers between participants in Euroclear and
Cedel will be effected in the ordinary way in accordance with their respective
rules and operating procedures. The laws of some states require that certain
persons take physical delivery of securities in definitive form. Consequently,
the ability to transfer beneficial interests in the Global Notes to such persons
may be limited.
The Holders of Notes who are not Participants may beneficially own interests
in the Global Notes held by DTC only through Participants or Indirect
Participants. So long as Cede, as the nominee of DTC, is the registered owner of
the Global Notes, Cede for all purposes will be considered the sole holder of
the Global Notes.
Payment of interest on the Redemption Price (upon redemption at the option
of the Company) and the repurchase price (at the option of the Holder upon a
Repurchase Event) of the Global Notes will be made to Cede, the nominee for DTC,
as the registered owner of the Global Notes, by wire transfer of immediately
available funds. None of the Company, the Trustee or any paying agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company has been informed by DTC that, with respect to any payment of
interest on the Redemption Price (upon redemption at the option of the Company)
or the repurchase price (at the option of the Holder upon a Repurchase Event) of
the Global Notes, and liquidated damages, if any, DTC's practice is to credit
Participants' accounts on the payment date therefor with payments in amounts
proportionate to their respective beneficial interests in the Notes represented
by the Global Notes as shown on the records of DTC, unless DTC has reason to
believe that it will not receive payment on such payment date. Payments by
Participants to owners of beneficial interests in Notes represented by the
Global Notes held through such Participants will be the responsibility of such
Participants, as is now the case with securities held for the accounts of
customers registered in "street name."
Transfers between Participants will be effected in the ordinary way in
accordance with DTC rules and will be settled in immediately available funds.
The laws of some states require that certain persons take physical delivery of
securities in definitive form. Because DTC can only act on behalf of
Participants, who in turn act on behalf of Indirect Participants and certain
banks, the ability of a person having a beneficial interest in Notes represented
by the Global Notes to pledge such interest to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interest, may be affected by the lack of a physical certificate evidencing such
interest.
Neither the Company nor the Trustee (or any registrar, paying agent or
conversion agent under the Indenture) will have any responsibility for the
performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entry
changes to the accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing
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corporations and may include certain other organizations such as the Initial
Purchasers. Certain of such Participants (or their representatives), together
with other entities, own DTC. Indirect access to the DTC system is available to
others such as banks, brokers, dealers and trust companies that clear through,
or maintain a custodial relationship with, a Participant, either directly or
indirectly.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures in
order to facilitate transfers of interests in the Global Notes among
Participants, they are under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time. If DTC is
at any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by the Company within 90 days, the Company will
cause Notes to be issued in definitive form in exchange for the Global Notes.
DEFINITIVE NOTES. Notes sold to investors that so request will be issued in
the form of a Definitive Note (which will initially bear the Securities Act
Legend, as defined below) and such interest in the Notes will not be represented
by the Global Notes. Furthermore, Definitive Notes may be issued in exchange for
Notes represented by the Global Note if no successor depositary is appointed by
the Company as set forth above. Any Definitive Note issued to a QIB or an
Institutional Accredited Investor or to a Non-U.S. Person will bear the
Securities Act Legend, except as provided below.
Unless determined otherwise by the Company in accordance with applicable
law, Definitive Notes issued upon transfer or exchange of beneficial interests
in Notes represented by the 144A Global Note and the Institutional Accredited
Investor Global Note will bear a legend setting forth transfer restrictions
under the Securities Act. Unless determined otherwise by the Company in
accordance with applicable law, Definitive Notes issued upon transfer or
exchange of beneficial interests in Notes represented by the Regulation S Global
Note will not bear the Securities Act Legend. Upon the transfer, exchange or
replacement of Notes bearing the legend, or upon specific request for removal of
the Securities Act Legend on a Note, the Trustee shall make available for
delivery only Notes that bear such legend, or shall refuse to remove such
legend, as the case may be, unless there is delivered to the Company and the
Trustee such satisfactory evidence, in the form of a Regulation S Transfer
Certificate and an opinion of counsel, that neither the Securities Act Legend
nor the restrictions on transfer set forth therein are required to ensure
compliance with the provisions of the Securities Act.
Any Holder desiring to exchange a legended Definitive Note for a beneficial
interest in Notes represented by the Rule 144A Global Note must provide a
certification that it is a QIB (a "Rule 144A Exchange Certificate"). Any Holder
desiring to exchange a legended Definitive Note for a beneficial interest in
Notes represented by a Regulation S Global Note must provide a certification
that the Note was purchased in a transaction complying with Regulation S (a
"Regulation S Exchange Certificate"). Any Holder desiring to exchange a legended
Definitive Note for a beneficial interest in Notes represented by the
Institutional Accredited Investor Global Note must provide a certification that
it is an Institutional Accredited Investor (an "Institutional Accredited
Investor Exchange Certificate").
Any Holder desiring to transfer a legended Definitive Note to a transferee
which takes delivery in the form of a beneficial interest in Notes represented
by the 144A Global Note must provide a Rule 144A Transfer Certificate. Any
Holder desiring to transfer a legended Definitive Note to a transferee which
takes delivery in the form of a beneficial interest in Notes represented by the
Regulation S Global Note must provide a Regulation S Transfer Certificate. Any
Holder desiring to exchange a legended Definitive Note to a transferee which
takes delivery in the form of a beneficial interest in Notes represented by the
Institutional Accredited Investor Global Note must provide an Institutional
Accredited Investor Transfer Certificate.
Any Holder desiring to exchange an unlegended Definitive Note for, or
transfer an unlegended Definitive Note to a transferee which takes delivery in
the form of, a beneficial interest in Notes represented by a Global Note may do
so without need for such certification.
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If a Holder desires to exchange an unlegended Definitive Note for, or
transfer an unlegended Definitive Note to a transferee which takes delivery in
the form of, a beneficial interest in Notes represented by a Global Note, the
Trustee must receive a certificate, in the case of any exchange, in the form of
a Rule 144A Exchange Certificate or an Institutional Accredited Investor
Exchange Certificate, as applicable, or, in the case of a transfer, in the form
of a Rule 144A Transfer Certificate or an Institutional Accredited Investor
Exchange Certificate, as the case may be.
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, if any, interest and liquidated
damages, if any) be made by wire transfer of immediately available same day
funds to the accounts specified by the Holder of interests in such Global Note.
With respect to Definitive Notes, the Company will make all payments of
principal, premium, if any, interest and liquidated damages, if any, by wire
transfer of immediately available same day funds to the accounts specified by
the Holders thereof or, if no such account is specified, by mailing a check to
each such Holder's registered address. The Company expects that secondary
trading in the Definitive Notes will also be settled in immediately available
funds.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Pursuant to the Shelf Registration Agreement, the Company has filed the
Shelf Registration Statement to cover resales of Transfer Restricted Securities
by the Holders thereof. The Company will be permitted to prohibit offers and
sales of Transfer Restricted Securities pursuant to the Shelf Registration
Statement under certain circumstances and subject to certain conditions (any
period during which offers and sales are prohibited being referred to as a
"Suspension Period"). "Transfer Restricted Securities" means each Note and any
underlying share of Common Stock until the date on which such Note or underlying
share of Common Stock has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement, the date on
which such Note or underlying share of Common Stock is distributed to the public
pursuant to Rule 144 under the Securities Act or the date on which such Note or
share of Common Stock may be sold or transferred pursuant to Rule 144(k) (or any
similar provisions then in force).
Holders of the Transfer Restricted Securities will be required to deliver
information to be used in connection with, and to be named as selling
securityholders in, the Shelf Registration Statement in order to transfer their
Transfer Restricted Securities pursuant to the Shelf Registration Statement.
There can be no assurance that the Company will be able to maintain an effective
and current registration statement as required. The absence of such a
registration statement may limit the Holder's ability to sell such Transfer
Restricted Securities or adversely affect the price at which such Transfer
Restricted Securities can be sold.
If the Shelf Registration Statement shall cease to be effective (without
being succeeded immediately by an additional registration statement filed and
declared effective) or useable for the offer and sale of Transfer Restricted
Securities for a period of time (including any Suspension Period) which shall
exceed 60 days in the aggregate in any 12-month period (such event , a
"Registration Default"), then the Company is required to pay damages
("liquidated damages") to each Holder of Transfer Restricted Securities, with
respect to the first 90-day period immediately following the occurrence of such
Registration Default, in an amount equal to $.05 per week per $1,000 aggregate
principal amount of the Notes, or, if applicable, an equivalent amount per week
per share (subject to adjustment as set forth above) of Common Stock
constituting Transfer Restricted Securities, held by such Holder. The amount of
the liquidated damages will increase by an additional $.05 per week per $1,000
aggregate principal amount of Notes held by each Holder (or shares of Common
Stock, as noted above) with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of liquidated
damages of $.50 per week per $1,000 aggregate principal amount of the Notes (or
shares of Common Stock, as noted above) held by each Holder. All accrued
liquidated damages will be paid by the Company on each Interest
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Payment Date in cash. Such payment will be made to Holders as set forth under
"Same Day Settlement and Payment" above. Following the cure of all Registration
Defaults, the accrual of liquidated damages will cease.
The Company shall cause the Shelf Registration Statement to be effective for
a period of two years from the effective date thereof or such shorter period
that will terminate when each of the Transfer Restricted Securities covered by
the Shelf Registration Statement ceases to be a Transfer Restricted Security.
The foregoing summary of certain provisions of the Shelf Registration
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the provisions of the Shelf Registration
Agreement. Copies of the Shelf Registration Agreement are available from the
Company upon request.
The Company is required, to the extent it receives certain information from
Holders after initial effectiveness of the Shelf Registration Statement, to file
supplemental prospectuses within 20 business days of receiving such information
unless the Company receives such information from Holders holding at least $2.0
million principal amount of Notes, in which case supplemental prospectuses will
be filed within 10 business days of receiving such information. Holders who are
not named in the Shelf Registration Statement or any such supplemental
prospectus are not be permitted to sell or otherwise transfer the Notes held
except in accordance with certain transfer restrictions set forth herein.
GOVERNING LAW
The Indenture and the Notes are governed by and construed in accordance with
the laws of the State of New York, without giving effect to such state's
conflicts of laws principles.
INFORMATION CONCERNING THE TRUSTEE
U.S. Bank National Association is the Trustee under the Indenture. The
Company and its subsidiaries may maintain deposit accounts and conduct other
banking transactions with the Trustee in the ordinary course of business.
In case an Event of Default shall occur (and shall not be cured or waived in
a timely manner), the Trustee will be required to use the degree of care of a
prudent person in the conduct of his own affairs in the exercise of its powers.
Subject to such provisions, the Trustee is 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.
ABSENCE OF PUBLIC MARKET
Prior to this offering, there has been no public market for the Notes and
there can be no assurance as to the liquidity of any markets that may develop
for the Notes, the ability of the Holders to sell their Notes or at what price
Holders of the Notes will be able to sell their Notes. Future trading prices of
the Notes will depend upon many factors including, among other things,
prevailing interest rates, the Company's operating results, the price of the
Common Stock and the market for similar securities. The Initial Purchasers have
informed the Company that they intend to make a market in the Notes offered
hereby; however, the Initial Purchasers are not obligated to do so and any such
market making activity may be terminated at any time without notice to the
Holders of the Notes. Prior to this offering, the Notes were designated for
trading on the PORTAL Market. The Notes are not expected to remain eligible for
trading on the PORTAL Market. The Company does not intend to apply for listing
of the Notes on any securities exchange or for quotation of the Notes through
any automated quotation system.
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DESCRIPTION OF COMMON STOCK
The Amended and Restated Articles of Incorporation, as amended, of the
Company authorize the issuance by the Company through its Board of Directors of
45,000,000 shares of Common Stock, par value $.01 per share. Upon any
liquidation or dissolution of the Company, the holders of Common Stock share
ratably, in proportion to the number of shares held, in the assets available for
distribution after payment of all prior claims. All outstanding shares of the
Company's Common Stock are fully paid and nonassessable. As of December 28,
1997, there were 19,638,568 shares of Common Stock outstanding, held of record
by approximately 1,013 shareholders.
Holders of Common Stock have no preemptive rights and are entitled to one
vote for each share held on each matter submitted to a vote of shareholders.
Cumulative voting for the election of directors is not permitted. Generally, the
affirmative vote of the holders of a majority of the outstanding shares of
Company voting stock is necessary to authorize any agreement for consolidation,
merger or sale or other disposition of all or substantially all of the Company's
assets, unless such transactions involve a beneficial holder of 20% or more of
the Company's voting stock or related parties. Generally, such transactions
involving a beneficial holder of at least 20% of the voting stock of the
Company, liquidations or dissolutions of the Company at the time that it has
such a 20% or more beneficial shareholder, and certain other specified
transactions involving such a substantial shareholder, whether or not they
otherwise require a shareholder vote, require the affirmative vote of the
holders of at least two-thirds of the outstanding shares of voting stock, unless
first approved by not less than the greater of (a) two or (b) two-thirds of the
directors (other than such 20% shareholder or related parties) who were members
of the Board of Directors on May 15, 1983, or immediately prior to the time such
shareholder became the beneficial owner of 20% or more of the Company's Common
Stock. A two-thirds vote of the outstanding shares of the Company's voting stock
is required to amend this special voting provision. Other amendments to the
Company's Amended and Restated Articles of Incorporation require an affirmative
vote of the holders of a majority of the shares entitled to vote that are
present at a meeting of the shareholders.
Holders of Common Stock are entitled to receive ratably such dividends as
may be declared by the Board of Directors of the Company out of funds legally
available therefor. However, as noted under "Dividend Policy," the Company
presently intends to retain any earnings for use in the Company's business and
does not anticipate paying cash dividends in the foreseeable future. Certain of
the Company's financing agreements contain restrictive covenants which, among
other things, impose limitations on the payment of dividends. See the Notes to
Consolidated Financial Statements of the Company incorporated herein by
reference to the Company's Annual Report on Form 10-K, as amended, for the
fiscal year ended September 28, 1997.
TRANSFER AGENT AND REGISTRAR
Norwest Bank Minnesota, N.A., is the Transfer Agent and Registrar for the
Common Stock of the Company.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain material United States
federal income tax consequences to holders of the Notes and Common Stock into
which the Notes may be converted. This discussion is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, Internal
Revenue Service ("IRS") rulings, and judicial decisions now in effect, all of
which are subject to change (possibly with retroactive effect) or different
interpretations. There can be no assurance that the IRS will not successfully
challenge one or more of the tax consequences described herein, and the Company
has not obtained, nor does it intend to obtain, a ruling from the IRS with
respect to the U.S. federal income tax consequences of acquiring or holding
Notes or Common Stock.
This discussion does not deal with all aspects of United States federal
income taxation that may be important to holders of the Notes or shares of
Common Stock and does not deal with tax consequences arising under the laws of
any foreign, state or local jurisdiction. This discussion is for general
information only, and does not purport to address all tax consequences that may
be important to a particular holder in light of their personal circumstances
(such as holders subject to the alternative minimum tax provisions of the Code),
or to certain types of purchasers (such as certain financial institutions,
insurance companies, tax-exempt entities, dealers in securities or persons who
hold the Notes or Common Stock in connection with a straddle or hedge, a
conversion transaction or other integrated transactions) that may be subject to
special rules. This discussion is limited to holders who hold the Notes and the
shares of Common Stock received upon conversion thereof as capital assets.
For the purpose of this discussion, a "Non-U.S. Holder" refers to any holder
who is not a United States person. The term "United States person" or "U.S.
Holder" means a citizen or resident (as defined in Section 7701(a) of the Code)
of the United States, a corporation or partnership created or organized in the
United States or any state thereof, an estate, the income of which is subject to
U.S. federal income tax regardless of its source and, in general, a trust, if
(i) a court within the United States is able to exercise primary supervision
over the administration of the trust and (ii) one or more United States persons
have the authority to control all substantial decisions of the trust.
PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING
THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THEIR PARTICIPATION IN
THIS OFFERING, OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING CONVERSION OF
THE NOTES, AND THE EFFECT THAT THEIR PARTICULAR CIRCUMSTANCES MAY HAVE ON SUCH
TAX CONSEQUENCES.
OWNERSHIP OF THE NOTES
INTEREST ON NOTES. Interest on Notes generally will be taxable to a holder
as ordinary interest income at the time such interest is paid or accrued, in
accordance with the holder's method of tax accounting. The Company expects that
the Notes will not be issued with original issue discount ("OID") within the
meaning of the Code.
The Company intends to take the position that the liquidated damages, if and
when paid, will be taxable to a U.S. Holder as ordinary income in accordance
with such U.S. Holder's method of tax accounting. The IRS, however, may take a
different position, which could affect both a U.S. Holder's income and the
timing of the Company's deduction with respect to such liquidated damages.
MARKET DISCOUNT AND BOND PREMIUM. If a U.S. Holder acquires a Note
subsequent to its original issuance and if the face amount of the Note exceeds
the U.S. Holder's tax basis by more than a specified DE MINIMIS amount, the U.S.
Holder generally will be treated as having acquired the Note at a market
discount equal to such excess. Gain on disposition of a Note purchased with
market discount generally will be treated as ordinary income to the extent such
gain does not exceed the accrued market discount on the Note. In addition, a
U.S. Holder of a Note purchased with market discount may be required to defer a
portion of its interest deductions attributable to any indebtedness incurred or
continued to purchase or carry the Note. Generally, the amount of accrued market
discount is determined using a straight-line
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method. However, a U.S. Holder may elect to accrue such market discount on a
constant yield method, in which case neither the rule regarding the
recharacterization of income as ordinary upon disposition nor the interest
deferral rule will apply to such U.S. Holder.
If a U.S. Holder acquires a Note subsequent to its original issuance and if
the face amount of the Note is less than the U.S. Holder's tax basis, the U.S.
Holder generally will be treated as having acquired the Note with bond premium
equal to such excess. Such a U.S. Holder may elect to amortize such bond premium
as an offset to interest income under a constant-yield method over the life of
the Note, in which case the U.S. Holder's tax basis in the Note would be reduced
by the amount of the amortized bond premium.
All U.S. Holders who acquire a Note with either market discount or bond
premium should consult their tax advisers regarding the tax consequences of
holding such Note and the consequences of the various elections available to
such U.S. Holders.
CONSTRUCTIVE DIVIDEND. Certain corporate transactions, such as
distributions of assets to holders of Common Stock, may cause a deemed
distribution to the holders of the Notes if the conversion price or conversion
ratio of the Notes is adjusted to reflect such corporate transaction. Such
deemed distributions, if any, will be taxable as a dividend, return of capital,
or capital gain in accordance with the earnings and profits rules discussed
under "Distribution on Shares of Common Stock" below.
SALE OR EXCHANGE OF NOTES OR SHARES OF COMMON STOCK. In general, a U.S.
Holder of Notes will recognize gain or loss upon the sale, exchange, redemption,
retirement or other disposition of the Notes measured by the difference between
the amount of cash and the fair market value of any property received (except to
the extent attributable to the payment of accrued interest not previously
included in income) and the holder's adjusted tax basis in the Notes. A U.S.
Holder's tax basis in Notes generally will equal the cost of the Notes to the
holder. In general, each U.S. Holder of Common Stock into which the Notes have
been converted will recognize gain or loss upon the sale, exchange, redemption
or other disposition of the Common Stock under rules similar to those applicable
to the Notes. For the basis and holding period of shares of Common Stock, see
"Conversion of Notes" below. Special rules may apply to redemptions of the
Common Stock which may result in the amount paid being treated as a dividend.
The gain or loss on the disposition of the Notes or shares of Common Stock will
be capital gain or loss and will be long-term capital gain or loss if the Notes
or shares of Common Stock have been held for more than one year at the time of
such disposition. Legislation enacted in 1997 reduces to 20% the maximum rate of
tax on long-term capital gains on most capital assets held by an individual for
more than 18 months. Gain on most capital assets held by an individual more than
one year and up to 18 months is subject to tax at a maximum rate of 28%. Holders
are urged to consult their own tax advisors regarding the legislation.
U.S. Holders should be aware that the resale of the Notes may be affected by
the "market discount" rules of the Code under which a purchaser of a Note
acquiring the Note at a market discount generally would be required to include
as ordinary income a portion of the gain realized upon the disposition or
retirement of such Note, to the extent of the market discount that has accrued
but has not been included in income while the debt instrument was held by such
purchaser.
CONVERSION OF NOTES. A U.S. Holder of Notes will not recognize gain or loss
on the conversion of Notes into shares of Common Stock except to the extent the
Common Stock is considered attributable to accrued interest not previously
included in income (which is taxable as ordinary income) or with respect to cash
received in lieu of a fractional share of Common Stock. The U.S. Holder's tax
basis in the shares of Common Stock received upon conversion of the Notes will
be equal to the holder's aggregate basis in the Notes exchanged therefor (less
any portion thereof allocable to cash received in lieu of a fractional share).
The holding period of the shares of Common Stock received by the U.S. Holder
upon conversion of Notes will generally include the period during which the
holder held the Notes prior to the conversion.
Cash received in lieu of a fractional share of Common Stock should be
treated as a payment in exchange for such fractional share rather than as a
dividend. Gain or loss recognized on the receipt of cash
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paid in lieu of such fractional shares generally will equal the difference
between the amount of cash received and the amount of tax basis allocable to the
fractional shares.
DISTRIBUTION ON SHARES OF COMMON STOCK. Distributions, if any, on shares of
Common Stock will constitute dividends for United States federal income tax
purposes to the extent of current or accumulated earnings and profits of the
Company as determined under United States federal income tax principles.
Dividends paid to holders that are United States corporations may qualify for
the dividends-received deduction.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES APPLICABLE TO NON-U.S. HOLDERS
INTEREST ON NOTES. Generally, interest paid on the Notes to a Non-U.S.
Holder will not be subject to United States federal income tax pursuant to the
"portfolio interest exemption" if: (i) such interest is not effectively
connected with the conduct of a trade or business within the United States by
such Non-U.S. Holder; (ii) the Non-U.S. Holder does not actually or
constructively own 10% or more of the total voting power of all classes of stock
of the Company entitled to vote; (iii) the Non-U.S. Holder is not a controlled
foreign corporation with respect to which the Company is a "related person"
within the meaning of the Code; (iv) the Non-U.S. Holder is not a bank extending
credit pursuant to a loan agreement entered into in the normal course of
business; and (v) the beneficial owner, under penalties of perjury, certifies
that the beneficial owner is not a United States person and provides the
beneficial owner's name and address. The information required under clause (v)
above may be provided by a securities clearing organization, a bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business. For purposes of clause (ii) above, a Non-U.S. Holder of
Notes is deemed to own the Common Stock into which such Notes may be converted.
A Non-U.S. Holder that is not exempt from tax under these rules generally will
be subject to United States federal income tax withholding at a rate of 30% (or
lower applicable treaty rate); provided, however, that interest effectively
connected with the conduct of a trade or business in the United States by such
Non-U.S. Holder will be subject to the United States federal income tax on net
income that applies to United States persons generally (and, with respect to
corporate holders under certain circumstances, may also be subject to the branch
profits tax) and will not be subject to a 30% withholding tax if certain
certification requirements are met as discussed below. Non-U.S. Holders should
consult applicable income tax treaties, which may provide different rules. To
claim the benefit of a tax treaty or to claim the exemption from withholding for
effectively connected income, a Non-U.S. Holder must provide a properly executed
Form 1001 or 4224, as applicable, prior to the payment of interest. Under
recently issued Treasury Regulations, these forms will be replaced after 1998 by
Form W-8, subject to certain transition rules. Special rules are provided in the
Treasury Regulations for payments through qualified intermediaries.
SALE OR EXCHANGE OF NOTES OR SHARES OF COMMON STOCK. A Non-U.S. Holder
generally will not be subject to United States federal income tax on gain
recognized upon the sale or other disposition of the Notes or shares of Common
Stock unless (i) the gain is effectively connected with the conduct of a trade
or business within the United States by the Non-U.S. Holder, (ii) in the case of
a Non-U.S. Holder who is a nonresident alien individual, such holder is present
in the United States for 183 or more days in the taxable year of the sale or
disposition and either has a "tax home" (as defined for United States federal
income tax purposes) in the United States or an office or other fixed place of
business in the United States to which the sale or disposition is attributable,
(iii) the Non-U.S. Holder is subject to tax pursuant to the provisions of U.S.
tax law applicable to certain United States expatriates, or (iv) in the case of
the disposition of Common Stock, the Company is a United States real property
holding corporation. The Company believes that it has not been, and does not
expect to become, a United States real property holding corporation. Non-U.S.
Holders should consult applicable income tax treaties, which may provide
different rules.
CONVERSION OF NOTES. A Non-U.S. Holder generally will not be subject to
United States federal income tax on the conversion of Notes into shares of
Common Stock. To the extent a Non-U.S. Holder receives cash in lieu of a
fractional share on conversion, such cash may give rise to gain that would be
subject to the rules described above with respect to the sale or exchange of a
Note or Common Stock. Cash
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or Common Stock treated as or issued for accrued interest will be treated as
interest under the rules described above.
DISTRIBUTION ON SHARES OF COMMON STOCK. Generally, any dividend on shares
of Common Stock to a Non-U.S. Holder will be subject to United States federal
income tax withholding at a rate of 30% unless the dividend is effectively
connected with the conduct of trade or business within the United States by the
Non-U.S. Holder, in which case the dividend will be subject to the United States
federal income tax on net income that applies to United States persons generally
(and, with respect to corporate holders, and under certain circumstances, the
branch profits tax) provided certain certification requirements are met. Non-
U.S. Holders should consult any applicable income tax treaties, which may
provide for a lower rate of withholding or other rules different from those
described above. Currently, dividends paid to an address in a foreign country
generally are presumed (absent actual knowledge to the contrary) to be paid to a
resident of such country for purposes of the withholding rules and for
determining the applicability of a tax treaty rate. Under recently issued
Treasury Regulations, effective after 1998, a Non-U.S. Holder may be required to
satisfy certain certification requirements in order to claim a reduction or of
exemption from withholding under the foregoing rules.
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. HOLDERS. Information reporting will apply to payments of interest or
dividends on or the proceeds of the sale or other disposition of the Notes or
shares of Common Stock made by the Company with respect to certain noncorporate
U.S. Holders, and backup withholding at a rate of 31% may apply unless the
recipient of such payment supplies a taxpayer identification number, certified
under penalties of perjury, as well as certain other information, or otherwise
establishes, in the manner prescribed by law, an exemption from backup
withholding. The Company may nevertheless institute backup withholding with
respect to a holder for payments made on the Notes if instructed to do so by the
IRS. Any amount withheld under backup withholding is allowable as a credit
against the U.S. Holder's federal income tax, providing that the required
information is provided to the IRS.
NON-U.S. HOLDERS. The Company must report annually to the IRS and to each
Non-U.S. Holder any interest or dividend that is subject to withholding, or that
is exempt from U.S. withholding tax pursuant to a tax treaty, or interest that
is exempt from U.S. tax under the portfolio interest exemption. Copies of these
information returns may also be made available under the provisions of a
specific treaty or agreement to the tax authorities of the country in which the
Non-U.S. Holder resides.
Currently, backup withholding and information reporting will not apply to
payments of principal on the Notes by the Company to a Non-U.S. Holder if the
holder certifies as to its non-United States person status under penalties of
perjury or otherwise establishes an exemption (provided that neither the Company
nor its 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).
The payment of the proceeds on the disposition of Notes or shares of Common
Stock to or through the United States office of a United States or foreign
broker will be subject to information reporting and backup withholding unless
the owner provides the certification described above or otherwise establishes an
exemption. The proceeds of the disposition by a Non-U.S. Holder of Notes or
shares of Common Stock to or through a foreign office of a broker will not be
subject to backup withholding. However, if such broker is a United States
person, a controlled foreign corporation for United States tax purposes, or a
foreign person 50% or more of whose gross income from all sources for certain
periods is from activities that are effectively connected with a United States
trade or business, information reporting requirements will apply unless such
broker has documentary evidence in its files of the owner's Non-U.S. Holder
status and has no actual knowledge to the contrary or unless the owner otherwise
establishes an exemption. Both backup withholding and information reporting will
apply to the proceeds from such dispositions if the broker has actual knowledge
that the payee is a U.S. Holder.
64
<PAGE>
DEDUCTIBILITY OF INTEREST TO THE COMPANY
Under recent tax legislation, interest on debt "payable in equity" of the
issuer or certain related parties is not deductible by the issuer. For this
purpose, debt payable in equity includes (i) an obligation which is part of an
arrangement designed to result in payment of the obligation with or by reference
to equity of the issuer or certain related parties as well as (ii) certain
obligations convertible at the option of the holder where the holder is
substantially certain to convert. Legislative history provides, among other
things, that the new legislation is not expected to affect convertible debt with
a conversion price significantly higher than the market price for the stock to
be received upon conversion on the date of issuance of the debt. Because the
conversion price for the Common Stock to be received upon conversion of the
Notes will exceed the market price for the Common Stock on the date of issuance
of the Notes, the Company intends to take the position that the interest on the
Notes is deductible to the Company.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH PROSPECTIVE
HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES
OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF A NOTE AND OF COMMON STOCK INTO
WHICH A NOTE MAY BE CONVERTED (INCLUDING THE APPLICABILITY AND EFFECT OF STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS).
65
<PAGE>
SELLING HOLDERS
The Notes were initially issued and sold pursuant to a Purchase Agreement,
dated March 12, 1998, among the Company and the Initial Purchasers (the
"Purchase Agreement"). The Notes were acquired from the Initial Purchasers by
the Selling Holders in compliance with Rule 144A, Regulation D or Regulation S
under the Securities Act, or in other permitted resale transactions from holders
who acquired such Notes from the Initial Purchasers or their successors in
further permitted resale transactions exempt from registration under the
Securities Act. The Company agreed to indemnify and hold the Initial Purchasers
harmless against certain liabilities under the Securities Act that may arise in
connection with the sale of the Notes by the Initial Purchasers.
Except as otherwise indicated, the table below sets forth certain
information as of April 8, 1998 with respect to the Notes and the Common Stock
issuable upon conversion thereof. The term "Selling Holders" includes the
beneficial owners of such Notes and Common Stock listed below and their
respective transferees, pledgees, donees or their successors. To the knowledge
of the Company and based on certain representations made by the Selling Holders,
other than as a result of the ownership of the Notes and Common Stock listed
below, none of the Selling Holders (other than NationsBanc Montgomery Securities
LLC) has had any material relationship with the Company or any of its affiliates
within the past three years. NationsBanc Montgomery Securities LLC has engaged
in transactions with and performed various investment banking and other services
for the Company in the past and may do so from time to time in the future.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
AGGREGATE COMMON STOCK
PRINCIPAL AMOUNT ISSUABLE UPON
OF NOTES OWNED AND CONVERSION OF NOTES
NAME OF SELLING HOLDER THAT MAY BE SOLD THAT MAY BE SOLD(1)
- ---------------------------------------------------------------------- ------------------ ---------------------
<S> <C> <C>
Morgan Stanley & Co. Inc.............................................. $ 250,000 8,818
The Bank of New York.................................................. 8,470,000 298,765
Bankers Trust Company................................................. 9,530,000 336,155
Bear, Stearns Securities Corp......................................... 2,100,000 74,074
Boston Safe Deposit and Trust Company................................. 8,930,000 314,991
Brown Brothers Harriman & Co.......................................... 12,830,000 452,557
Chase Manhattan Bank.................................................. 3,460,000 122,045
Custodial Trust Company............................................... 5,000,000 176,366
DB Clearing Services (Deutsche Morgan Grenfell)....................... 10,200,000 359,788
Fiduciary Trust Company International................................. 1,000,000 35,273
First Tennessee Bank N.A. Memphis..................................... 600,000 21,164
Firstar Trust Company................................................. 1,480,000 52,204
Goldman Sachs International........................................... 1,500,000 52,910
HSBC Securities, Inc.................................................. 1,300,000 45,855
Lehman Brothers, Inc.................................................. 675,000 23,809
Lehman Brothers International (Europe)--Prime Broker.................. 12,450,000 439,153
Merrill Lynch, Pierce Fenner & Smith Safekeeping...................... 7,200,000 253,968
NationsBanc Montgomery Securities LLC/San Francisco................... 11,295,000 398,412
The Northern Trust Company............................................ 400,000 14,109
Paine Webber Incorporated............................................. 1,670,000 58,906
Smith Barney Inc...................................................... 80,000 2,821
SBC Warburg Dillon Read Inc........................................... 4,000,000 141,093
SSB--Custodian........................................................ 44,360,000 1,564,726
U.S. Bank National Association........................................ 150,000 5,291
Wachovia Bank, N.A.................................................... 1,070,000 37,742
------------------ ----------
TOTAL............................................................... $ 150,000,000 5,290,995
------------------ ----------
------------------ ----------
</TABLE>
- ------------------------
(1) Includes only full shares of Common Stock issuable upon conversion of the
Notes based on an initial conversion price of $28.35 per share (initially
equivalent to a conversion price of 35,273 shares per $1,000 principal
amount of Notes). A cash payment will be made in lieu of any fractional
interest upon conversion.
66
<PAGE>
The preceding table has been prepared based on information furnished to the
Company by DTC and by or on behalf of the Selling Holders. With respect to each
Selling Holder, the principal amount set forth may have increased or decreased
since the information was furnished, and there may be additional Selling Holders
of which the Company is unaware.
In view of the fact that Selling Holders may offer all or a portion of the
Notes or shares of Common Stock held by them pursuant to this offering, and
because this offering is not being underwritten on a firm commitment basis, no
estimate can be given as to the amount of Notes or the number of shares of
Common Stock that will be held by the Selling Holders after completion of this
offering. In addition, the Selling Holders identified above may have sold,
transferred or otherwise disposed of all or a portion of their Notes since the
date on which they provided information regarding their Notes in transactions
exempt from registration under the Securities Act.
Information concerning the Selling Holders may change from time to time and
any such changed information that the Company becomes aware of will be set forth
in supplements to this prospectus if and when necessary. In addition, the per
share conversion price, and 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 issuable upon conversion thereof, offered hereby may increase or
decrease. As of the date this prospectus, the aggregate principal amount of
Notes outstanding is $150,000,000.
PLAN OF DISTRIBUTION
The Notes, and the Common Stock issuable upon conversion of the Notes,
offered hereby may be sold from time to time by the Selling Holders to
purchasers directly by any of the Selling Holders in one or more transactions at
a fixed price, which may be changed, or at varying prices determined at the time
of sale or at negotiated prices. Such prices will be determined by the holders
of such securities or by agreement between such holders and underwriters or
dealers who may receive fees or commissions in connection therewith.
Any of the Selling Holders may from time to time offer the Notes, or the
Common Stock issuable upon conversion of the Notes, beneficially owned by them
through underwriters, dealers or agents, who may receive compensation in the
form of underwriting discounts, commissions or concessions from the Selling
Holders and the purchasers of the Notes, or the Common Stock issuable upon
conversion of the Notes, for whom they may act as agent. Each Selling Holder
will be responsible for payment of discounts and commissions of underwriters,
dealers or agents. The aggregate proceeds to the Selling Holders from the sale
of the Notes, or the Common Stock issuable upon conversion of the Notes, offered
by them hereby will be the purchase price of such Notes, or Common Stock
issuable upon conversion of the Notes, 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 issuable upon conversion of the Notes, to be
made directly or through agents. The Company will not receive any of the
proceeds from the sale of the Notes, or Common Stock issuable upon conversion of
the Notes, by the Selling Holders. Alternatively, the Selling Holders may sell
all or a portion of the Notes, and the Common Stock issuable upon conversion of
the Notes, beneficially owned by them and offered hereby from time to time on
any exchange on which the securities are listed on terms to be determined at the
times of such sales. The Selling Holders also may make private sales directly or
through a broker or brokers.
The Company's outstanding Common Stock is listed for trading on the Nasdaq
National Market. Prior to this offering, the Notes were designated for trading
on the PORTAL Market. The Notes are not expected to remain eligible for trading
on the PORTAL Market. The Company does not intend to list the Notes for trading
on any national securities exchange or for quotation through any automated
quotation
67
<PAGE>
system. Accordingly, no assurance can be given as to the development of any
trading market for the Notes. See "Risk Factors--Absence of Public Market" and
"--Volatility of Notes and Stock Price."
In order to comply with the securities laws of certain states, if
applicable, the Notes, and Common Stock issuable upon conversion of the Notes,
may be sold in such jurisdictions only through registered or licensed brokers or
dealers. In addition, in certain states the Notes, and Common Stock issuable
upon conversion of the Notes, may not be sold unless they have been registered
or qualified for sale or an exemption from registration or qualification
requirements is available and is complied with.
The Selling Holders and any underwriters, dealers or agents that participate
in the distribution of the Notes, and Common Stock issuable upon conversion of
the Notes, offered hereby may be deemed to be underwriters within the meaning of
the Securities Act, and any discounts, commissions or concessions received by
them and any provided pursuant to the sale of shares of Common Stock by them
might be deemed to be underwriting discounts and commissions under the
Securities Act.
In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus. To the best
knowledge of the Company, there are currently no plans, arrangements or
understandings between any Selling Holders and any underwriters, dealers or
agents regarding the sale of Notes, or Common Stock issuable upon conversion of
the Notes, by the Selling Holders. There is no assurance that any Selling Holder
will sell any or all of the Notes, or Common Stock issuable upon conversion of
the Notes, described herein, and any Selling Holder may transfer, devise or gift
such securities by other means not described herein.
To the extent required, the specific Notes, or Common Stock issuable upon
conversion of the Notes, to be sold, the names of the Selling Holders, the
respective purchase prices and public offering prices, the names of any
underwriter, dealer or agent, 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 Shelf
Registration Statement, of which this prospectus is a part. The Company entered
into the Shelf Registration Agreement for the benefit of holders of the Notes to
register their Notes, and Common Stock issuable upon conversion of the Notes,
under applicable federal and state securities laws under certain circumstances
and at certain times. The Shelf Registration Agreement provides for
cross-indemnification of the Selling Holders and the Company and their
respective directors, officers and controlling persons against certain
liabilities in connection with the offer and sale of the Notes, and the Common
Stock issuable upon conversion of the Notes, including liabilities under the
Securities Act, and to contribute to payments the parties may be required to
make in respect thereof.
The Company has agreed to pay substantially all of the expenses incurred by
the Selling Holders and the Company incident to the registration, offering and
sale of the Notes, and Common Stock issuable upon conversion of the Notes,
excluding any underwriting discounts or commissions.
The Selling Holders and any other person participating in distribution will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Regulation M under the
Exchange Act, which may limit the timing of purchases and sales of any of the
Notes, and Common Stock issuable upon conversion of the Notes, by the Selling
Holders and any other such person. Furthermore, under Regulation M, any person
engaged in the distribution of the Notes, and Common Stock issuable upon
conversion of the Notes, may not simultaneously engage in market-making
activities with respect to the particular Notes, and Common Stock issuable upon
conversion of the Notes, being distributed for certain periods prior to the
commencement of such distribution. All of the foregoing may affect the
marketability of the Notes, and Common Stock issuable upon conversion of the
Notes, and the ability of any person or entity to engage in market-making
activities with respect to the Notes, and Common Stock issuable upon conversion
of the Notes.
68
<PAGE>
The Initial Purchasers have advised the Company that they presently intend
to make a market in the Notes as permitted by applicable laws and regulations.
The Initial Purchasers are not obligated, however, to make a market in the Notes
and any such market making may be discontinued at any time at the sole
discretion of the Initial Purchasers.
LEGAL MATTERS
The validity of the Notes offered hereby and the validity of the Common
Stock issuable upon conversion of the Notes will be passed upon by Faegre &
Benson LLP, Minneapolis, Minnesota.
EXPERTS
The audited financial statements incorporated by reference in this Shelf
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report dated October 29, 1997 with
respect thereto, and are incorporated herein in reliance upon the authority of
said firm as experts in giving said report.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports and other information with the
Commission. Such reports and other information can be inspected and copied at
the Public Reference Section of the Commission's office at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
in New York (7 World Trade Center, 13th Floor, New York, New York 10048) and
Chicago (Citicorp Center, 14th Floor, 500 West Madison Street, Chicago, Illinois
60661). Copies of such reports and information may be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. The Commission maintains a Website that contains
reports, proxy statements and other information filed by the Company at
(http://www.sec.gov). Such reports and other information can also be inspected
at the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20549.
The Company has agreed that, if at any time while the Notes, or the Common
Stock issuable upon conversion of the Notes, are restricted securities within
the meaning of the Securities Act or the Company is not subject to the
informational requirements of the Exchange Act, the Company will furnish to
Holders of such Notes and Common Stock and to prospective purchasers designated
by such Holders the information described under "Description of Notes--Reports"
to permit compliance with Rule 144A in connection with resales of such Notes and
Common Stock.
ADDITIONAL INFORMATION
A registration statement on Form S-3 with respect to the Notes, and the
Common Stock issuable upon conversion of the Notes, offered hereby (together
with all amendments, exhibits and schedules thereto, the "Shelf Registration
Statement") has been filed with the Commission under the Securities Act. This
prospectus does not contain all of the information contained in the Shelf
Registration Statement, certain portions of which have been omitted pursuant to
the rules and regulations of the Commission. For further information with
respect to the Company and the Notes, and the Common Stock issuable upon
conversion of the Notes, offered hereby, reference is made to the Shelf
Registration Statement. Statements contained in this prospectus regarding the
contents of any contract or any other documents are not necessarily complete
and, in each instance, reference is hereby made to the copy of such contract or
document filed as an exhibit to the Shelf Registration Statement. The Shelf
Registration Statement may be inspected without charge at the Commission's
principal office in Washington D.C., and copies of all or any part thereof may
be obtained from the Public Reference Section, Securities and Exchange
Commission, Washington, D.C. 20549, upon payment of the prescribed fees.
69
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by the Company with the Commission under the
Exchange Act, are incorporated in this prospectus by reference:
(a) The Company's Annual Report on Form 10-K, as amended, for the fiscal
year ended September 28, 1997 (which incorporates by reference certain
portions of the Company's 1997 Annual Report to Shareholders, including
financial statements and accompanying information, and certain portions of
the Company's definitive notice and proxy statement for the Company's 1998
Annual Meeting of Shareholders);
(b) The Company's Quarterly Report on Form 10-Q for the thirteen weeks
ended December 28, 1997;
(c) The Company's Current Report on Form 8-K dated March 5, 1998;
(d) The Company's Current Report on Form 8-K dated March 18, 1998; and
(e) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed with the Commission on
June 9, 1986.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this prospectus and prior to
the termination of the offering of the Notes, and the Common Stock issuable upon
conversion of the Notes, offered hereby shall be deemed to be incorporated by
reference in this prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this prospectus.
The Company will provide without charge to each person to whom this
prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits to such documents which are not specifically incorporated by reference
in such documents). Written requests for such copies should be directed to Mr.
John A. Ingleman, Secretary, Hutchinson Technology Incorporated, 40 West
Highland Park, Hutchinson, Minnesota 55350. Telephone requests may be directed
to Mr. Ingleman at (320) 587-3797.
70
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE NOTES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE NOTES TO ANYONE OR BY
ANYONE IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT WOULD BE UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY........................................................ 1
RISK FACTORS.............................................................. 7
USE OF PROCEEDS........................................................... 16
CAPITALIZATION............................................................ 16
DIVIDEND POLICY........................................................... 17
PRICE RANGE OF COMMON STOCK............................................... 17
SELECTED CONSOLIDATED FINANCIAL DATA...................................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION..................................................... 19
BUSINESS.................................................................. 26
MANAGEMENT................................................................ 37
DESCRIPTION OF CERTAIN INDEBTEDNESS AND OTHER FINANCING AGREEMENTS........ 39
DESCRIPTION OF NOTES...................................................... 43
DESCRIPTION OF COMMON STOCK............................................... 60
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES..................... 61
SELLING HOLDERS........................................................... 66
PLAN OF DISTRIBUTION...................................................... 67
LEGAL MATTERS............................................................. 69
EXPERTS................................................................... 69
AVAILABLE INFORMATION..................................................... 69
ADDITIONAL INFORMATION.................................................... 69
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 70
</TABLE>
$150,000,000
[LOGO]
6% CONVERTIBLE
SUBORDINATED NOTES
DUE 2005
-------------------
PROSPECTUS
-------------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee.............................................................. $ 44,250
NASD filing fee................................................................... --
Nasdaq listing fee................................................................ 17,500
Printing expenses................................................................. 30,000
Fees and expenses of counsel...................................................... 50,000
Fees and expenses of accountants.................................................. 25,000
Transfer agent and registrar fees................................................. 10,000
Miscellaneous..................................................................... 3,250
----------
Total........................................................................... $ 180,000
----------
----------
</TABLE>
Except for the SEC registration fee, the NASD filing fee and the Nasdaq
listing fee, all of the foregoing expenses have been estimated. All of such
expenses will be paid by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant is subject to Minnesota Statutes Chapter 302A, the Minnesota
Business Corporation Act (the "Corporation Act"). Section 302A.521 of the
Corporation Act provides in substance that, unless prohibited by its articles of
incorporation or bylaws, a corporation must indemnify an officer or director who
is made or threatened to be made a party to a proceeding by reason of his
official capacity against judgments, penalties, fines, settlements and
reasonable expenses, including attorneys' fees and disbursements, incurred by
such person in connection with the proceeding, if certain criteria are met.
These criteria, all of which must be met by the person seeking indemnification,
are (a) that such person has not been indemnified by another organization for
the same judgments, penalties, fines, settlements and expenses; (b) that such
person must have acted in good faith; (c) that no improper personal benefit was
obtained by such person and such person satisfied certain statutory conflicts of
interest provisions, if applicable; (d) that in the case of a criminal
proceeding, such person had no reasonable cause to believe that the conduct was
unlawful; and (e) that such person must have acted in a manner he reasonably
believed was in the best interests of the corporation or, in certain limited
circumstances, not opposed to the best interests of the corporation. The
determination as to eligibility for indemnification is made by the members of
the corporation's board of directors or a committee of the board who are at the
time not parties to the proceedings under consideration, by special legal
counsel, by the shareholders who are not parties to the proceedings or by a
court. Section 4.01 of the Restated By-Laws of the Registrant requires
indemnification by the Registrant in such manner, under such circumstances and
to such extent as required or permitted by Section 302A.521 of the Corporation
Act, as amended from time to time, or as required or permitted by other
provisions of law.
ITEM 16. EXHIBITS.
4.1 Restated Articles of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 to Registration Statement No. 2-98270), as
amended by Articles of Amendment dated January 27, 1988 (incorporated
by reference to Exhibit 4.1 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended December 27, 1987, File No. 0-14709)
and by Articles of Amendment dated January 21, 1997 (incorporated by
reference to Exhibit 3.1 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended December 29, 1996, File No. 0-14709).
II-1
<PAGE>
4.2 Restated By-Laws of the Registrant (incorporated by reference to
Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended December 29, 1996, File No. 0-14709).
4.3 Note Purchase Agreement dated as of July 26, 1996, providing for the
placement of $15,000,000 of senior unsecured notes with Metropolitan
Insurance and Annuity Company (incorporated by reference to Exhibit 4.6
to the Company's Annual Report on Form 10-K for the fiscal year ended
September 29, 1996, File No. 0-14709).
4.4 Note Purchase Agreement dated as of July 26, 1996, providing for the
placement of $10,000,000 of senior unsecured notes with Metropolitan
Life Insurance Company (incorporated by reference to Exhibit 4.7 to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 29, 1996, File No. 0-14709).
4.5 Note Purchase Agreement dated as of July 26, 1996, providing for the
placement of $25,000,000 of senior unsecured notes with Teachers
Insurance and Annuity Association of America (incorporated by reference
to Exhibit 4.8 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 29, 1996, File No. 0-14709).
4.6 Indenture dated as of March 18, 1998 between the Company and U.S. Bank
National Association, as Trustee.
4.7 Purchase Agreement dated March 12, 1998 by and among the Company,
NationsBanc Montgomery Securities LLC and First Chicago Capital
Markets, Inc.
4.8 Shelf Registration Agreement dated as of March 18, 1998 by and among
the Company, NationsBanc Securities LLC and First Chicago Capital
Markets, Inc.
5.1 Opinion and consent of Faegre & Benson LLP, counsel for the Registrant.
12.1 Statement Regarding Computation of Ratios of Earnings to Fixed Charges
23.1 Consent of Independent Public Accountants.
23.2 Consent of Faegre & Benson LLP (included in Exhibit 5.1).
24.1 Powers of attorney (included with signatures to this Registration
Statement).
25.1 Statement of Eligibility of Trustee on Form T-1.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to file, during any period in
which offers or sales are being made, a post-effective amendment to this
Registration Statement 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.
The undersigned Registrant hereby undertakes 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.
The undersigned Registrant hereby undertakes to remove from registration by
mean of a post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration
II-2
<PAGE>
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.
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 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<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 Hutchinson and State of Minnesota on the 14th day of
April, 1998.
<TABLE>
<S> <C> <C>
HUTCHINSON TECHNOLOGY INCORPORATED
By: /s/ WAYNE M. FORTUN
-----------------------------------------
Wayne M. Fortun
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHIEF OPERATING OFFICER
</TABLE>
POWER OF ATTORNEY
Each of the undersigned hereby appoints Jeffrey W. Green, Wayne M. Fortun
and John A. Ingleman, and each of them (with full power to act alone), as
attorneys 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
Securities and Exchange Commission under the Securities Act of 1933 any and all
amendments and exhibits to this Registration Statement and any and all
applications, instruments and other documents to be filed with the Securities
and Exchange 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 and necessary or desirable.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President, Chief Executive
/s/ WAYNE M. FORTUN Officer and Chief
- ------------------------------ Operating Officer April 14, 1998
Wayne M. Fortun (Principal Executive
Officer) and Director
Vice President, Chief
Financial Officer and
/s/ JOHN A. INGLEMAN Secretary (Principal
- ------------------------------ Financial Officer and April 14, 1998
John A. Ingleman Principal Accounting
Officer)
/s/ W. THOMAS BRUNBERG
- ------------------------------ Director April 14, 1998
W. Thomas Brunberg
/s/ ARCHIBALD COX, JR.
- ------------------------------ Director April 14, 1998
Archibald Cox, Jr.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ JAMES E. DONAGHY
- ------------------------------ Director April 14, 1998
James E. Donaghy
/s/ HARRY C. ERVIN, JR.
- ------------------------------ Director April 14, 1998
Harry C. Ervin, Jr.
/s/ JEFFREY W. GREEN
- ------------------------------ Director April 14, 1998
Jeffrey W. Green
/s/ STEVEN E. LANDSBURG
- ------------------------------ Director April 14, 1998
Steven E. Landsburg
/s/ RICHARD N. ROSETT
- ------------------------------ Director April 14, 1998
Richard N. Rosett
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS
- ---------
<C> <S> <C>
4.1 Restated Articles of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 to Registration Statement No. 2-98270), as amended by
Articles of Amendment dated January 27, 1988 (incorporated by reference to
Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended December 27, 1987, File No. 0-14709) and by Articles of Amendment dated
January 21, 1997 (incorporated by reference to Exhibit 3.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended December 29, 1996, File
No. 0-14709).
4.2 Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.2
to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
December 29, 1996, File No. 0-14709).
4.3 Note Purchase Agreement dated as of July 26, 1996, providing for the placement
of $15,000,000 of senior unsecured notes with Metropolitan Insurance and
Annuity Company (incorporated by reference to Exhibit 4.6 to the Company's
Annual Report on Form 10-K for the fiscal year ended September 29, 1996, File
No. 0-14709).
4.4 Note Purchase Agreement dated as of July 26, 1996, providing for the placement
of $10,000,000 of senior unsecured notes with Metropolitan Life Insurance
Company (incorporated by reference to Exhibit 4.7 to the Company's Annual
Report on Form 10-K for the fiscal year ended September 29, 1996, File No.
0-14709).
4.5 Note Purchase Agreement dated as of July 26, 1996, providing for the placement
of $25,000,000 of senior unsecured notes with Teachers Insurance and Annuity
Association of America (incorporated by reference to Exhibit 4.8 to the
Company's Annual Report on Form 10-K for the fiscal year ended September 29,
1996, File No. 0-14709).
4.6 Indenture dated as of March 18, 1998 between the Company and U.S. Bank
National Association, as Trustee.............................................. Electronically Filed
4.7 Purchase Agreement dated March 12, 1998 by and among the Company, NationsBanc
Montgomery Securities LLC and First Chicago Capital Markets, Inc.............. Electronically Filed
4.8 Shelf Registration Agreement dated as of March 18, 1998 by and among the
Company, NationsBanc Securities LLC and First Chicago Capital Markets, Inc.... Electronically Filed
5.1 Opinion and consent of Faegre & Benson LLP, counsel for the Registrant........ Electronically Filed
12.1 Statement Regarding Computation of Ratios of Earnings to Fixed Charges........ Electronically Filed
23.1 Consent of Independent Public Accountants..................................... Electronically Filed
23.2 Consent of Faegre & Benson LLP (included in Exhibit 5.1).
24.1 Powers of attorney (included with signatures to this Registration Statement).
25.1 Statement of Eligibility of Trustee on Form T-1............................... Electronically Filed
</TABLE>
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED, as Issuer
and
U.S. BANK NATIONAL ASSOCIATION, as Trustee
-------------------------------------
INDENTURE
Dated as of March 18, 1998
-------------------------------------
$150,000,000
6% Convertible Subordinated Notes due 2005
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE. . . . . . . . . . . . . 1
SECTION 1.01. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. OTHER DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. . . . . . . . 8
SECTION 1.04. RULES OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . 8
SECTION 1.05. ACTS OF HOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 2. THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.01. FORM AND DATING. . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.02. EXECUTION AND AUTHENTICATION . . . . . . . . . . . . . . . . . .11
SECTION 2.03. REGISTRAR AND PAYING AGENT.. . . . . . . . . . . . . . . . . . .11
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. . . . . . . . . . . . . . .12
SECTION 2.05. NOTEHOLDER LISTS.. . . . . . . . . . . . . . . . . . . . . . . .12
SECTION 2.06. TRANSFER AND EXCHANGE. . . . . . . . . . . . . . . . . . . . . .12
SECTION 2.07. REPLACEMENT NOTES. . . . . . . . . . . . . . . . . . . . . . . .20
SECTION 2.08. OUTSTANDING NOTES; DETERMINATIONS OF HOLDERS' ACTION . . . . . .20
SECTION 2.09. TEMPORARY NOTES. . . . . . . . . . . . . . . . . . . . . . . . .21
SECTION 2.10. CANCELLATION . . . . . . . . . . . . . . . . . . . . . . . . . .21
SECTION 2.11. CUSIP NUMBERS. . . . . . . . . . . . . . . . . . . . . . . . . .21
SECTION 2.12. DEFAULTED INTEREST . . . . . . . . . . . . . . . . . . . . . . .22
ARTICLE 3. REDEMPTION AND REPURCHASE OF NOTES. . . . . . . . . . . . . . . . .22
SECTION 3.01. REDEMPTION PRICES. . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 3.02. NOTICE OF REDEMPTION; SELECTION OF NOTES . . . . . . . . . . . .22
SECTION 3.03. PAYMENT OF NOTES CALLED FOR REDEMPTION . . . . . . . . . . . . .23
SECTION 3.04. CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION. . . . . . . . . .24
SECTION 3.05. REPURCHASE UPON A REPURCHASE EVENT . . . . . . . . . . . . . . .24
ARTICLE 4. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
SECTION 4.01. PAYMENT OF NOTES . . . . . . . . . . . . . . . . . . . . . . . .25
SECTION 4.02. REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
SECTION 4.03. COMPLIANCE CERTIFICATES. . . . . . . . . . . . . . . . . . . . .26
SECTION 4.04. FURTHER INSTRUMENTS AND ACTS . . . . . . . . . . . . . . . . . .26
SECTION 4.05. MAINTENANCE OF OFFICE OR AGENCY. . . . . . . . . . . . . . . . .27
SECTION 4.06. PAYMENT OF TAXES AND OTHER CLAIMS. . . . . . . . . . . . . . . .27
SECTION 4.07. CORPORATE EXISTENCE. . . . . . . . . . . . . . . . . . . . . . .27
SECTION 4.08. MAINTENANCE OF PROPERTIES AND INSURANCE. . . . . . . . . . . . .27
SECTION 4.09. STAY, EXTENSION AND USURY LAWS . . . . . . . . . . . . . . . . .28
SECTION 4.10. INVESTMENT COMPANY ACT . . . . . . . . . . . . . . . . . . . . .28
SECTION 4.11. NOTICE OF REGISTRATION DEFAULT . . . . . . . . . . . . . . . . .28
ARTICLE 5. SUCCESSOR PERSON. . . . . . . . . . . . . . . . . . . . . . . . . .28
SECTION 5.01. MERGER, CONSOLIDATION AND SALE OF ASSETS . . . . . . . . . . . .28
SECTION 5.02. SUCCESSOR PERSON TO BE SUBSTITUTED . . . . . . . . . . . . . . .28
ARTICLE 6. DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . .29
SECTION 6.01. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . .29
SECTION 6.02. ACCELERATION . . . . . . . . . . . . . . . . . . . . . . . . . .30
SECTION 6.03. OTHER REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . .30
SECTION 6.04. CONTROL BY MAJORITY. . . . . . . . . . . . . . . . . . . . . . .30
i
<PAGE>
SECTION 6.05. LIMITATION ON SUITS. . . . . . . . . . . . . . . . . . . . . . .31
SECTION 6.06. RIGHTS OF HOLDERS TO RECEIVE PAYMENT . . . . . . . . . . . . . .31
SECTION 6.07. COLLECTION SUIT BY TRUSTEE . . . . . . . . . . . . . . . . . . .31
SECTION 6.08. TRUSTEE MAY FILE PROOFS OF CLAIM . . . . . . . . . . . . . . . .31
SECTION 6.09. PRIORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . .32
SECTION 6.10. UNDERTAKING FOR COSTS. . . . . . . . . . . . . . . . . . . . . .32
ARTICLE 7. TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
SECTION 7.01. DUTIES OF TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . .32
SECTION 7.02. RIGHTS OF TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . .33
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE . . . . . . . . . . . . . . . . . .34
SECTION 7.04. TRUSTEE'S DISCLAIMER . . . . . . . . . . . . . . . . . . . . . .34
SECTION 7.05. NOTICE OF DEFAULTS . . . . . . . . . . . . . . . . . . . . . . .34
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. . . . . . . . . . . . . . . . . .34
SECTION 7.07. COMPENSATION AND INDEMNITY . . . . . . . . . . . . . . . . . . .35
SECTION 7.08. REPLACEMENT OF TRUSTEE . . . . . . . . . . . . . . . . . . . . .35
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER. . . . . . . . . . . . . . . . . . .36
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. . . . . . . . . . . . . . . . . .36
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY. . . . . .36
ARTICLE 8. SATISFACTION AND DISCHARGE OF INDENTURE . . . . . . . . . . . . . .36
SECTION 8.01. SATISFACTION AND DISCHARGE OF INDENTURE. . . . . . . . . . . . .36
SECTION 8.02. SURVIVAL OF CERTAIN OBLIGATIONS. . . . . . . . . . . . . . . . .37
SECTION 8.03. ACKNOWLEDGMENT OF DISCHARGE BY TRUSTEE . . . . . . . . . . . . .37
SECTION 8.04 APPLICATION OF TRUST MONEY . . . . . . . . . . . . . . . . . . .37
SECTION 8.05. REPAYMENT TO THE COMPANY; UNCLAIMED MONEY. . . . . . . . . . . .37
SECTION 8.06. REINSTATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . .38
ARTICLE 9. AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
SECTION 9.01. WITHOUT CONSENT OF HOLDERS . . . . . . . . . . . . . . . . . . .38
SECTION 9.02. WITH CONSENT OF HOLDERS. . . . . . . . . . . . . . . . . . . . .38
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. . . . . . . . . . . . . . .39
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS, WAIVERS AND ACTIONS . . . . .39
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES . . . . . . . . . . . . . . . .40
SECTION 9.06. TRUSTEE TO SIGN SUPPLEMENTAL INDENTURES. . . . . . . . . . . . .40
SECTION 9.07. EFFECT OF SUPPLEMENTAL INDENTURES. . . . . . . . . . . . . . . .40
ARTICLE 10. SUBORDINATION. . . . . . . . . . . . . . . . . . . . . . . . . . .40
SECTION 10.01. AGREEMENT TO SUBORDINATE. . . . . . . . . . . . . . . . . . . .40
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY. . . . . . . . . . . . . .40
SECTION 10.03. DEFAULT ON SENIOR INDEBTEDNESS. . . . . . . . . . . . . . . . .40
SECTION 10.04. NO SUSPENSION OF REMEDIES . . . . . . . . . . . . . . . . . . .41
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER . . . . . . . . . . . . . .41
SECTION 10.06. NOTICE BY THE COMPANY . . . . . . . . . . . . . . . . . . . . .42
SECTION 10.07. SUBROGATION . . . . . . . . . . . . . . . . . . . . . . . . . .42
SECTION 10.08. RELATIVE RIGHTS . . . . . . . . . . . . . . . . . . . . . . . .42
SECTION 10.09. NO WAIVER OF SUBORDINATION PROVISIONS . . . . . . . . . . . . .42
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. . . . . . . . . . . .43
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT. . . . . . . . . . . . . . .43
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION;
NO FIDUCIARY DUTY TO HOLDERS OF SENIOR INDEBTEDNESS . . . . . .43
SECTION 10.13. MISCELLANEOUS.. . . . . . . . . . . . . . . . . . . . . . . . .44
ARTICLE 11. CONVERSION OF NOTES. . . . . . . . . . . . . . . . . . . . . . . .44
ii
<PAGE>
SECTION 11.01. RIGHT TO CONVERT. . . . . . . . . . . . . . . . . . . . . . . .44
SECTION 11.02. EXERCISE OF CONVERSION PRIVILEGE; ISSUANCE OF COMMON STOCK
ON CONVERSION; NO ADJUSTMENT FOR INTEREST OR DIVIDENDS. . . . .44
SECTION 11.03. CASH PAYMENTS IN LIEU OF FRACTIONAL SHARES. . . . . . . . . . .46
SECTION 11.04. CONVERSION PRICE. . . . . . . . . . . . . . . . . . . . . . . .46
SECTION 11.05. ADJUSTMENT OF CONVERSION PRICE. . . . . . . . . . . . . . . . .46
SECTION 11.06. EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE . . .53
SECTION 11.07. TAXES ON SHARES ISSUED. . . . . . . . . . . . . . . . . . . . .54
SECTION 11.08. RESERVATION OF SHARES; SHARES TO BE FULLY PAID; LISTING OF
COMMON STOCK. . . . . . . . . . . . . . . . . . . . . . . . . .54
SECTION 11.09. RESPONSIBILITY OF TRUSTEE . . . . . . . . . . . . . . . . . . .54
SECTION 11.10. NOTICE TO HOLDERS PRIOR TO CERTAIN ACTIONS. . . . . . . . . . .55
ARTICLE 12. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . .55
SECTION 12.01. TRUST INDENTURE ACT CONTROLS. . . . . . . . . . . . . . . . . .55
SECTION 12.02. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
SECTION 12.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS . . . . . . . . . .56
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. . . . . . .57
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION . . . . . . . . .57
SECTION 12.06. SEVERABILITY CLAUSE . . . . . . . . . . . . . . . . . . . . . .57
SECTION 12.07. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR. . . . . . . . . .57
SECTION 12.08. LEGAL HOLIDAYS. . . . . . . . . . . . . . . . . . . . . . . . .57
SECTION 12.09. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . .57
SECTION 12.10. NO RECOURSE AGAINST OTHERS. . . . . . . . . . . . . . . . . . .57
SECTION 12.11. SUCCESSORS. . . . . . . . . . . . . . . . . . . . . . . . . . .58
SECTION 12.12. MULTIPLE ORIGINALS. . . . . . . . . . . . . . . . . . . . . . .58
</TABLE>
iii
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Trust Indenture
Act Indenture
Section Section
------- -------
<S> <C>
310(a)(1)................................................ 7.10
(a)(2)................................................ 7.10
(a)(3)................................................ N.A.
(a)(4)................................................ N.A.
(a)(5)................................................ 12.01
(b)................................................... 7.10
(c)................................................... N.A.
311(a)................................................... 7.11
(b)................................................... 7.11
(c)................................................... N.A.
312(a)................................................... 2.05
(b)................................................... 12.03
(c)................................................... 12.03
313(a)................................................... 7.06
(b)(1)................................................ 7.06
(b)(2)................................................ 7.06
(c)................................................... 7.06
(d)................................................... 7.06
314(a)................................................... 4.02
(b)................................................... N.A.
(c)(1)................................................ 7.2
(c)(2)................................................ 7.2
(c)(3)................................................ 7.2
(d)................................................... N.A.
(e)................................................... 12.05
(f)................................................... N.A.
315(a)................................................... 7.01;7.02
(b)................................................... 7.05
(c)................................................... 7.01
(d)................................................... 7.07
(e)................................................... 6.10
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Trust Indenture
Act Indenture
Section Section
------- -------
<S> <C>
316(a)(last sentence).................................... 2.08
(a)(1)(A)............................................. 6.04
(a)(1)(B)............................................. 6.05
(a)(2)................................................ N.A.
(b)................................................... 6.06
317(a)(1)................................................ 6.07
(a)(2)................................................ 6.08
(b)................................................... 2.04
318(a)................................................... 12.01
</TABLE>
<PAGE>
INDENTURE, dated as of March 18, 1998 between Hutchinson Technology
Incorporated, a Minnesota corporation (the "Company"), and U.S. Bank National
Association (the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders (as defined below) of
$150,000,000 aggregate principal amount of the Company's 6% Convertible
Subordinated Notes due 2005 ( the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. A Person shall be deemed to "control"
(including the correlative meanings, the terms "controlling," "controlled by,"
and "under common control with") another Person if the controlling Person (i)
possesses, directly or indirectly, the power to direct or cause the direction of
the management or policies of the controlled Person, whether through ownership
of voting securities, by agreement or otherwise, or (ii) owns, directly or
indirectly, 10% or more of any class of the issued and outstanding equity
securities of the controlled Person.
"Applicable Procedures" means, with respect to any transfer or
exchange of beneficial interests in a Global Note, the rules and procedures of
the Depositary that apply to such transfer and exchange.
"Business Day" means any day that is not a Saturday, a Sunday or a day
on which banking institutions in New York or the city in which the principal
corporate trust office of the Trustee is located are required to close.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
which would at such time be so required to be capitalized on the balance sheet
in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions or assets of, the issuing Person.
"Cedel" means Cedel Bank, Societe Anonyme.
A "Change of Control" shall occur when: (i) all or substantially all
of the Company's assets are sold as an entirety to any person or related group
of persons; (ii) there shall be consummated any consolidation or merger of the
Company (A) in which the Company is not the continuing or surviving corporation
(other than a consolidation or merger with a wholly owned subsidiary of the
Company in which all shares of Common Stock outstanding immediately prior to the
effectiveness thereof are changed into or exchanged for the same consideration)
or (B) pursuant to which the Common Stock would be converted into cash,
securities or other property, in each case, other than a consolidation or merger
of the Company in which the holders of the Common Stock immediately prior to the
consolidation or merger have, directly or indirectly, at least a majority of the
total voting power of all classes of capital stock entitled to vote generally in
the election of directors of the continuing or surviving corporation immediately
after such consolidation or merger in substantially the same relative proportion
as their ownership of Common Stock immediately before such transaction; (iii)
any person, or any persons acting together which would constitute
<PAGE>
a "group" for purposes of Section 13(d) of the Exchange Act, together with any
affiliates thereof, shall beneficially own (as defined in Rule 13d-3 under the
Exchange Act) at least 50% of the total voting power of all classes of capital
stock of the Company entitled to vote generally in the election of directors of
the Company; (iv) at any time during any consecutive two-year period,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by such
Board of Directors or whose nomination for election by the shareholders of the
Company was approved by a vote of 66-2/3% of the directors then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office;
or (v) the Company is liquidated or dissolved or adopts a plan of liquidation or
dissolution.
"Common Stock" means any stock of any class of the Company that does
not have a preference in respect of dividends or of amounts payable in the event
of any voluntary or involuntary liquidation, dissolution or winding up of the
Company and that is not subject to redemption by the Company. Subject to the
provisions of Section 11.06, however, shares issuable on conversion of Notes
shall include only shares of the class designated as common stock of the Company
at the date of this Indenture or shares of any class or classes resulting from
any reclassification or reclassifications thereof and that do not have a
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and that are not subject to redemption by the Company; provided that if at any
time there shall be more than one such resulting class, the shares of each such
class then so issuable shall be substantially in the proportion that the total
number of shares of such class resulting from all such reclassifications bear to
the total number of shares of all such classes resulting from all such
reclassifications.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Conversion Price" shall have the meaning specified in Section 11.04.
"Credit Facility" means, with respect to the Company, any credit
facility, as the same may be amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Definitive Notes" means Notes that are in the form of EXHIBIT A-1
attached hereto.
"Designated Senior Indebtedness" means principal, interest, premiums,
fees, indemnifications, reimbursements, damages and other liabilities payable
under the documentation governing (i) indebtedness outstanding under the Old
Credit Facility, the Private Placement Notes and the Company's variable rate
demand note (and related letter of credit) with the City of Hutchinson, and (ii)
any other indebtedness (a) under any debt facility with banks or other lenders
which provides for revolving credit loans, term loans, receivables financing
(including through the sale of receivables) or letters of credit to the Company
or any of its subsidiaries and (b) any other Senior Indebtedness the principal
amount of which is $5 million or more and, in each case, that has been
designated by the Company as "Designated Senior Indebtedness."
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, until a successor
2
<PAGE>
shall have been appointed and become such pursuant to Section 2.06 of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"Disqualified Capital Stock" means, with respect to the Company,
Capital Stock of the Company that, by its terms or by the terms of any security
into which it is convertible, exercisable or exchangeable, is, or upon the
happening of an event or the passage of time would be, required to be redeemed
or repurchased (including at the option of the holder thereof) by the Company,
in whole or in part, on or prior to the Stated Maturity of the Notes, provided
that only the portion of such Capital Stock which is so convertible,
exercisable, exchangeable or redeemable or subject to repurchase prior to such
Stated Maturity shall be deemed to be Disqualified Capital Stock.
"Euroclear" means Morgan Guaranty Trust Company of New York, the
Brussels office, as operator of the Euroclear system.
"GAAP" means 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,
from time to time.
"Global Notes" means the Rule 144A Global Notes, the Institutional
Accredited Investor Global Notes, the Regulation S Temporary Global Notes and
the Regulation S Permanent Global Notes.
"Holder" or "Noteholder" means a Person in whose name a Note is
registered on the Registrar's books.
"Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof, including the provisions of the TIA
that are deemed to be a part hereof.
"Indirect Participant" means a Person who holds an interest through a
Participant.
"Initial Purchasers" has the meaning given in the preamble.
"Institutional Accredited Investor" means an "accredited investor" as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Institutional Accredited Investor Global Notes" means the permanent
global notes representing Notes sold to a limited number of Institutional
Accredited Investors in reliance on Rule 501(a)(1), (2), (3) or (7) that contain
the paragraph referred to in footnote 1 and the additional schedule referred to
in footnote 3 to the form of the Note attached hereto as EXHIBIT A-1, and that
are deposited with and registered in the name of the Depositary or its nominee.
"Interest Payment Date" means March 15 and September 15, commencing
September 15, 1998.
"Junior Securities" means any Qualified Capital Stock and any
indebtedness of the Company that is fully subordinated in right of payment to
Senior Indebtedness to the same extent as the Notes and has no scheduled
installment of principal due, by redemption, sinking fund payment or otherwise,
on or prior to the Stated Maturity of the Notes.
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional
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sale or other title retention agreement, any lease in the nature thereof, any
option or other agreement to sell or give any security interest in and any
filing or other agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means, with respect to any Notes, all unpaid
additional amounts owing by the Company pursuant to Section 4 of the Shelf
Registration Agreement for such Notes.
"Note Custodian" means the Trustee, when serving as custodian for the
Depositary with respect to the Notes in global form, or any successor entity
thereto.
"Officer" means, with respect to any corporation, the Chairman of the
Board, any Vice Chairman, the Chief Executive Officer, the President, any Vice
President, the Treasurer, the Secretary, any Assistant Treasurer or any
Assistant Secretary of such corporation.
"Officers' Certificate" means a written certificate containing the
information specified in Sections 11.04 and 11.05, signed in the name of the
Company by any two of its Officers, and delivered to the Trustee.
"Old Credit Facility" shall mean the credit agreement, dated as of
December 8, 1995, between the Company and The First National Bank of Chicago, as
amended.
"Opinion of Counsel" means a written opinion containing the
information specified in Sections 12.04 and 12.05, rendered by legal counsel who
is acceptable to the Trustee.
"Participant" means, with respect to DTC, Euroclear or Cedel, a Person
who has an account with DTC, Euroclear or Cedel, respectively (and, with respect
to DTC, shall include Euroclear and Cedel).
"Person" or "person" means any individual, corporation, limited
liability company, partnership, joint venture, association, joint stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Private Placement Legend" means the legend initially set forth on the
Notes in the form set forth in Section 2.06(g) hereof.
"Private Placement Notes" means (i) the 7.46% Senior Notes due 2004 in
the original aggregate principal amount of $30,000,000 issued and sold pursuant
to the three separate note purchase agreements, each dated as of April 20, 1994,
between the Company and Teachers Insurance and Annuity Association of America,
Central Life Assurance Company and Modern Woodmen of America, respectively, (ii)
the 7.85% Senior Notes due 2003 in the original aggregate principal amount of
$25,000,000 and the 8.07% Senior Note due 2006 in the original aggregate
principal amount of $25,000,000 issued and sold pursuant to the three separate
note purchase agreements, each dated as of July 26, 1996, between the Company
and Metropolitan Life Insurance Company, Metropolitan Insurance and Annuity
Company and Teachers Insurance and Annuity Association of America, respectively,
(iii) the 10.31% Senior Notes due 1998 in the original aggregate principal
amount of $10,000,000 issued and sold pursuant to a note purchase agreement
dated October 28, 1988, between the Company and Northwestern National Life
Insurance Company, Northern Life Insurance Company, The North Atlantic Life
Insurance Company of America and American Investors Life Insurance Company, and
(iv) the Promissory Notes due 2006 in the original aggregate principal amount of
up to $1,000,000 issued pursuant to an agreement dated March 21, 1996 between
the Company and the Wisconsin Department of Development.
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"Purchase Agreement" means that certain purchase agreement dated March
12, 1998, between the Company and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A
under the Securities Act.
"Qualified Capital Stock" of the Company means any Capital Stock of
the Company that is not Disqualified Capital Stock.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Temporary Global Notes" means the temporary global notes
that contain the paragraphs referred to in footnote 1 to the form of the Note
attached hereto as EXHIBIT A-2, and that are deposited with and registered in
the name of the Depositary or its nominee, representing a Note sold in reliance
on Regulation S.
"Regulation S Permanent Global Notes" means the permanent global notes
that do not contain the paragraphs referred to in footnote 1 to the form of the
Note attached hereto as EXHIBIT A-2, and that are deposited with and registered
in the name of the Depositary or its nominee, representing a Note sold in
reliance on Regulation S.
"Regulation S Global Notes" means the Regulation S Temporary Global
Notes or the Regulation S Permanent Global Notes, as applicable.
A "Repurchase Event" shall have occurred upon the occurrence of a
Change of Control or a Termination of Trading.
"Restricted Beneficial Interest" means any beneficial interest of a
Participant or Indirect Participant in the Rule 144A Global Note or the
Regulation S Global Note.
Restricted Global Notes" means the Rule 144A Global Notes and the
Regulation S Global Notes, all of which shall bear the Private Placement Legend.
Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Global Notes" means (i) the permanent global notes
representing Notes sold to QIBs in reliance on Rule 144A that contain the
paragraph referred to in footnote 1 and the additional schedule referred to in
footnote 3 to the form of the Note attached hereto as EXHIBIT A-1, and that are
deposited with and registered in the name of the Depositary or its nominee and
(ii) the Institutional Accredited Investor Global Notes.
"Rule 501(a)(1), (2), (3) or (7)" means Rule 501(a)(1), (2), (3) or
(7) under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Senior Indebtedness" means (a) all indebtedness, liabilities and
obligations of the Company for money borrowed under the Company's credit
facilities (including, without limitation, the principal, premium (if any),
unpaid fees and interest in connection therewith and reimbursement obligations
under letters of credit issued pursuant to such credit facilities) and any
predecessor or successor credit facilities thereto, whether outstanding on the
date of execution of the Indenture or thereafter created, incurred or assumed;
(b) all present and future obligations under any agreement, device or
arrangement providing for payments which are
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related to fluctuations of interest rates, exchange rates or forward rates,
including, but not limited to, dollar-denominated or cross-currency interest
rate exchange agreements, forward currency exchange agreements, interest rate
swap or collar protection agreements, forward rate currency or interest rate
options, puts and warrants or similar agreements, devices or arrangements of the
Company ("Hedging Agreements"), including all obligations of the Company,
whether absolute or contingent under any and all cancellations, buy backs,
reversals, terminations or assignments of any Hedging Agreement; (c)
indebtedness of the Company for money borrowed, whether outstanding on the date
of execution of the Indenture or thereafter created, incurred or assumed, except
any such other indebtedness that by the terms of the instrument or instruments
by which such indebtedness was created or incurred expressly provides that it
(i) is junior in right of payment to the Notes or (ii) ranks PARI PASSU in right
of payment with the Notes; and (d) any amendments, renewals, extensions,
modifications, refinancings and refundings of any of the foregoing. The term
"indebtedness for money borrowed" when used with respect to the Company is
defined to mean (i) any obligation of, or any obligation guaranteed by, the
Company for the repayment of borrowed money (including, without limitation,
fees, penalties and other obligations in respect thereof), whether or not
evidenced by bonds, notes or other written instruments; (ii) any deferred
payment obligation of, or any such obligation guaranteed by, the Company for the
payment of the purchase price of property or assets evidenced by a note or
similar instrument; (iii) repurchase obligations or liabilities of the Company
with respect to accounts or notes receivable sold by the Company or otherwise
financed by the Company in a securitization or structured receivables financing
transaction; (iv) reimbursement obligations of the Company in respect of letters
of credit relating to indebtedness or other obligations of the Company that
qualify as indebtedness or obligations of the kind referred to in clauses (i)
through (iii) above; and (v) any obligation of, or any such obligation
guaranteed by, the Company for the payment of rent or other amounts under a
lease of property or assets which obligation is required to be classified and
accounted for as a capitalized lease on the balance sheet of the Company under
generally accepted accounting principles, in each such case whether such
indebtedness or obligations arise or accrue before or after the commencement of
any bankruptcy, insolvency or receivership proceedings and whether they arise
directly between the Company and any holder of such indebtedness or obligation,
or are acquired outright, conditionally or as collateral security from another
by any such holder, including, without limitation, interest and fees accruing
pre-petition or post-petition at the rate or rates prescribed in the applicable
credit agreements, notes or agreement evidencing such Senior Indebtedness and
costs, expenses and attorneys' and paralegals' fees, whenever incurred (and
whether or not such claims, interest, costs, expenses or fees are allowed or
allowable in any such proceeding).
"Shelf Registration Agreement" means the Shelf Registration Agreement
dated as of March 18, 1998 between the Initial Purchasers and the Company, as
such agreement may be amended, modified or supplemented from time to time.
"Shelf Registration Statement" shall have the meaning set forth in the
Shelf Registration Agreement.
"Stated Maturity," when used with respect to the Notes, means March
15, 2005.
"Subsidiary" means any corporation, association or other business
entity of which more than 50% of the total voting power of shares of capital
stock or other equity interest entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by any Person or one
or more of the other Subsidiaries of that Person or a combination thereof.
A "Termination of Trading" shall occur if the Common Stock (or other
common stock into which the Notes are then convertible) is neither listed for
trading on a U.S. national securities exchange nor approved for trading on an
established automated over-the-counter trading market in the United States.
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"TIA" means the Trust Indenture Act of 1939 as amended and as in
effect on the date of this Indenture; provided, however, that in the event the
TIA is amended after such date, TIA means, to the extent required by any such
amendment, the TIA as so amended.
"Transfer Restricted Notes" means Notes that bear or are required to
bear the legend set forth in Section 2.06(g).
"Trust Officer," when used with respect to the Trustee, means any
officer in the Corporate Trust Administration Department of the Trustee with
direct responsibility for the administration of this Indenture and also means,
with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of his knowledge of and familiarity with the
particular subject.
"Trustee" means the party named as the "Trustee" in the first
paragraph of this Indenture until a successor replaces it pursuant to the
applicable provisions of this Indenture and, thereafter, shall mean such
successor.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Acceleration Notice". . . . . . . . . . . . . . . . . 6.02
"Act". . . . . . . . . . . . . . . . . . . . . . . . . 1.05
"Bankruptcy Law" . . . . . . . . . . . . . . . . . . . 6.01
"Called Notes" . . . . . . . . . . . . . . . . . . . . 3.04
"Closing Price". . . . . . . . . . . . . . . . . . . . 11.05
"Commencement Date". . . . . . . . . . . . . . . . . . 11.05
"Current Market Price. . . . . . . . . . . . . . . . . 11.05
"Custodian". . . . . . . . . . . . . . . . . . . . . . 6.01
"DTC". . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Event of Default" . . . . . . . . . . . . . . . . . . 6.01
"Exchange Act" . . . . . . . . . . . . . . . . . . . . 4.02
"Expiration Time". . . . . . . . . . . . . . . . . . . 11.05
"fair market value". . . . . . . . . . . . . . . . . . 11.05
"Legal Holiday". . . . . . . . . . . . . . . . . . . . 11.08
"non-electing share" . . . . . . . . . . . . . . . . . 11.06
"Nonpayment Default" . . . . . . . . . . . . . . . . . 10.03
"Notice of Default". . . . . . . . . . . . . . . . . . 6.01
"Offer Expiration Time". . . . . . . . . . . . . . . . 11.05
"Offer Purchased Shares" . . . . . . . . . . . . . . . 11.05
"Paying Agent" . . . . . . . . . . . . . . . . . . . . 2.03
"Payment Blockage Notice". . . . . . . . . . . . . . . 10.03
"Payment Default". . . . . . . . . . . . . . . . . . . 10.03
"Purchased Shares" . . . . . . . . . . . . . . . . . . 11.05
"Record Date". . . . . . . . . . . . . . . . . . . . . 11.05
"Register" . . . . . . . . . . . . . . . . . . . . . . 2.03
"Registrar". . . . . . . . . . . . . . . . . . . . . . 2.03
"Repurchase Date". . . . . . . . . . . . . . . . . . . 3.05
"Repurchase Offer" . . . . . . . . . . . . . . . . . . 3.05
"Repurchase Price" . . . . . . . . . . . . . . . . . . 3.05
"Securities Act" . . . . . . . . . . . . . . . . . . . 7.04
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<PAGE>
"Trading Day". . . . . . . . . . . . . . . . . . . . . 11.05
"Trigger Event". . . . . . . . . . . . . . . . . . . . 11.05
</TABLE>
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
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 Notes.
"Indenture security holder" means a Holder.
"Indenture to be qualified" means this Indenture.
"Indenture trustee" or "institutional trustee" means the Trustee.
"Obligor" on the indenture securities means the Company.
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 have the
meanings assigned to them by such definitions.
SECTION 1.04. 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) "including" means including, without limitation; and
(5) words in the singular include the plural, and words in the plural
include the singular.
SECTION 1.05. ACTS OF HOLDERS.
(1) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of Holders signing such
instrument or instruments. Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
(2) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Trustee deems
sufficient.
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<PAGE>
(3) The ownership of Notes shall be proved by the Register.
(4) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Note shall bind every future Holder of
the same Note and the Holder of every Note issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such Note.
(5) If the Company shall solicit from the Holders any request,
demand, authorization, direction, notice, consent, waiver or other Act, the
Company may at its option, by or pursuant to a resolution of its board of
directors, fix in advance a record date for the determination of Holders
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Company shall have no obligation to do so.
If such a record date is fixed, such request, demand, authorization, direction,
notice, consent, waiver or other Act may be given before or after such record
date, but only the Holders of record at the close of business on such record
date shall be deemed to be Holders for the purposes of determining whether
Holders' of the requisite proportion of outstanding Notes have authorized or
agreed or consented to such request demand, authorization, direction, notice,
consent, waiver or other Act, and for that purpose the outstanding Notes shall
be computed as of such record date; provided that no such authorization,
agreement or consent by the Holders on such record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Indenture not later than six months after the record date.
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING. The Notes and the Trustee's
certificate of authentication shall be substantially in the form of EXHIBIT A-1
and EXHIBIT A-2 attached hereto. The Notes may have notations, legends or
endorsements required by law, stock exchange rule or usage. The form of the
Notes and any notation, legend or endorsement shall be in a form acceptable to
the Company and the Trustee. Each Note shall be dated the date of its
authentication.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture. 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.
(a) GLOBAL NOTES. The Notes are being offered and sold by the
Company pursuant to a Purchase Agreement relating to the Notes, dated March 12,
1998, between the Company and the Initial Purchasers.
Notes offered and sold to QIBs in reliance on Rule 144A and/or to a
limited number of Institutional Accredited Investors in reliance on Rule
501(a)(1), (2), (3) or (7) shall be issued initially in the form of Rule 144A
Global Notes, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Note Custodian, and registered in the name of the
Depositary or a nominee of the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of the Rule 144A Global Notes may from time to time be increased or
decreased by adjustments made on the records of the Trustee and the Depositary
or its nominee as hereinafter provided.
Notes offered and sold in reliance on Regulation S shall be issued
initially in the form of the Regulation S Temporary Global Note, which shall be
deposited on behalf of the purchasers of the Notes represented thereby with the
Note Custodian, and registered in the name of the Depositary or the nominee of
the Depositary for the accounts of designated agents holding on behalf of
Euroclear or Cedel, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The "40-DAY RESTRICTED PERIOD" (as
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<PAGE>
defined in Regulation S) shall be terminated upon the receipt by the Trustee of
(i) a written certificate from the Depositary, together with copies of
certificates from Euroclear and Cedel certifying that they have received
certification of non-United States beneficial ownership of 100% of the aggregate
principal amount of the Regulation S Temporary Global Notes (except to the
extent of any beneficial owners thereof who acquired an interest therein
pursuant to another exemption from registration under the Securities Act and who
will take delivery of a beneficial ownership interest in a Rule 144A Global
Note, all as contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers'
Certificate from the Company certifying as to the same matters covered in clause
(i) above. Following the termination of the 40-day restricted period,
beneficial interests in the Regulation S Temporary Global Note shall be
exchanged for beneficial interests in Regulation S Permanent Global Notes
pursuant to the Applicable Procedures. Simultaneously with the authentication
of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation
S Temporary Global Notes. The aggregate principal amount of the Regulation S
Temporary Global Notes and the Regulation S Permanent Global Notes may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee, as the case may be, in connection
with transfers of interests as hereinafter provided.
Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate amount of outstanding Notes from time to time endorsed thereon and
that the aggregate amount of outstanding Notes represented thereby may from time
to time be reduced or increased, as appropriate, to reflect exchanges and
transfers of interests. Any endorsement of a Global Note to reflect the amount
of any increase or decrease in the amount of outstanding Notes represented
thereby shall be made by the Trustee or the Note Custodian, at the direction of
the Trustee, in accordance with instructions given by the Holder thereof as
required by Section 2.06 hereof.
Upon effectiveness of the Shelf Registration Statement, the Notes
resold or transferred pursuant to the prospectus forming part of the Shelf
Registration Statement may be represented by one or more permanent global Notes
in definitive, fully registered form without interest coupons and without the
Private Placement Legend, registered in the name of the Depositary or a nominee
of the Depositary, duly executed by the Company and authenticated by the Trustee
as hereinafter provided. The aggregate principal amount of such global Notes
may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depositary or its nominee to reflect transfers of
beneficial interests from the Regulation S Permanent Global Note and the Rule
144A Global Notes, subject to the rules and procedures of Euroclear and Cedel,
as the case may be, and the Depositary.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "Management
Regulations" and "Instructions to Participants" of Cedel shall be applicable to
interests in the Regulation S Temporary Global Notes and the Regulation S
Permanent Global Notes that are held by Participants through Euroclear or Cedel.
The Trustee shall have no obligation to notify Holders of any such procedures or
to monitor or enforce compliance with the same.
Except as set forth in Section 2.06 hereof, the Global Notes may be
transferred, in whole and not in part, only to another nominee of the Depositary
or to a successor of the Depositary or its nominee.
(b) BOOK-ENTRY PROVISIONS. This Section 2.01(b) shall apply only to
Rule 144A Global Notes and Regulation S Permanent Global Notes deposited with or
on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.01(b), authenticate and deliver the Global Notes that (i) shall
be registered in the name of the Depositary or the nominee of the Depositary and
(ii) shall be delivered by the Trustee to the Depositary or pursuant to the
Depositary's instructions or held by the Trustee as Note Custodian.
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<PAGE>
Participants shall have no rights either under this Indenture with
respect to any Global Note held on their behalf by the Depositary or by the Note
Custodian as custodian for the Depositary or under such Global Note, and the
Depositary may be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner of such Global Note for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its
Participants, the operation of customary practices of such Depositary governing
the exercise of the rights of an owner of a beneficial interest in any Global
Note.
(c) DEFINITIVE NOTES. Notes issued in certificated form shall be
substantially in the form of EXHIBIT A-1 attached hereto (but without including
the text referred to in footnotes 1 and 3 thereto).
SECTION 2.02. EXECUTION AND AUTHENTICATION. The Notes shall be
executed on behalf of the Company by its Chairman of the Board, one of its Vice
Chairmen, the Chief Executive Officer, its President or one of its Vice
Presidents, and attested by its Secretary or one of its Assistant Secretaries.
The signature of any such Officer on the Notes may be manual or facsimile.
Notes bearing the manual or facsimile signatures of individuals who
were at any time the proper Officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for in EXHIBIT
A-1 or EXHIBIT A-2 annexed hereto duly executed by the Trustee by manual
signature of an authorized signatory, and such certificate upon any Note shall
be conclusive evidence, and the only evidence, that such Note has been duly
authenticated and made available for delivery hereunder.
The Trustee shall authenticate and make available for delivery Notes
for original issue in the aggregate principal amount of $150,000,000 upon a
direction that it do so set forth in an Officers' Certificate of the Company,
but without any further action by the Company. Such order shall specify the
amount of the Notes to be authenticated and the date on which the original issue
of Notes is to be authenticated and delivered. The aggregate principal amount
of Notes outstanding at any time may not exceed the amounts provided in this
Section 2.02, except as provided in Section 2.07.
The Trustee shall act as the initial authenticating agent.
Thereafter, the Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Notes. An authenticating agent may
authenticate Notes 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 a Paying Agent to deal
with the Company or an Affiliate of the Company.
The Notes shall be issuable only in registered form without coupons
and only in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall maintain
or cause to be maintained an office or agency where Notes may be presented for
registration of transfer or for exchange ("Registrar"), an office or agency
where Notes may be presented or surrendered for purchase or payment or
conversion ("Paying Agent") and an office or agency where notices and demands to
or upon the Company in respect of the Notes and this Indenture may be served.
The Registrar shall keep a register of the Notes and of their transfer and
exchange (the "Register"). 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.
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The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar (if not the Trustee or the Company).
The agreement shall implement the provisions of this Indenture that relate to
such agent. The Company shall notify the Trustee of the name and address of any
such agent. If the Company fails to maintain a Registrar, Paying Agent or agent
for service of notices or demands, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.07. The
Company or any Subsidiary or an Affiliate of either of them may act as Paying
Agent, Registrar or co-registrar or agent for service of notices and demands.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. Except as
otherwise provided herein, prior to each due date of the principal and interest
on any Note, the Company shall deposit with the Paying Agent a sum of money
sufficient to pay such principal and interest so becoming due. The Company
shall require each Paying Agent (other than the Trustee or the Company) to agree
in writing that such Paying Agent shall hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal
and interest on the Notes (whether such money has been paid to it by the Company
or any other obligor on the Notes) and shall notify the Trustee of any default
by the Company (or any other obligor on the Notes) in making any such payment.
At any time during the continuance of any such default, the Paying Agent shall,
upon the request of the Trustee, forthwith pay to the Trustee all money so held
in trust and account for any money disbursed by it. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee and to account
for any money disbursed by it. Upon doing so, the Paying Agent shall have no
further liability for the money so paid over to the Trustee. If the Company, a
Subsidiary or an Affiliate of either of them acts as Paying Agent, it shall
segregate the money held by it as Paying Agent and hold it as a separate trust
fund.
SECTION 2.05. NOTEHOLDER LISTS. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Holders. If the Trustee is not the Registrar, the
Company shall cause to be furnished to the Trustee not more than five days after
each record date and at such other times as the Trustee may request in writing,
within five Business Days of such request, a list in such form as the Trustee
may reasonably require of the names and addresses of Holders.
Section 2.06. TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF GLOBAL NOTES. The transfer and exchange
of beneficial interests in Global Notes shall be effected through the
Depositary, in accordance with this Indenture and the procedures of the
Depositary therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act. Beneficial
interests in a Global Note may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in the same Global Note in
accordance with the transfer restrictions set forth in the legend in subsection
(g) of this Section 2.06. Transfers of beneficial interests in the Global Notes
to Persons required to take delivery thereof in the form of an interest in
another Global Note shall be permitted as follows:
(i) RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE. If,
at any time, an owner of a beneficial interest in a
Rule 144A Global Note deposited with the Depositary (or
the Trustee as Note Custodian) wishes to transfer its
beneficial interest in such Rule 144A Global Note to a
Person who is required or permitted to take delivery
thereof in the form of an interest in a Regulation S
Global Note, such owner shall, subject to the
Applicable
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Procedures, exchange or cause the exchange of such
interest for an equivalent beneficial interest in a
Regulation S Global Note as provided in this Section
2.06(a)(i). Upon receipt by the Trustee of (1)
instructions given in accordance with the Applicable
Procedures from a Participant directing the Trustee to
credit or cause to be credited a beneficial interest in
the Regulation S Global Note in an amount equal to the
beneficial interest in the Rule 144A Global Note to be
exchanged, (2) a written order given in accordance with
the Applicable Procedures containing information
regarding the Participant account of the Depositary and
the Euroclear or Cedel account to be credited with such
increase, and (3) a certificate in the form of Exhibit
B-1 hereto given by the owner of such beneficial
interest stating that the transfer of such interest has
been made in compliance with the transfer restrictions
applicable to the Global Notes and pursuant to and in
accordance with Rule 903 or Rule 904 of Regulation S,
then the Trustee, as Registrar, shall instruct the
Depositary to reduce or cause to be reduced the
aggregate principal amount at maturity of the
applicable Rule 144A Global Note and to increase or
cause to be increased the aggregate principal amount at
maturity of the applicable Regulation S Global Note by
the principal amount at maturity of the beneficial
interest in the Rule 144A Global Note to be exchanged
or transferred, to credit or cause to be credited to
the account of the Person specified in such
instructions, a beneficial interest in the Regulation S
Global Note equal to the reduction in the aggregate
principal amount at maturity of the Rule 144A Global
Note, and to debit, or cause to be debited, from the
account of the Person making such exchange or transfer
the beneficial interest in the Rule 144A Global Note
that is being exchanged or transferred.
(ii) REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE. If,
at any time, after the expiration of the 40-day
restricted period, an owner of a beneficial interest in
a Regulation S Global Note deposited with the
Depositary or with the Trustee as Note Custodian wishes
to transfer its beneficial interest in such Regulation
S Global Note to a Person who is required or permitted
to take delivery thereof in the form of an interest in
a Rule 144A Global Note, such owner shall, subject to
the Applicable Procedures, exchange or cause the
exchange of such interest for an equivalent beneficial
interest in a Rule 144A Global Note as provided in this
Section 2.06(a)(ii). Upon receipt by the Trustee of (1)
instructions from Euroclear or Cedel, if applicable,
and the Depositary, directing the Trustee, as
Registrar, to credit or cause to be credited a
beneficial interest in the Rule 144A Global Note equal
to the beneficial interest in the Regulation S Global
Note to be exchanged, such instructions to contain
information regarding the Participant account with the
Depositary to be credited with such increase, (2) a
written order given in accordance with the Applicable
Procedures containing information regarding the
Participant account of the Depositary to be debited
from the account of the Person making such exchange or
transfer of the beneficial interest in the Regulation S
Global Note that is being exchanged or transferred, (3)
a certificate executed by the transferee in the form of
EXHIBIT C attached hereto, if the owner of the
beneficial interest in the Regulation S Global Note is
transferring its beneficial interest in such Note to an
Institutional Accredited Investor and (4) a certificate
in the form of EXHIBIT B-2 attached hereto given by the
owner of such beneficial interest
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stating (A) if the transfer is pursuant to Rule 144A,
that the Person transferring such interest in a
Regulation S Global Note reasonably believes that the
Person acquiring such interest in a Rule 144A Global
Note is a QIB and is obtaining such beneficial interest
in a transaction meeting the requirements of Rule 144A
and any applicable blue sky or securities laws of any
state of the United States, (B) that the transfer
complies with the requirements of Rule 144 under the
Securities Act, (C) if the transfer is to an
Institutional Accredited Investor, that such transfer
is in compliance with the Securities Act and a
certificate in the form of EXHIBIT C attached hereto
has been executed by the Person acquiring such interest
and, if such transfer is in respect of an aggregate
principal amount of less than $100,000, an Opinion of
Counsel acceptable to the Company that such transfer is
in compliance with the Securities Act or (D) if the
transfer is pursuant to any other exemption from the
registration requirements of the Securities Act, that
the transfer of such interest has been made in
compliance with the transfer restrictions applicable to
the Global Notes and pursuant to and in accordance with
the requirements of the exemption claimed, such
statement to be supported by an Opinion of Counsel from
the transferee or the transferor in form reasonably
acceptable to the Company and to the Registrar and in
each case, in accordance with any applicable securities
laws of any state of the United States or any other
applicable jurisdiction, then the Trustee, as
Registrar, shall instruct the Depositary to reduce or
cause to be reduced the aggregate principal amount at
maturity of such Regulation S Global Note and to
increase or cause to be increased the aggregate
principal amount at maturity of the applicable Rule
144A Global Note by the principal amount at maturity of
the beneficial interest in the Regulation S Global Note
to be exchanged or transferred, and the Trustee, as
Registrar, shall instruct the Depositary, concurrently
with such reduction, to credit or cause to be credited
to the account of the Person specified in such
instructions a beneficial interest in the applicable
Rule 144A Global Note equal to the reduction in the
aggregate principal amount at maturity of such
Regulation S Global Note and to debit or cause to be
debited from the account of the Person making such
transfer the beneficial interest in the Regulation S
Global Note that is being exchanged or transferred.
(b) Transfer and Exchange of Definitive Notes. When Definitive Notes
are presented by a Holder to the Registrar with a request to register the
transfer of the Definitive Notes or to exchange such Definitive Notes for an
equal principal amount of Definitive Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested only
if the Definitive Notes are presented or surrendered for registration of
transfer or exchange, are endorsed and contain a signature guarantee or
accompanied by a written instrument of transfer in form satisfactory to the
Registrar duly executed by such Holder or by his attorney and contains a
signature guarantee, duly authorized in writing and the Registrar received the
following documentation (all of which may be submitted by facsimile):
(i) in the case of Definitive Notes that are Transfer Restricted
Notes, such request shall be accompanied by the following
additional information and documents, as applicable:
(A) if such Transfer Restricted Note is being delivered to
the Registrar by a Holder for registration in the name
of such Holder, without transfer, or such Transfer
Restricted Note is being transferred to the
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Company or any of its Subsidiaries, a certification to
that effect from such Holder (in substantially the form
of Exhibit B-3 hereto); or
(B) if such Transfer Restricted Note is being transferred
to a QIB in accordance with Rule 144A under the
Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 under the
Securities Act or pursuant to an effective registration
statement under the Securities Act, a certification to
that effect from such Holder (in substantially the form
of EXHIBIT B-3 hereto); or
(C) if such Transfer Restricted Note is being transferred
to a Non-U.S. Person in an offshore transaction in
accordance with Rule 904 under the Securities Act, a
certification to that effect from such Holder (in
substantially the form of EXHIBIT B-3 hereto);
(D) if such Transfer Restricted Note is being transferred
to an Institutional Accredited Investor in reliance on
an exemption from the registration requirements of the
Securities Act other than those listed in subparagraphs
(B) and (C) above, a certification to that effect from
such Holder (in substantially the form of EXHIBIT B-3
hereto), a certification from the applicable transferee
substantially in the form of EXHIBIT C hereto, and, if
such transfer is in respect of an aggregate principal
amount of Notes of less than $100,000, an Opinion of
Counsel acceptable to the Company that such transfer is
in compliance with the Securities Act; or
(E) if such Transfer Restricted Note is being transferred
in reliance on any other exemption from the
registration requirements of the Securities Act, a
certification to that effect from such Holder (in
substantially the form of EXHIBIT B-3 hereto) and an
Opinion of Counsel from such Holder or the transferee
reasonably acceptable to the Company and to the
Registrar to the effect that such transfer is in
compliance with the Securities Act.
(c) TRANSFER OF A BENEFICIAL INTEREST IN A RULE 144A GLOBAL NOTE OR
REGULATION S PERMANENT GLOBAL NOTE FOR A DEFINITIVE NOTE.
(i) Any Person having a beneficial interest in a Rule 144A
Global Note or Regulation S Permanent Global Note may upon
request, subject to the Applicable Procedures, exchange such
beneficial interest for a Definitive Note. Upon receipt by
the Trustee of written instructions or such other form of
instructions as is customary for the Depositary (or
Euroclear or Cedel, if applicable), from the Depositary or
its nominee on behalf of any Person having a beneficial
interest in a Rule 144A Global Note or Regulation S
Permanent Global Note, and, in the case of a Transfer
Restricted Note, 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
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certification to that effect from such Person (in
substantially the form of EXHIBIT B-4 hereto);
(B) if such beneficial interest is being transferred to a
QIB in accordance with Rule 144A under the Securities
Act or pursuant to an exemption from registration in
accordance with Rule 144 under the Securities Act or
pursuant to an effective registration statement under
the Securities Act, a certification to that effect from
the transferor (in substantially the form of EXHIBIT
B-4 hereto);
(C) if such beneficial interest is being transferred to an
Institutional Accredited Investor, pursuant to a
private placement exemption from the registration
requirements of the Securities Act (and based on an
opinion of counsel if the Company so requests), a
certification to that effect from such Holder (in
substantially the form of EXHIBIT B-4 hereto) and a
certificate from the applicable transferee (in
substantially the form of EXHIBIT C hereto and, if such
transfer is in respect of an aggregate principal amount
of Notes of less than $100,000, an opinion of counsel
acceptable to the Company that such transfer is in
compliance with the Securities Act); or
(D) if such beneficial interest is being transferred in
reliance on any other exemption from the registration
requirements of the Securities Act, a certification to
that effect from the transferor (in substantially the
form of EXHIBIT B-4 hereto) and an Opinion of Counsel
from the transferee or the transferor reasonably
acceptable to the Company and to the Registrar to the
effect that such transfer is in compliance with the
Securities Act, in which case the Trustee or the Note
Custodian, at the direction of the Trustee, shall, in
accordance with the standing instructions and
procedures existing between the Depositary and the Note
Custodian, cause the aggregate principal amount of Rule
144A Global Notes or Regulation S Permanent Global
Notes, as applicable, to be reduced accordingly and,
following such reduction, the Company shall execute
and, the Trustee shall authenticate and deliver to the
transferee a Definitive Note in the appropriate
principal amount.
(ii) Definitive Notes issued in exchange for a beneficial
interest in a Rule 144A Global Note or Regulation S
Permanent Global Note, as applicable, pursuant to this
Section 2.06(c) 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
deliver such Definitive Notes to the Persons in whose names
such Notes are so registered. Following any such issuance
of Definitive Notes, the Trustee, as Registrar, shall
instruct the Depositary to reduce or cause to be reduced the
aggregate principal amount at maturity of the applicable
Global Note to reflect the transfer.
(d) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL NOTES.
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (f) of this Section 2.06), a Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary
or by a
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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.
(e) TRANSFER AND EXCHANGE OF A DEFINITIVE NOTE FOR A BENEFICIAL
INTEREST IN A GLOBAL NOTE. A Definitive Note may not be transferred or
exchanged for a beneficial interest in a Global Note.
(f) AUTHENTICATION OF DEFINITIVE NOTES IN ABSENCE OF DEPOSITARY. If
at any time:
(i) the Depositary for the Notes notifies the Company that the
Depositary is unwilling or unable to continue as Depositary
for the Global Notes and a successor Depositary for the
Global Notes is not appointed by the Company within 90 days
after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Definitive
Notes under this Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Definitive Notes in an aggregate principal amount equal to the
principal amount of the Global Notes in exchange for such Global Notes.
(g) LEGENDS.
(i) Except as permitted by the following paragraph (ii), (iii)
and (iv), each Note certificate (and all Notes issued in
exchange therefor or substitution thereof) shall bear a
legend in substantially the following form:
"THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
OTHER STATE SECURITIES LAWS, AND, ACCORDINGLY, NEITHER THIS
SECURITY, THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM OR NOT
SUBJECT TO REGISTRATION.
THE HOLDER OF THIS SECURITY, BY ITS ACQUISITION HEREOF, AGREES
THAT IT WILL NOT, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE
ORIGINAL ISSUE DATE HEREOF, RESELL OR OTHERWISE TRANSFER THE NOTE
EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF
SUCH NOTE EXCEPT (A) TO HUTCHINSON TECHNOLOGY INCORPORATED OR A
SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES
IN
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COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE
TIME OF SUCH TRANSFER); AND AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH
ANY TRANSFER OF THE NOTE EVIDENCED HEREBY WITHIN TWO YEARS AFTER
THE ORIGINAL ISSUANCE OF SUCH NOTE, THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE
MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE
TRUSTEE. IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE (C), (D)
OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
THE TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON ANY
TRANSFER OF THE NOTE EVIDENCED HEREBY AFTER THE EXPIRATION OF TWO
YEARS FROM THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT."
(ii) Upon any sale or transfer of a Transfer Restricted Note
(including any Transfer Restricted Note represented by a
Global Note) pursuant to Rule 144 under the Securities Act
or pursuant to an effective registration statement under the
Securities Act:
(A) in the case of any Transfer Restricted Note that is a
Definitive Note, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Note for a
Definitive Note that does not bear the legend set forth
in (i) above and rescind any restriction on the
transfer of such Transfer Restricted Note upon receipt
of a certification from the transferring Holder
substantially in the form of EXHIBIT B-4 hereto; and
(B) in the case of any Transfer Restricted Note represented
by a Global Note, such Transfer Restricted Note shall
not be required to bear the legend set forth in (i)
above, but shall continue to be subject to the
provisions of Section 2.06(a) and (b) hereof; PROVIDED,
HOWEVER, that with respect to any request for an
exchange of a Transfer Restricted Note that is
represented by a Global Note for a Definitive Note that
does not bear the legend set forth in (i) above, which
request is made in reliance upon Rule 144, the Holder
thereof shall certify in writing to the Registrar that
such request is being made pursuant to Rule 144 (such
certification to be substantially in the form of
EXHIBIT B-4 hereto).
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(iii) Upon any sale or transfer of a Transfer Restricted Note
(including any Transfer Restricted Note represented by a
Global Note) in reliance on any exemption from the
registration requirements of the Securities Act (other than
exemptions pursuant to Rule 144A or Rule 144 under the
Securities Act) in which the Holder or the transferee
provides an Opinion of Counsel to the Company and the
Registrar in form and substance reasonably acceptable to the
Company and the Registrar (which Opinion of Counsel shall
also state that the transfer restrictions contained in the
legend are no longer applicable):
(A) in the case of any Transfer Restricted Note that is a
Definitive Note, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Note for a
Definitive Note that does not bear the legend set forth
in (i) above and rescind any restriction on the
transfer of such Transfer Restricted Note; and
(B) in the case of any Transfer Restricted Note represented
by a Global Note, such Transfer Restricted Note shall
not be required to bear the legend set forth in (i)
above, but shall continue to be subject to the
provisions of Section 2.06(a) and (b) hereof.
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as
all beneficial interests in Global Notes have been exchanged for Definitive
Notes, redeemed, repurchased or canceled, all Global Notes shall be returned to
or retained and canceled by the Trustee in accordance with Section 2.10 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for Definitive Notes, redeemed, repurchased or canceled, the
principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note, by the Trustee
or the Note Custodian, at the direction of the Trustee, to reflect such
reduction.
(i) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate
Global Notes and Definitive Notes at the Registrar's
request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any stamp or
transfer tax or similar governmental charge payable in
connection therewith.
(iii) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or
Definitive Notes shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Global Notes or
Definitive Notes surrendered upon such registration of
transfer or exchange.
(iv) The Registrar shall not be required (x) to register the
transfer of or exchange of a Note during a period beginning
at the opening of business 15 days before the mailing of a
notice of redemption pursuant to Section 3.02 hereof and
ending at the close of business on the day of such mailing,
(y) to register the transfer of or exchange of any Note
selected for redemption in whole or
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in part pursuant to Section 3.02 hereof, except the
unredeemed portion of such Note being redeemed in part or
(z) to register the transfer of or exchange of any Note
surrendered for conversion pursuant to Article 11 hereof or
repurchase (and not withdrawn) upon the occurrence of a
Repurchase Event.
(v) Prior to due presentment for the registration of a transfer
of any Note, the Trustee, any Agent and the Company may deem
and treat the Person in whose name any Note is registered as
the absolute owner of such Note for the purpose of receiving
payment of principal of and interest on such Notes and for
all other purposes, and neither the Trustee, any Agent nor
the Company shall be affected by notice to the contrary.
(vi) The Trustee shall authenticate Global Notes and Definitive
Notes in accordance with the provisions of Section 2.02
hereof.
SECTION 2.07. REPLACEMENT NOTES. If (a) any mutilated Note is
surrendered to the Company or the Trustee, or (b) the Company and the Trustee
receive evidence to their satisfaction of the destruction, loss or theft of any
Note, and there is delivered to the Company and the Trustee such security or
indemnity as may be required by them to save each of them harmless, then, in the
absence of notice to the Company or the Trustee that such Note has been acquired
by a bona fide purchaser, the Company shall execute, and upon its written
request, the Trustee shall authenticate and make available for delivery, in
exchange for any such mutilated Note or in lieu of any such destroyed, lost or
stolen Note, a new Note of like tenor and principal amount, bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, or is about to be purchased by the
Company pursuant to Section 3.05, the Company in its discretion may, instead of
issuing a new Note, pay or purchase such Note, as the case may be.
Upon the issuance of any new Notes under this Section 2.07, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) in connection
therewith.
Every new Note issued pursuant to this Section 2.07 in lieu of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all benefits of this Indenture equally and proportionately
with any and all other Notes duly issued hereunder.
The provisions of this Section 2.07 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen securities.
SECTION 2.08. OUTSTANDING NOTES; DETERMINATIONS OF HOLDERS' ACTION
Notes outstanding at any time are all the Notes authenticated by the Trustee
except for those canceled by it, those delivered to it for cancellation, those
referred to in Section 2.07 or purchased by the Company pursuant to Section 3.05
and those described in this Section 2.08 as not outstanding. A Note does not
cease to be outstanding because the Company or an Affiliate thereof holds the
Note; provided, however, that in determining whether the Holders of the
requisite principal amount of Notes have given or concurred in any request,
demand, authorization, direction, notice, consent or waiver hereunder, Notes
owned by the Company, any other obligor upon the Notes or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such
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request, demand, authorization, direction, notice, consent or waiver, only Notes
which the Trustee knows based upon an examination of the Register to be so owned
shall be so disregarded. Subject to the foregoing, only Notes outstanding at
the time of such determination shall be considered in any such determination
(including determinations pursuant to Articles 7 and 10).
If a Note is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the Paying Agent (other than the Company) holds, in accordance with
this Indenture, at maturity, money sufficient to pay the Notes payable on that
date, then immediately on the date of maturity such Notes shall cease to be
outstanding and interest, if any, on such Notes shall cease to accrue.
SECTION 2.09. TEMPORARY NOTES. Pending the preparation of definitive
Notes, the Company may execute, and upon written request from the Company signed
by two Officers of the Company, the Trustee shall authenticate and make
available for delivery, temporary Notes which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Notes in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and other
variations as the Officers of the Company executing such Notes may determine, as
conclusively evidenced by their execution of such Notes.
If temporary Notes are issued, the Company will cause definitive Notes
to be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the office or agency of the Company
designated for such purpose pursuant to Section 2.03, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Notes, the
Company shall execute and the Trustee, upon written request of the Company
signed by two Officers of the Company, shall authenticate and make available for
delivery in exchange therefor a like principal amount of definitive Notes of
authorized denominations. Until so exchanged, the temporary Notes shall in all
respects be entitled to the same benefits under this Indenture as definitive
Notes.
SECTION 2.10. CANCELLATION. All Notes surrendered for payment,
purchase by the Company, redemption by the Company pursuant to Article 3, or
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly canceled by
it. The Company may at any time deliver to the Trustee for cancellation any
Notes previously authenticated and made available for delivery hereunder which
the Company may have acquired in any manner whatsoever, and all Notes so
delivered shall be promptly canceled by the Trustee. The Company may not
reissue, or, except as expressly permitted by this Indenture, issue new Notes to
replace Notes it has paid or delivered to the Trustee for cancellation. No
Notes shall be authenticated in lieu of or in exchange for any Notes canceled as
provided in this Section 2.10, except as expressly permitted by this Indenture.
All canceled Notes held by the Trustee shall be destroyed by the Trustee and a
certificate of destruction shall be provided to the Company thereafter.
SECTION 2.11. CUSIP NUMBERS. The Company, in issuing the Notes may
use "CUSIP" numbers (if then generally in use), and the Trustee shall use CUSIP
numbers in notices of redemption or exchange as a convenience to Holders;
PROVIDED that any such notice shall state that no representation is made as to
the correctness of such numbers either as printed on the Notes or as contained
in any notice of redemption or exchange and that reliance may be placed only on
the other identification numbers printed on the Notes and any redemption shall
not be affected by any defect in or omission of such numbers.
SECTION 2.12. DEFAULTED INTEREST. If the Company defaults in a
payment of interest on the Notes, it shall pay the defaulted interest, plus (to
the extent lawful) any interest payable on the defaulted
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interest, to the Persons who are Holders on a subsequent special record date,
and such special record date, as used in this Section 2.12 with respect to the
payment of any defaulted interest, shall mean the 15th day next preceding the
date fixed by the Company for the payment of defaulted interest, whether or not
such day is a Business Day. At least 20 days before the subsequent special
record date, the Company shall mail to the Trustee a notice that states the
subsequent special record date, the payment date and the amount of defaulted
interest to be paid. At least 15 days before the subsequent special record
date, the Company shall mail to each Holder a notice that states the subsequent
special record date, the payment date and the amount of defaulted interest to be
paid. The Company may also pay defaulted interest in any other lawful manner.
ARTICLE 3.
REDEMPTION AND REPURCHASE OF NOTES
SECTION 3.01. REDEMPTION PRICES. The Notes are not redeemable at the
option of the Company prior to March 20, 2001. At any time on or after that
date, the Notes may be redeemed at the Company's option, upon notice as set
forth in Section 3.02, in whole at any time or in part from time to time, at the
following prices (expressed in percentages of the principal amount), together
with accrued and unpaid interest and Liquidated Damages, if any, thereon to the
date fixed for redemption if redeemed during the 12-month period beginning March
15 (beginning March 20 in the case of the first such period) of the years
indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----
<S> <C>
2001. . . . . . . . . . . . . . . . . . . . . . . 103.43%
2002. . . . . . . . . . . . . . . . . . . . . . . 102.57%
2003. . . . . . . . . . . . . . . . . . . . . . . 101.71%
2004. . . . . . . . . . . . . . . . . . . . . . . 100.86%
2005. . . . . . . . . . . . . . . . . . . . . . . 100.00%
</TABLE>
SECTION 3.02. NOTICE OF REDEMPTION; SELECTION OF NOTES. In case the
Company shall desire to exercise the right to redeem all or, as the case may be,
any part of the Notes pursuant to Section 3.1, it shall fix a date for
redemption and, in the case of any redemption pursuant to Section 3.1, it or, at
its request accompanied by the proposed form of notice of redemption (which must
be received by the Trustee at least ten days prior to the date the Trustee is
requested to give notice as described below, unless a shorter period is agreed
to by the Trustee), the Trustee in the name of and at the expense of the
Company, may publish a notice in THE WALL STREET JOURNAL and mail or cause to be
mailed a notice of such redemption at least 30 and not more than 60 days prior
to the date fixed for redemption to the Holders of Notes so to be redeemed as a
whole or in part at their last addresses as the same appear on the Note
register, provided that if the Company shall give such notice, it shall also
give such notice, and notice of the Notes to be redeemed, to the Trustee. Such
mailing shall be by first class mail. The notice, if mailed in the manner
herein provided, shall be conclusively presumed to have been duly given, whether
or not the Holder receives such notice. In any case, failure to give such
notice by mail or any defect in the notice to the Holder of any Note designated
for redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Note.
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Each such notice of redemption shall identify the Notes to be redeemed
(including CUSIP numbers), specify the aggregate principal amount of Notes to be
redeemed, the date fixed for redemption, the redemption price at which Notes are
to be redeemed, the place or places of payment, that payment shall be made upon
presentation and surrender of such Notes, that interest accrued to the date
fixed for redemption shall be paid as specified in said notice and that on and
after said date, interest thereon or on the portion thereof to be redeemed shall
cease to accrue. Such notice shall also state the current Conversion Price and
the date on which the right to convert such Notes or portions thereof into
Common Stock shall expire. If fewer than all the Notes are to be redeemed, the
notice of redemption shall identify the Notes to be redeemed. In case any Note
is to be redeemed in part only, the notice of redemption shall state the portion
of the principal amount thereof to be redeemed and shall state that on and after
the date fixed for redemption, upon surrender of such Note, a new Note or Notes
in principal amount equal to the unredeemed portion thereof shall be issued.
Prior to 10:00 a.m. on the redemption date specified in the notice of
redemption given as provided in this Section 3.02, the Company shall deposit
with the Trustee or with one or more paying agents (or, if the Company is acting
as its own paying agent, set aside, segregate and hold in trust as provided in
Section 2.04) an amount of money sufficient to redeem on the redemption date all
the Notes so called for redemption (other than those theretofore surrendered for
conversion into Common Stock) at the appropriate redemption price, together with
accrued interest to the date fixed for redemption. If any Note called for
redemption is converted pursuant hereto, any money deposited with the Trustee or
any paying agent or so segregated and held in trust for the redemption of such
Note shall be paid to the Company upon its request or, if then held by the
Company, shall be discharged from such trust.
If fewer than all the Notes are to be redeemed, the Trustee shall
select the Notes, or portions thereof to be redeemed, in compliance with the
requirements of the principal national securities exchange or national market
system, if any, on which the Notes are listed, or, if the Notes are not so
listed, on a pro rata basis, by lot or by such other method as the Trustee shall
deem fair and appropriate; provided that no Notes of $1,000 principal amount or
less shall be redeemed in part. If any Note is to be redeemed in part only, a
new Note or Notes in principal amount equal to the unredeemed principal portion
thereof shall be issued. If a portion of a Holder's Notes is selected for
partial redemption and such Holder converts a portion of such Notes, such
converted portion shall be deemed to be taken from the portion selected for
redemption. The Notes (or portions thereof) so selected shall be deemed duly
selected for redemption for all purposes hereof, notwithstanding that any such
Note is converted as a whole or in part before the mailing of the notice of
redemption.
Upon any redemption of less than all Notes, the Company and the
Trustee may treat as outstanding any Notes surrendered for conversion during the
period of 15 days next preceding the mailing of a notice of redemption and need
not treat as outstanding any Note authenticated and delivered during such period
in exchange for the unconverted portion of any Note converted in part during
such period.
SECTION 3.03. PAYMENT OF NOTES CALLED FOR REDEMPTION. If notice of
redemption has been given as above provided, the Notes or portion of Notes with
respect to which such notice has been given shall, unless converted into Common
Stock pursuant to the terms hereof, become due and payable on the date and at
the place or places stated in such notice at the applicable redemption price,
together with interest thereon accrued to the date fixed for redemption, and on
and after said date (unless the Company shall default in the payment of such
Notes at the redemption price, together with interest thereon accrued to said
date), interest on the Notes or portion of Notes so called for redemption shall
cease to accrue, and such Notes shall cease after the close of business on the
Business Day next preceding the date fixed for redemption to be convertible into
Common Stock and, except as provided in Sections 2.04 and 8.04, to be entitled
to any benefit or security under this Indenture, and the Holders thereof shall
have no right in respect of such Notes except the right to receive the
redemption price thereof and unpaid interest thereon to the date fixed for
redemption. On
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presentation and surrender of such Notes at a place of payment in said notice
specified, the said Notes or the specified portions thereof shall be paid and
redeemed by the Company at the applicable redemption price, together with
interest accrued thereon to the date fixed for redemption; provided that any
semi-annual payment of interest becoming due on the date fixed for redemption
shall be payable to the Holders of such Notes registered as such on the relevant
record date subject to the terms and provisions of the Notes.
Upon presentation of any Note redeemed in part only, the Company shall
execute and the Trustee shall authenticate and make available for delivery to
the Holder thereof, at the expense of the Company, a new Note or Notes, of
authorized denominations, in principal amount equal to the unredeemed portion of
the Notes so presented.
If any Note called for redemption shall not be so paid upon surrender
thereof for redemption, the principal and premium, if any, shall, until paid or
duly provided for, bear interest from the date fixed for redemption at the rate
borne by the Note and such Note shall remain convertible into Common Stock until
the principal and premium, if any, shall have been paid or duly provided for.
SECTION 3.04. CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION.
Notwithstanding anything to the contrary contained in this Indenture, in
connection with any redemption of Notes, the Company, by an agreement with one
or more investment bankers or other purchasers, may arrange for such purchasers
to purchase all Notes called for redemption (the "Called Notes") which are
either (i) surrendered for redemption or (ii) not duly surrendered for
redemption or conversion prior to the close of business on the Redemption Date,
and to convert the same into shares of Common Stock, by the purchasers'
depositing with the Trustee (acting as paying agent with respect to the deposit
of such amount and as conversion agent with respect to the conversion of such
Called Notes), in trust for the Holders of the Called Notes, on or prior to the
Redemption Date in the manner agreed to by the Company and such purchasers, an
amount sufficient to pay the Redemption Price, including accrued and unpaid
interest, if any, payable by the Company on redemption of such Called Notes. In
connection with any such arrangement for purchase and conversion, the Trustee as
Paying Agent shall pay on or after the Redemption Date such amounts so deposited
by the purchasers in exchange for Called Notes surrendered for redemption prior
to the close of business on the Redemption Date and for all Called Notes
surrendered after such Redemption Date. Notwithstanding anything to the
contrary contained in this Article 3, the obligation of the Company to pay the
Redemption Price, including accrued and unpaid interest, if any, of such Called
Notes shall be satisfied and discharged to the extent such amount is so paid by
such purchasers, provided, however, that nothing in this Section 3.04 shall in
any way relieve the Company of the obligation to pay such Redemption Price,
including accrued and unpaid interest, if any, on all Called Notes to the extent
such amount is not so paid by said purchasers. For all purposes of this
Indenture, any Called Notes surrendered by Holders for redemption, and any
Called Notes not duly surrendered for redemption or conversion prior to the
close of business on the Redemption Date, shall be deemed acquired by such
purchasers from such Holders and surrendered by such purchasers for conversion
and shall in all respects be deemed to have been converted, all as of
immediately prior to the close of business on the Redemption Date, subject to
the deposit by the purchasers of the above amount as aforesaid. Nothing in this
Section shall in any way limit the right of any Holder of a Note to convert his
Note pursuant to the terms of this Indenture any time prior to the close of
business on the Redemption Date.
SECTION 3.05. REPURCHASE UPON A REPURCHASE EVENT.
(1) Upon the occurrence of a Repurchase Event, each Holder of Notes
shall have the right to require that the Company repurchase such Holder's Notes
in whole or in part in integral multiples of $1,000, at a purchase price (the
"Repurchase Price") in cash in an amount equal to 100% of the principal amount
thereof, together with accrued and unpaid interest and Liquidated Damages, if
any, to the date of purchase (the "Repurchase Date") pursuant to an offer (the
"Repurchase Offer") made in accordance with the procedures described below and
the other procedures set forth in this Indenture.
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<PAGE>
(2) Within 15 days following any Repurchase Event, the Company shall
send by first-class mail, postage prepaid, to the Trustee and to each Holder of
Notes, at such Holder's address appearing in the security register, a notice
stating, among other things, (i) that a Repurchase Event has occurred, (ii) the
Repurchase Price, (iii) the Repurchase Date, which shall be the Business Day 30
days from the date such notice is mailed, or such later date as is necessary to
comply with requirements under the Exchange Act, (iv) that any Note not tendered
shall continue to accrue interest and to have all of the benefits of this
Indenture, (v) that, unless the Company defaults in the payment of the
Repurchase Price, any Notes accepted for payment pursuant to the Repurchase
Offer shall cease to accrue interest after the Repurchase Date, (vi) that
Noteholders electing to have any Notes purchased pursuant to a Repurchase Offer
shall be required to surrender the Notes, with the form entitled "Option of
Noteholder to Elect Purchase" on the reverse of the Notes completed, to the
Company at the address specified in the notice prior to the close of business on
the third Business Day preceding the Repurchase Date, (vii) that Noteholders
shall be entitled to withdraw their election if the Company receives, not later
than the close of business on the second Business Day preceding the Repurchase
Date, a telegram, telex, facsimile transmission or letter setting forth the name
of the Noteholder, the principal amount of Notes delivered for purchase, and a
statement that such Noteholder is withdrawing his election to have such Notes
purchased, and (viii) that Noteholders whose Notes are being purchased only in
part shall be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, which unpurchased portion must be equal to
$1,000 in principal amount or an integral multiple thereof. The Company shall
comply, to the extent applicable, with the requirements of Rule 13e-4 and 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of the Notes in connection with a Repurchase Event.
(3) On the Repurchase Date, the Company shall, to the extent lawful,
(i) accept for payment Notes or portions thereof tendered pursuant to the
Repurchase Offer, (ii) deposit with the Trustee an amount equal to the
Repurchase Price in respect of all Notes or portions thereof so tendered and
(iii) deliver or cause to be delivered to the Trustee the Notes so accepted
together with an Officers' Certificate setting forth the Notes or portions
thereof tendered to the Company. The Trustee shall promptly mail to each
Noteholder of Notes so accepted payment in an amount equal to the purchase price
of such Notes, and the Trustee shall promptly authenticate and mail to each
Noteholder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note shall be in a
principal amount of $1,000 or an integral multiple thereof. The Company shall
publicly announce the results of the Repurchase Offer on or as soon as
practicable after the Repurchase Payment Date.
ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES. The Company shall pay the principal
of and interest (including interest accruing on or after the filing of a
petition in bankruptcy or reorganization relating to the Company, whether or not
a claim for post-filing interest is allowed in such proceeding) on the Notes on
(or prior to) the dates and in the manner provided in the Notes or pursuant to
this Indenture. An installment of principal and interest shall be considered
paid on the applicable date due if on such date the Trustee or the Paying Agent
holds, in accordance with this Indenture, money sufficient to pay all of such
installment then due. The Company shall pay interest on overdue principal and
interest on overdue installments of interest (including interest accruing on or
after the filing of a petition in bankruptcy or reorganization relating to the
Company whether or not a claim for post-filing interest is allowed in such
proceeding), to the extent lawful, at the rate per annum borne by the Notes,
which interest on overdue interest shall accrue from the date such amounts
became overdue.
SECTION 4.02. REPORTS.
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(1) Whether or not required by the rules and regulations of the SEC,
so long as any Notes are outstanding, the Company shall furnish to the Holders
of Notes and file with the SEC (unless the SEC will not accept such a filing)
(i) all quarterly and annual financial information that would be required to be
contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were
required to file such Forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" that describes the financial
condition and results of operations of the Company and its consolidated
Subsidiaries and, with respect to the annual information only, a report thereon
by the Company's certified independent public accountants and (ii) all current
reports that would be required to be filed with the SEC on Form 8-K if the
Company were required to file such reports, in each case within the time periods
specified in the SEC's rules and regulations. The Company shall at all times
comply with TIA Section 314(a).
(2) For so long as any Notes remain outstanding, the Company shall
furnish to the Holders, securities analysts, prospective investors and
beneficial owners of the Notes, upon their request, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(3) The Company shall provide the Trustee with a sufficient number of
copies of all reports and other documents and information that the Company may
be required to deliver to the Holders under this Section 4.02.
SECTION 4.03. COMPLIANCE CERTIFICATES.
(1) The Company shall deliver to the Trustee within 90 days after the
end of each of the Company's fiscal years a certificate containing a
certification from the principal executive officer, principal financial officer
or principal accounting officer of the Company as to his or her knowledge of the
Company's compliance with all conditions and covenants under this Indenture.
For purposes of this Section 4.03(l), such compliance shall be determined
without regard to any period of grace or requirement of notice provided under
this Indenture. If they do know of such a Default or Event of Default, the
certificate shall describe any such Default or Event of Default and its status.
Such certificate need not comply with Sections 12.04 and 12.05.
(2) So long as not contrary to the then current recommendation of the
American Institute of Certified Public Accountants, the Company shall deliver to
the Trustee within 120 days after the end of each fiscal year a written
statement by the Company's independent certified public accountants stating (A)
that their audit examination has included a review of the terms of this
Indenture and the Notes as they relate to accounting matters, and (B) whether,
in connection with their audit examination, any Default or Event of Default has
come to their attention and, if such a Default or Event of Default has come to
their attention, specifying the nature and period of the existence thereof;
PROVIDED, HOWEVER, that the independent certified public accountants delivering
such statement shall not be liable in respect of such statement by reason of any
failure to obtain knowledge of any such Default or Event of Default that would
not be disclosed in the course of an audit examination conducted in accordance
with GAAP.
(3) The Company shall deliver to the Trustee as soon as possible and
in any event within 15 days after the Company becomes aware of the occurrence of
each Default or Event of Default, which is continuing, an Officers' Certificate
(which need not comply with Sections 12.04 and 12.05) setting forth the details
of such Default or Event of Default, and the action which the Company proposes
to take with respect thereto.
SECTION 4.04. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Trustee, the Company shall execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.
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SECTION 4.05. MAINTENANCE OF OFFICE OR AGENCY. The Company shall
maintain or cause to be maintained, within the Borough of Manhattan, the City of
New York, an office or agency of the Trustee, Registrar and Paying Agent where
securities may be presented or surrendered for payment, where Notes may be
surrendered for registration of transfer, exchange or redemption and where
notices and demands to or upon the Company in respect of the Notes and this
Indenture may be served. The office or agency of the Trustee at the address
specified in Section 12.02 shall initially be such office or agency for all of
the aforesaid purposes. The Company shall give prompt written notice to the
Trustee of any change of location of such office or agency. If at any time the
Company shall fail to maintain or cause to be maintained 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 12.02.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations. The
Company shall give prompt written notice to the Trustee of any such designation
or rescission and of any change in location of any such other office or agency.
SECTION 4.06. PAYMENT OF TAXES AND OTHER CLAIMS. The Company shall
pay or discharge or cause to be paid or discharged, before any penalty accrues
thereon, (i) all material taxes, assessments and governmental charges levied or
imposed upon the Company or any Subsidiary thereof upon the income, profits or
property of the Company or any Subsidiary thereof and (ii) all material lawful
claims for labor, materials and supplies which, if unpaid, would by law become a
lien upon the property of the Company or any Subsidiary thereof; PROVIDED that
none of the Company or any Subsidiary thereof shall be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claims the amount, applicability or validity of which is being contested in good
faith by appropriate proceedings and for which adequate provision has been made
or where the failure to effect such payment or discharge is not adverse in any
material respect to the Holders.
SECTION 4.07. CORPORATE EXISTENCE. Subject to Article 5, the Company
will do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence and the corporate, partnership or other
existence of any of its Subsidiaries in accordance with the respective
organizational documents of such Subsidiary and the rights (charter and
statutory), licenses and franchises of the Company and its Subsidiaries;
PROVIDED, HOWEVER, that the Company shall not be required to preserve any such
right, license or franchise, or the corporate, partnership or other existence of
any of its Subsidiaries, if the board of directors of the Company shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Subsidiaries taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders.
SECTION 4.08. MAINTENANCE OF PROPERTIES AND INSURANCE. The Company
shall cause all material properties owned by or leased to it or any of its
Subsidiaries and used or useful in the conduct of its business or the business
of such Subsidiary to be maintained and kept in normal condition, repair and
working order and supplied with all necessary equipment and shall cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; PROVIDED, HOWEVER, that nothing in this Section 4.08
shall prevent the Company or any Subsidiary thereof from discontinuing the
maintenance of any such properties, if such discontinuance is desirable in the
conduct of its business or the business of such Subsidiary.
The Company shall provide or cause to be provided, for itself and any
of its Subsidiaries, insurance (including appropriate self-insurance) against
loss or damage of the kinds customarily insured against by corporations
similarly situated and owning like properties, including, but not limited to,
public
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liability insurance, with reputable insurers in such amounts with such
deductibles and by such methods as shall be customary for corporations similarly
situated in the industry.
SECTION 4.09. STAY, EXTENSION AND USURY LAWS. The Company covenants
(to the extent it may lawfully do so) that it will not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
enforce, which may affect the covenants or the performance of this Indenture;
and the Company (to the extent it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not, by
resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law has been enacted.
SECTION 4.10. INVESTMENT COMPANY ACT. The Company shall not become
an investment company subject to registration under the Investment Company Act
of 1940, as amended.
SECTION 4.11. NOTICE OF REGISTRATION DEFAULT. The Company will
notify the Trustee of the existence of any event under the Shelf Registration
Agreement which gives rise to Liquidated Damages under Section 4 thereof and of
the amount of Liquidated Damages payable as a result of such event. Unless and
until the Trustee receives such notice, it may assume that no such event exists
and that Liquidated Damages are not payable by the Company.
ARTICLE 5.
SUCCESSOR PERSON
SECTION 5.01. MERGER, CONSOLIDATION AND SALE OF ASSETS. The Company
shall not consolidate with or merge with or into, or sell, convey, transfer or
lease all or substantially all its assets (determined on a consolidated basis),
whether in a single transaction or a series of related transactions, to any
Person unless:
(i) the Person formed by such consolidation or into which the Company
is merged or the Person which acquires the properties and assets of the Company
substantially as an entirety is a corporation, partnership, trust, or limited
liability company organized and validly existing under the laws of the United
States or any state thereof or the District of Columbia and expressly assumes
payment of the principal of, premium, if any, interest on, and Liquidated
Damages, if any, with respect to, the Notes and performance and observance of
each obligation of the Company under this Indenture;
(ii) immediately after giving effect to such consolidation, merger,
transfer or lease, no Default or Event of Default will occur and be continuing;
(iii) such consolidation, merger, conveyance, transfer or lease does
not adversely affect the validity or enforceability of the Notes; and
(iv) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease complies with the provisions of this Indenture.
SECTION 5.02. SUCCESSOR PERSON TO BE SUBSTITUTED. In case of any
such consolidation, merger, sale, conveyance, transfer or lease in accordance
with the foregoing, the successor Person formed by such consolidation or into
which the Company is merged or to which such sale, lease, conveyance or transfer
is made, shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under the Indenture with the same effect as if such
successor Person had been named therein as the Company, and when a successor
Person duly assumes all of the obligations of the Company pursuant hereto and
pursuant
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to the Notes, the predecessor shall be released from such obligations (except
with respect to any obligations that arise from or as a result of such
transaction).
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" occurs if one
of the following shall have occurred and be continuing:
(1) The Company defaults in the payment of the principal of, or the
premium, if any, on the Notes when due at maturity, upon redemption or
otherwise, including failure by the Company to purchase the Notes when required
under Section 3.05 (whether or not such payment shall be prohibited by Article
10 of this Indenture); or
(2) The Company defaults for 30 days in payment of any interest on,
or Liquidated Damages, if any, with respect to, the Notes as and when the same
shall become due and payable (whether or not such payment shall be prohibited by
Article 10 of this Indenture); or
(3) The Company fails to provide timely notice of a Repurchase Event;
or
(4) The Company defaults in the payment of the Repurchase Price in
respect of any Note on the Repurchase Date therefor (whether or not such payment
shall be prohibited by Article 10 of this Indenture); or
(5) The Company defaults for 60 days after written notice in the
observance or performance of any other covenants or warranties of the Company in
the Indenture (other than a default in the performance or breach of a covenant
or agreement that is specifically dealt with elsewhere in this Section 6.01); or
(6) The Company defaults under one or more bonds, notes or other
evidences of indebtedness for money borrowed by the Company or any subsidiary of
the Company or under one or more mortgages, indentures or instruments under
which there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company or any subsidiary of the Company,
whether such indebtedness now exists or shall hereafter be created, which
default individually or in the aggregate shall constitute a failure to pay the
principal of indebtedness in excess of $5.0 million when due and payable after
the expiration of any applicable grace period with respect thereto or shall have
resulted in indebtedness in excess of $5.0 million becoming or being declared
due and payable prior to the date on which it would otherwise have become due
and payable, without such indebtedness having been discharged, or such
acceleration having been rescinded or annulled; or
(7) The Company or any of its Subsidiaries pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding;
(B) consents to the entry of an order for relief against it
in an involuntary case or proceeding;
(C) consents to the appointment of a custodian of it or for
all or substantially all of its property;
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(D) makes a general assignment for the benefit of its
creditors; or
(E) admits in writing its inability to pay its debts
generally as they become due; or
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any of its
Subsidiaries in an involuntary case or proceeding;
(B) appoints a custodian of the Company or any of its
Subsidiaries for all or substantially all of its
property;
(C) orders the liquidation of the Company or any of its
Subsidiaries;
(D) and in each case the order or decree remains unstayed
and in effect for 60 days.
"Bankruptcy Law" means Title 11, United States Code, or any similar
Federal or state law for the relief of debtors. "Custodian" means any receiver,
trustee, assignee, liquidator, sequestrator, custodian or similar official under
any Bankruptcy Law.
SECTION 6.02. ACCELERATION. If any Event of Default under clauses
(1) through (6) of Section 6.01 (or clauses (7) or (8) of Section 6.01 with
respect to a Subsidiary of the Company) occurs and is continuing, the Trustee
may, by notice to the Company, or the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding may, by notice to the Company and
the Trustee (each, an "Acceleration Notice"), and the Trustee shall, upon the
request of such Holders, declare the principal of, and premium, if any, on the
Notes to be due and payable immediately. If any Event of Default under clauses
(7) or (8) of Section 6.01 occurs with respect to the Company, all principal of,
premium and Liquidated Damages, if any, on the Notes will IPSO FACTO become and
be immediately due and payable. Except as set forth in Section 10.05, the
Holders of a majority in aggregate principal amount of the Notes then
outstanding by written notice to the Trustee and to the Company may cancel such
declaration and may waive past defaults (except an acceleration due to a default
in payment of the principal or interest on any of the Notes) if all existing
Events of Default have been cured, except non-payment of principal or interest
that has become due solely because of the acceleration, and the Company has paid
or deposited with the Trustee a sum sufficient to pay all principal of, premium,
if any, interest on, and Liquidated Damages, if any, with respect to, Notes then
due.
SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of and interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if the Trustee does not
possess any of the Notes or does not produce any of the Notes in the proceeding.
A delay or omission by the Trustee or any Holder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of, or acquiescence in, the Event of Default. No remedy is
exclusive of any other remedy. Except as set forth in Section 2.07, all
remedies are cumulative to the extent permitted by law.
SECTION 6.04. CONTROL BY MAJORITY. Subject to the duty of the
Trustee following an Event of Default to act with the required standard of care,
the Trustee will not be under an obligation to exercise any of its rights or
powers provided herein at the request or direction of any of the Holders, unless
such Holders
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shall have offered to the Trustee satisfactory indemnity against any associated
loss, liability or expense. Subject to such provisions for the indemnification
of the Trustee, the Holders of a majority in aggregate principal amount of the
Notes then outstanding shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee.
SECTION 6.05. LIMITATION ON SUITS. Except as provided in Section
6.07, a Holder may not pursue any remedy with respect to this Indenture or the
Notes unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in aggregate principal amount of the
Notes at the time outstanding make a written request to the Trustee to pursue
the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security
or indemnity against any loss, liability or expense satisfactory to the Trustee;
(4) the Trustee does not comply with the request within 30 days after
receipt of the notice, the request and the offer of security or indemnity; and
(5) the Holders of a majority in aggregate principal amount of the
Notes at the time outstanding do not give the Trustee a direction inconsistent
with the request during such 30-day period.
A Holder may not use this Indenture to prejudice the rights of any
other Holder or to obtain a preference or priority over any other Holder.
SECTION 6.06. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of the principal amount or interest, in respect of the Notes held by
such Holder, on or after the respective due dates expressed in the Notes or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected adversely without the consent of each
such Holder.
SECTION 6.07. COLLECTION SUIT BY TRUSTEE. If an Event of Default
described in Section 6.01 occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
for the whole amount owing with respect to the Notes and the amounts provided
for in Section 7.07.
SECTION 6.08. 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 the property of the Company, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise:
(1) to file and prove a claim for the whole amount of the principal
amount and interest on the Notes and to file such other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel) and of the Holders allowed
in such judicial proceeding; and
(2) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
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and any custodian in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07.
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 Notes 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 6.09. PRIORITIES. If the Trustee collects any money pursuant
to this Article 6, it shall, subject to Article 10 hereof, pay out the money in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Holders for amounts due and unpaid on the Notes for the
principal and interest, ratably, without preference or priority of any kind,
according to such amounts due and payable on the Notes for principal and
interest respectively; and
THIRD: the balance, if any, to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 6.09.
SECTION 6.10. UNDERTAKING FOR COSTS. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant (other than the Trustee) in the suit of
an undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees and expenses,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.10
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.06 or a suit by Holders of more than 10% in aggregate principal amount of the
Notes at the time outstanding.
ARTICLE 7.
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(1) If an Event of Default has occurred and is continuing, the
Trustee shall exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in its exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(2) Except during the continuance of an Event of Default:
(A) the Trustee need perform only those duties that are
specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this
Indenture against the Trustee; and
(B) 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
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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 examine the certificates and
opinions to determine whether or not they conform to
the requirements of this Indenture.
The Trustee shall not be liable for any interest on any money received
by it.
(3) 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:
(A) this paragraph (3) does not limit the effect of
paragraph (2) of this Section 7.01;
(B) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer unless
it is proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(C) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 6.05.
(4) Whether or not expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (1),
(2), (3) and (5) of this Section 7.01.
(5) The Trustee may refuse to perform any duty or exercise any right
or power or extend or risk its own funds or otherwise incur any financial
liability unless it receives security or indemnity satisfactory to it against
any loss, liability or expense.
(6) Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money held by it hereunder.
(7) Except with respect to Section 4.01, the Trustee shall have no
duty to inquire as to the performance of the Company with respect to the
covenants contained in Article 4. In addition, the Trustee shall not be deemed
to have knowledge of an Event of Default except (i) any Default or Event of
Default occurring pursuant to Sections 4.01, 6.01(1) or 6.01(2) or (ii) any
Default or Event of Default of which the Trustee shall have received written
notification or obtained actual knowledge.
(8) Delivery of reports, information and documents to the Trustee
under Section 4.02 is for informational purposes only and the Trustee's receipt
of the foregoing shall not constitute constructive notice of any information
contained therein or determinable from information contained therein, including
the Company's compliance with any of their covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers' Certificates).
SECTION 7.02. RIGHTS OF TRUSTEE.
(1) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
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(2) Before the Trustee acts or refrains from acting, it may require
(and in the circumstances described in Section 314(c) of the TIA shall) an
Officers' Certificate and 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
such Officers' Certificate or Opinion of Counsel.
(3) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(4) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers.
(5) The Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon.
(6) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security and indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Company or its Affiliates with the same rights it
would have if it were not Trustee. Any Paying Agent, Registrar or co-registrar
may do the same with like rights. However, the Trustee must comply with
Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee makes no
representation as to the validity or adequacy of this Indenture or the Notes, it
shall not be accountable for the Company's use of the proceeds from the Notes,
and it shall not be responsible for any statement in a registration statement
for the Notes when filed under the Securities Act of 1933, as amended (the
"Securities Act"), (other than statements contained in a Form T-1 when filed
with the SEC under the TIA) or in this Indenture or the Notes (other than its
certificate of authentication), or the determination as to which beneficial
owners are entitled to receive any notices hereunder.
SECTION 7.05. NOTICE OF DEFAULTS. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Holder as their names and addresses appear on the Register notice of the Default
within 90 days after it becomes known to the Trustee unless such Default shall
have been cured or waived. Except in the case of a Default or Event of Default
described in Section 6.01(1) or (2), the Trustee may withhold such notice if and
so long as its board of directors, the executive committee of its board of
directors or a committee of Trust Officers in good faith determines that the
withholding of such notice is in the interests of Holders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after
each May 15 beginning with the May 15 following the date of this Indenture, the
Trustee shall mail to each Holder a brief report dated as of such reporting date
that complies with Section 313(a) of the TIA. The Trustee shall also transmit
all reports as required by Section 313(b) of the TIA to such Holders. The
Trustee shall transmit such reports in such manner as required by Section 313(c)
of the TIA.
A copy of each report at the time of its mailing to Holders shall be
filed with the Company, the SEC and each stock exchange on which the Notes are
listed. The Company shall promptly notify the Trustee whenever the Notes become
listed on any stock exchange and of any delisting thereof.
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SECTION 7.07. COMPENSATION AND INDEMNITY. The Company agrees:
(1) To pay to the Trustee from time to time such compensation as
shall be agreed in writing between the Company and the Trustee for all services
rendered by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
(2) To reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses, disbursements and advances of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) To indemnify the Trustee for, and to hold it harmless against,
any and all loss, liability or expense incurred without negligence, willful
misconduct or bad faith on its part, arising out of or in connection with the
acceptance or administration of this trust, including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder.
The Trustee shall have a claim and lien prior to the Notes as to all
property and funds held by it hereunder for any amount owing it or any
predecessor Trustee pursuant to this Section 7.07, except with respect to funds
held in trust for the payment of principal of or interest on particular Notes.
The Company's payment obligations pursuant to this Section 7.07 shall
survive the resignation or removal of the Trustee and the discharge of this
Indenture. When the Trustee renders services or incurs expenses after the
occurrence of a Default specified in Section 6.01(4) or (5), the compensation
for services and expenses are intended to constitute expenses of administration
under any Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE. The Trustee may resign by so
notifying the Company in writing at least 30 days prior to the date of the
proposed resignation; PROVIDED, HOWEVER, no such resignation shall be effective
until a successor Trustee has accepted its appointment pursuant to this Section
7.08. The Holders of a majority in aggregate principal amount of the Notes at
the time outstanding may remove the Trustee by so notifying the Trustee and the
Company. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent or an order for
relief is entered with respect to the Trustee under any
Bankruptcy Law;
(3) a custodian or public officer takes charge of the Trustee or its
property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint, by
resolution of its board of directors, a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. Subject to payment of all amounts owing to the Trustee
under Section 7.07 and subject further to its lien under Section 7.07, the
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee.
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If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in aggregate principal amount of the Notes at the time
outstanding may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets (including the trust created by the
Indenture) to, another corporation, the resulting, surviving or transferee
corporation without any further act shall be the successor Trustee; PROVIDED
that such successor is eligible and qualified under Section 7.10.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. The Trustee shall at
all times satisfy requirements of Section 310(a)(1) of the TIA. The Trustee
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 Section 310(b) of the TIA. In determining whether the Trustee has
conflicting interests as defined in Section 310(b)(1) of the TIA, the provisions
contained in the proviso to Section 310(b)(1) of the TIA shall be deemed
incorporated herein.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee is subject to Section 311(a) of the TIA, excluding any creditor
relationship listed in Section 311(b) of the TIA. A Trustee who has resigned or
been removed shall be subject to Section 311(a) of the TIA to the extent
indicated therein.
ARTICLE 8.
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. SATISFACTION AND DISCHARGE OF INDENTURE. This
Indenture shall upon an order contained in an Officers' Certificate cease to be
of further effect (except as expressly provided for in this Article 8), and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) all Notes theretofore authenticated and delivered (other
than Notes which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 2.07) have been delivered to the Trustee
for cancellation; or
(B) all such Notes not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving
of notice of redemption by the Trustee in the name, and
at the expense, of the Company, or
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(iv) are delivered to the Trustee for conversion in
accordance with Article 11,
and the Company, in the case of (i), (ii), (iii) or (iv) above, has irrevocably
deposited or caused to be deposited with the Trustee as trust funds an amount in
cash sufficient (without consideration of any investment of such cash) to pay
and discharge the entire indebtedness on such Notes not theretofore delivered to
the trustee for cancellation for principal of, premium, if any, and interest and
Liquidated Damages to the date of such deposit (in the case of Notes which have
become due and payable) or to the Stated Maturity or Redemption Date, as the
case may be; provided that the Trustee shall have been irrevocably instructed to
apply such amount to said payments with respect to the Notes;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with.
SECTION 8.02. SURVIVAL OF CERTAIN OBLIGATIONS. Notwithstanding the
satisfaction and discharge of this Indenture and of the Notes referred to in
Section 8.01, the respective obligations of the Company and the Trustee under
Sections 2.03, 2.04, 2.05, 2.06, 2.07, 4.01, 6.04, 6.09, 7.01, 7.07, 7.08,
Article 8, Article 10 and Article 11 shall survive until the Notes are no longer
outstanding, and thereafter, the obligations of the Company and the Trustee
under Article 10 and in Section 7.07 shall survive. Nothing contained in this
Article 8 shall abrogate any of the rights, obligations or duties of the Trustee
under this Indenture.
SECTION 8.03. ACKNOWLEDGMENT OF DISCHARGE BY TRUSTEE. Subject to
Section 8.06, after (i) the conditions of Section 8.01 have been satisfied, (ii)
the Company has paid or caused to be paid all other sums payable hereunder by
the Company and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent referred to in clause (i) above relating to the satisfaction and
discharge of this Indenture have been complied with, the Trustee upon written
request shall acknowledge in writing the discharge of the Company's obligations
under this Indenture except for those surviving obligations specified in Section
8.02.
SECTION 8.04 APPLICATION OF TRUST MONEY. Subject to the provisions
of the Section 6.09, all money deposited with the Trustee pursuant to Section
8.01 shall be held in trust and applied by it, in accordance with the provisions
of the Notes and this Indenture, to the payment, either directly or through the
Trustee (or any paying agent), to the Persons entitled thereto, of the principal
of, premium, if any, and interest and Liquidated Damages for which payment has
been deposited with the Trustee. All moneys deposited with the Trustee pursuant
to Section 8.01 (and held by it or any paying agent) for the payment of Notes
subsequently converted shall be returned to the Company upon an order pursuant
to an Officers' Certificate.
SECTION 8.05. REPAYMENT TO THE COMPANY; UNCLAIMED MONEY. Subject to
applicable laws governing escheat of such property, and upon termination of the
trust established pursuant to Section 8.01 hereof or 8.02 hereof, as the case
may be, the Trustee shall promptly pay to the Company upon written request any
excess cash or U.S. Government Obligations held by it. Additionally, if any
amounts for the payment of principal, premium and Liquidated Damages, if any, or
interest remain unclaimed for two years, the Trustee shall, upon written
request, pay such amounts back to the Company forthwith. Thereafter, all
liability of the Trustee with respect to such amounts shall cease. After
payment to the Company, Holders entitled to such payment must look to the
Company for such payment as general creditors unless an applicable abandoned
property law designates another person.
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SECTION 8.06. REINSTATEMENT. If the Trustee is unable to apply any
cash in accordance with this Article 8 by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Company's
obligations under this Indenture and the Notes shall be revived and reinstated
as though no deposit had occurred pursuant to this Article 8 until such time as
the Trustee is permitted to apply all such cash held in trust with respect to
the Notes; provided that if the Company makes any payment of principal of,
premium, if any, or interest or Liquidated Damages on any Notes following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the amounts held by
the Trustee.
ARTICLE 9.
AMENDMENTS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS. From time to time, when
authorized by a resolution of its board of directors, the Company and the
Trustee, without notice to or the consent of the Holders of the Notes issued
hereunder, may amend or supplement this Indenture or the Notes as follows:
(1) to cause the Indenture to be qualified under the TIA;
(2) to evidence the succession of another Person to the Company as
otherwise permitted by the Indenture;
(3) to add to the covenants of the Company for the benefit of the
Holders of the Notes or to surrender any power conferred upon the Company;
(4) to add any Events of Default;
(5) to permit or facilitate the issuance of securities in
uncertificated form;
(6) to secure the Notes;
(7) to provide for successor trustees; or
(8) to cure any ambiguity, to correct or supplement any provision
which may be inconsistent with any other provision or to make any other
provisions with respect to matters or questions arising under this Indenture;
provided such action shall not adversely affect the interest of Holders of Notes
in any material respect and the Trustee may rely upon the opinion of counsel to
that effect.
SECTION 9.02. WITH CONSENT OF HOLDERS. With the written consent of
the Holders of at least a majority in aggregate principal amount of the Notes at
the time outstanding, the Company and the Trustee may amend this Indenture or
the Notes or may waive compliance in a particular instance by the Company with
any provisions of this Indenture or the Notes and may waive any past default
under this Indenture except (i) a default in the payment of principal, premium
or interest or Liquidated Damages, if any, on, any Note, (ii) the right of a
Holder to redeem or convert the Note, or (iii) with respect to any covenant or
provision of this Indenture which cannot be modified or amended without the
consent of the Holder of each Note under this Section 9.02. However, without
the consent of each Holder affected thereby, a waiver or an amendment to this
Indenture or the Notes may not:
(1) change the Stated Maturity of the principal of, or any
installment of interest on, or Liquidated Damages, if any, with respect to, any
Note;
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(2) reduce the principal amount thereof, or the premium or interest
on, or Liquidated Damages, if any, with respect to, any Note;
(3) change the place of payment where, or currency in which, any Note
or any premium or interest or Liquidated Damages, if any, thereon is payable;
(4) impair the right to institute suit for the enforcement of any
payment on or with respect to any Note;
(5) make any change to Article 10 of this Indenture in a manner
adverse to the Holders of Notes;
(6) adversely affect the right to cause the Company to repurchase the
Notes; or
(7) modify the subordination provisions in a manner adverse to the
Holders of the Notes.
Without the consent of the Holders of all of the Notes then
outstanding, a waiver or an amendment to this Indenture may not reduce the
aforesaid percentage of Notes.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
In the event that certain Holders are willing to defer or waive
certain obligations of the Company hereunder with respect to Notes held by them,
such deferral or waiver shall not be deemed to affect any other Holder who
receives the subject payment or performance in a timely manner.
After an amendment or waiver under this Section 9.02 becomes
effective, the Company shall mail to each Holder a notice briefly describing the
amendment 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 amendment or waiver.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment
to this Indenture or the Notes at a time when this Indenture shall be qualified
under the TIA shall be set forth in a supplement that complies with the TIA as
then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS, WAIVERS AND ACTIONS.
Until an amendment, waiver or other action by Holders becomes effective, a
consent to it or any other action by a Holder of a Note hereunder is a
continuing consent by the Holder and every subsequent Holder of that Note or
portion of the Note that evidences the same obligation as the consenting
Holder's Note, even if notation of the consent, waiver or action is not made on
the Note. However, any such Holder or subsequent Holder may revoke the consent,
waiver or action as to such Holder's Note or portion of the Note if the Trustee
receives the notice of revocation before the consent of the requisite aggregate
principal amount of the Notes then outstanding has been obtained and not
revoked. After an amendment, waiver or action becomes effective, it shall bind
every Holder, except as provided in Section 9.02.
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 or
waiver. If a record date is fixed, then, notwithstanding the first two
sentences of the immediately preceding paragraph, those Persons who were Holders
at such record date (or their duly designated proxies), and only those Persons,
shall be entitled to consent to such amendment, supplement or waiver or to
revoke any consent previously given, whether or not
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such Persons continue to be Holders after such record date. No such consent
shall be valid or effective for more than 90 days after such record date.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES. Notes authenticated
and made available for delivery after the execution of any supplemental
indenture pursuant to this Article 9 may, and shall, if required by the Trustee,
bear a notation in form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Company shall so determine, new Notes so
modified as to conform, in the opinion of the Trustee and the board of directors
of the Company, to any such supplemental indenture may be prepared and executed
by the Company and authenticated and made available for delivery by the Trustee
in exchange for outstanding Notes.
SECTION 9.06. TRUSTEE TO SIGN SUPPLEMENTAL INDENTURES. The Trustee
shall sign any supplemental indenture authorized pursuant to this Article 9 if
the supplemental indenture does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee may, but need
not sign it. In signing such amendment the Trustee shall be entitled to
receive, and shall be fully protected in relying upon, an Officers' Certificate
and Opinion of Counsel stating that such supplemental indenture is authorized or
permitted by this Indenture.
SECTION 9.07. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution
of any supplemental indenture under this Article 9, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form a
part of this Indenture for all purposes; and every Holder of Notes theretofore
or thereafter authenticated and made available for delivery hereunder shall be
bound thereby.
ARTICLE 10.
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE. The Company agrees, and
each Holder by accepting a Note agrees, that the indebtedness evidenced by the
Notes (including principal, premium, if any, interest, and Liquidated Damages,
if any) is subordinated in right of payment, to the extent and in the manner
provided in this Article 10 to the prior payment in full in cash of all Senior
Indebtedness, and that the subordination is for the benefit of the holders of
the Senior Indebtedness.
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any
(i) distribution to creditors of the Company in a liquidation or dissolution of
the Company, (ii) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to the Company or its property or (iii) assignment
for the benefit of creditors or any marshaling of the assets and liabilities of
the Company:
(1) holders of all Senior Indebtedness will first be entitled to
receive payment in full in cash of all amounts due or to become due thereon
before the Holders of the Notes will be entitled to receive any payment in
respect of the principal of, premium, if any, interest on, and Liquidated
Damages, if any, with respect to, the Notes (except that the Holders may receive
Junior Securities); and
(2) until the Senior Indebtedness (as provided in subsection (1)
above) is paid in full in cash or, at the option of the holders of the Senior
Indebtedness, cash equivalents, any distribution to which Holders would be
entitled but for this Article 10 shall be made to holders of Senior Indebtedness
(except that the Holders may receive Junior Securities), as their interests may
appear.
SECTION 10.03. DEFAULT ON SENIOR INDEBTEDNESS. Upon the final
maturity of any Senior Indebtedness by lapse of time, acceleration or otherwise,
all such Senior Indebtedness shall first be paid in full in cash, or such
payment duly provided for in cash or in a manner satisfactory to the holders of
such Senior Indebtedness (except that the Holders may receive Junior
Securities), before any payment is made by
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the Company or any Person acting on behalf of the Company on account of the
principal or interest of the Notes.
Until all Senior Indebtedness has been paid in full, in cash or cash
equivalents, the Company may not, directly or indirectly, make any payment
(whether by redemption, repurchase, retirement, defeasance or otherwise) to the
Holders upon or in respect to the Notes (except that the Holders may receive
Junior Securities) if:
(i) a default in the payment of the principal of, or premium, if
any, or interest on any Designated Senior Indebtedness (a
"Payment Default") occurs and is continuing beyond any
applicable grace period or
(ii) a default, other than a Payment Default, on any Designated
Senior Indebtedness occurs and is continuing beyond any
applicable grace period with respect to Designated Senior
Indebtedness that permits holders of the Designated Senior
Indebtedness as to which such default relates to accelerate
its maturity (a "Nonpayment Default"), and the Trustee
receives a notice of such default (a "Payment Blockage
Notice") from (a) if such Nonpayment Default shall have
occurred under any Credit Facility, the representative of
the Credit Facility, (b) if such Nonpayment Default shall
have occurred under the Private Placement Notes, the holders
thereof or their designated agents or (c) if such Nonpayment
Default shall have occurred with respect to any other issue
of Designated Senior Indebtedness, the holders or a
representative of the holders, of at least 20% of such
Designated Senior Indebtedness.
SECTION 10.04. NO SUSPENSION OF REMEDIES. Payments on or in
respect of the Notes may and shall be resumed (i) in the case of a Payment
Default respecting Designated Senior Indebtedness, on the date on which such
default is cured or waived or ceases to exist, and (ii) in the case of a
Nonpayment Default respecting Designated Senior Indebtedness, the earliest of
(a) the date on which that Nonpayment Default is cured or waived or ceases to
exist, (b) the date the applicable Payment Blockage Notice is retracted by
written notice to the Trustee from a representative of the holders of the
Designated Senior Indebtedness which have given that Payment Blockage Notice and
(c) 179 days after the date on which the applicable Payment Blockage Notice is
received by the Trustee, unless any Payment Default has occurred and is
continuing or an Event of Default of the type referred to in clause (7) or (8)
of Section 6.01 has occurred with respect to the Company. No new period of
payment blockage may be commenced unless and until (i) 365 days shall have
elapsed since the effectiveness of the immediately prior Payment Blockage Notice
and (ii) all scheduled payments of principal, premium, if any, interest on, and
Liquidated Damages, if any, with respect to, the Notes that have come due have
been paid in full in cash. No Nonpayment Default that existed or was continuing
on the date of delivery of any Payment Blockage Notice to the Trustee shall be,
or be made, the basis of a subsequent Payment Blockage Notice unless such
default shall have been cured or waived for a period of not less than 90 days.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER. In the event
that, notwithstanding any other provision hereof, the Trustee or any Holder
receives any payment or distribution of assets of the Company of any kind in
contravention of any of the terms of this Indenture, whether in cash, property
or securities, including, without limitation, by way of set-off or otherwise, in
respect of the Notes before all Senior Indebtedness is paid in full in cash,
then such payment or distribution will be held by the recipient in trust for the
benefit of holders of Senior Indebtedness, and will be immediately paid over or
delivered to the holders of Senior Indebtedness or their representative or
representatives to the extent
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necessary to make payment in full of all Senior Indebtedness remaining unpaid,
after giving effect to any concurrent payment or distribution, or provision
therefor, to or for the holders of Senior Indebtedness.
SECTION 10.06. NOTICE BY THE COMPANY. The Company shall promptly
notify the Trustee and the Paying Agent of any facts known to the Company that
would cause a payment of principal of or interest on the Notes to violate this
Article 10, but failure to give such notice shall not affect the subordination
of the Notes to the Senior Indebtedness provided in this Article 10. Nothing in
this Article 10 shall apply to claims of, or payments to, the Trustee under or
pursuant to Section 7.07.
SECTION 10.07. SUBROGATION. After all Senior Indebtedness is
paid in full and until the Notes are paid in full, Holders shall be subrogated
(equally and ratably with all other indebtedness PARI PASSU with the Notes) to
the rights of holders of Senior Indebtedness to receive distributions applicable
to Senior Indebtedness to the extent that distributions otherwise payable to the
Holders have been applied to the payment of Senior Indebtedness.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article 10 shall have been
applied pursuant to the provisions of this Article 10 to the payment of all
amounts payable in respect of the Senior Indebtedness of the Company, then and
in such case, the Holders shall be entitled to receive from the holders of such
Senior Indebtedness at the time outstanding any payments or distributions
received by such holders of Senior Indebtedness in excess of the amount
sufficient to pay all amounts payable in respect of the Senior Indebtedness of
the Company in full in cash or, at the option of the holders of Senior
Indebtedness, cash equivalents.
SECTION 10.08. RELATIVE RIGHTS. This Article 10 defines the
relative rights of Holders and holders of Senior Indebtedness. Nothing in this
Indenture shall:
(1) impair, as between the Company and Holders, the obligation of the
Company, which is absolute and unconditional, to pay principal of and interest
on the Notes in accordance with their terms;
(2) affect the relative rights of Holders and creditors of the
Company other than holders of Senior Indebtedness; or
(3) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of holders of
Senior Indebtedness under this Article 10.
If the Company fails because of this Article 10 to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
The provisions of this Article 10 shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any Senior
Indebtedness is rescinded or must otherwise be returned by any holder of Senior
Indebtedness upon the insolvency, bankruptcy or reorganization of the Company or
otherwise, all as though such payment had not been made.
SECTION 10.09. NO WAIVER OF SUBORDINATION PROVISIONS. No right
of any holder of Senior Indebtedness to enforce the subordination of the
indebtedness evidenced by the Notes shall be impaired by any act or failure to
act by the Company or by its failure to comply with this Indenture.
The holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Notes and without incurring responsibility to the Holders of the Notes and
without impairing or releasing the subordination provided in this Article 10 or
the obligations hereunder of the Holders of the Notes to the holders of Senior
Indebtedness, do any one or more of
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the following: (1) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Senior Indebtedness or any instrument
evidencing the same or any agreement under which Senior Indebtedness is
outstanding; (2) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness; (3) release any
person liable in any manner for the collection or payment of Senior
Indebtedness; and (4) exercise or refrain from exercising any rights against the
Company or any other Person.
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of Senior
Indebtedness, the distribution may be made and the notice given to their
representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Trustee and the Holders shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction or upon any
certificate of such representative or 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
10. In the event that the Trustee determines, in good faith, that further
evidence is required with respect to the right of any Person, as a holder of
Senior Indebtedness, to participate in any payment or distribution pursuant to
this Section 10.10, the Trustee may request such Person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amount of such Senior
Indebtedness held by such Person, as to the extent to which such Person is
entitled to participation in such payment or distribution, and as to other facts
pertinent to the rights of such Person under this Section 10.10, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT. The Trustee
or Paying Agent shall not at any time be charged with the knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee unless and until an Officer in the Corporate Trust Administration
Department of the Trustee and each Paying Agent shall have received written
notice thereof from a holder (or the agent) of Senior Indebtedness who shall
have been certified by the Company or otherwise established to the satisfaction
of the Trustee to be such holder or agent; and, prior to the receipt of any such
written notice, the Trustee and each Paying Agent shall be entitled to assume
conclusively that no such facts exist. Unless at least three Business Days
prior to the date on which by the terms of this Indenture any monies are to be
deposited by the Company with the Trustee or any Paying Agent (whether or not in
trust) for any purpose (including, without limitation, the payment of the
principal of or interest on any Note) the Trustee and each Paying Agent shall
have received with respect to such monies the notice provided for in the
foregoing sentence, the Trustee and each Paying Agent shall have full power and
authority to receive such monies and to apply the same to the purpose for which
they were received, and shall not be affected by any notice to the contrary
which may be received by it on or after such date. The foregoing shall not
apply to the Paying Agent if the Company is Paying Agent.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee.
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION; NO
FIDUCIARY DUTY TO HOLDERS OF SENIOR INDEBTEDNESS. Each Holder of a Note by his
acceptance thereof authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in this Article 10, and appoints the Trustee as attorney-in-fact for
any and all purposes. Notwithstanding anything to the contrary in this Article
10, the Trustee shall not be deemed to owe any fiduciary duty to the holders of
Senior Indebtedness and shall have no duties to such holders, except as
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expressly set forth in this Article 10 and no implied covenants or obligation
shall be read into this Indenture against the Trustee. The Trustee shall not be
liable to holders of Senior Indebtedness if it shall mistakenly pay over or
distribute to or on behalf of Holders of Notes or the Company monies or assets
to which any holders of Senior Indebtedness shall be entitled by virtue of this
Article 10.
SECTION 10.13. MISCELLANEOUS.
(a) All rights and interests under this Article 10 of the holders of
Senior Indebtedness, and all agreements and obligations of the Holders, the
Trustee and the Company under this Article 10, shall remain in full force and
effect irrespective of:
(i) any lack of validity or enforceability of Senior
Indebtedness, the notes or security instruments issued
pursuant thereto or any other agreement or instrument
relating thereto;
(ii) any exchange, release or non-perfection of any lien securing
Senior Indebtedness, or any release or amendment or waiver
of or consent to departure from any guaranty, for all or any
of the Senior Indebtedness; or
(iii) any other circumstance that might otherwise constitute a
defense available to, or a discharge of the Company in
respect of, Senior Indebtedness.
(b) The provisions of this Article 10 constitute a continuing
agreement and shall (i) remain in full force and effect until the Senior
Indebtedness shall have been paid in full, (ii) be binding upon the Holders and
the Trustee, the Company and their successors and assigns, and (iii) inure to
the benefit of and be enforceable by each other holder of Senior Indebtedness
and its successors, transferees and assigns.
ARTICLE 11.
CONVERSION OF NOTES
SECTION 11.01. RIGHT TO CONVERT. Subject to and upon compliance
with the provisions of this Indenture, Holders of Notes shall be entitled prior
to March 15, 2005, subject to prior redemption, to convert any Notes, or
portions thereof (in denominations of $1,000 in principal amount or multiples
thereof), into that number of fully paid and nonassessable shares of Common
Stock (as such shares shall then be constituted) obtained by dividing the
aggregate principal amount of the Notes or portion thereof surrendered for
conversion by the Conversion Price in effect at such time rounded to the nearest
1/100,000th of a share (with .000005 being rounded upward), by surrender of the
Note so to be converted in whole or in part in the manner provided in Section
11.02; PROVIDED that in the case of Notes called for redemption, conversion
rights will expire at the close of business on the Business Day immediately
preceding the Redemption Date, unless the Company subsequently defaults on
payment of the Redemption Price. A Note for which a Holder has delivered a
Repurchase Event purchase notice exercising the option of such Holder to require
the Company to repurchase such Note pursuant to Article 3 may be converted only
if such notice is withdrawn by a written notice of withdrawal delivered by the
Holder to the Company prior to the close of business on the Business Day
immediately preceding the Repurchase Date, unless the Company subsequently
defaults on the payment of the Repurchase Price. A Holder of Notes is not
entitled to any rights of a holder of Common Stock until such holder has
converted such Holder's Notes to Common Stock and only to the extent such Notes
are deemed to have been converted to Common Stock under this Article 11.
SECTION 11.02. EXERCISE OF CONVERSION PRIVILEGE; ISSUANCE OF
COMMON STOCK ON CONVERSION; NO ADJUSTMENT FOR INTEREST OR DIVIDENDS. In order
to exercise the conversion privilege with respect to any Note in definitive
form, the Holder of any such Note to be converted in whole or in part shall
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surrender such Note, duly endorsed, at an office or agency maintained by the
Company pursuant to Section 2.03, accompanied by the funds, if any, required by
the penultimate paragraph of this Section 11.02, and shall give written notice
of conversion in the form provided on the form of Note (or such other notice
that is acceptable to the Company) to the office or agency that the Holder
elects to convert such Note or the portion thereof specified in said notice.
Such notice shall also state the name or names (with address) in which the
certificate or certificates for shares of Common Stock that shall be issuable on
such conversion shall be issued and shall be accompanied by an amount of cash
required to pay transfer taxes, if required pursuant to Section 11.07. Each
such Note surrendered for conversion shall, unless the shares issuable on
conversion are to be issued in the name of the Holder of such Note as it appears
on the Note register, be duly endorsed by, or be accompanied by instruments of
transfer in form satisfactory to the Company duly executed by, the Holder or his
duly authorized attorney.
In order to exercise the conversion privilege with respect to any
interest in a Note in global form, the beneficial holder must complete the
appropriate instruction form for conversion pursuant to the Depositary's
book-entry conversion program and follow the other procedures set forth in such
program.
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, subject to compliance with any restrictions on
transfer if shares issuable on conversion are to be issued in a name other than
that of the Noteholder (as if such transfer were a transfer of the Note or Notes
(or a portion thereof) so converted), the Company shall issue and shall deliver
to such Holder at the office or agency maintained by the Company for such
purpose pursuant to Section 2.03, a certificate or certificates for the number
of full shares issuable upon the conversion of such Note or portion thereof in
accordance with the provisions of this Article 11 and a check or cash in respect
of any fractional interest in respect of a share of Common Stock arising upon
such conversion, as provided in Section 11.03. In case any Note of a
denomination greater than $1,000 shall be surrendered for partial conversion,
and subject to Section 2.02, the Company shall execute and the Trustee shall
authenticate and make available for delivery to the Holder of the Note so
surrendered, without charge to him, a new Note or Notes in authorized
denominations in an aggregate principal amount equal to the unconverted portion
of the surrendered Note.
Each conversion shall be deemed to have been effected as to any such
Note (or portion thereof) on the date on which the requirements set forth above
in this Section 11.02 have been satisfied as to such Note (or portion thereof),
and the person in whose name any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder of record of the shares represented thereby;
PROVIDED that any such surrender on any date when the stock transfer books of
the Company shall be closed shall constitute the person in whose name the
certificates are to be issued as the record holder thereof for all purposes on
the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such Note shall have been surrendered.
Any Note or portion thereof surrendered for conversion during the
period from the close of business on the record date for any Interest Payment
Date to the opening of business on the corresponding Interest Payment Date shall
(unless such Note or portion thereof being converted shall have been called for
redemption on a date during the period from the close of business on or after
any record date to the close of business on the corresponding payment date) be
accompanied by payment, in funds acceptable to the Company, of an amount equal
to the interest otherwise payable on such Interest Payment Date on the principal
amount being converted; PROVIDED that no such payment need be made if there
shall exist at the time of conversion a default in the payment of interest on
the Notes. An amount equal to such payment shall be paid by the Company on such
Interest Payment Date to the Holder of such Note at the close of business on
such record date; PROVIDED that if the Company shall default in the payment of
interest on such Interest Payment Date, such amount shall be paid to the person
who made such required payment. The interest payment with respect to a Note
called for redemption on a date during the period from the close of business on
or after any
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record date to the close of business on the Business Day following the
corresponding Interest Payment Date shall be payable on the corresponding
Interest Payment Date to the registered Holder at the close of business on that
record date (notwithstanding the conversion of such Note before the
corresponding Interest Payment Date) and a Holder who elects to convert need not
include funds equal to the interest paid. Except as provided above in this
Section 11.02, no adjustment shall be made for interest accrued on any Note
converted or for dividends on any shares issued upon the conversion of such Note
as provided in this Article 11.
Upon the conversion of an interest in a Note in global form, the
Trustee or the Note Custodian, at the direction of the Trustee, shall make a
notation on such Note in global form as to the reduction in the principal amount
represented thereby.
SECTION 11.03. CASH PAYMENTS IN LIEU OF FRACTIONAL SHARES. No
fractional shares of Common Stock or scrip representing fractional shares shall
be issued upon conversion of Notes. If more than one Note shall be surrendered
for conversion at one time by the same Holder, the number of fully paid and
non-assessable shares of Common Stock issuable upon conversion of a Note shall
be determined by dividing the aggregate principal amount of the Notes or portion
thereof surrendered for conversion by the Conversion Price in effect at such
time. The aggregate number of shares of Common Stock issuable upon conversion
shall be rounded to the nearest 1/100,000th of a share (with .000005 being
rounded upward). If any fractional share of stock would be issuable upon the
conversion of any Note or Notes, the Company shall pay a cash adjustment
therefor at the current market value thereof. The current market value of a
share of Common Stock shall be determined by multiplying the fractional share by
the Closing Price at the close of business on the day of conversion (or, if such
day is not a Trading Day, on the Trading Day immediately preceding such day).
SECTION 11.04. CONVERSION PRICE. The initial Conversion Price
shall be as specified in the forms of Notes (herein called the "Conversion
Price") attached as Exhibits A-1 and A-2 hereto, subject to adjustment as
provided in this Article 11.
SECTION 11.05. ADJUSTMENT OF CONVERSION PRICE. The Conversion
Price will be subject to adjustment, without duplication, upon the occurrence of
any one or more of the following events:
(1) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Price in effect
at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced, and, conversely,
in case outstanding shares of Common Stock shall each be combined into a smaller
number of shares of Common Stock, the Conversion Price in effect at the opening
of business on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
(2) In case the Company shall pay or make a dividend or other
distribution on the Common Stock in Common Stock or shall pay or make a dividend
or other distribution on any other class of capital stock of the Company which
dividend or distribution includes Common Stock, the Conversion Price in effect
at the opening of business on the day following the date fixed for the
determination of shareholders entitled to receive such dividend or other
distribution shall be reduced by multiplying such Conversion Price by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the total number of
shares constituting such dividend or other distribution, such reduction to
become effective immediately after the opening of business on the day following
the date fixed for such determination. For the purposes of this paragraph (2),
the number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall include shares issuable in
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respect of scrip certificates issued in lieu of fractions of shares of Common
Stock held in the treasury of the Company.
(3) Subject to the provisions of paragraph (9) of this Section, in
case the Company shall pay or make a dividend or other distribution on the
Common Stock consisting of, or shall otherwise issue to all holders of Common
Stock, rights, options or warrants entitling the holders thereof to subscribe
for or purchase shares of Common Stock (or securities convertible into shares of
Common Stock) at a price per share less than the Current Market Price
(determined as provided in paragraph (10) of this Section) on the date fixed for
the determination of shareholders entitled to receive such rights, options or
warrants, the Conversion Price in effect at the opening of business on the day
following the date fixed for such determination shall be reduced by multiplying
such Conversion Price by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding at the close of business on the date fixed
for such determination plus the number of shares of Common Stock which the
aggregate of the offering price of the total number of shares of Common Stock
offered for subscription or purchase (or such number of shares of Common Stock
into which such securities would be convertible) would purchase at such Current
Market Price and the denominator shall be the number shares of Common Stock
outstanding at the close of business on the date fixed for such determination
plus the number of shares of Common Stock so offered for subscription or
repurchase (or such number of shares of Common Stock into which such securities
would be convertible), such reduction to become effective immediately after the
opening of business on the day following the date fixed for such determination.
For the purposes of this paragraph (3), the number of shares of Common Stock at
any time outstanding shall not include shares held in the treasury of the
Company but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock. The Company will not
issue any rights, options or warrants in respect of shares of Common Stock held
in the treasury of the Company. In determining whether any rights, options or
warrants entitle the Holders to subscribe for or purchase shares of Common Stock
at less than such Current Market Price, and in determining the aggregate
offering price of such shares of Common Stock, there shall be taken into account
any consideration received by the Company for such rights, options or warrants,
the value of such consideration, if other than cash, to be determined by the
Board of Directors.
(4) Subject to the last sentence of this paragraph (4) and the
provisions of paragraph (9) of this Section, in case the Company shall, by
dividend or otherwise, distribute to all holders of Common Stock shares of any
class of its capital stock, evidences of indebtedness or assets (including
securities and any dividends or distributions paid in part in cash, but
excluding (x) any dividends or distributions paid exclusively in cash, (y) any
rights, options or warrants referred to in paragraph (3) of this Section and (z)
any dividends or distributions referred to in paragraph (2) of this Section),
the Conversion Price shall be reduced by multiplying the Conversion Price in
effect immediately prior to the close of business on the date fixed for the
determination of shareholders entitled to such distribution by a fraction of
which the numerator shall be the Current Market Price (determined as provided in
paragraph (10) of this Section) on such date less the fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a Board Resolution) on such date of the portion of the
evidences of indebtedness, shares of capital stock and other assets to be
distributed applicable to one share of Common Stock and the denominator shall be
such Current Market Price, such reduction to become effective immediately prior
to the opening of business on the day following such date. If the Board of
Directors determines the fair market value of any distribution for purposes of
this paragraph (4) by reference to the actual or when-issued trading market for
any securities comprising part or all of such distribution, it must in doing so
consider the prices in such market over the same period used in computing the
Current Market Price pursuant to paragraph (10) of this Section, to the extent
possible. For purposes of this paragraph (4) any dividend or distribution that
includes shares of Common Stock, rights, options or warrants to subscribe for or
purchase shares of Common Stock or securities convertible into or exchangeable
for shares of Common Stock shall be deemed to be (x) a dividend or distribution
of the evidences of indebtedness, assets or shares of capital stock other than
such shares of
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Common Stock, such rights, options or warrants or such convertible or
exchangeable securities (making any Conversion Price reduction required by this
paragraph (4)) immediately followed by (y) in the case of such shares of Common
Stock or such rights, options or warrants, dividend or distribution thereof
(making any further Conversion Price reduction required by (2) and (3) of this
Section, except any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at close of business on the date
fixed for such determination" within the meaning of paragraph (2) of this
Section), or (z) in the case of such convertible or exchangeable securities, a
dividend or distribution of the number of shares of Common Stock as would then
be issuable upon the conversion or exchange thereof, whether or not the
conversion or exchange of such securities is subject to any conditions (making
any further Conversion Price reduction required by paragraph (2) of this
Section, except the shares deemed to constitute such dividend or distribution
shall not be deemed "outstanding at the close of business on the date fixed for
such determination" within the meaning of paragraph (2) of this Section).
(5) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock cash (excluding any cash that is distributed
upon a merger or consolidation to which Section 11.06 applies or as part of a
distribution referred to in paragraph (4) of this Section) in an aggregate
amount that, combined together with (a) the aggregate amount of any other cash
distributions (excluding cash distributions referred to in paragraph (4) above)
to all holders of its Common Stock within the twelve (12) months preceding the
date of payment of such distribution, and in respect of which no adjustment
pursuant to this paragraph (5) has been made, and (b) the aggregate of any cash
plus the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) of
consideration paid or payable in respect of any tender offer by the Company or
any Subsidiary of the Company for all or any portion the Common Stock concluded
within twelve (12) months preceding the date of payment of such distribution,
and in respect of which no adjustment pursuant to paragraph (6) of this Section
has been made, exceeds 10.0% of the product of the Current Market Price
(determined as provided in paragraph (10) of this Section) on the date for the
determination of holders of shares of Common Stock entitled to receive such
distribution times the number of shares of Common Stock outstanding on such
date, then, an in each such case, immediately after the close of business on
such date for determination, the Conversion Price shall be reduced so that same
shall equal the price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on the date fixed for determination
of the shareholders entitled to receive such distribution by a fraction (i) the
numerator of which shall be equal to the Current Market Price (determined as
provided in paragraph (10) of this Section) on the date fixed for such
determination less an amount equal to the quotient of (x) the excess of such
combined amount over such 10.0% and (y) the number of shares of Common Stock
outstanding on such date for determination and (ii) the denominator of which
shall be equal to the Current Market Price (determined as provided in paragraph
(10) of this Section) on such date for determination.
(6) In case a tender offer made by the Company or any Subsidiary of
the Company for all or any portion of the Common Stock shall expire and such
tender offer (as amended upon the expiration thereof) shall require the payment
to shareholders (based on the acceptance (up to any maximum specified in the
terms of the tender offer) of Purchased Shares (as defined below)) of any
aggregate consideration having a fair market value (as determined by the Board
of Directors, whose determination shall be conclusive and described in a Board
Resolution) that combined together with (a) the aggregate of the cash plus the
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution), as of the expiration
of such tender offer of consideration paid or payable in respect of any other
tender offer, by the Company or any Subsidiary of the Company for all or any
portion of the Common Stock expiring within the twelve (12) months preceding the
expiration of such tender offer and in respect of which no adjustment pursuant
to this paragraph (6) has been made and (b) the aggregate amount of any
distributions to all holders of the Company's Common Stock made exclusively in
cash within twelve (12) months preceding the expiration of such tender offer and
in respect of which no adjustment pursuant to
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paragraph (5) of this Section has been made, exceeds 10.0% of the product of the
Current Market Price (determined as provided in paragraph (10) of this Section)
as of the last time (the "Expiration Time") tenders could have been made
pursuant to such tender offer (as it may be amended) times the number of shares
of Common Stock outstanding (including any tendered shares) on the Expiration
Time, then, and in each such case, immediately prior to the opening of business
on the day after the date of the Expiration Time, the Conversion Price shall be
adjusted so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to close of business on the date of
the Expiration Time by a fraction (I) the numerator of which shall be equal to
(A) the product of (1) the Current Market Price (determined as provided in
paragraph (10) of this Section) on the date of the Expiration Time and (II) the
number of shares of Common Stock outstanding (including any tendered shares) as
of the Expiration Time less (B) the amount of cash plus 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 tender
offer) of Purchased Shares, and (ii) the denominator of which shall be equal to
the product of (A) the Current Market Price (determined as provided in paragraph
(10) of this Section) as of the Expiration Time and (B) the number of shares of
Common Stock outstanding (including any tendered shares) as of the Expiration
Time less the number of all shares validly tendered and not withdrawn as of the
Expiration Time (the shares deemed to be accepted up to any such maximum, being
referred to as the "Purchased Shares").
(7) In case of a tender or exchange offer made by a Person other than
the Company or any Subsidiary of the Company for an amount which increases the
offeror's ownership of Common Stock to more than 25% of the Common Stock
outstanding and shall involve the payment by such person of consideration per
share of Common Stock having a fair market value (as determined by the Board of
Directors, whose determination shall be conclusive, and described in a
resolution of the Board of Directors) at the last time (the "Offer Expiration
Time") tenders or exchanges may be made pursuant to such tender or exchange
offer (as it shall have been amended) that exceeds the Current Market Price of
the Common Stock on the Trading Day next succeeding the Offer Expiration Time,
and in which, as of the Offer Expiration Time the Board of Directors is not
recommending rejection of the offer, the Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the Offer Expiration Time by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) on the Offer Expiration Time
multiplied by the Current Market Price of the Common Stock on the Trading Day
next succeeding the Offer Expiration Time and the denominator shall be the sum
of (x) 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 tender or exchange offer) of all shares validly
tendered or exchanged and not withdrawn as of the Offer Expiration Time (the
shares deemed so accepted, up to any such maximum, being referred to as the
"Offer Purchased Shares") and (y) the product of the number of shares of Common
Stock outstanding (less any Offer Purchased Shares) on the Offer Expiration Time
and the Current Market Price of the Common Stock on the Trading Day next
succeeding the Offer Expiration Time, such reduction to become effective
immediately prior to the opening of business on the day following the Offer
Expiration Time. In the event that such person is obligated to purchase shares
pursuant to any such tender or exchange offer, but such person is permanently
prevented by applicable law from effecting any such purchases or all such
purchases are rescinded, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such tender or exchange offer
had not been made. Notwithstanding the foregoing, the adjustment described in
this Section 11.05 shall not be made if, as of the Offer Expiration Time, the
offering documents with respect to such offer disclose a plan or intention to
cause the Company to engage in any transaction described in Article 5.
(8) In case the Company shall issue Common Stock or securities
convertible into, or exchangeable for, Common Stock at a price per share (or
having a conversion or exchange price per share) that is less than the then
Current Market Price of the Common Stock (but excluding issuances: (a) pursuant
to any
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bona fide plan for the benefit of employees, directors or consultants of the
Company now or hereafter in effect; (b) to acquire all or any portion of a
business in an arm's-length transaction between the Company and an unaffiliated
third party including, if applicable, issuances upon exercise of options or
warrants assumed in connection with such an acquisition; (c) in a bona fide
public offering pursuant to a firm commitment underwriting (or a similar type of
offering made pursuant to Rule 144A and/or Regulation S under the Securities
Act) or sales at the market pursuant to a continuous offering stock program; (d)
pursuant to the exercise of warrants, rights (including, without limitation,
earnout rights) or options, or upon the conversion of convertible securities,
which are issued and outstanding on the date hereof, or which may be issued in
the future at fair value and with an exercise price or Conversion Price at least
equal to the Current Market Price of the Common Stock at the time of issuance of
such warrant, right, option or convertible security; and (e) pursuant to a
dividend reinvestment plan or other plan hereafter adopted for the reinvestment
of dividends or interest provided that such Common Stock is issued at a price at
least equal to 95% of the Current Market Price of the Common Stock at the time
of such issuance), the Conversion Price shall be adjusted so that the holder of
each Note shall be entitled to receive, upon the conversion thereof, the number
of shares of Common Stock determined by multiplying (i) the Conversion Price on
the day immediately prior to such date of issuance by (ii) a fraction, the
numerator of which shall be the sum of (A) the number of shares of Common Stock
outstanding on such date and (B) the number of additional shares of Common Stock
issued (or into which the convertible securities may convert), and the
denominator of which shall be the sum of (1) the number of shares of Common
Stock outstanding on such date and (2) the number of shares of Common Stock
which the aggregate consideration receivable by the Company for the total number
of shares of Common Stock so issued (or into which the convertible securities
may convert) would purchase at such Conversion Price on such date. An
adjustment made pursuant to this paragraph (8) shall be made on the next
Business Day following the date on which any such issuance is made and shall be
effective retroactively immediately after the close of business on such date.
For purposes of this paragraph (8), the aggregate consideration receivable by
the Company in connection with the issuance of shares of Common Stock or of
securities convertible into shares of Common Stock shall be deemed to be equal
to the sum of the aggregate offering price (before deduction of underwriting
discounts or commissions and expenses payable to third parties) of all such
securities plus the minimum aggregate amount, if any, payable upon conversion of
any such convertible securities into shares of Common Stock.
(9) The reclassification of Common Stock into securities, including
securities other than Common Stock (other than any reclassification upon a
consolidation or merger to which Section 11.06 applies), shall be deemed to
involve (i) a distribution of such securities other than Common Stock to all
holders of Common Stock (and the effective date of such reclassification shall
be deemed to be "the date fixed for the determination of shareholders entitled
to receive such distribution" and the "date fixed for such determination" within
the meaning of paragraph (4) of this Section), and (ii) a subdivision or
combination, as the case may be, of the number of shares of Common Stock
outstanding immediately prior to such reclassification into the number of shares
of Common Stock outstanding immediately thereafter (and the effective date of
such reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective,"
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (1) of this Section).
Rights, options or warrants issued by the Company to all holders of the Common
Stock entitling the holders thereof to subscribe for or purchase shares of
Common Stock (either initially or under certain circumstances), which rights,
options or warrants (i) are deemed to be transferred with such shares of Common
Stock, (ii) are not exercisable and (iii) are also issued in respect of future
issuances of Common Stock, in each case in clauses (i) through (iii) until the
occurrence of a specified event or events ("Trigger Event"), shall for purposes
of paragraphs (3) and (4) above not be deemed issued until the occurrence of the
earliest Trigger Event. Notwithstanding any provision of paragraphs (3) and (4)
above to the contrary, no adjustment shall be made pursuant to paragraphs (3)
and (4) above for any dividend, distribution or issuance of rights, options or
warrants to all holders of Common Stock if the Company makes proper provision so
that each Holder of a Note who converts such Note (or any portion thereof) after
the date fixed for the determination of shareholders
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entitled to such issuance, dividend or distribution, shall be entitled to
receive upon such conversion, in addition to the shares of Common Stock issuable
upon such conversion, that number of rights, options or warrants as would have
been issuable to a holder of a number of shares of Common Stock equal to the
number of shares to which the Notes were convertible as of the date fixed for
such issuance, dividend or distribution (with adjustments to the rights and
privileges under such rights, options or warrants given effect as if such
rights, options or warrants had been issued as of such date), provided that the
foregoing provisions set forth in this sentence shall only apply to the extent
(and so long as) such rights, options or warrants receivable upon conversion of
the Notes would be exercisable without any loss of rights or privileges for a
period of at least 90 days following conversion of the Notes. In addition, in
the event of any issuance or distribution of rights, options or warrants, or any
Trigger Event with respect thereto, which shall have resulted in an adjustment
to the Conversion Price with respect to the Notes under paragraphs (3) or (4)
above, (a) in the case of any such rights, options or warrants which shall all
have been redeemed or repurchased without exercise by any holders thereof, the
Conversion Price shall be readjusted upon such final redemption or repurchase to
give effect to such issuance or distribution (or Trigger Event, as the case may
be) as though a cash distribution had been made to all of the holders of Common
Stock equal to the per share redemption or repurchase price received by a holder
of Common Stock with respect to the rights, options, or warrants received by
such holder of Common Stock with respect to the rights, options or warrants
received by such holder (assuming such holder had retained such rights, options
or warrants), and (b) in the case of any such rights, options or warrants all of
which shall have expired without exercise by any holder thereof, the Conversion
Price with respect to the Notes shall be readjusted as if such issuance had not
occurred.
(10) For the purpose of any computation under this paragraph and
paragraphs (3), (4) and (5) of this Section, the current market price per share
of Common Stock (the "Current Market Price") on any date shall be deemed to be
the average of the daily Closing Prices (as hereinafter defined) for the ten
consecutive Trading Days immediately prior to the date in question; provided,
however, that (i) if the "ex" date (as hereinafter defined) for any event (other
than the issuance or distribution requiring such computation) that requires an
adjustment to the Conversion Price pursuant to paragraph (1), (2), (3), (4), or
(5) above occurs on or after the 10th Trading Day prior to the date in question
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 paragraph (1), (2), (3), (4), or (5) above
occurs on or after the "ex" date for the issuance or distribution requiring such
computation and on or prior to the date in question, the Closing Price for each
Trading Day on and after the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a result of such other event,
and (iii) if the "ex" date for the issuance or distribution requiring such
computation is on or prior to the date in question, after taking into account
any adjustment required pursuant to this proviso, the Closing Price for each
Trading Day on or after such "ex" date shall be adjusted by adding thereto the
amount of any cash and the fair market value on the date in question (as
determined by the Board of Directors in a manner consistent with any
determination of such value for purposes of paragraph (4) or (5) of this
Section, whose determination shall be conclusive and described in a Board
Resolution) of the evidences of indebtedness, shares of capital stock or assets
being distributed applicable to one share of Common Stock as of the close of
business on the day before such "ex" date. For the purpose of any computation
under paragraph (6) or (7) of this Section, the Current Market Price on any date
shall be deemed to be the average of the daily Closing Prices for the 10
consecutive Trading Days commencing on or after the later (the "Commencement
Date") of (i) the date of commencement of the tender offer requiring such
computation and (ii) 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
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such tender offer, PROVIDED, HOWEVER, that if the "ex" date for any event (other
than the tender offer requiring such computation) that requires an adjustment to
the Conversion Price pursuant to paragraph (1), (2), (3), (4), or (5) 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. The closing price for
any Trading Day (the "Closing Price") shall be the last reported sales price
regular way or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way, in either case
on the New York Stock Exchange or, if the Common Stock is not listed or admitted
to trading or, if not listed or admitted to trading on such exchange, on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading or, if not listed or admitted to trading on any national
securities exchange, on the National Association of Securities Dealers Automated
Quotations National Market System or, if the Common Stock is not listed or
admitted to trading on any national securities exchange or quoted on such
National Market System, the average of the closing bid an asked prices in the
over-the-counter market as furnished by any New York Stock Exchange member firm
selected from time to time by the Company for that purpose. 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 Prices were 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
last time that tenders may be made pursuant to such tender offer (as it shall
have been amended). The term "fair market value" shall mean the amount that a
willing buyer would pay a willing seller in an arm's-length transaction. The
term "Trading Day" shall mean (x) if the applicable security is listed or
admitted for trading on the New York Stock Exchange or another national security
exchange, a day on which the New York Stock Exchange or such other national
security exchange is open for business or (y) if the applicable security is
quoted on the Nasdaq National Market, a day on which trades may be made thereon
or (z) if the applicable security is not so listed, admitted for trading or
quoted, any day other than a Saturday or Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to close.
(11) The Company may make such reductions in the Conversion Price, in
addition to those required by Sections 11.05(1), (2), (3), (4), (5), (6), (7)
and (8) as the Board of Directors considers to be advisable to avoid or diminish
any income tax to holders of Common Stock or rights to purchase Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes. To the extent
permitted by applicable law, the Company from time to time may reduce the
Conversion Price by any amount for any period of time if the period is at least
20 days, the reduction is irrevocable during the period and the Board of
Directors shall have made a determination that such reduction would be in the
best interests of the Company, which determination shall be conclusive and
described in a Board Resolution. Whenever the Conversion Price is reduced
pursuant to the preceding sentence, the Company shall mail to all holders of
record of the Notes a notice of the reduction at least 15 days prior to the date
the reduced Conversion Price takes effect, and such notice shall state the
reduced Conversion Price and the period it shall be in effect.
(12) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in such
price; PROVIDED, that any adjustments that by reason of this Section 11.05(12)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Article 11 shall be made
by the Company and shall be made to the nearest 1/100,000 (with 0.000005 being
rounded upward).
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No adjustment need be made for a change in the par value, or to or
from no par value, of the Common Stock.
To the extent the Notes become convertible into cash, assets, property
or securities (other than Common Stock of the Company), no adjustment need be
made thereafter as to the cash, assets, property or such securities (except as
such securities may otherwise by their terms provide), and interest shall not
accrue on such cash.
(13) Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly file with the Trustee and any conversion agent other than
the Trustee an Officers' Certificate setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment. Promptly after delivery of such certificate, the Company shall
prepare a notice of such adjustment of the Conversion Price setting forth the
adjusted Conversion Price and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the Conversion Price
to the Holder of each Note at his last address appearing on the Register
provided for in Section 2.03, within 20 days after execution thereof. Failure
to deliver such notice shall not effect the legality or validity of any such
adjustment.
(14) In any case in which this Section 11.05 provides that an
adjustment shall become effective immediately after a Record Date for an event,
the Company may defer until the occurrence of such event (i) issuing to the
Holder of any Note converted after such Record Date and before the occurrence of
such event the additional shares of Common Stock issuable upon such conversion
by reason of the adjustment required by such event over and above the Common
Stock issuable upon such conversion before giving effect to such adjustment and
(ii) paying to such Holder any amount in cash in lieu of any fraction pursuant
to Section 11.03.
(15) In the event that the Company implements a shareholders' rights
plan, such rights plan must provide that upon conversion of the Notes the
Holders will receive, in addition to the Common Stock issuable upon such
conversion, such rights whether or not such rights have been separated from the
Common Stock at the time of such conversion.
SECTION 11.06. EFFECT OF RECLASSIFICATION, CONSOLIDATION,
MERGER OR SALE. If any of the following events occur, namely (i) any
reclassification or change of the Common Stock upon a consolidation or
merger involving the Company (other than a change in par value, or from par
value to no par value or resulting from a subdivision or combination), (ii) a
consolidation or merger involving the Company with another corporation as a
result of which holders of Common Stock shall be entitled to receive stock,
securities or other property or assets (including cash) with respect to or in
exchange for such Common Stock or (iii) any sale or conveyance of the
properties and assets of the Company as, or substantially as, an entirety
(determined on a consolidated basis) to any other corporation as a result of
which holders of Common Stock shall be entitled to receive stock, securities
or other property or assets (including cash) with respect to or in exchange
for such Common Stock, then the Company or the successor or purchasing
corporation, as the case may be, shall execute with the Trustee a
supplemental indenture (which shall comply with the Trust Indenture Act as in
force at the date of execution of such supplemental indenture if such
supplemental indenture is then required to so comply) providing that the
Notes shall be convertible into the kind and amount of shares of stock and
other securities or property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, sale or
conveyance by a holder of a number of shares of Common Stock issuable upon
conversion of such Notes (assuming, for such purposes, a sufficient number of
authorized shares of Common Stock available to convert all such Notes)
immediately prior to such reclassification, change, consolidation, merger,
combination, sale or conveyance, assuming such holder of Common Stock did not
exercise his rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon such reclassification,
change, consolidation, merger, combination, sale or conveyance (provided
that, if the kind or amount of securities, cash or other property receivable
upon such reclassification, change,
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consolidation, merger, combination, sale or conveyance is not the same for
each share of Common Stock in respect of which such rights of election shall
not have been exercised ("non-electing share"), then for the purposes of this
Section 11.06 the kind and amount of securities, cash or other property
receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance for each non-electing share shall be deemed
to be the kind and amount so receivable per share by a plurality of the
non-electing shares). Such supplemental indenture shall provide for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 11.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each Holder of Notes, at his address appearing on the
Note register provided for in Section 2.03, within 20 days after execution
thereof. Failure to deliver such notice shall not affect the legality or
validity of such supplemental indenture.
The above provisions of this Section 11.06 shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
SECTION 11.07. TAXES ON SHARES ISSUED. The issuance of stock
certificates on conversions of Notes shall be made without charge to the
converting Noteholder for any transfer or similar tax in respect of the issue
thereof. The Company shall not, however, be required to pay any tax that may be
payable in respect of any transfer involved in the issue and delivery of stock
in any name other than that of the Holder of any Note converted, and the Company
shall not be required to issue or deliver any such stock certificate unless and
until the person or persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
SECTION 11.08. RESERVATION OF SHARES; SHARES TO BE FULLY PAID;
LISTING OF COMMON STOCK. The Company shall provide, free from preemptive
rights, out of its authorized but unissued shares or shares held in treasury,
sufficient shares to provide for the conversion of the Notes from time to time
as such Notes are presented for conversion.
Before taking any action that would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Notes, the Company shall take all corporate
action that may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted Conversion Price.
The Company covenants that all shares of Common Stock that may be
issued upon conversion of Notes shall, upon issuance, be fully paid and
nonassessable by the Company and free from all taxes (other than transfer and
similar taxes as set forth in Section 11.07), liens and charges with respect to
the issuance thereof.
The Company further covenants that it shall, if permitted by the rules
of the Nasdaq National Market, list and keep listed, so long as the Common Stock
shall be so listed thereon, all Common Stock issuable upon conversion of the
Notes.
SECTION 11.09. RESPONSIBILITY OF TRUSTEE. The Trustee and any
other conversion agent shall not at any time be under any duty or responsibility
to any Holder of Notes to determine whether any facts exist that may require any
adjustment of the Conversion Price, or with respect to the nature or extent or
calculation of any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to be employed, in
making the same. The Trustee and any other conversion agent shall not be
accountable with respect to the validity or value (or the kind or amount) of any
shares of Common Stock, or of any securities or property, that may at any time
be issued or delivered upon the
54
<PAGE>
conversion of any Note; and the Trustee and any other conversion agent make no
representations with respect thereto. Subject to the provisions of Section
7.01, neither the Trustee nor any conversion agent shall be responsible for any
failure of the Company to issue, transfer or deliver any shares of Common Stock
or stock certificates or other securities or property or cash upon the surrender
of any Note for the purpose of conversion or to comply with any of the duties,
responsibilities or covenants of the Company contained in this Article 11.
Without limiting the generality of the foregoing, neither the Trustee nor any
conversion agent shall be under any responsibility to determine whether a
supplemental indenture under Section 11.06 hereof needs to be entered into or
the correctness of any provisions contained in any supplemental indenture
entered into pursuant to Section 11.06 relating either to the kind or amount of
shares of stock or securities or property (including cash) receivable by
Noteholders upon the conversion of their Notes after any event referred to in
such Section 11.06 or to any adjustment to be made with respect thereto, but,
subject to the provisions of Section 7.01, 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 11.10. NOTICE TO HOLDERS PRIOR TO CERTAIN ACTIONS. In
case:
(1) the Company makes any distribution or dividend that would require
an adjustment in the Conversion Price pursuant to Section 11.05; or
(2) the Company takes any action that would require a supplemental
indenture pursuant to Section 11.06; or
(3) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company shall cause to be filed with the Trustee and to be mailed to each
Holder of Notes at his address appearing on the Note register, as promptly as
possible but in any event at least 15 days prior to the applicable date
hereinafter specified, a notice stating (x) the date on which a record date is
to be taken for the purpose of such dividend, distribution, rights, options or
warrants, or, if a record is not to be taken, the date as of which the holders
of Common Stock of record to be entitled to such dividend, distribution, rights,
options or warrants are to be determined or (y) the date on which such
reclassification, change, consolidation, merger, sale, conveyance, transfer,
dissolution, liquidation or winding-up is expected to become effective or occur
and the date as of which it is expected that holders of record of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, change, consolidation, merger,
sale, conveyance, transfer, dissolution, liquidation or winding-up. Neither the
failure to give such notice nor any defect therein shall affect the legality or
validity of the proceedings referenced in clauses (1) through (3) of this
Section 11.10.
ARTICLE 12.
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS. If any provision of
this Indenture limits, qualifies or conflicts with the duties imposed by
operation of subsection (c) of Section 318 of the TIA, the duties imposed by the
TIA shall control. The provisions of Sections 310 to 317, inclusive, of the TIA
that impose duties on any Person (including provisions automatically deemed
included in an indenture unless the indenture provides that such provisions are
excluded) are a part of and govern this Indenture, except as, and to the extent,
expressly excluded from this Indenture, as permitted by the TIA.
55
<PAGE>
SECTION 12.02. NOTICES. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail, postage prepaid,
or overnight air courier guaranteeing next day delivery, addressed as follows:
if to the Company:
Hutchinson Technology Incorporated
40 West Highland Park
Hutchinson, Minnesota 55350
Attention: Wayne M. Fortun
if to the Trustee:
U.S. Bank National Association
First Trust Center
180 East 5th Street, Suite 200
St. Paul, MN 55101
Attention: Corporate Trust Administration (Hutchinson Technology
Incorporated Account)
and:
U.S. Bank National Association
100 Wall Street, Suite 2000
New York, NY 10005
Attention: Corporate Trust Administration (Hutchinson Technology
Incorporated Account)
The address of the office or agency of the Trustee in the Borough of
Manhattan, the City of New York at which Notes may be presented for payment or
for registration of transfer, exchange, redemption or conversion is the same as
listed above.
The Company or the Trustee, by notice to the other, may designate
additional or different addresses for subsequent notices or communications or
presentation of securities.
Any notice or communication given to a Holder shall be mailed to the
Holder at the Holder's address as it appears on the registration books of the
Registrar and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not received by the addressee, except that no notice or communication
to the Trustee shall be deemed given unless actually received by the Trustee.
If the Company mails a notice or communication to the Holders, it
shall mail a copy to the Trustee and each Registrar, Paying Agent or
co-registrar.
SECTION 12.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant Section 312(b) of the TIA with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Trustee, the Registrar, the Paying Agent and anyone else shall have the
protection of Section 312(c) of the TIA.
56
<PAGE>
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT. Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each Officers' Certificate and Opinion of Counsel with respect to compliance
with a covenant or condition provided for in this Indenture shall include:
(1) a statement that each Person making such Officers' Certificate or
Opinion of Counsel has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
Officers' Certificate or Opinion of Counsel are based;
(3) a statement that, in the opinion of each such Person, he has made
such examination or investigation as is necessary to enable such Person to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement that, in the opinion of such Person, such covenant or
condition has been 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.
SECTION 12.06. SEVERABILITY CLAUSE. In case any provision in
this Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 12.07. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR. The
Trustee may make reasonable rules for action by or a meeting of Holders. The
Registrar and Paying Agent may make reasonable rules for their functions.
SECTION 12.08. LEGAL HOLIDAYS. A "Legal Holiday" is any day
other than a Business Day. If any specified date (including a date for giving
notice) is a Legal Holiday, the action shall be taken on the next succeeding day
that is not a Legal Holiday, and, if the action to be taken on such date is a
payment in respect of the Notes, no principal or interest installment shall
accrue for the intervening period.
SECTION 12.09. GOVERNING LAW. THIS INDENTURE AND THE NOTES SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK.
SECTION 12.10. NO RECOURSE AGAINST OTHERS. A director, officer,
employee or shareholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Notes or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Note, each Holder shall waive and release all such
liability. The waiver and release shall be part of the consideration for the
issue of the Notes.
57
<PAGE>
SECTION 12.11. SUCCESSORS. All agreements of the Company in this
Indenture and the Notes shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 12.12. MULTIPLE ORIGINALS. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement. One signed copy is enough to
prove this Indenture.
[SIGNATURE PAGE TO FOLLOW]
58
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the undersigned, being duly authorized, have
executed this Indenture on behalf of the respective parties hereto as of the
date first above written.
HUTCHINSON TECHNOLOGY INCORPORATED
By: /s/ Wayne M. Fortun
----------------------------------
Name: Wayne M. Fortun
----------------------------
Title: President, Chief Executive
Officer and Chief Operating
Officer
---------------------------
U.S. BANK NATIONAL ASSOCIATION
By: /s/ K. Barrett
----------------------------------
Name: Kathe Barrett
----------------------------
Title: Trust Officer
---------------------------
59
<PAGE>
EXHIBIT A-1
[FORM OF FACE OF CONVERTIBLE SUBORDINATED NOTE]
HUTCHINSON TECHNOLOGY INCORPORATED
6% Convertible Subordinated Note due 2005
CUSIP No. 448407AA4 [QIB]
448407AB2 [IAI]
No. ____ $
Hutchinson Technology Incorporated, a Minnesota corporation (the
"Company," which term includes any successor Person under the Indenture
hereinafter referred to), promises to pay to ______________________________ or
registered assigns, the principal amount of _______________ Dollars on March 15,
2005.
Interest Payment Dates: March 15 and September 15, commencing
September 15, 1998.
Record Dates: March 1 and September 1.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof which further provisions shall for all purposes have
the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and attested by its
Secretary or one of its Assistant Secretaries.
HUTCHINSON TECHNOLOGY
INCORPORATED
Attested by: By:
-------------------------- --------------------------
Name: Name:
Title: Title:
Dated:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred
to in the within-mentioned Indenture.
U.S. BANK NATIONAL ASSOCIATION
By:
---------------------------
Authorized Officer
A-1-1
<PAGE>
[REVERSE SIDE OF CONVERTIBLE SUBORDINATED NOTE]
6% Convertible Subordinated Note due 2005
[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
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 Trust Company (55 Water Street, New York, New
York) ("DTC"), to the issuer or its agent for registration of transfer, exchange
or payment, and any certificate issued is registered in the name of Cede & Co.
or such other name as may be requested by an authorized representative of DTC
(and any payment is made to Cede & Co. or such other entity as may be requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.](1)
"THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
OTHER STATE SECURITIES LAWS, AND, ACCORDINGLY, NEITHER THIS SECURITY,
THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM OR NOT SUBJECT TO REGISTRATION.
THE HOLDER OF THIS SECURITY, BY ITS ACQUISITION HEREOF, AGREES THAT IT
WILL NOT, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE ORIGINAL
ISSUE DATE HEREOF, RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED
HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE
EXCEPT (A) TO HUTCHINSON TECHNOLOGY INCORPORATED OR A SUBSIDIARY
THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D)
OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE
TIME OF SUCH TRANSFER); AND AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFER
IS PURSUANT TO CLAUSE (C), (D) OR (E) ABOVE, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE TRUSTEE, SUCH
- --------------------
(1) This paragraph should be included only if the Note is issued in global
form.
A-1-2
<PAGE>
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE
REMOVED UPON ANY TRANSFER OF THE NOTE EVIDENCED HEREBY AFTER THE
EXPIRATION OF TWO YEARS FROM THE ORIGINAL ISSUANCE OF THE NOTE
EVIDENCED HEREBY. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT."
1. INTEREST
Hutchinson Technology Incorporated, a Minnesota corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above. Interest will be payable semi-annually on each
Interest Payment Date referred to on the face hereof, commencing September 15,
1998. Interest on the Notes will accrue from the most recent date to which
interest has been paid, or if no interest has been paid, from the date of the
Indenture; PROVIDED that, if there is no existing Event of Default in the
payment of interest and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such Interest Payment Date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and interest on
overdue installments of interest, to the extent lawful, at the rate per annum
borne by the Notes.
2. METHOD OF PAYMENT
The Company will pay interest on the Notes (except defaulted interest)
to the persons who are registered Holders at the close of business on the record
dates referred to on the face hereof immediately preceding the respective
Interest Payment Dates even if the Note is canceled on registration of transfer
or registration of exchange. Holders must surrender Notes to a paying agent to
collect principal payments. 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 Section 2.12 of
the Indenture. Except as provided below, the Company shall pay principal of,
premium, if any, and interest and Liquidated Damages on, the Notes 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, if any, interest and Liquidated
Damages, if any, at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or at the option of
the Company, such payments may be made by check mailed to the Holders at their
addresses set forth in the registry of Holders; PROVIDED that payments by wire
transfer of immediately available funds will be required with respect to
principal of, premium, if any, and interest and Liquidated Damages on Global
Notes and all other Notes the Holders of which shall have provided wire transfer
instructions to the Company or the Trustee or paying agent.
3. PAYING AGENT AND REGISTRAR
Initially, the Trustee will act as Paying Agent and Registrar. The
Company may appoint and change any Paying Agent or Registrar without notice,
other than notice to the Trustee. The Company or any subsidiary or an Affiliate
of either of them may act as Paying Agent, Registrar or co-registrar.
4. INDENTURE
A-1-3
<PAGE>
The Company issued the Notes under an Indenture, dated as of March 18,
1998 (the "Indenture"), between the Company and the Trustee. 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 of 1939, as amended and as in effect on
the date of the Indenture (the "TIA"), and as provided in the Indenture. The
Notes are subject to all such terms, and Holders are referred to the Indenture
and the TIA for a statement of those terms.
The Notes are general obligations of the Company limited to
$150,000,000 aggregate principal amount and subordinated in right of payment to
all existing and future Senior Indebtedness of the Company.
5. OPTIONAL REDEMPTION
The Notes are not redeemable at the option of the Company prior to
March 20, 2001. At any time on or after that date, the Notes may be redeemed at
the Company's option, upon notice as set forth in Section 3.02 of the Indenture,
in whole at any time or in part from time to time, at the optional redemption
prices set forth below plus accrued and unpaid interest and Liquidated Damages,
if any, thereon to the date fixed for redemption if redeemed during the
twelve-month period beginning March 15 (beginning March 20 in the case of the
first such period) of the years indicated:
<TABLE>
<CAPTION>
Redemption
Year Price
<S> <C>
2001 103.43%
2002 102.57%
2003 101.71%
2004 100.86%
2005 100.00%
</TABLE>
6. MANDATORY REDEMPTION
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER
Upon the occurrence of a Repurchase Event, each Holder of Notes shall
have the right to require that the Company repurchase such Holder's Notes in
whole or in part in integral multiples of $1,000, at a purchase price in cash in
an amount equal to 100% of the principal amount thereof, together with accrued
and unpaid interest and Liquidated Damages, if any, to the date of purchase
pursuant to an offer made in accordance with the procedures described in the
Indenture.
8. NOTICE OF REDEMPTION
Notice of redemption will be mailed by first class mail at least 30
days but not more that 60 days before the redemption date to each Holder of
Notes to be redeemed at its registered address. Notes in denominations larger
than $1,000 may be redeemed in part but only in whole multiples of $1,000,
unless all of the Notes held by a Holder are to be redeemed. On and after the
redemption date interest ceases to accrue on the Notes or portions thereof
called for redemption.
9. SUBORDINATION
A-1-4
<PAGE>
The Notes are subordinated to Senior Indebtedness. To the extent
provided in the Indenture, Senior Indebtedness must be paid before the Notes may
be paid. The Company agrees, and each Holder by accepting a Note agrees, to
such subordination and authorizes the Trustee to give it effect.
10. DENOMINATIONS; TRANSFER; EXCHANGE
The Notes are in registered form, without coupons, in denominations of
$1,000 of principal amount and integral multiples of $1,000. A Holder may
transfer 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 (except, in the case of a Note to be redeemed in
part, the portion of the Note not to be redeemed).
11. PERSONS DEEMED OWNERS
The registered Holder of this Note may be treated as the owner of this
Note for all purposes.
12. SUPPLEMENTAL INDENTURES
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in aggregate principal amount of the Notes at the time
outstanding and (ii) certain defaults or noncompliance with certain provisions
may be waived with the written consent of the Holders of a majority in aggregate
principal amount of the Notes at the time outstanding. Subject to certain
exceptions set forth in the Indenture, without the consent of any Holder, the
Company and the Trustee may amend the Indenture or the Notes: to cause the
Indenture to be qualified under the TIA; to evidence the succession of another
Person to the Company as otherwise permitted by the Indenture; to add to the
covenants of the Company for the benefit of the Holders of the Notes or to
surrender any power conferred upon the Company; to add any Events of Default; to
permit or facilitate the issuance of securities in uncertificated form; to
secure the Notes; to provide for successor trustees; or to cure any ambiguity,
to correct or supplement any provision which may be inconsistent with any other
provision or to make any other provisions with respect to matters or questions
arising under this Indenture; provided such action shall not adversely affect
the interest of Holders of Notes in any material respect and the Trustee may
rely upon the opinion of counsel to that effect.
13. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include: (1) failure to pay
principal of, or the premium, if any, on any Note when due at maturity, upon
redemption or otherwise; (2) failure to pay any interest on, or Liquidated
Damages, if any, with respect to any Note when due and payable, continued for 30
days; (3) failure to provide timely notice of a Repurchase Event; (4) default in
the payment of the Repurchase Price in respect of any Note on the Repurchase
Date therefor; (5) failure to perform any other covenant or warranty of the
Company in the Indenture, continued for 60 days after written notice as provided
in the Indenture; (6) default under one or more bonds, notes or other evidences
of indebtedness for money borrowed by the Company or any subsidiary of the
Company or under one or more mortgages, indentures or instruments under which
there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company or any subsidiary of the Company,
whether such indebtedness now exists or shall hereafter be created, which
default individually or in the aggregate shall constitute a failure to pay the
principal of indebtedness in excess of $5.0 million when due and payable after
the expiration of any applicable grace period with respect thereto or shall have
resulted in indebtedness in excess of $5.0 million becoming or being declared
due and payable prior to the date on which it would otherwise have become due
and payable, without such indebtedness having been discharged, or such
acceleration having been rescinded or annulled; and (7)
A-1-5
<PAGE>
certain events in bankruptcy, insolvency or reorganization involving the
Company. If an Event of Default occurs and is continuing, the Trustee, or the
Holders of at least 25% in aggregate principal amount of the Notes at the time
outstanding, may declare all the Notes to be due and payable immediately.
Certain events of bankruptcy or insolvency are Events of Default which will
result in the Notes becoming due and payable immediately upon the occurrence of
such Events of Default.
Holders may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee may refuse to enforce the Indenture or the Notes
unless it receives reasonable indemnity or security. Subject to certain
limitations, Holders of a majority in aggregate principal amount of the Notes at
the time outstanding may direct the Trustee in its exercise of any trust or
power.
14. CONVERSION
The Holders of Notes will be entitled at any time prior to March 15,
2005, subject to prior redemption, to convert any Notes or portions thereof (in
denominations of $1,000 in principal amount or multiples thereof) into Common
Stock at the Conversion Price of $28.35 per share, subject to adjustment under
certain circumstances provided in the Indenture; PROVIDED that in the case of
Notes called for redemption, conversion rights will expire immediately prior to
the close of business on the last Business Day before the date fixed for
redemption, unless the Company defaults in payment of the redemption price.
In order to exercise the conversion privilege with respect to any Note
in definitive form, the Holder of any such Note to be converted in whole or in
part shall surrender such Note, duly endorsed, at an office or agency maintained
by the Company pursuant to Section 2.03 of the Indenture, accompanied by the
funds, if any, required by Section 11.02 of the Indenture, and shall give
written notice of conversion in the form provided on the form of Note (or such
other notice that is acceptable to the Company) to the office or agency that the
Holder elects to convert such Note or the portion thereof specified in said
notice. Such notice shall also state the name or names (with address) in which
the certificate or certificates for shares of Common Stock that shall be
issuable on such conversion shall be issued and shall be accompanied by transfer
taxes, if required pursuant to Section 11.07. Each such Note surrendered for
conversion shall, unless the shares issuable on conversion are to be issued in
the name of the Holder of such Note as it appears on the Note register, be duly
endorsed by, or be accompanied by instruments of transfer in form satisfactory
to the Company duly executed by, the Holder or his duly authorized attorney.
Except under certain circumstances, no adjustment will be made on
conversion of any Notes for interest accrued thereon or for dividends paid on
any Common Stock issued. Holders of Notes at the close of business on a record
date will be entitled to receive the interest payable on such Notes on the
corresponding Interest Payment Date. However, Notes surrendered for conversion
after the close of business on a record date, and before the opening of business
on the corresponding Interest Payment Date must be accompanied by funds equal to
the interest payable on such succeeding Interest Payment Date on the principal
amount so converted (unless such Note is subject to redemption on a redemption
date between such record date and the close of business on the corresponding
Interest Payment Date). The interest payment with respect to a Note called for
redemption on a date during the period from the close of business on or after
any record date to the close of business on the Business Day following the
corresponding Interest Payment Date will be payable on the corresponding
Interest Payment Date to the registered Holder at the close of business on that
record date (notwithstanding the conversion of such Note before the close of
business on the corresponding Interest Payment Date) and a Holder of Notes who
elects to convert need not include funds equal to the interest to be paid. The
Company is not required to issue fractional shares of Common Stock upon
conversion of Notes and, in lieu thereof, will pay a cash adjustment based upon
the closing price of the Common Stock on the last Business Day prior to the date
of conversion.
A-1-6
<PAGE>
The above description of conversion of the Notes is qualified by
reference to, and is subject in its entirety by, the more complete description
thereof contained in the Indenture.
15. REGISTRATION RIGHTS
The Holder of this Note is entitled to the benefits of a Shelf
Registration Agreement, dated as of March 18, 1998, among the Company and the
Initial Purchasers (the "Shelf Registration Agreement"). Pursuant to the Shelf
Registration Agreement the Company has agreed for the benefit of the Holders of
the Notes that it will (i) file with the Commission within 30 days after the
Issue Date a shelf registration statement (the "Shelf Registration Statement")
on such form as the Company deems appropriate covering resales by the Holders of
Notes and the shares of Common Stock issuable upon conversion of the Notes (the
"Shares"), (ii) use all reasonable efforts to cause the Shelf Registration
Statement to become effective within 90 days and (iii) keep such Shelf
Registration Statement effective until such date that is two years after the
latest date of original issuance of the Notes.
If (a) on or after 30 days following the Issue Date, a Shelf
Registration Statement has not been filed with the Commission or (b) on or prior
to 90 days following the Issue Date, such Shelf Registration Statement is not
declared effective or (c) the Shelf Registration Statement has been declared
effective by the Commission and ceases to be effective (without being succeeded
on the same day by a post-effective amendment to such Shelf Registration
Statement that cures such failure and that is immediately declared effective) or
use of the Prospectus is suspended, pursuant to the Shelf Registration Agreement
during the registration period for a time which shall exceed 60 days in the
aggregate during any 360-day period (each, a "Registration Default"), additional
amounts ("Liquidated Damages") will be payable with respect to the Notes, from
and including the day following such Registration Default to but excluding the
day on which such Registration Default has been cured. Liquidated Damages will
be paid in cash semi-annually in arrears, with the first semi-annual payment due
on the first Interest Payment Date following the date on which the Holders of
Notes are first entitled to receive Liquidated Damages, and will be payable,
with respect to the first 90-day period immediately following the occurrence of
such Registration Default, in an amount equal to $.05 per week per $1,000
aggregate principal amount of the Notes, or, if applicable, an equivalent amount
per week per share (subject to adjustment) of Common Stock constituting Transfer
Restricted Securities, held by such Holder. The amount of the Liquidated
Damages will increase by an additional $.05 per week per $1,000 aggregate
principal amount of the Notes held by each Holder (or shares of Common Stock, as
noted above) with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages of $.50 per week per $1,000 aggregate principal amount of the Notes (or
shares of Common Stock, as noted above) held by each Holder. All accrued
Liquidated Damages will be paid by the Company on each Interest Payment Date in
cash. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
16. TRUSTEE DEALINGS WITH THE COMPANY
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by the Company or its Affiliates and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee.
17. NO RECOURSE AGAINST OTHERS
A director, officer, employee or shareholder, as such, of the Company
shall not have any liability for any 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 accepting a Note, each Holder waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
A-1-7
<PAGE>
18. AUTHENTICATION
This Note shall not be valid until an authorized officer of the
Trustee manually signs the Trustee's Certificate of Authentication on the other
side of this Note.
19. ABBREVIATIONS
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TENANT (=tenants by the
entireties), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. UNCLAIMED MONEY
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent will pay the money back to the
Company at its request. After that, Holders entitled to money must look to the
Company for payment.
21. DISCHARGE PRIOR TO MATURITY
If the Company deposits with the Trustee or Paying Agent money or U.S.
Government Obligations sufficient to pay the principal of and interest on the
Notes to maturity, the Company will be discharged from the Indenture except for
certain Sections thereof.
22. GOVERNING LAW
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
A-1-8
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
(insert assignee's social security or tax I.D. number)
(print or type assignee's name, address and zip code)
and irrevocably appoint_________________________agent to transfer this Note on
the books of the Company. The agent may substitute another to act for him.
Dated: Signature:
-------------------------
(Sign exactly as
your name appears on
the other side of
this Note)
Signature
Guarantee*:
---------------------------------------------
*Signature must be guaranteed by an eligible guarantor institution within the
meaning of Securities and Exchange Commission Rule 17Ad-15 (including banks,
stock brokers, savings and loan associations, national securities exchanges,
registered securities associations, clearing agencies and credit unions) with
membership or participation in an approved signature guarantee medallion program
if this Note is to be delivered other than to and in the name of the registered
holder.
A-1-9
<PAGE>
SCHEDULE OF EXCHANGES FOR OTHER NOTES(2)
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
<TABLE>
<CAPTION>
Amount of Principal Amount of this Signature of
Date of Amount of decrease in increase in Global Note authorized officer of
Exchange Principal Amount of Principal Amount of following such decrease Trustee or Note
- -------- this Global Note this Global Note (or increase) Custodian
---------------- ---------------- ----------- ---------
<S> <C> <C> <C> <C>
</TABLE>
- --------------------
(2) This should be included only if the Note is issued in global form.
A-1-10
<PAGE>
EXHIBIT A-2
[FORM OF FACE OF REGULATION S TEMPORARY GLOBAL NOTE]
HUTCHINSON TECHNOLOGY INCORPORATED
6% Convertible Subordinated Note due 2005
CUSIP No. U44698AA3 [REG S]
No. ____ $
Hutchinson Technology Incorporated, a Minnesota corporation (the
"Company," which term includes any successor Person under the Indenture
hereinafter referred to), promises to pay to ______________________________ or
registered assigns, the principal amount of _______________Dollars on March 15,
2005.
Interest Payment Dates: March 15 and September 15, commencing
September 15, 1998.
Record Dates: March 1 and September 1.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof which further provisions shall for all purposes have
the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and attested by its
Secretary or one of its Assistant Secretaries.
HUTCHINSON TECHNOLOGY
INCORPORATED
ATTESTED BY: BY:
-------------------------------- --------------------------------
Name: Name:
Title: Title:
Dated:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred
to in the within-mentioned Indenture.
U.S. BANK NATIONAL ASSOCIATION
By:
----------------------------
Authorized Officer
A-2-1
<PAGE>
[REVERSE SIDE OF REGULATION S TEMPORARY GLOBAL NOTE]
6% Convertible Subordinated Note due 2005
[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
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 Trust Company (55 Water Street, New York, New
York) ("DTC"), to the issuer or its agent for registration of transfer, exchange
or payment, and any certificate issued is registered in the name of Cede & Co.
or such other name as may be requested by an authorized representative of DTC
(and any payment is made to Cede & Co. or such other entity as may be requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.](1)
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
OTHER STATE SECURITIES LAWS, AND, ACCORDINGLY, NEITHER THIS SECURITY,
THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM OR NOT SUBJECT TO REGISTRATION.
THE HOLDER OF THIS SECURITY, BY ITS ACQUISITION HEREOF, AGREES
THAT IT WILL NOT, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE
ORIGINAL ISSUE DATE HEREOF, RESELL OR OTHERWISE TRANSFER THE NOTE
EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH
NOTE EXCEPT (A) TO HUTCHINSON TECHNOLOGY INCORPORATED OR A SUBSIDIARY
THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D)
OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE
TIME OF SUCH TRANSFER); AND AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFER
IS PURSUANT TO CLAUSE (C), (D) OR (E) ABOVE, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE TRUSTEE, SUCH
- ---------------------------
(1) This paragraph should be included only if the Note is issued in Global
Form.
A-2-2
<PAGE>
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE
REMOVED UPON ANY TRANSFER OF THE NOTE EVIDENCED HEREBY AFTER THE
EXPIRATION OF TWO YEARS FROM THE ORIGINAL ISSUANCE OF THE NOTE
EVIDENCED HEREBY. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT."
[Until this Regulation S Temporary Global Note is exchanged for
Regulation S Permanent Global Notes, the Holder hereof shall not be entitled to
receive payments of interest or Liquidated Damages, if any, hereon although
interest and Liquidated Damages, if any, will continue to accrue; until so
exchanged in full, this Regulation S Temporary Global Note shall in all other
respects be entitled to the same benefits as other Convertible Subordinated
Notes under the Indenture.
This Regulation S Temporary Global Note is exchangeable in whole or in
part for one or more Regulation S Permanent Global Notes or Rule 144A Global
Notes only (i) on or after the termination of the 40-day restricted period (as
defined in Regulation S) and (ii) upon presentation of certificates (accompanied
by an Opinion of Counsel, if applicable) required by Article 2 of the Indenture.
Upon exchange of this Regulation S Temporary Global Note for one or more
Regulation S Permanent Global Notes or Rule 144A Global Notes, the Trustee shall
cancel this Regulation S Temporary Global Note.
This Regulation S Temporary Global Note shall not become valid or
obligatory until the certificate of authentication hereon shall have been duly
manually signed by the Trustee in accordance with the Indenture. This
Regulation S Temporary Global Note shall be governed by and construed in
accordance with the laws of the State of the New York. All references to "$,"
"Dollars," "dollars" or "U.S. $" are to such coin or currency of the United
States of America as at the time shall be legal tender for the payment of public
and private debts therein."](2)
Capitalized terms used herein have the meaning assigned to them in the
Indenture unless otherwise indicated.
1. INTEREST
Hutchinson Technology Incorporated, a Minnesota corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above. Interest will be payable semi-annually on each
Interest Payment Date referred to on the face hereof, commencing September 15,
1998. Interest on the Notes will accrue from the most recent date to which
interest has been paid, or if no interest has been paid, from the date of the
Indenture; PROVIDED that, if there is no existing Event of Default in the
payment of interest and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such Interest Payment Date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and interest on
overdue installments of interest, to the extent lawful, at the rate per annum
borne by the Notes.
- --------------------
(2) These paragraphs should be removed upon the exchange of the Regulation
S Temporary Global Notes for Regulation S Permanent Global Notes
pursuant to the Indenture.
A-2-3
<PAGE>
2. METHOD OF PAYMENT
The Company will pay interest on the Notes (except defaulted interest)
to the persons who are registered Holders at the close of business on the record
dates referred to on the face hereof immediately preceding the respective
Interest Payment Dates even if the Note is canceled on registration of transfer
or registration of exchange. Holders must surrender Notes to a Paying Agent to
collect principal payments. 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 Section 2.12 of
the Indenture. Except as provided below, the Company shall pay principal of,
premium, if any, and interest and Liquidated Damages on, the Notes 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, if any, interest and Liquidated
Damages, if any, at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or at the option of
the Company, such payments may be made by check mailed to the Holders at their
addresses set forth in the registry of Holders; PROVIDED that payments by wire
transfer of immediately available funds will be required with respect to
principal of, premium, if any, and interest and Liquidated Damages on Global
Notes and all other Notes the Holders of which shall have provided wire transfer
instructions to the Company or the Trustee or paying agent.
3. PAYING AGENT AND REGISTRAR
Initially, the Trustee will act as Paying Agent and Registrar. The
Company may appoint and change any Paying Agent or Registrar without notice,
other than notice to the Trustee. The Company or any subsidiary or an Affiliate
of either of them may act as Paying Agent, Registrar or co-registrar.
4. INDENTURE
The Company issued the Notes under an Indenture, dated as of March 18,
1998 (the "Indenture"), between the Company and the Trustee. 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 of 1939, as amended and as in effect on
the date of the Indenture (the "TIA"), and as provided in the Indenture. The
Notes are subject to all such terms, and Holders are referred to the Indenture
and the TIA for a statement of those terms.
The Notes are general obligations of the Company limited to
$150,000,000 aggregate principal amount and subordinated in right of payment to
all existing and future Senior Indebtedness of the Company.
5. OPTIONAL REDEMPTION
The Notes are not redeemable at the option of the Company prior to
March 20, 2001. At any time on or after that date, the Notes may be redeemed at
the Company's option, upon notice as set forth in Section 3.02 of the Indenture,
in whole at any time or in part from time to time, at the optional redemption
prices set forth below plus accrued and unpaid interest and Liquidated Damages,
if any, thereon to the date fixed for redemption if redeemed during the
twelve-month period beginning March 15 (beginning March 20 in the case of the
first such period) of the years indicated:
<TABLE>
<CAPTION>
Redemption
Date Price
<S> <C>
2001............. 103.43%
</TABLE>
A-2-4
<PAGE>
<TABLE>
<CAPTION>
Redemption
Date Price
<S> <C>
2002............. 102.57%
2003............. 101.71%
2004............. 100.86%
2005............. 100.00%
</TABLE>
6. MANDATORY REDEMPTION
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER
Upon the occurrence of a Repurchase Event, each Holder of Notes shall
have the right to require that the Company repurchase such Holder's Notes in
whole or in part in integral multiples of $1,000, at a purchase price in cash in
an amount equal to 100% of the principal amount thereof, together with accrued
and unpaid interest and Liquidated Damages, if any, to the date of purchase
pursuant to an offer made in accordance with the procedures described in the
Indenture.
8. NOTICE OF REDEMPTION
Notice of redemption will be mailed by first class mail at least 30
days but not more that 60 days before the redemption date to each Holder of
Notes to be redeemed at its registered address. Notes in denominations larger
than $1,000 may be redeemed in part but only in whole multiples of $1,000,
unless all of the Notes held by a Holder are to be redeemed. On and after the
redemption date interest ceases to accrue on the Notes or portions thereof
called for redemption.
9. SUBORDINATION
The Notes are subordinated to Senior Indebtedness. To the extent
provided in the Indenture, Senior Indebtedness must be paid before the Notes may
be paid. The Company agrees, and each Holder by accepting a Note agrees, to
such subordination and authorizes the Trustee to give it effect.
10. DENOMINATIONS; TRANSFER; EXCHANGE
The Notes are in registered form, without coupons, in denominations of
$1,000 of principal amount and integral multiples of $1,000. A Holder may
transfer 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 (except, in the case of a Note to be redeemed in
part, the portion of the Note not to be redeemed).
11. PERSONS DEEMED OWNERS
The registered Holder of this Note may be treated as the owner of this
Note for all purposes.
12. SUPPLEMENTAL INDENTURES
A-2-5
<PAGE>
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in aggregate principal amount of the Notes at the time
outstanding and (ii) certain defaults or noncompliance with certain provisions
may be waived with the written consent of the Holders of a majority in aggregate
principal amount of the Notes at the time outstanding. Subject to certain
exceptions set forth in the indenture, without the consent of any Holder, the
Company and the Trustee may amend the Indenture or the Notes: to cause the
Indenture to be qualified under the TIA; to evidence the succession of another
Person to the Company as otherwise permitted by the Indenture; to add to the
covenants of the Company for the benefit of the Holders of the Notes or to
surrender any power conferred upon the Company; to add any Events of Default; to
permit or facilitate the issuance of securities in uncertificated form; to
secure the Notes; to provide for successor trustees; or to cure any ambiguity,
to correct or supplement any provision which may be inconsistent with any other
provision or to make any other provisions with respect to matters or questions
arising under this Indenture; provided such action shall not adversely affect
the interest of Holders of Notes in any material respect and the Trustee may
rely upon the opinion of counsel to that effect.
13. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include: (1) failure to pay
principal of, or the premium, if any, on any Note when due at maturity, upon
redemption or otherwise; (2) failure to pay any interest on, or Liquidated
Damages, if any, with respect to any Note when due and payable, continued for 30
days; (3) failure to provide timely notice of a Repurchase Event; (4) default in
the payment of the Repurchase Price in respect of any Note on the Repurchase
Date therefor; (5) failure to perform any other covenant or warranty of the
Company in the Indenture, continued for 60 days after written notice as provided
in the Indenture; (6) default under one or more bonds, notes or other evidences
of indebtedness for money borrowed by the Company or any subsidiary of the
Company or under one or more mortgages, indentures or instruments under which
there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company or any subsidiary of the Company,
whether such indebtedness now exists or shall hereafter be created, which
default individually or in the aggregate shall constitute a failure to pay the
principal of indebtedness in excess of $5.0 million when due and payable after
the expiration of any applicable grace period with respect thereto or shall have
resulted in indebtedness in excess of $5.0 million becoming or being declared
due and payable prior to the date on which it would otherwise have become due
and payable, without such indebtedness having been discharged, or such
acceleration having been rescinded or annulled; and (7) certain events in
bankruptcy, insolvency or reorganization involving the Company. If an Event of
Default occurs and is continuing, the Trustee, or the Holders of at least 25% in
aggregate principal amount of the Notes at the time outstanding, may declare all
the Notes to be due and payable immediately. Certain events of bankruptcy or
insolvency are Events of Default which will result in the Notes becoming due and
payable immediately upon the occurrence of such Events of Default.
Holders may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee may refuse to enforce the Indenture or the Notes
unless it receives reasonable indemnity or security. Subject to certain
limitations, Holders of a majority in aggregate principal amount of the Notes at
the time outstanding may direct the Trustee in its exercise of any trust or
power.
14. CONVERSION
The Holders of Notes will be entitled at any time prior to March 15,
2005, subject to prior redemption, to convert any Notes or portions thereof (in
denominations of $1,000 in principal amount or multiples thereof) into Common
Stock at the Conversion Price of $28.35 per share, subject to adjustment under
certain circumstances provided in the Indenture; PROVIDED that in the case of
Notes called for redemption, conversion rights will expire immediately prior to
the close of business on the last Business Day before the date fixed for
redemption, unless the Company defaults in payment of the redemption price.
A-2-6
<PAGE>
In order to exercise the conversion privilege with respect to any Note
in definitive form, the Holder of any such Note to be converted in whole or in
part shall surrender such Note, duly endorsed, at an office or agency maintained
by the Company pursuant to Section 2.03 of the Indenture, accompanied by the
funds, if any, required by Section 11.02 of the Indenture, and shall give
written notice of conversion in the form provided on the form of Note (or such
other notice that is acceptable to the Company) to the office or agency that the
Holder elects to convert such Note or the portion thereof specified in said
notice. Such notice shall also state the name or names (with address) in which
the certificate or certificates for shares of Common Stock that shall be
issuable on such conversion shall be issued and shall be accompanied by transfer
taxes, if required pursuant to Section 11.07. Each such Note surrendered for
conversion shall, unless the shares issuable on conversion are to be issued in
the name of the Holder of such Note as it appears on the Note register, be duly
endorsed by, or be accompanied by instruments of transfer in form satisfactory
to the Company duly executed by, the Holder or his duly authorized attorney.
Except under certain circumstances, no adjustment will be made on
conversion of any Notes for interest accrued thereon or for dividends paid on
any Common Stock issued. Holders of Notes at the close of business on a record
date will be entitled to receive the interest payable on such Notes on the
corresponding Interest Payment Date. However, Notes surrendered for conversion
after the close of business on a record date, and before the opening of business
on the corresponding Interest Payment Date must be accompanied by funds equal to
the interest payable on such succeeding Interest Payment Date on the principal
amount so converted (unless such Note is subject to redemption on a redemption
date between such record date and the close of business on the corresponding
Interest Payment Date). The interest payment with respect to a Note called for
redemption on a date during the period from the close of business on or after
any record date to the close of business on the Business Day following the
corresponding Interest Payment Date will be payable on the corresponding
Interest Payment Date to the registered Holder at the close of business on that
record date (notwithstanding the conversion of such Note before the close of
business on the corresponding Interest Payment Date) and a Holder of Notes who
elects to convert need not include funds equal to the interest to be paid. The
Company is not required to issue fractional shares of Common Stock upon
conversion of Notes and, in lieu thereof, will pay a cash adjustment based upon
the closing price of the Common Stock on the last Business Day prior to the date
of conversion.
The above description of conversion of the Notes is qualified by
reference to, and is subject in its entirety by, the more complete description
thereof contained in the Indenture.
15. REGISTRATION RIGHTS
The Holder of this Note is entitled to the benefits of a Shelf
Registration Agreement, dated as of March 18, 1998, among the Company and the
Initial Purchasers (the "Shelf Registration Agreement"). Pursuant to the Shelf
Registration Agreement the Company has agreed for the benefit of the Holders of
the Notes that it will (i) file with the Commission within 30 days after the
Issue Date a shelf registration statement (the "Shelf Registration Statement")
on such form as the Company deems appropriate covering resales by the Holders of
Notes and the shares of Common Stock issuable upon conversion of the Notes (the
"Shares"), (ii) use all reasonable efforts to cause the Shelf Registration
Statement to become effective within 90 days and (iii) keep such Shelf
Registration Statement effective generally until such date that is two years
after the latest date of original issuance of the Notes.
If (a) on or after 30 days following the Issue Date, a Shelf
Registration Statement has not been filed with the Commission or (b) on or prior
to 90 days following the Issue Date, such Shelf Registration Statement is not
declared effective or (c) the Shelf Registration Statement has been declared
effective by the Commission and ceases to be effective (without being succeeded
on the same day by a post-effective amendment to such Shelf Registration
Statement that cures such failure and that is immediately declared effective) or
use of the Prospectus is suspended, pursuant to the Shelf Registration Agreement
during the
A-2-7
<PAGE>
registration period for a time which shall exceed 60 days in the aggregate
during any 360-day period (each, a "Registration Default"), additional amounts
("Liquidated Damages") will be payable with respect to the Notes, from and
including the day following such Registration Default to but excluding the day
on which such Registration Default has been cured. Liquidated Damages will be
paid in cash semi-annually in arrears, with the first semi-annual payment due on
the first Interest Payment Date following the date on which the Holders of Notes
are first entitled to receive Liquidated Damages, and will be payable, with
respect to the first 90-day period immediately following the occurrence of such
Registration Default, in an amount equal to $.05 per week per $1,000 aggregate
principal amount of the Notes, or, if applicable, an equivalent amount per week
per share (subject to adjustment) of Common Stock constituting Transfer
Restricted Securities, held by such Holder. The amount of the Liquidated
Damages will increase by an additional $.05 per week per $1,000 aggregate
principal amount of the Notes held by each Holder (or shares of Common Stock, as
noted above) with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages of $.50 per week per $1,000 aggregate principal amount of the Notes (or
shares of Common Stock, as noted above) held by each Holder. All accrued
Liquidated Damages will be paid by the Company on each Interest Payment Date in
cash. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
16. TRUSTEE DEALINGS WITH THE COMPANY
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by the Company or its Affiliates and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee.
17. NO RECOURSE AGAINST OTHERS
A director, officer, employee or shareholder, as such, of the Company
shall not have any liability for any 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 accepting a Note, each Holder waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
18. AUTHENTICATION
This Note shall not be valid until an authorized officer of the
Trustee manually signs the Trustee's Certificate of Authentication on the other
side of this Note.
19. ABBREVIATIONS
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TENANT (=tenants by the
entireties), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. UNCLAIMED MONEY
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent will pay the money back to the
Company at its request. After that, Holders entitled to money must look to the
Company for payment.
21. DISCHARGE PRIOR TO MATURITY
A-2-8
<PAGE>
If the Company deposits with the Trustee or Paying Agent money or U.S.
Government Obligations sufficient to pay the principal of and interest on the
Notes to maturity, the Company will be discharged from the Indenture except for
certain Sections thereof.
22. GOVERNING LAW
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
A-2-9
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
(insert assignee's social security or tax I.D. number)
(print or type assignee's name, address and zip code)
and irrevocably appoint ____________________________ agent to transfer this Note
on the books of the Company. The agent may substitute another to act for him.
Dated: Signature:
------------------------------------
(Sign exactly as your
name appears on the other
side of this Note)
Signature
Guarantee*:
--------------------------
*Signature must be guaranteed by an eligible guarantor institution
within the meaning of Securities and Exchange Commission Rule 17Ad-15 (including
banks, stock brokers, savings and loan associations, national securities
exchanges, registered securities associations, clearing agencies and credit
unions) with membership or participation in an approved signature guarantee
medallion program if this Note is to be delivered other than to and in the name
of the registered holder.
A-2-10
<PAGE>
SCHEDULE OF EXCHANGES OF NOTES(3)
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or a Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
AMOUNT OF PRINCIPAL AMOUNT OF THIS SIGNATURE OF
AMOUNT OF DECREASE IN INCREASE IN GLOBAL NOTE AUTHORIZED OFFICER OF
PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF FOLLOWING SUCH DECREASE TRUSTEE OR NOTE
DATE OF EXCHANGE THIS GLOBAL NOTE THIS GLOBAL NOTE (OR INCREASE) CUSTODIAN
---------------- ---------------- ---------------- ----------- ---------
<S> <C> <C> <C> <C>
</TABLE>
- --------------------
(3) This should be included only if the Note is issued in global form.
A-2-11
<PAGE>
Exhibit B-1
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE
(Pursuant to Section 2.06(a)(i) of the Indenture)
U.S. Bank National Association
100 Wall Street, Suite 200
New York, New York 10005
Re: 6% Convertible Subordinated Notes due 2005 of Hutchinson
Technology Incorporated
Reference is hereby made to the Indenture, dated as of March 18, 1998
(the "Indenture"), between Hutchinson Technology Incorporated, a Minnesota
corporation (the "Company") and U.S. Bank National Association, as trustee (the
"Trustee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
This letter relates to $ _______________ principal amount of the above
referenced securities (the "Convertible Subordinated Notes") which are evidenced
by one or more Rule 144A Global Notes and held with the Depositary in the name
of ______________________ (the "Transferor"). The Transferor has requested a
transfer of such beneficial interest in the Convertible Subordinated Notes to a
Person who will take delivery thereof in the form of an equal principal amount
of Convertible Subordinated Notes evidenced by one or more Regulation S Global
Notes, which amount, immediately after such transfer, is to be held with the
Depositary through Euroclear or Cedel or both.
In connection with such request and in respect of such Convertible
Subordinated Notes, the Transferor hereby certifies that such transfer has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with Rule 903 or Rule 904 under the
United States Securities Act of 1933, as amended (the "Securities Act"), and
accordingly the Transferor hereby further certifies that:
(1) The offer of the Convertible Subordinated Notes was not made to a
person in the United States;
(2) either:
(a) at the time the buy order was originated, the transferee was
outside the United States or the Transferor and any person acting
on its behalf reasonably believed and believes that the
transferee was outside the United States; or
(b) the transaction was executed in, on or through the facilities of
a designated offshore securities market and neither the
Transferor nor any person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in contravention of
the requirements of Rule 904(b) of Regulation S;
(4) the transaction is not part of a plan or scheme to evade the
registration provisions of the Securities Act; and
B-1-1
<PAGE>
(5) upon completion of the transaction, the beneficial interest being
transferred as described above is to be held with the Depositary through
Euroclear or Cedel or both.
Upon giving effect to this request to exchange a beneficial interest
in a Rule 144A Global Note for a beneficial interest in a Regulation S Global
Note, the resulting beneficial interest shall be subject to the restrictions on
transfer applicable to Regulation S Global Notes pursuant to the Indenture and
the Securities Act and, if such transfer occurs prior to the end of the 40-day
restricted period associated with the initial offering of Convertible
Subordinated Notes, the additional restrictions applicable to transfers of
interest in the Regulation S Temporary Global Note.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and NationsBanc Montgomery Securities LLC
and First Chicago Capital Markets, Inc., the Initial Purchasers of such
Convertible Subordinated Notes being transferred. Terms used in this
certificate and not otherwise defined in the Indenture have the meanings set
forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
------------------------------------------
Name:
Title:
Dated:
cc: Hutchinson Technology Incorporated
B-1-2
<PAGE>
Exhibit B-2
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE
(Pursuant to Section 2.06(a)(ii) of the Indenture)
U.S. Bank National Association
100 Wall Street, Suite 200
New York, New York 10005
Re: 6% Convertible Subordinated Notes due 2005 of Hutchinson
Technology Incorporated
Reference is hereby made to the Indenture, dated as of March 18, 1998
(the "Indenture"), between Hutchinson Technology Incorporated, a Minnesota
corporation (the "Company") and U.S. Bank National Association, as trustee (the
"Trustee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
This letter relates to $_________ principal amount of the above
referenced securities (the "Convertible Subordinated Notes") which are evidenced
by one or more Regulation S Global Notes and held with the Depositary through
Euroclear or Cedel in the name of __________________________________ (the
"Transferor"). The Transferor has requested a transfer of such beneficial
interest in the Convertible Subordinated Notes to a Person who will take
delivery thereof in the form of an equal principal amount of Convertible
Subordinated Notes evidenced by one or more Rule 144A Global Notes, to be held
with the Depositary.
In connection with such request and in respect of such Convertible
Subordinated Notes, the Transferor hereby certifies that:
[CHECK ONE]
/ / such transfer is being effected pursuant to and in accordance with Rule
144A under the United States Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, the Transferor hereby further
certifies that the Convertible Subordinated Notes are being transferred to
a Person that the Transferor reasonably believes is purchasing the
Convertible Subordinated Notes for its own account, or for one or more
accounts with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a "qualified
institutional buyer" within the meaning of Rule 144A in a transaction
meeting the requirements of Rule 144A;
or
/ / such transfer is being effected pursuant to and in accordance with Rule 144
under the Securities Act;
or
/ / such transfer is being effected pursuant to an exemption under the
Securities Act other than Rule 144A, Rule 144 or Rule 904 and the
Transferor further certifies that the Transfer complies with the transfer
restrictions applicable to beneficial interests in Global Notes and
Definitive Convertible Subordinated Notes bearing the Private Placement
Legend and the requirements of the exemption claimed, which certification
is supported by (x) if such transfer is in respect of a principal amount of
Convertible Subordinated Notes at the time of Transfer of $100,000 or more,
a certificate executed by the Transferee in the form of EXHIBIT C to the
Indenture, or (y) if such Transfer is in respect of a
B-2-1
<PAGE>
principal amount of Convertible Subordinated Notes at the time of transfer
of less than $100,000, (1) a certificate executed by the Transferee in the
form of EXHIBIT C to the Indenture and (2) an Opinion of Counsel provided
by the Transferor or the Transferee (a copy of which the Transferor has
attached to this certification), to the effect that (1) such Transfer is in
compliance with the Securities Act and (2) such Transfer complies with any
applicable blue sky securities laws of any state of the United States;
or
/ / such transfer is being effected pursuant to an effective registration
statement under the Securities Act;
or
/ / such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A or
Rule 144, and the Transferor hereby further certifies that the Convertible
Subordinated Notes are being transferred in compliance with the transfer
restrictions applicable to the Definitive Notes and in accordance with the
requirements of the exemption claimed, which certification is supported by
an Opinion of Counsel, provided by the Transferor or the transferee (a copy
of which the Transferor has attached to this certification) in form
reasonably acceptable to the Company and to the Registrar, to the effect
that such transfer is in compliance with the Securities Act;
and such Convertible Subordinated Notes are being transferred in compliance with
any applicable blue sky securities laws of any state of the United States.
Upon giving effect to this request to exchange a beneficial interest
in Regulation S Global Notes for a beneficial interest in 144A Global
Convertible Subordinated Notes, the resulting beneficial interest shall be
subject to the restrictions on transfer applicable to Rule 144A Global Notes
pursuant to the Indenture and the Securities Act.
B-2-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and NationsBanc Montgomery Securities LLC
and First Chicago Capital Markets, Inc., the Initial Purchasers of such
Convertible Subordinated Notes being transferred. Terms used in this
certificate and not otherwise defined in the Indenture have the meanings set
forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
------------------------------------------
Name:
Title:
Dated:
cc: Hutchinson Technology Incorporated
B-2-3
<PAGE>
Exhibit B-3
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
OF DEFINITIVE CONVERTIBLE SUBORDINATED NOTES
(Pursuant to Section 2.06(b) of the Indenture)
U.S. Bank National Association
100 Wall Street, Suite 200
New York, New York 10005
Re: 6% Convertible Subordinated Notes due 2005 of Hutchinson
Technology Incorporated
Reference is hereby made to the Indenture, dated as of March 18, 1998
(the "Indenture"), between Hutchinson Technology Incorporated, a Minnesota
corporation (the "Company") and U.S. Bank National Association, as trustee (the
"Trustee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
This letter relates to $ ____________ principal amount of the above
referenced securities (the "Convertible Subordinated Notes") which are evidenced
by one or more Definitive Convertible Subordinated Notes in the name of
___________________ (the "Transferor"). The Transferor has requested an
exchange or transfer of such Definitive Convertible Subordinated Note(s) in the
form of an equal principal amount of Convertible Subordinated Notes evidenced by
one or more Definitive Convertible Subordinated Notes, to be delivered to the
Transferor or, in the case of a transfer of such Convertible Subordinated Notes,
to such Person as the Transferor instructs the Trustee.
In connection with such request and in respect of the Convertible
Subordinated Notes surrendered to the Trustee herewith for exchange (the
"Surrendered Convertible Subordinated Notes"), the Holder of such Surrendered
Convertible Subordinated Notes hereby certifies that:
[CHECK ONE]
/ / the Surrendered Convertible Subordinated Notes are being acquired for the
Transferor's own account, without transfer;
or
/ / the Surrendered Convertible Subordinated Notes are being transferred to the
Company;
or
/ / the Surrendered Convertible Subordinated Notes are being transferred
pursuant to and in accordance with Rule 144A under the United States
Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the Surrendered
Convertible Subordinated Notes are being transferred to a Person that the
Transferor reasonably believes is purchasing the Surrendered Convertible
Subordinated Notes for its own account, or for one or more accounts with
respect to which such Person exercises sole investment discretion, and such
Person and each such account is a "qualified institutional buyer" within
the meaning of Rule 144A, in each case in a transaction meeting the
requirements of Rule 144A;
or
B-3-1
<PAGE>
/ / the Surrendered Convertible Subordinated Notes are being transferred in a
transaction permitted by Rule 144 under the Securities Act;
or
/ / the Surrendered Convertible Subordinated Notes are being transferred
pursuant to an exemption under the Securities Act other than Rule 144A,
Rule 144 or Rule 904 and the Transferor further certifies that the Transfer
complies with the transfer restrictions applicable to beneficial interests
in Global Notes and Definitive Convertible Subordinated Notes bearing the
Private Placement Legend and the requirements of the exemption claimed,
which certification is supported by (x) if such transfer is in respect of a
principal amount of Convertible Subordinated Notes at the time of Transfer
of $100,000 or more, a certificate executed by the Transferee in the form
of EXHIBIT C to the Indenture, or (y) if such Transfer is in respect of a
principal amount of Convertible Subordinated Notes at the time of transfer
of less than $100,000, (1) a certificate executed by the Transferee in the
form of EXHIBIT C to the Indenture and (2) an Opinion of Counsel provided
by the Transferor or the Transferee (a copy of which the Transferor has
attached to this certification), to the effect that (1) such Transfer is in
compliance with the Securities Act and (2) such Transfer complies with any
applicable blue sky securities laws of any state of the United States;
or
/ / the Surrendered Convertible Subordinated Notes are being transferred
pursuant to an effective registration statement under the Securities Act;
or
/ / such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A or
Rule 144, and the Transferor hereby further certifies that the Convertible
Subordinated Notes are being transferred in compliance with the transfer
restrictions applicable to the Definitive Notes and in accordance with the
requirements of the exemption claimed, which certification is supported by
an Opinion of Counsel, provided by the transferor or the transferee (a copy
of which the Transferor has attached to this certification) in form
reasonably acceptable to the Company and to the Registrar, to the effect
that such transfer is in compliance with the Securities Act;
and the Surrendered Convertible Subordinated Notes are being transferred in
compliance with any applicable blue sky securities laws of any state of the
United States.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and NationsBanc Montgomery Securities LLC
and First Chicago Capital Markets, Inc., the Initial Purchasers of such
Convertible Subordinated Notes being transferred. Terms used in this
certificate and not otherwise defined in the Indenture have the meanings set
forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
------------------------------------------
Name:
Title:
Dated:
B-3-2
<PAGE>
cc: Hutchinson Technology Incorporated
B-3-3
<PAGE>
Exhibit B-4
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM RULE 144A GLOBAL NOTE OR REGULATION S
PERMANENT GLOBAL NOTE
TO DEFINITIVE CONVERTIBLE SUBORDINATED NOTE
(Pursuant to Section 2.06(c) of the Indenture)
U.S. Bank National Association
100 Wall Street, Suite 200
New York, New York 10005
Re: 6% Convertible Subordinated Notes due 2005 of Hutchinson
Technology Incorporated
Reference is hereby made to the Indenture, dated as of March 18, 1998
(the "Indenture"), between Hutchinson Technology Incorporated, a Minnesota
corporation (the "Company") and U.S. Bank National Association, as trustee (the
"Trustee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
This letter relates to $__________ principal amount of the above
referenced securities (the "Convertible Subordinated Notes") which are evidenced
by a beneficial interest in one or more Rule 144A Global Notes or Regulation S
Permanent Global Notes and held with the Depositary (through Euroclear or Cedel
in the case of a Regulation S Permanent Global Note) in the name of
____________________ (the "Transferor"). The Transferor has requested an
exchange or transfer of such beneficial interest in the form of an equal
principal amount of Convertible Subordinated Notes evidenced by one or more
Definitive Convertible Subordinated Notes, to be delivered to the Transferor or,
in the case of a transfer of such Convertible Subordinated Notes, to such Person
as the Transferor instructs the Trustee.
In connection with such request and in respect of the Convertible
Subordinated Notes surrendered to the Trustee herewith for exchange (the
"Surrendered Convertible Subordinated Notes"), the Holder of such Surrendered
Convertible Subordinated Notes hereby certifies that:
[CHECK ONE]
/ / the Surrendered Convertible Subordinated Notes are being transferred to the
beneficial owner of such Convertible Subordinated Notes;
or
/ / the Surrendered Convertible Subordinated Notes are being transferred
pursuant to and in accordance with Rule 144A under the United States
Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the Surrendered
Convertible Subordinated Notes are being transferred to a Person that the
Transferor reasonably believes is purchasing the Surrendered Convertible
Subordinated Notes for its own account, or for one or more accounts with
respect to which such Person exercises sole investment discretion, and such
Person and each such account is a "qualified institutional buyer" within
the meaning of Rule 144A, in each case in a transaction meeting they
requirements of Rule 144A;
or
B-4-1
<PAGE>
/ / the Surrendered Convertible Subordinated Notes are being transferred in a
transaction permitted by Rule 144 under the Securities Act;
or
/ / the Surrendered Convertible Subordinated Notes are being transferred
pursuant to an effective registration statement under the Securities Act;
or
/ / the Surrendered Convertible Subordinated Notes are being transferred
pursuant to an exemption under the Securities Act other than Rule 144A,
Rule 144 or Rule 904 and the Transferor further certifies that the Transfer
complies with the transfer restrictions applicable to beneficial interests
in Global Notes and Definitive Convertible Subordinated Notes bearing the
Private Placement Legend and the requirements of the exemption claimed,
which certification is supported by (x) if such transfer is in respect of a
principal amount of Convertible Subordinated Notes at the time of Transfer
of $100,000 or more, a certificate executed by the Transferee in the form
of EXHIBIT C to the Indenture, or (y) if such Transfer is in respect of a
principal amount of Convertible Subordinated Notes at the time of transfer
of less than $100,000, (1) a certificate executed in the form of EXHIBIT C
to the Indenture and (2) an Opinion of Counsel provided by the Transferor
or the Transferee (a copy of which the Transferor has attached to this
certification), to the effect that (1) such Transfer is in compliance with
the Securities Act and (2) such Transfer complies with any applicable blue
sky securities laws of any state of the United States;
or
/ / such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A or
Rule 144, and the Transferor hereby further certifies that the Convertible
Subordinated Notes are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in accordance with the
requirements of the exemption claimed, which certification is supported by
an Opinion of Counsel, provided by the transferor or the transferee (a copy
of which the Transferor has attached to this certification) in form
reasonably acceptable to the Company and to the Registrar, to the effect
that such transfer is in compliance with the Securities Act;
and the Surrendered Convertible Subordinated Notes are being transferred in
compliance with any applicable blue sky securities laws of any state of the
United States.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and NationsBanc Montgomery Securities LLC
and First Chicago Capital Markets, Inc., the Initial Purchasers of such
Convertible Subordinated Notes being transferred. Terms used in this
certificate and not otherwise defined in the Indenture have the meanings set
forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
------------------------------------------
Name:
Title:
Dated:
B-4-2
<PAGE>
cc: Hutchinson Technology Incorporated
B-4-3
<PAGE>
Exhibit C
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
U.S. Bank National Association
100 Wall Street, Suite 200
New York, New York 10005
Re: 6% Convertible Subordinated Notes due 2005 of Hutchinson
Technology Incorporated
Reference is hereby made to the Indenture, dated as of March 18, 1998
(the "Indenture"), between Hutchinson Technology Incorporated, a Minnesota
corporation (the "Company") and U.S. Bank National Association, as trustee (the
"Trustee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
In connection with our proposed purchase of $__________ aggregate
principal amount of:
(a) / / Beneficial interests in the above referenced securities (the
"Convertible Subordinated Notes"), or
(b) / / Definitive Convertible Subordinated Notes,
we confirm that:
1. We understand that any subsequent transfer of the Convertible
Subordinated Notes of any interest therein is subject to certain restrictions
and conditions set forth in the Indenture and the undersigned agrees to be bound
by, and not to resell, pledge or otherwise transfer the Convertible Subordinated
Notes or any interest therein except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "SECURITIES ACT").
2. We understand that the offer and sale of the Convertible
Subordinated Notes have not been registered under the Securities Act, and that
the Convertible Subordinated Notes and any interest therein may not be offered
or sold except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell the Convertible Subordinated Notes or any
interest therein, (A) we will do so only (1)(a) to a person who the Seller
reasonably believes is a qualified institutional buyer (as defined in Rule 144A
under the Securities Act) in a transaction meeting the requirements of 144A, (b)
in a transaction meeting the requirements of Rule 144 under the Securities Act,
(c) outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 of the Securities Act, or (d) in accordance with
another exemption from the registration requirements of the Securities Act (and
based upon an opinion of counsel), (2) to the Company or any of its subsidiaries
or (3) pursuant to an effective registration statement and, in each case, in
accordance with any applicable securities laws of any State of the United States
or any other applicable jurisdiction and (B) we will, and each subsequent holder
will be required to, notify any purchaser from it of the security evidenced
hereby of the resale restrictions set forth in (A) above.
3. We understand that, on any proposed resale of the Convertible
Subordinated Notes or beneficial interests, we will be required to furnish to
you and the Company such certifications, legal opinions and other information as
you and the Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that the
Convertible Subordinated Notes purchased by us will bear a legend to the
foregoing effect.
C-1-1
<PAGE>
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Convertible
Subordinated Notes, and we and any accounts for which we are acting are each
able to bear the economic risk of our or its investment.
5. We are acquiring the Convertible Subordinated Notes or beneficial
interests therein purchased by us for our own account or for one or more
accounts (each of which is an institutional accredited investor") as to each of
which we exercise sole investment discretion.
6. We are not acquiring the Convertible Subordinated Notes with a
view to any distribution thereof that would violate the Securities Act or the
securities laws of any State of the United States.
---------------------------------------------
Name
---------------------------------------------
Address
---------------------------------------------
C-1-2
<PAGE>
HUTCHINSON TECHNOLOGY INCORPORATED
$140,000,000
6% CONVERTIBLE SUBORDINATED NOTES DUE 2005
PURCHASE AGREEMENT
DATED MARCH 12, 1998
NATIONSBANC MONTGOMERY SECURITIES LLC
FIRST CHICAGO CAPITAL MARKETS, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . 3
(a) NO REGISTRATION REQUIRED. . . . . . . . . . . . . . . . . . . . . . . 3
(b) NO INTEGRATION OF OFFERINGS OR GENERAL SOLICITATION.. . . . . . . . . 3
(c) ELIGIBILITY FOR RESALE UNDER RULE 144A. . . . . . . . . . . . . . . . 3
(d) THE OFFERING MEMORANDUM . . . . . . . . . . . . . . . . . . . . . . . 3
(e) INCORPORATED DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . 4
(f) THE PURCHASE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . 4
(g) THE SHELF REGISTRATION AGREEMENT AND DTC AGREEMENT. . . . . . . . . . 4
(h) AUTHORIZATION OF THE SECURITIES . . . . . . . . . . . . . . . . . . . 5
(i) AUTHORIZATION OF THE INDENTURE. . . . . . . . . . . . . . . . . . . . 5
(j) DESCRIPTION OF THE SECURITIES AND THE INDENTURE . . . . . . . . . . . 5
(k) NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . 5
(l) INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . 6
(m) PREPARATION OF THE FINANCIAL STATEMENTS . . . . . . . . . . . . . . . 6
(n) INCORPORATION AND GOOD STANDING OF THE COMPANY AND ITS SUBSIDIARIES . 6
(o) CAPITALIZATION AND OTHER CAPITAL STOCK MATTERS. . . . . . . . . . . . 7
(p) STOCK EXCHANGE LISTING. . . . . . . . . . . . . . . . . . . . . . . . 7
(q) NON-CONTRAVENTION OF EXISTING INSTRUMENTS; NO FURTHER
AUTHORIZATIONS OR APPROVALS REQUIRED . . . . . . . . . . . . . . . . 7
(r) NO MATERIAL ACTIONS OR PROCEEDINGS. . . . . . . . . . . . . . . . . . 8
(s) INTELLECTUAL PROPERTY RIGHTS. . . . . . . . . . . . . . . . . . . . . 9
(t) ALL NECESSARY PERMITS, ETC. . . . . . . . . . . . . . . . . . . . . . 9
(u) TITLE TO PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . 9
(v) TAX LAW COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . . . 9
(w) COMPANY NOT AN "INVESTMENT COMPANY" . . . . . . . . . . . . . . . . . 10
(x) INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(y) NO PRICE STABILIZATION OR MANIPULATION. . . . . . . . . . . . . . . . 10
(z) NO UNLAWFUL CONTRIBUTIONS OR OTHER PAYMENTS . . . . . . . . . . . . . 10
(aa) COMPANY'S ACCOUNTING SYSTEM. . . . . . . . . . . . . . . . . . . . . 10
(bb) COMPLIANCE WITH ENVIRONMENTAL LAWS . . . . . . . . . . . . . . . . . 11
(cc) PERIODIC REVIEW OF COSTS OF ENVIRONMENTAL COMPLIANCE . . . . . . . . 12
(dd) ERISA COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(ee) SOLVENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(ff) NO DEFAULT IN SENIOR INDEBTEDNESS. . . . . . . . . . . . . . . . . . 13
(gg) RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . 13
(hh) AUTHORIZATION OF COMMON STOCK. . . . . . . . . . . . . . . . . . . . 13
(ii) COMPLIANCE WITH REGULATION S REQUIREMENTS. . . . . . . . . . . . . . 13
(jj) REPORTING ISSUER . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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<TABLE>
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SECTION 2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES . . . . . . . . . . 14
(a) THE FIRM SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . 14
(b) THE FIRST CLOSING DATE. . . . . . . . . . . . . . . . . . . . . . . . 14
(c) THE OPTIONAL SECURITIES; THE SECOND CLOSING DATE. . . . . . . . . . . 14
(d) DELIVERY OF THE SECURITIES. . . . . . . . . . . . . . . . . . . . . . 15
(e) DELIVERY OF OFFERING MEMORANDUM TO THE INITIAL PURCHASERS . . . . . . 15
(f) INITIAL PURCHASERS AS QUALIFIED INSTITUTIONAL BUYERS. . . . . . . . . 15
SECTION 3. ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . 16
(a) INITIAL PURCHASERS' REVIEW OF PROPOSED AMENDMENTS AND SUPPLEMENTS . . 16
(b) AMENDMENTS AND SUPPLEMENTS TO THE OFFERING MEMORANDUM AND OTHER
SecuRITIES ACT MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . 16
(c) COPIES OF THE OFFERING MEMORANDUM . . . . . . . . . . . . . . . . . . 17
(d) BLUE SKY COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . 17
(e) USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(f) THE DEPOSITARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(g) ADDITIONAL ISSUER INFORMATION . . . . . . . . . . . . . . . . . . . . 17
(h) AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES. . . . . . . . . 18
(i) FUTURE REPORTS TO THE INITIAL PURCHASERS. . . . . . . . . . . . . . . 18
(j) SHELF REGISTRATION AGREEMENT. . . . . . . . . . . . . . . . . . . . . 18
(k) NO INTEGRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(l) RESTRICTION ON REPURCHASES. . . . . . . . . . . . . . . . . . . . . . 19
(m) LEGENDED SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . 19
(n) PORTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(o) FORM D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(p) DUE DILIGENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(q) LOCK-UP AGREEMENT FROM CERTAIN STOCKHOLDERS OF THE COMPANY. . . . . . 19
SECTION 4. PAYMENT OF EXPENSES . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE INITIAL PURCHASERS . . . . . 20
(a) ACCOUNTANTS' COMFORT LETTER . . . . . . . . . . . . . . . . . . . . . 21
(b) NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . 21
(c) OPINION OF COUNSEL FOR THE COMPANY. . . . . . . . . . . . . . . . . . 21
(d) OPINION OF SPECIAL NEW YORK COUNSEL FOR THE COMPANY . . . . . . . . . 21
(e) OPINION OF COUNSEL FOR THE INITIAL PURCHASERS . . . . . . . . . . . . 21
(f) OFFICERS' CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . 21
(g) BRING-DOWN COMFORT LETTER . . . . . . . . . . . . . . . . . . . . . . 22
(h) PORTAL LISTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(i) SHELF REGISTRATION AGREEMENT. . . . . . . . . . . . . . . . . . . . . 22
(j) AMENDMENT OF OLD CREDIT FACILITY. . . . . . . . . . . . . . . . . . . 22
(k) ADDITIONAL DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 6. REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES . . . . . . . . . . 22
</TABLE>
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SECTION 7. OFFER, SALE AND RESALE PROCEDURES . . . . . . . . . . . . . . . . 23
SECTION 8. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . 25
(a) INDEMNIFICATION OF THE INITIAL PURCHASERS . . . . . . . . . . . . . . 25
(b) INDEMNIFICATION OF THE COMPANY, ITS DIRECTORS AND OFFICERS. . . . . . 26
(c) NOTIFICATIONS AND OTHER INDEMNIFICATION PROCEDURES. . . . . . . . . . 27
(d) SETTLEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 9. CONTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 10. TERMINATION OF THIS AGREEMENT. . . . . . . . . . . . . . . . . . 30
SECTION 11. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. . . . . . . 30
SECTION 12. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 13. SUCCESSORS.. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 14. PARTIAL UNENFORCEABILITY . . . . . . . . . . . . . . . . . . . . 32
SECTION 15. (a) GOVERNING LAW PROVISIONS.. . . . . . . . . . . . . . . . . . 32
(b) CONSENT TO JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . 32
(c) WAIVER OF IMMUNITY. . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 16. DEFAULT OF ONE OR MORE OF THE SEVERAL INITIAL PURCHASERS . . . . 33
SECTION 17. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
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PURCHASE AGREEMENT
March 12, 1998
NATIONSBANC MONTGOMERY SECURITIES LLC
FIRST CHICAGO CAPITAL MARKETS, INC.
As Initial Purchasers
c/o NATIONSBANC MONTGOMERY SECURITIES LLC
600 Montgomery Street
San Francisco, California 94111
Ladies and Gentlemen:
INTRODUCTORY. Hutchinson Technology Incorporated, a Minnesota
corporation (the "Company), proposes to issue and sell to the several Initial
Purchasers named in SCHEDULE A (the "Initial Purchasers"), acting severally and
not jointly, the respective amounts set forth in such SCHEDULE A of an
$140,000,000 aggregate principal amount of the Company's 6% Convertible
Subordinated Notes due 2005 (the "Firm Securities"). In addition, the Company
has granted to the Initial Purchasers an option to purchase up to an additional
$21,000,000 aggregate principal amount of Notes (the "Optional Securities"), as
provided in Section 2. The Firm Securities and, if and to the extent such
option is exercised, the Optional Securities are collectively called the
"Securities." NationsBanc Montgomery Securities LLC and First Chicago Capital
Markets, Inc. have agreed to act as the Initial Purchasers in connection with
the offering and sale of the Securities.
The Securities will be issued pursuant to an indenture dated as of
March 18, 1998 (the "Indenture") between the Company and U.S. Bank National
Association, as trustee (the "Trustee"). Securities issued in book-entry form
will be issued in the name of Cede & Co., as nominee of The Depository Trust
Company (the "Depositary") pursuant to a DTC Agreement, to be dated as of the
Closing Date (as defined in Section 2) (the "DTC Agreement"), among the Company,
the Trustee and the Depositary.
The holders of the Securities will be entitled to the benefits of a
shelf registration agreement dated as of March 18, 1998 (the "Shelf Registration
Agreement"), among the Company and the Initial Purchasers, pursuant to which the
Company will agree to file, within 30 days of the Closing Date, a registration
statement with the Securities and Exchange Commission (the "Commission")
registering the Securities under the Securities Act of 1933 (the "Securities
Act", which term, as used herein, includes the rules and regulations of the
Commission promulgated thereunder).
The Securities are convertible into shares of common stock, par value
$.01 per share, of the Company (the "Common Stock") in accordance with the terms
of the Securities and
<PAGE>
the Indenture, at an initial conversion price of $28.35 per share (equivalent to
a conversion rate of 35.273 shares per $1,000 principal amount of Securities).
The Company understands that the Initial Purchasers propose to make an
offering of the Securities on the terms and in the manner set forth herein and
in the Offering Memorandum (as defined below) and agrees that the Initial
Purchasers may resell, subject to the conditions set forth herein, all or a
portion of the Securities to purchasers (the "Subsequent Purchasers") at any
time after the date of this Agreement. The Securities are to be offered and
sold to or through the Initial Purchasers without being registered with the
Commission under the Securities Act, in reliance upon exemptions therefrom. The
terms of the Securities and the Indenture will require that investors that
acquire Securities expressly agree that Securities may only be resold or
otherwise transferred, after the date hereof, if such Securities are registered
for sale under the Securities Act or if an exemption from the registration
requirements of the Securities Act is available (including the exemptions
afforded by Rule 144A ("Rule 144A") or Regulation S ("Regulation S")
thereunder).
The Company has prepared and delivered to each Initial Purchaser
copies of an Offering Memorandum "subject to completion" dated March 6, 1998
(the "Preliminary Offering Memorandum") and has prepared and will deliver to
each Initial Purchaser, on the date hereof or the next succeeding day, copies of
the Offering Memorandum dated March 12, 1998 describing the terms of the
Securities, each for use by such Initial Purchaser in connection with its
solicitation of offers to purchase the Securities. As used herein, the
"Offering Memorandum" shall mean, with respect to any date or time referred to
herein this Agreement, the Company's Offering Memorandum dated March 12, 1998,
including amendments or supplements thereto, any exhibits thereto and the
Incorporated Documents (as defined by Section 1(e) below), in the most recent
form that has been prepared and delivered by the Company to the Initial
Purchasers in connection with their solicitation of offers to purchase
Securities. Further, any reference to the Preliminary Offering Memorandum or
the Offering Memorandum shall be deemed to refer to and include any Additional
Issuer Information (as defined in Section 3(g)) furnished by the Company prior
to the completion of the distribution of the Securities.
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Offering Memorandum (or other references of like import) shall be deemed to mean
and include all such financial statements and schedules and other information
which are incorporated by reference in the Offering Memorandum; and all
references in this Agreement to amendments or supplements to the Offering
Memorandum shall be deemed to mean and include the filing of any document under
the Securities Exchange Act of 1934 (the "Exchange Act", which term, as used
herein, includes the rules and regulations of the Commission promulgated
thereunder) which is incorporated or deemed to be incorporated by reference in
the Offering Memorandum.
The Company hereby confirms its agreements with the Initial Purchasers
as follows:
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SECTION 1. REPRESENTATIONS AND WARRANTIES.
The Company hereby represents, warrants and covenants to each Initial
Purchaser as follows:
(a) NO REGISTRATION REQUIRED.
Subject to compliance by the Initial Purchasers with the
representations and warranties set forth in Section 2(e) hereof and with
the procedures set forth in Section 7 hereof, it is not necessary in
connection with the offer, sale and delivery of the Securities to the
Initial Purchasers and to each Subsequent Purchaser in the manner
contemplated by this Agreement and the Offering Memorandum to register the
Securities under the Securities Act or, until such time as the Securities
are issued, pursuant to an effective registration statement, to qualify the
Indenture under the Trust Indenture Act of 1939 (the "Trust Indenture Act",
which term, as used herein, includes the rules and regulations of the
Commission promulgated thereunder).
(b) NO INTEGRATION OF OFFERINGS OR GENERAL SOLICITATION. The Company
has not, directly or indirectly, solicited any offer to buy or offered to
sell, and will not, directly or indirectly, solicit any offer to buy or
offer to sell, in the United States or to any United States citizen or
resident, any security which is or would be integrated with the sale of the
Securities in a manner that would require the Securities to be registered
under the Securities Act. None of the Company, its affiliates (as such
term is defined in Rule 501(b) under the Securities Act (each, an
"Affiliate")), or any person acting on its or any of their behalf (other
than the Initial Purchasers, as to whom the Company makes no representation
or warranty) has engaged or will engage, in connection with the offering of
the Securities, in any form of general solicitation or general advertising
within the meaning of Rule 502(c) under the Securities Act. With respect
to those Securities sold in reliance upon Regulation S, (i) none of the
Company, its Affiliates or any person acting on its or their behalf (other
than the Initial Purchasers, as to whom the Company makes no representation
or warranty) has engaged or will engage in any directed selling efforts
within the meaning of Regulation S and (ii) each of the Company and its
Affiliates and any person acting on its or their behalf (other than the
Initial Purchasers, as to whom the Company makes no representation or
warranty) has complied and will comply with the offering restrictions set
forth in Regulation S.
(c) ELIGIBILITY FOR RESALE UNDER RULE 144A. The Securities are
eligible for resale pursuant to Rule 144A and will not be, at the Closing
Date, of the same class as securities listed on a national securities
exchange registered under Section 6 of the Exchange Act or quoted in a U.S.
automated interdealer quotation system.
(d) THE OFFERING MEMORANDUM. The Offering Memorandum does not,
3
<PAGE>
and at the Closing Date will not, include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that this representation, warranty and
agreement shall not apply to statements in or omissions from the Offering
Memorandum made in reliance upon and in conformity with information
furnished to the Company in writing by any Initial Purchaser through
NationsBanc Montgomery Securities LLC expressly for use in the Offering
Memorandum. 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). The Company has not
distributed and will not distribute, prior to the later of the Closing Date
and the completion of the Initial Purchasers' distribution of the
Securities, any offering material in connection with the offering and sale
of the Securities other than the Preliminary Offering Memorandum or the
Offering Memorandum.
(e) INCORPORATED DOCUMENTS The Offering Memorandum as delivered from
time to time shall incorporate by reference the most recent Annual Report
of the Company on Form 10-K filed with the Commission and each Quarterly
Report of the Company on Form 10-Q and each Current Report of the Company
on Form 8-K filed with the Commission since the filing of the end of the
fiscal year to which such Annual Report relates. The documents
incorporated or deemed to be incorporated by reference in the Offering
Memorandum at the time they were or hereafter are filed with the Commission
collectively, the "Incorporated Documents" complied and will comply in all
material respects with the requirements of the Exchange Act and, when read
together with the other information in the Offering Memorandum, at the date
of the Offering Memorandum and at the Closing Date, do not and will not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(f) THE PURCHASE AGREEMENT. This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the
Company, enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as
the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
(g) THE SHELF REGISTRATION AGREEMENT AND DTC AGREEMENT. At the
Closing Date, each of the Shelf Registration Agreement and the DTC
Agreement will be duly authorized, executed and delivered by, and will be a
valid and binding agreement of, the Company, enforceable in accordance with
its terms, except as rights to indemnification thereunder may be limited by
applicable law
4
<PAGE>
and except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights and remedies of creditors or by general equitable
principles.
(h) AUTHORIZATION OF THE SECURITIES. The Securities to be purchased
by the Initial Purchasers from the Company are in the form contemplated by
the Indenture, have been duly authorized for issuance and sale pursuant to
this Agreement and the Indenture and, at the Closing Date, will have been
duly executed by the Company and, when authenticated in the manner provided
for in the Indenture and delivered against payment of the purchase price
therefor, will constitute valid and binding agreements of the Company,
enforceable in accordance with their terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles and will be
entitled to the benefits of the Indenture.
(i) AUTHORIZATION OF THE INDENTURE. The Indenture has been duly
authorized by the Company and, at the Closing Date, will have been duly
executed and delivered by the Company and will constitute a valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as the enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.
(j) DESCRIPTION OF THE SECURITIES AND THE INDENTURE. The Securities
and the Indenture will conform in all material respects to the respective
statements relating thereto contained in the Offering Memorandum and will
be in substantially the respective forms previously delivered to the
Initial Purchasers.
(k) NO MATERIAL ADVERSE CHANGE. Except as otherwise disclosed in the
Offering Memorandum, subsequent to the respective dates as of which
information is given in the Offering Memorandum: (i) there has been no
material adverse change, or any development that could reasonably be
expected to result in a material adverse change, in the condition,
financial or otherwise, or in the earnings, business, operations or
prospects, whether or not arising from transactions in the ordinary course
of business, of the Company and its subsidiaries, considered as one entity
(any such change is called a "Material Adverse Change"); (ii) the Company
and its subsidiaries, considered as one entity, have not incurred any
material liability or obligation, indirect, direct or contingent, not in
the ordinary course of business nor entered into any material transaction
or agreement not in the ordinary course of business; and (iii) there has
been no dividend or distribution of any kind declared, paid or made by the
Company or, except for dividends paid to the Company or other subsidiaries,
any of its subsidiaries on any class of capital stock or repurchase or
redemption by the Company or any of its subsidiaries of any class of
capital stock.
5
<PAGE>
(l) INDEPENDENT ACCOUNTANTS. Arthur Andersen LLP, who have expressed
their opinion with respect to the financial statements (which term as used
in this Agreement includes the related notes thereto) and supporting
schedules filed with the Commission included in the Offering Memorandum,
are independent public accountants within the meaning of Regulation S-X
under the Securities Act and the Exchange Act.
(m) PREPARATION OF THE FINANCIAL STATEMENTS. The financial
statements, together with the related schedules and notes, included or
incorporated by reference in the Offering Memorandum present fairly the
consolidated financial position of the Company and its subsidiaries as of
and at the dates indicated and the results of their operations and cash
flows for the periods specified. Such financial statements have been
prepared in conformity with generally accepted accounting principles as
applied in the United States applied on a consistent basis throughout the
periods involved, except as may be expressly stated in the related notes
thereto. The financial data set forth in the Offering Memorandum under the
captions "Offering Memorandum Summary--Summary Consolidated Financial
Data", "Selected Consolidated Financial Data" and "Capitalization" fairly
present the information set forth therein on a basis consistent with that
of the audited financial statements contained in the Offering Memorandum.
The Company's ratios of earnings to fixed charges set forth in the Offering
Memorandum under the captions "Offering Memorandum Summary--Summary
Consolidated Financial Data" and "Selected Consolidated Financial Data"
have been calculated in compliance with Item 503(d) of Regulation S-K under
the Securities Act.
(n) INCORPORATION AND GOOD STANDING OF THE COMPANY AND ITS
SUBSIDIARIES. Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation and has corporate
power and authority to own, lease and operate its properties and to conduct
its business as described in the Offering Memorandum and, in the case of
the Company, to enter into and perform its obligations under each of this
Agreement, the Shelf Registration Agreement, the DTC Agreement, the
Securities, and the Indenture. Each of the Company and each subsidiary is
duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except for such jurisdictions where the failure to so qualify or
to be in good standing would not, individually or in the aggregate, result
in a Material Adverse Change. All of the issued and outstanding capital
stock of each subsidiary has been duly authorized and validly issued, is
fully paid and nonassessable and is owned by the Company, directly or
through subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance or claim. The Company does not own or control,
directly or indirectly, any corporation, association or other entity other
than the subsidiaries listed in Exhibit 21.1 to the Company's Annual Report
on Form 10-K for the fiscal year ended September 28,
6
<PAGE>
1997.
(o) CAPITALIZATION AND OTHER CAPITAL STOCK MATTERS. At December 28,
1997, on a consolidated basis, after giving pro forma effect to the
issuance and sale of the Securities pursuant hereto, the Company would have
an authorized and outstanding capitalization as set forth in the Offering
Memorandum under the caption "Capitalization" (other than for subsequent
issuances of capital stock, if any, pursuant to employee benefit plans
described in the Offering Memorandum or upon exercise of outstanding
options or warrants described in the Offering Memorandum). The Common
Stock conforms in all material respects to the description thereof set
forth or incorporated by reference in the Offering Memorandum. All of the
outstanding shares of Common Stock have been duly authorized and validly
issued, are fully paid and nonassessable and have been issued in compliance
with federal and state securities laws. None of the outstanding shares of
Common Stock were issued in violation of any preemptive rights, rights of
first refusal or other similar rights to subscribe for or purchase
securities of the Company. There are no authorized or outstanding options,
warrants, preemptive rights, rights of first refusal or other rights to
purchase, or equity or debt securities convertible into or exchangeable or
exercisable for, any capital stock of the Company or any of its
subsidiaries other than those accurately described in the Offering
Memorandum. The description of the Company's stock option, stock bonus and
other stock plans or arrangements, and the options or other rights granted
thereunder, set forth or incorporated by reference in the Offering
Memorandum accurately and fairly describes such plans, arrangements,
options and rights.
(p) STOCK EXCHANGE LISTING. The Common Stock is registered pursuant
to Section 12(g) of the Exchange Act and is listed on the Nasdaq National
Market, and the Company has taken no action designed to, or likely to have
the effect of, terminating the registration of the Common Stock under the
Exchange Act or delisting the Common Stock from the Nasdaq National Market,
nor has the Company received any notification that the Commission or the
National Association of Securities Dealers, Inc. (the "NASD") is
contemplating terminating such registration or listing.
(q) NON-CONTRAVENTION OF EXISTING INSTRUMENTS; NO FURTHER
AUTHORIZATIONS OR APPROVALS REQUIRED. Neither the Company nor any of its
subsidiaries is in violation of its charter or by-laws or is in default
(or, with the giving of notice or lapse of time, would be in default)
("Default") under any indenture, mortgage, loan or credit agreement, note,
contract, franchise, lease or other instrument to which the Company or any
of its subsidiaries is a party or by which it or any of them may be bound
(including, without limitation, (A) the Company's 7.46% Senior Notes due
2004 in the original aggregate principal amount of $30,000,000, (B) the
Company's 7.85% Senior Notes due 2003 in the original aggregate principal
amount of $25,000,000, (C) the Company's 8.07%
7
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Senior Note due 2006 in the original aggregate principal amount of
$25,000,000, (D) the Company's 10.31% Senior Notes due 1998 in the original
aggregate principal amount of $10,000,000, (E) the Company's Promissory
Notes due 2006 in the original aggregate principal amount of $1,000,000,
(F) the Company's Master Lease Agreement with General Electric Capital
Corporation, dated December 19, 1996, as amended, (G) the Company's
$2,000,000 variable rate demand note with the City of Hutchinson and the
related letter of credit, dated March 1, 1993, as amended) or to which any
of the property or assets of the Company or any of its subsidiaries is
subject (each, an "Existing Instrument"), except for such Defaults as would
not, individually or in the aggregate, result in a Material Adverse Change.
The Company's execution, delivery and performance of this Agreement, the
Shelf Registration Agreement, the DTC Agreement and the Indenture, and the
issuance and delivery of the Securities and the issuance of the shares of
Common Stock issuable upon conversion of the Securities, and consummation
of the transactions contemplated hereby and thereby and by the Offering
Memorandum (i) have been duly authorized by all necessary corporate action
and will not result in any violation of the provisions of the charter or
by-laws of the Company or any subsidiary, (ii) will not conflict with or
constitute a breach of, or Default or a Debt Repayment Triggering Event (as
defined below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any of
its subsidiaries pursuant to, or require the consent of any other party to,
any Existing Instrument, except for such conflicts, breaches, Defaults,
liens, charges or encumbrances as would not, individually or in the
aggregate, result in a Material Adverse Change and (iii) will not result in
any violation of any law, administrative regulation or administrative or
court decree applicable to the Company or any subsidiary. No consent,
approval, authorization or other order of, or registration or filing with,
any court or other governmental or regulatory authority or agency is
required for the Company's execution, delivery and performance of this
Agreement, the Shelf Registration Agreement, the DTC Agreement or the
Indenture, or the issuance and delivery of the Securities, or consummation
of the transactions contemplated hereby and thereby and by the Offering
Memorandum, except such as have been obtained or made by the Company and
are in full force and effect under the Securities Act, applicable state
securities or blue sky laws. As used herein, a "Debt Repayment Triggering
Event" means any event or condition which gives, or with the giving of
notice or lapse of time would give, the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of all
or a portion of such indebtedness by the Company or any of its
subsidiaries.
(r) NO MATERIAL ACTIONS OR PROCEEDINGS. There are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's knowledge, threatened (i) against or affecting the Company or any
of its subsidiaries, (ii) which has as the subject thereof any officer or
director of, or property owned or leased by, the Company or any of its
subsidiaries or
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(iii) relating to environmental or discrimination matters, where in any
such case (A) there is a reasonable possibility that such action, suit or
proceeding might be determined adversely to the Company or such subsidiary
and (B) any such action, suit or proceeding, if so determined adversely,
would reasonably be expected to result in a Material Adverse Change or
adversely affect the consummation of the transactions contemplated by this
Agreement. No material labor dispute with the employees of the Company or
any of its subsidiaries exists or, to the best of the Company's knowledge,
is threatened or imminent.
(s) INTELLECTUAL PROPERTY RIGHTS. The Company and its subsidiaries
own or possess sufficient trademarks, trade names, patent rights,
copyrights, licenses, approvals, trade secrets and other similar rights
(collectively, "Intellectual Property Rights") reasonably necessary to
conduct their businesses as now conducted; and the expected expiration of
any of such Intellectual Property Rights would not result in a Material
Adverse Change. Neither the Company nor any of its subsidiaries has
received any notice of infringement or conflict with asserted Intellectual
Property Rights of others, which infringement or conflict, if the subject
of an unfavorable decision, would result in a Material Adverse Change.
(t) ALL NECESSARY PERMITS, ETC. The Company and each subsidiary
possess such valid and current certificates, authorizations or permits
issued by the appropriate state, federal or foreign regulatory agencies or
bodies necessary to conduct their respective businesses, and neither the
Company nor any subsidiary has received any notice of proceedings relating
to the revocation or modification of, or non-compliance with, any such
certificate, authorization or permit which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, could result in
a Material Adverse Change.
(u) TITLE TO PROPERTIES. The Company and each of its subsidiaries
has good and marketable title to all the properties and assets reflected as
owned in the financial statements referred to in Section 1(m) above (or
elsewhere in the Offering Memorandum), in each case free and clear of any
security interests, mortgages, liens, encumbrances, equities, claims and
other defects, except such as do not materially and adversely affect the
value of such property and do not materially interfere with the use made or
proposed to be made of such property by the Company or such subsidiary.
The real property, improvements, equipment and personal property held under
lease by the Company or any subsidiary are held under valid and enforceable
leases, with such exceptions as are not material and do not materially
interfere with the use made or proposed to be made of such real property,
improvements, equipment or personal property by the Company or such
subsidiary.
(v) TAX LAW COMPLIANCE. The Company and its subsidiaries have filed
all necessary federal, state and foreign income and franchise tax returns
(or
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have properly requested extensions thereof) and have paid all taxes
required to be paid by any of them and, if due and payable, any related or
similar assessment, fine or penalty levied against any of them except as
may be being contested in good faith and by appropriate proceedings. The
Company has made adequate charges, accruals and reserves in the applicable
financial statements referred to in Section 1(m) above in respect of all
federal, state and foreign income and franchise taxes for all periods as to
which the tax liability of the Company or any of its subsidiaries has not
been finally determined.
(w) COMPANY NOT AN "INVESTMENT COMPANY". The Company has been
advised of the rules and requirements under the Investment Company Act
of 1940, as amended (the "Investment Company Act"). The Company is not,
and after receipt of payment for the Securities will not be, an "investment
company" within the meaning of Investment Company Act and will conduct its
business in a manner so that it will not become subject to the Investment
Company Act.
(x) INSURANCE. Each of the Company and its subsidiaries are insured
by recognized, financially sound institutions with policies in such amounts
and with such deductibles and covering such risks as are generally deemed
adequate and customary for their businesses including, but not limited to,
policies covering real and personal property owned or leased by the Company
and its subsidiaries against theft, damage, destruction, and acts of
vandalism. The Company has no reason to believe that it or any subsidiary
will not be able (i) to renew its existing insurance coverage as and when
such policies expire or (ii) to obtain comparable coverage from similar
institutions as may be necessary or appropriate to conduct its business as
now conducted and at a cost that would not result in a Material Adverse
Change. Neither of the Company nor any subsidiary has been denied any
insurance coverage which it has sought or for which it has applied.
(y) NO PRICE STABILIZATION OR MANIPULATION. The Company has not
taken and will not take, directly or indirectly, any action designed to or
that might be reasonably expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities or the Common Stock issuable upon
conversion of the Securities.
(z) NO UNLAWFUL CONTRIBUTIONS OR OTHER PAYMENTS. Neither the Company
nor any of its subsidiaries nor, to the best of the Company's knowledge,
any employee or agent of the Company or any subsidiary, has made any
contribution or other payment to any official of, or candidate for, any
federal, state or foreign office in violation of any law or of the
character necessary to be disclosed in the Offering Memorandum in order to
make the statements therein not misleading.
(aa) COMPANY'S ACCOUNTING SYSTEM. The Company maintains a system of
accounting controls sufficient to provide reasonable assurances that
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(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles as applied in the United States and to
maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with respect
to any differences.
(bb) COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as would not,
individually or in the aggregate, result in a Material Adverse Change (i)
neither the Company nor any of its subsidiaries is in violation of any
federal, state, local or foreign law or regulation relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including without limitation, laws and
regulations relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum and petroleum products (collectively,
"Materials of Environmental Concern"), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environment Concern (collectively,
"Environmental Laws"), which violation includes, but is not limited to,
noncompliance with any permits or other governmental authorizations
required for the operation of the business of the Company or its
subsidiaries under applicable Environmental Laws, or noncompliance with the
terms and conditions thereof, nor has the Company or any of its
subsidiaries received any written communication, whether from a
governmental authority, citizens group, employee or otherwise, that alleges
that the Company or any of its subsidiaries is in violation of any
Environmental Law; (ii) there is no claim, action or cause of action filed
with a court or governmental authority, no investigation with respect to
which the Company has received written notice, and no written notice by any
person or entity alleging potential liability for investigatory costs,
cleanup costs, governmental responses costs, natural resources damages,
property damages, personal injuries, attorneys' fees or penalties arising
out of, based on or resulting from the presence, or release into the
environment, of any Material of Environmental Concern at any location
owned, leased or operated by the Company or any of its subsidiaries, now or
in the past (collectively, "Environmental Claims"), pending or, to the best
of the Company's knowledge, threatened against the Company or any of its
subsidiaries or any person or entity whose liability for any Environmental
Claim the Company or any of its subsidiaries has retained or assumed either
contractually or by operation of law; and (iii) to the best of the
Company's knowledge, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge, presence or disposal of any
Material of Environmental Concern, that reasonably could result in a
violation of any Environmental Law or form the basis of a potential
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Environmental Claim against the Company or any of its subsidiaries or
against any person or entity whose liability for any Environmental Claim
the Company or any of its subsidiaries has retained or assumed either
contractually or by operation of law.
(cc) PERIODIC REVIEW OF COSTS OF ENVIRONMENTAL COMPLIANCE. In the
ordinary course of its business, the Company conducts a periodic review of
the effect of Environmental Laws on the business, operations and properties
of the Company and its subsidiaries, in the course of which it identifies
and evaluates associated costs and liabilities (including, without
limitation, any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws or any permit,
license or approval, any related constraints on operating activities and
any potential liabilities to third parties). On the basis of such review
and the amount of its established reserves, the Company has reasonably
concluded that such associated costs and liabilities would not,
individually or in the aggregate, result in a Material Adverse Change.
(dd) ERISA COMPLIANCE. The Company and its subsidiaries and any
"employee benefit plan" (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or
maintained by the Company, its subsidiaries or their "ERISA Affiliates" (as
defined below) are in compliance in all material respects with ERISA.
"ERISA Affiliate" means, with respect to the Company or a subsidiary, any
member of any group of organizations described in Sections 414(b), (c), (m)
or (o) of the Internal Revenue Code of 1986, as amended, and the
regulations and published interpretations thereunder (the "Code") of which
the Company or such subsidiary is a member. No "reportable event" (as
defined under ERISA) has occurred or is reasonably expected to occur with
respect to any "employee benefit plan" established or maintained by the
Company, its subsidiaries or any of their ERISA Affiliates. No "employee
benefit plan" established or maintained by the Company, its subsidiaries or
any of their ERISA Affiliates, if such "employee benefit plan" were
terminated, would have any "amount of unfunded benefit liabilities" (as
defined under ERISA). Neither the Company, its subsidiaries nor any of
their ERISA Affiliates has incurred or reasonably expects to incur any
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971,
4975 or 4980B of the Code. Each "employee benefit plan" established or
maintained by the Company, its subsidiaries or any of their ERISA
Affiliates that is intended to be qualified under Section 401(a) of the
Code is so qualified and nothing has occurred, whether by action or failure
to act, which would cause the loss of such qualification.
(ee) SOLVENCY. The Company is, and immediately after the Closing Date
will be, Solvent. As used herein, the term "Solvent" means, with respect
to the Company on a particular date, that on such date (i) the fair market
value of the
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assets of the Company is greater than the total amount of liabilities
(including contingent liabilities) of the Company, (ii) the present fair
salable value of the assets of the Company is greater than the amount that
will be required to pay the probable liabilities of the Company on its
debts as they become absolute and matured, (iii) the Company is able to
realize upon its assets and pay its debts and other liabilities, including
contingent obligations, as they mature and (iv) the Company does not have
unreasonably small capital.
(ff) NO DEFAULT IN SENIOR INDEBTEDNESS. No event of default exists
under any contract, indenture, mortgage, loan agreement, note, lease or
other agreement or instrument constituting Senior Indebtedness (as defined
in the Indenture).
(gg) RELATED PARTY TRANSACTIONS. There are no business relationships
or related-party transactions involving the Company or any subsidiary or
any other person that would be required to be described in the Offering
Memorandum were it to be filed as a part of a Registration Statement on
Form S-1 under the Securities Act, which have not been described as would
have been so required.
(hh) AUTHORIZATION OF COMMON STOCK. Upon issuance and delivery of the
Securities in accordance with this Agreement and the Indenture, the
Securities will be convertible at the option of the holders thereof for
shares of Common Stock in accordance with the terms of the Securities and
the Indenture. The shares of Common Stock issuable upon conversion of the
Securities have been duly authorized by all necessary corporate action and
such shares, when issued upon such conversion, (i) will be validly issued,
fully paid and nonassessable, (ii) will have been issued in compliance with
federal and state securities laws and (iii) will not have been issued in
violation of any preemptive rights, rights of first refusal or other
similar rights to subscribe for or purchase securities of the Company.
(ii) COMPLIANCE WITH REGULATION S REQUIREMENTS. The Company and its
affiliates and all persons acting on their behalf (other than the Initial
Purchasers, as to whom the Company makes no representation) have complied
with and will comply with the offering restrictions requirements of
Regulation S in connection with the offering of the Securities outside the
United States and, in connection therewith, the Offering Memorandum will
contain the disclosure required by Rule 902(h).
(jj) REPORTING ISSUER. The Company is a "reporting issuer", as
defined in Rule 902 under the Securities Act.
Any certificate signed by an officer of the Company and delivered to
the Initial Purchasers or to counsel for the Initial Purchasers shall be
deemed to be a representation and warranty by the Company to each Initial
Purchaser as to the matters set forth therein.
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SECTION 2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES
(a) THE FIRM SECURITIES. The Company agrees to issue and sell to the
several Initial Purchasers, severally and not jointly, all of the Firm
Securities upon the terms herein set forth. On the basis of the
representations, warranties and agreements herein contained, and upon the
terms but subject to the conditions herein set forth, the Initial
Purchasers agree, severally and not jointly, to purchase from the Company
the aggregate principal amount of Firm Securities set forth opposite their
names on SCHEDULE A, at a discounted purchase price of 97% (which amount
equals a Price to Investors of 100% less the Initial Purchasers' Discount
of 3%) of the principal amount thereof payable on the Closing Date.
(b) THE FIRST CLOSING DATE. Delivery of certificates for the Firm
Securities in definitive form to be purchased by the Initial Purchasers and
payment therefor shall be made at the offices of NationsBanc Montgomery
Securities LLC, 9 West 57th Street, New York, New York (or such other
place as may be agreed to by the Company and the Initial Purchasers) at
9:00 a.m. New York time, on March 18, 1998, or such other time and date not
later than 1:30 p.m., New York time, on March 28, 1998 as the Initial
Purchasers shall designate by notice to the Company (the time and date of
such closing are called the "First Closing Date"). Delivery of other
closing documents shall be made at the offices of Latham & Watkins, 505
Montgomery Street, Suite 1900, San Francisco, California on the Closing
Date. The Company hereby acknowledges that circumstances under which the
Initial Purchasers may provide notice to postpone the First Closing Date as
originally scheduled include, but are in no way limited to, any
determination by the Company or the Initial Purchasers to recirculate to
investors copies of an amended or supplemented Offering Memorandum or a
delay as contemplated by the provisions of Section 16.
(c) THE OPTIONAL SECURITIES; THE SECOND CLOSING DATE. In addition,
on the basis of the representations, warranties and agreements herein
contained, and upon the terms but subject to the conditions herein set
forth, the Company hereby grants an option to the Initial Purchasers to
purchase, severally and not jointly, up to an additional $21,000,000
aggregate principal amount of Optional Securities from the Company at the
purchase price to be paid by the Initial Purchasers for the Firm
Securities. The option granted hereunder is for use by the Initial
Purchasers solely to cover any over-allotments in connection with the sale
and distribution of the Firm Securities. The option granted hereunder may
be exercised at any time (but not more than once) upon notice by the
Initial Purchasers to the Company, which notice may be given at any time
within 30 days of the date of this Agreement. Such notice shall set forth
(i) the aggregate principal amount of Optional Securities as to which the
Initial Purchasers are exercising the option, and (ii) the time, date and
place at which such certificates will be delivered (which time and date may
be simultaneous with, but not earlier than, the First Closing Date); and in
such case the term "First Closing Date" shall
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refer to the time and date of delivery of certificates for the Firm
Securities and the Optional Securities). Such time and date of delivery,
if subsequent to the First Closing Date, is called the "Second Closing
Date" and shall be determined by the Initial Purchasers and shall not be
earlier than three nor later than five full business days after delivery of
such notice of exercise. If any Optional Securities are to be purchased,
each Initial Purchaser agrees, severally and not jointly, to purchase the
number of Optional Securities that bears the same proportion to the total
number of Optional Securities to be purchased as the number of Firm
Securities set forth on SCHEDULE A opposite the name of such Initial
Purchaser bears to the total number of Firm Securities. The Initial
Purchasers may cancel the option at any time prior to its expiration by
giving written notice of such cancellation to the Company.
(d) DELIVERY OF THE SECURITIES. The Company shall deliver, or cause
to be delivered, to NationsBanc Montgomery Securities LLC for the accounts
of the several Initial Purchasers certificates for the Firm Securities at
the First Closing Date against the irrevocable release of a wire transfer
of immediately available funds for the amount of the purchase price
therefor. The Company shall also deliver, or cause to be delivered, to
NationsBanc Montgomery Securities LLC for the accounts of the several
Initial Purchasers certificates for the Optional Securities the Initial
Purchasers have agreed to purchase at the First Closing Date or the Second
Closing Date, as the case may be, against the irrevocable release of a wire
transfer of immediately available funds for the amount of the purchase
price therefor. The certificates for the Securities shall be in
denominations of $1,000 or integral multiples thereof and registered in the
name of Cede & Co., as nominee of the Depository, pursuant to the DTC
Agreement and shall be made available for inspection on the business day
preceding the First Closing Date (or the Second Closing Date, as the case
may be) at a location in New York City as the Initial Purchasers may
designate; provided that certificated Securities originally purchased by or
transferred to institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) who are not also
"qualified institutional buyers" (as defined in Rule 144A under the
Securities Act) will be issued in minimum denominations of $250,000. Time
shall be of the essence, and delivery at the time and place specified in
this Agreement is a further condition to the obligations of the Initial
Purchasers.
(e) DELIVERY OF OFFERING MEMORANDUM TO THE INITIAL PURCHASERS. Not
later than 12:00 p.m. on the second business day following the date of this
Agreement, the Company shall delivery or cause to be delivered copies of
the Offering Memorandum in such quantities and at such places as the
Initial Purchasers shall reasonably request.
(f) INITIAL PURCHASERS AS QUALIFIED INSTITUTIONAL BUYERS. Each
Initial Purchaser severally and not jointly represents and warrants to, and
agrees with, the Company that it is a "qualified institutional buyer"
within the meaning of
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Rule 144A (a "Qualified Institutional Buyer") and an "accredited investor"
within the meaning of Rule 501(a) under the Securities Act (an "Accredited
Investor").
SECTION 3. ADDITIONAL COVENANTS. The Company further covenants and
agrees with each Initial Purchaser as follows:
(a) INITIAL PURCHASERS' REVIEW OF PROPOSED AMENDMENTS AND
SUPPLEMENTS. Prior to amending or supplementing the Offering Memorandum
(including any amendment or supplement through incorporation by reference
of any report filed under the Exchange Act), the Company shall furnish to
the Initial Purchasers for review a copy of each such proposed amendment or
supplement, and the Company shall not file any such proposed amendment or
supplement to which the Initial Purchasers reasonably object.
(b) AMENDMENTS AND SUPPLEMENTS TO THE OFFERING MEMORANDUM AND OTHER
SECURITIES ACT MATTERS. If, prior to the completion of the placement of
the Securities by the Initial Purchasers with the Subsequent Purchasers (as
evidenced by a notice in writing from the Initial Purchasers to the
Company), any event shall occur or condition exist as a result of which it
is necessary to amend or supplement the Offering Memorandum in order to
make the statements therein, in the light of the circumstances when the
Offering Memorandum is delivered to a purchaser, not misleading, or if in
the opinion of the Initial Purchasers or counsel for the Initial Purchasers
it is otherwise necessary to amend or supplement the Offering Memorandum to
comply with law, the Company agrees to promptly prepare (subject to
Section 3(a) hereof), file with the Commission (if the amendment or
supplement relates to documents incorporated by reference) and furnish at
its own expense to the Initial Purchasers, amendments or supplements to the
Offering Memorandum so that the statements in the Offering Memorandum as so
amended or supplemented will not, in the light of the circumstances when
the Offering Memorandum is delivered to a purchaser, be misleading or so
that the Offering Memorandum, as amended or supplemented, will comply with
law.
Following the effectiveness of an applicable shelf registration
statement and for so long as the Securities are outstanding if, in the
reasonable judgment of the Initial Purchasers, the Initial Purchasers or
any of their affiliates (as such term is defined in the rules and
regulations under the Securities Act) are required to deliver a prospectus
in connection with sales of, or market-making activities with respect to,
such securities, (A) to periodically amend the applicable registration
statement so that the information contained therein complies with the
requirements of Section 10(a) of the Securities Act, (B) to amend the
applicable registration statement or supplement the related prospectus or
the documents incorporated therein when necessary to reflect any material
changes in the information provided therein so that the registration
statement and the prospectus will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the
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circumstances existing as of the date the prospectus is so delivered, not
misleading and (C) to provide the Initial Purchasers with copies of each
amendment or supplement filed and such other documents as the Initial Purchasers
may reasonably request.
The Company hereby expressly acknowledges that the indemnification and
contribution provisions of Sections 8 and 9 hereof are specifically
applicable and relate to each offering memorandum, registration statement,
prospectus, amendment or supplement referred to in this Section 3(b).
(c) COPIES OF THE OFFERING MEMORANDUM. The Company agrees to furnish
the Initial Purchasers, without charge, as many copies of the Offering
Memorandum and any amendments and supplements thereto as they shall have
reasonably requested.
(d) BLUE SKY COMPLIANCE. The Company shall cooperate with the
Initial Purchasers and counsel for the Initial Purchasers to qualify or
register the Securities for sale under (or obtain exemptions from the
application of) the Blue Sky or state securities laws of those
jurisdictions designated by the Initial Purchasers, shall comply with such
laws and shall continue such qualifications, registrations and exemptions
in effect so long as required for the distribution of the Securities. The
Company shall not be required to qualify as a foreign corporation or to
take any action that would subject it to general service of process in any
such jurisdiction where it is not presently qualified or where it would be
subject to taxation as a foreign corporation. The Company will advise the
Initial Purchasers promptly of the suspension of the qualification or
registration of (or any such exemption relating to) the Securities for
offering, sale or trading in any jurisdiction or any initiation or threat
of any proceeding for any such purpose, and in the event of the issuance of
any order suspending such qualification, registration or exemption, the
Company shall use its best efforts to obtain the withdrawal thereof at the
earliest possible moment.
(e) USE OF PROCEEDS. The Company shall apply the net proceeds from
the sale of the Securities sold by it in the manner described under the
caption "Use of Proceeds" in the Offering Memorandum.
(f) THE DEPOSITARY. The Company will cooperate with the Initial
Purchasers and use its best efforts to permit the Securities to be eligible
for clearance and settlement through the facilities of the Depositary.
(g) ADDITIONAL ISSUER INFORMATION. Prior to the completion of the
placement of the Securities by the Initial Purchasers with the Subsequent
Purchasers (as evidenced by a notice in writing from the Initial Purchasers
to the Company), the Company shall file, on a timely basis, with the
Commission and the Nasdaq National Market all reports and documents
required to be filed under Section 13 or 15(d) of the Exchange Act.
Additionally, at any time when the
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Company is not subject to Section 13 or 15(d) of the Exchange Act, for the
benefit of holders and beneficial owners from time to time of Securities,
the Company shall furnish, at its expense, upon request, to holders and
beneficial owners of Securities and prospective purchasers of Securities
information ("Additional Issuer Information") satisfying the requirements
of subsection (d)(4) of Rule 144A.
(h) AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES. During the
period of 90 days following the date of the Offering Memorandum, the
Company will not, without the prior consent of NationsBanc Montgomery
Securities LLC, other than pursuant to outstanding stock options or stock
option plans, issue, offer, sell, grant options to purchase or otherwise
dispose of any of the Company's equity securities or any other securities
convertible into or exchangeable with its Common Stock or other equity
security.
(i) FUTURE REPORTS TO THE INITIAL PURCHASERS. During the period of
five years hereafter the Company will furnish to NationsBanc Montgomery
Securities LLC at 600 Montgomery Street, San Francisco, California 94111,
Attention: David DeRuff, and to First Chicago Capital Markets, Inc., One
First National Plaza, Chicago, Illinois 60670, Attention: Timothy McGann
(i) as soon as practicable after the end of each fiscal year, copies of the
Annual Report of the Company containing the balance sheet of the Company as
of the close of such fiscal year and statements of income, stockholders'
equity and cash flows for the year then ended and the opinion thereon of
the Company's independent public or certified public accountants; (ii) as
soon as practicable after the filing thereof, copies of each proxy
statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q,
Current Report on Form 8-K or other report filed by the Company with the
Commission, the NASD or any securities exchange; and (iii) as soon as
available, copies of any report or communication of the Company mailed
generally to holders of its capital stock or debt securities (including the
holders of the Securities).
(j) SHELF REGISTRATION AGREEMENT. The Company shall comply with all
provisions and obligations of the Shelf Registration Agreement.
(k) NO INTEGRATION. The Company agrees that it will not and will
cause its Affiliates not to make any offer or sale of securities of the
Company of any class if, as a result of the doctrine of "integration"
referred to in Rule 502 under the Securities Act, such offer or sale would
render invalid (for the purpose of (i) the sale of the Securities by the
Company to the Initial Purchasers, (ii) the resale of the Securities by the
Initial Purchasers to Subsequent Purchasers or (iii) the resale of the
Securities by such Subsequent Purchasers to others) the exemption from the
registration requirements of the Securities Act provided by Section 4(2)
thereof or by Rule 144A or by Regulation S thereunder or otherwise.
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(l) RESTRICTION ON REPURCHASES. Until the expiration of two years
after the original issuance of the Securities, the Company will not, and
will cause its Affiliates not to, purchase or agree to purchase or
otherwise acquire any Securities which are "restricted securities" (as such
term is defined under Rule 144(a)(3) under the Securities Act), whether as
beneficial owner or otherwise (except as agent acting as a securities
broker on behalf of and for the account of customers in the ordinary course
of business in unsolicited broker's transactions) unless, immediately upon
any such purchase, the Company or any Affiliate shall submit such
Securities to the Trustee for cancellation.
(m) LEGENDED SECURITIES. Each certificate for a Note will bear the
legend contained in "Transfer Restrictions" in the Offering Memorandum for
the time period and upon the other terms stated in the Offering Memorandum.
(n) PORTAL. The Company will use its best efforts to cause such
Notes to be eligible for the NASD PORTAL market (the "PORTAL market").
(o) FORM D. The Company will file with the Commission, not later
than 15 days after the Closing Date, five copies of a notice on Form D
under the Securities Act (one of which will be manually signed by a person
duly authorized by the Company); will otherwise comply with the
requirements of Rule 503 under the Securities Act; and will furnish
promptly to the Initial Purchasers evidence of each such required timely
filing (including a copy thereof).
(p) DUE DILIGENCE. In connection with the original distribution of
the Securities, the Company agrees that, prior to any offer or resale of
the Securities by the Initial Purchasers, the Initial Purchasers and
counsel for the Initial Purchasers shall have the right to make reasonable
inquiries into the business of the Company and its subsidiaries. The
Company also agrees to provide answers to each prospective Subsequent
Purchaser of Securities who so requests concerning the Company and its
subsidiaries (to the extent that such information is available or can be
acquired and made available to prospective Subsequent Purchasers without
unreasonable effort or expense and to the extent the provision thereof is
not prohibited by applicable law) and the terms and conditions of the
offering of the Securities, as provided in the Offering Memorandum.
(q) LOCK-UP AGREEMENT FROM CERTAIN STOCKHOLDERS OF THE COMPANY. On
the date hereof, the Company shall have furnished to the Initial Purchasers
an agreement in the form of EXHIBIT C hereto from each of the Company's
officers and directors who beneficially own an aggregate of approximately
1,210,826 shares of Common Stock or options to purchase 1,476,915 shares of
Common Stock of the Company's Common Stock, and each such agreement shall
be in full force and effect on each of the Closing Dates.
NationsBanc Montgomery Securities LLC, on behalf of the several
Initial Purchasers, may, in its sole discretion, waive in writing the
performance by the
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Company of any one or more of the foregoing covenants or extend the time
for their performance.
SECTION 4. PAYMENT OF EXPENSES. The Company agrees to pay all
costs, fees and expenses incurred in connection with the performance of its
obligations hereunder and in connection with the transactions contemplated
hereby, including without limitation (i) all expenses incident to the
issuance and delivery of the Securities and the Common Stock issuable upon
conversion of the Securities (including all printing and engraving costs),
(ii) all necessary issue, transfer and other stamp taxes in connection with
the issuance and sale of the Securities to the Initial Purchasers,
(iii) all fees and expenses of the Company's counsel, independent public
accountants and other advisors, (iv) all costs and expenses incurred in
connection with the preparation, printing, filing, shipping and
distribution of each preliminary Offering Memorandum and the Offering
Memorandum (including financial statements and exhibits), and all
amendments and supplements thereto, this Agreement, the Shelf Registration
Agreement, the Indenture, the DTC Agreement, the Securities and the Common
Stock issuable upon conversion of the Securities, (v) all filing fees,
attorneys' fees and expenses incurred by the Company or the Initial
Purchasers in connection with qualifying or registering (or obtaining
exemptions from the qualification or registration of) all or any part of
the Securities and the Common Stock issuable upon conversion of the
Securities for offer and sale under the Blue Sky laws and, if requested by
the Initial Purchasers, preparing and printing a "Blue Sky Survey" or
memorandum, and any supplements thereto, advising the Initial Purchasers of
such qualifications, registrations and exemptions, (vi) the fees and
expenses of the Trustee, including the fees and disbursements of counsel
for the Trustee in connection with the Indenture and the Securities,
(vii) any fees payable in connection with the rating of the Securities with
the ratings agencies and the listing of the Securities with the PORTAL
market, (viii) any filing fees incident to, and any reasonable fees and
disbursements of counsel to the Initial Purchasers in connection with the
review by the NASD, if any, of the terms of the sale of the Securities or
the Common Stock issuable upon conversion of the Securities, (ix) all fees
and expenses (including reasonable fees and expenses of counsel) of the
Company in connection with approval of the Securities by DTC for
"book-entry" transfer, (x) the fees and expenses of any transfer agent or
registrar for the Common Stock, (xi) the fees and expenses incurred in
connection with the listing of the Common Stock issuable upon conversion of
the Securities on the Nasdaq National Market, and (xii) the performance by
the Company of its other obligations under this Agreement. Except as
provided in this Section 4, Section 6, Section 8 and Section 9 hereof, the
Initial Purchasers shall pay their own expenses, including the fees and
disbursements of their counsel.
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE INITIAL
PURCHASERS. The obligations of the several Initial Purchasers to purchase
and pay for the Securities as provided herein on the Closing Date shall be
subject to the accuracy of the representations and warranties on the part
of the Company set forth in Section 1 hereof as of the date hereof and as
of the Closing Date as though then made and to the timely performance by
the Company of its covenants and other obligations hereunder, and to
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each of the following additional conditions:
(a) ACCOUNTANTS' COMFORT LETTER. On the date hereof, the Initial
Purchasers shall have received from Arthur Andersen LLP, independent public
accountants for the Company, a letter dated the date hereof addressed to
the Initial Purchasers, in form and substance satisfactory to the Initial
Purchasers, containing statements and information of the type ordinarily
included in accountant's "comfort letters" to Initial Purchasers, delivered
according to Statement of Auditing Standards Nos. 72 and 76 (or any
successor bulletins), with respect to the audited and unaudited financial
statements and certain financial information contained in the Registration
Statement and the Offering Memorandum.
(b) NO MATERIAL ADVERSE CHANGE. For the period from and after the
date of this Agreement and prior to the Closing Date, in the judgment of
the Initial Purchasers there shall not have occurred any Material Adverse
Change.
(c) OPINION OF COUNSEL FOR THE COMPANY. On the Closing Date the
Initial Purchasers shall have received the favorable opinion of Faegre &
Benson LLP, counsel for the Company, dated as of such Closing Date, the
form of which is attached as EXHIBIT A.
(d) OPINION OF SPECIAL NEW YORK COUNSEL FOR THE COMPANY. On the
Closing Date the Initial Purchasers shall have received the favorable
opinion of Fried, Frank, Harris, Shriver & Jacobson, special New York
counsel for the Company, dated as of such Closing Date, the form of which
is attached as EXHIBIT B.
(e) OPINION OF COUNSEL FOR THE INITIAL PURCHASERS. On the Closing
Date the Initial Purchasers shall have received the favorable opinion of
Latham & Watkins, counsel for the Initial Purchasers, dated as of such
Closing Date, with respect to such matters as may be reasonably requested
by the Initial Purchasers.
(f) OFFICERS' CERTIFICATE. On the Closing Date the Initial
Purchasers shall have received a written certificate executed by the Chief
Executive Officer of the Company and the Chief Financial Officer of the
Company, dated as of the Closing Date, to the effect that:
(i) for the period from and after the date of this Agreement and
prior to the Closing Date there has not occurred any Material Adverse
Change;
(ii) the representations, warranties and covenants of the Company
set forth in Section 1 of this Agreement are true and correct with the same
force and effect as though expressly made on and as of the Closing Date;
and
(iii) the Company has complied with all the agreements and
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satisfied all the conditions on its part to be performed or satisfied at or
prior to the Closing Date.
(g) BRING-DOWN COMFORT LETTER. On the Closing Date the Initial
Purchasers shall have received from Arthur Andersen LLP, independent public
accountants for the Company, a letter dated such date, in form and
substance satisfactory to the Initial Purchasers, to the effect that they
reaffirm the statements made in the letter furnished by them pursuant to
subsection (a) of this Section 5, except that the specified date referred
to therein for the carrying out of procedures shall be no more than three
business days prior to the Closing Date.
(h) PORTAL LISTING. At the Closing Date the Notes shall have been
designated for trading on the PORTAL market.
(i) SHELF REGISTRATION AGREEMENT. The Company shall have entered
into the Shelf Registration Agreement and the Initial Purchasers shall have
received executed counterparts thereof.
(j) AMENDMENT OF OLD CREDIT FACILITY. The Company shall have
furnished to the Initial Purchasers a copy of a signed amendment providing
that the Company's Old Credit Facility (as defined in the Offering
Memorandum) has been amended such that as of the Closing Date, and after
giving effect to the issuance of $161,000,000 of Notes contemplated by this
Agreement, and the existence of the indebtedness of the Company outstanding
as of the Closing Date and as of the end of the Company's 1998 second
fiscal quarter, the Company is not and will not be at such date, in default
thereunder.
(k) ADDITIONAL DOCUMENTS. On or before the Closing Date, the Initial
Purchasers and counsel for the Initial Purchasers shall have received such
information, documents and opinions as they may reasonably require for the
purposes of enabling them to pass upon the issuance and sale of the
Securities as contemplated herein, or in order to evidence the accuracy of
any of the representations and warranties, or the satisfaction of any of
the conditions or agreements, herein contained.
If any condition specified in this Section 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the Initial
Purchasers by notice to the Company at any time on or prior to the Closing Date,
which termination shall be without liability on the part of any party to any
other party, except that Section 4, Section 6, Section 8 and Section 9 shall at
all times be effective and shall survive such termination.
SECTION 6. REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES. If this
Agreement is terminated by the Initial Purchasers pursuant to Section 5 or
Section 10, or if the sale to the Initial Purchasers of the Securities on the
Closing Date is not consummated because of any refusal, inability or failure on
the part of the Company to perform any agreement herein or to comply with any
provision hereof, the Company
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agrees to reimburse the Initial Purchasers (or such Initial Purchasers as have
terminated this Agreement with respect to themselves), severally, upon demand
for all out-of-pocket expenses that shall have been reasonably incurred by the
Initial Purchasers in connection with the proposed purchase and the offering and
sale of the Securities, including but not limited to fees and disbursements of
counsel, printing expenses, travel expenses, postage, facsimile and telephone
charges.
SECTION 7. OFFER, SALE AND RESALE PROCEDURES. Each of the Initial
Purchasers and the Company hereby establish and agree to observe the following
procedures in connection with the offer and sale of the Securities:
(i) OFFERS AND SALES ONLY TO INSTITUTIONAL ACCREDITED INVESTORS OR
QUALIFIED INSTITUTIONAL BUYERS. Offers and sales of the Securities will be
made only by the Initial Purchasers or Affiliates thereof qualified to do
so in the jurisdictions in which such offers or sales are made. Each such
offer or sale shall only be made (A) to persons whom the offeror or seller
reasonably believes to be qualified institutional buyers (as defined in
Rule 144A under the Securities Act), (B) to a limited number of other
institutional accredited investors (as such term is defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D) that the offeror or seller
reasonably believes to be and, with respect to sales and deliveries, that
are Accredited Investors ("Institutional Accredited Investors"), or (C)
non-U.S. persons outside the United States to whom the offeror or seller
reasonably believes offers and sales of the Securities may be made in
reliance upon Regulation S under the Securities Act, upon the terms and
conditions set forth in ANNEX I hereto, which ANNEX I is hereby expressly
made a part hereof.
(ii) NO GENERAL SOLICITATION. The Securities will be offered by
approaching prospective Subsequent Purchasers on an individual basis. No
general solicitation or general advertising (within the meaning of
Rule 502(c) under the Securities Act) will be used in the United States in
connection with the offering of the Securities.
(iii) PURCHASES BY NON-BANK FIDUCIARIES. In the case of a non-bank
Subsequent Purchaser of a Note acting as a fiduciary for one or more third
parties, in connection with an offer and sale to such purchaser pursuant to
clause (i) above, each third party shall, in the judgment of the applicable
Initial Purchaser, be an Institutional Accredited Investor or a Qualified
Institutional Buyer or a non-U.S. person outside the United States.
(iv) RESTRICTIONS ON TRANSFER. Upon original issuance by the Company,
and until such time as the same is no longer required under the applicable
requirements of the Securities Act, the Securities (and all securities
issued in exchange therefor or in substitution thereof) shall bear the
following legend:
"THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE
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"SECURITIES ACT"), OR ANY OTHER STATE SECURITIES LAWS, AND, ACCORDINGLY,
NEITHER THIS SECURITY, THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION
OF THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM OR NOT SUBJECT TO REGISTRATION.
THE HOLDER OF THIS SECURITY, BY ITS ACQUISITION HEREOF, AGREES THAT IT
WILL NOT, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE ORIGINAL ISSUE
DATE HEREOF, RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE
COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO HUTCHINSON
TECHNOLOGY INCORPORATED OR A SUBSIDIARY THEREOF, (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE
EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE, (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME
OF SUCH TRANSFER); AND AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE (C),
(D) OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE
COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE
REMOVED UPON ANY TRANSFER OF THE NOTE EVIDENCED HEREBY AFTER THE EXPIRATION
OF TWO YEARS FROM THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT."
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Following the sale of the Securities by the Initial Purchasers to
Subsequent Purchasers pursuant to the terms hereof, the Initial Purchasers
shall not be liable or responsible to the Company for any losses, damages
or liabilities suffered or incurred by the Company, including any losses,
damages or liabilities under the Securities Act, arising from or relating
to any resale or transfer of any Security.
(v) DELIVERY OF OFFERING MEMORANDUM. Each Initial Purchaser
will deliver to each purchaser of the Securities from such Initial
Purchaser, in connection with its original distribution of the Securities,
a copy of the Offering Memorandum, as amended and supplemented at the date
of such delivery.
SECTION 8. INDEMNIFICATION.
(a) INDEMNIFICATION OF THE INITIAL PURCHASERS. The Company agrees to
indemnify and hold harmless each Initial Purchaser, its officers and
employees, and each person, if any, who controls any Initial Purchaser
within the meaning of the Securities Act and the Exchange Act against any
loss, claim, damage, liability or expense, as incurred, to which such
Initial Purchaser or such controlling person may become subject, under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company), insofar as such loss, claim, damage, liability or expense (or
actions in respect thereof as contemplated below) arises out of or is based
(i) upon any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Offering Memorandum or the Offering
Memorandum (or any amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; or (ii) in whole or in part upon any inaccuracy
in the representations and warranties of the Company contained herein; or
(iii) in whole or in part upon any failure of the Company to perform its
obligations hereunder or under law; or (iv) any act or failure to act or
any alleged act or failure to act by any Initial Purchaser in connection
with, or relating in any manner to, the offering contemplated hereby, and
which is included as part of or referred to in any loss, claim, damage,
liability or action arising out of or based upon any matter covered by
clause (i) above, provided that the Company shall not be liable under this
clause (iv) to the extent that a court of competent jurisdiction shall have
determined by a final judgment that such loss, claim, damage, liability or
action resulted directly from any such acts or failures to act undertaken
or omitted to be taken by such Initial Purchaser through its gross
negligence or willful misconduct; and to reimburse each Initial Purchaser
and each such controlling person for any and all expenses (including the
fees and disbursements of counsel chosen by NationsBanc Montgomery
Securities LLC) as such expenses are reasonably incurred by such Initial
Purchaser or such controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or
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action; PROVIDED, HOWEVER, that the foregoing indemnity agreement shall not
apply to any loss, claim, damage, liability or expense to the extent, but
only to the extent, arising out of or based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with written information furnished to the Company by
the Initial Purchasers expressly for use in any Preliminary Offering
Memorandum or the Offering Memorandum (or any amendment or supplement
thereto); and PROVIDED, FURTHER, that with respect to any Preliminary
Offering Memorandum, the foregoing indemnity agreement shall not inure to
the benefit of any Initial Purchaser from whom the person asserting any
loss, claim, damage, liability or expense purchased Securities, or any
person controlling such Initial Purchaser, if copies of the Offering
Memorandum were timely delivered to the Initial Purchaser pursuant to
Section 2 and a copy of the Offering Memorandum (as then amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Initial
Purchaser to such person, if required by law so to have been delivered, at
or prior to the written confirmation of the sale of the Securities to such
person, and if the Offering Memorandum (as so amended or supplemented)
would have cured the defect giving rise to such loss, claim, damage,
liability or expense. The indemnity agreement set forth in this
Section 8(a) shall be in addition to any liabilities that the Company may
otherwise have.
(b) INDEMNIFICATION OF THE COMPANY, ITS DIRECTORS AND OFFICERS. Each
Initial Purchaser agrees, severally and not jointly, to indemnify and hold
harmless the Company and each of its directors and each person, if any, who
controls the Company within the meaning of the Securities Act or the
Exchange Act, against any loss, claim, damage, liability or expense, as
incurred, to which the Company or any such director, or controlling person
may become subject, under the Securities Act, the Exchange Act, or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected
with the written consent of such Initial Purchaser), insofar as such loss,
claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or alleged
untrue statement of a material fact contained in any Preliminary Offering
Memorandum or the Offering Memorandum (or any amendment or supplement
thereto), or arises out of or is based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to
the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in any
Preliminary Offering Memorandum or the Offering Memorandum (or any
amendment or supplement thereto), in reliance upon and in conformity with
written information furnished to the Company by the Initial Purchasers
expressly for use therein; and to reimburse the Company, or any such
director or controlling person for any legal and other expenses reasonably
incurred by the Company, or any such director or controlling person in
connection
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with investigating, defending, settling, compromising or paying any such
loss, claim, damage, liability, expense or action. The Company hereby
acknowledges that the only information that the Initial Purchasers have
furnished to the Company expressly for use in any Preliminary Offering
Memoranum or the Offering Memorandum (or any amendment or supplement
thereto) are the statements set forth (A) as the last paragraph on the
outside front cover of the Offering Memorandum concerning delivery of the
Notes, (B) as the last paragraph on the inside front cover page of the
Offering Memorandum concerning stabilization by the Initial Purchasers and
(C) in the fifth and eighth paragraphs under the caption "Plan of
Distribution" in the Offering Memorandum; and the Initial Purchasers
confirm that such statements are correct. The indemnity agreement set
forth in this Section 8(b) shall be in addition to any liabilities that
each Initial Purchaser may otherwise have.
(c) NOTIFICATIONS AND OTHER INDEMNIFICATION PROCEDURES. Promptly
after receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement
thereof, but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
for contribution or otherwise than under the indemnity agreement contained
in this Section 8 or to the extent it is not prejudiced as a proximate
result of such failure. In case any such action is brought against any
indemnified party and such indemnified party seeks or intends to seek
indemnity from an indemnifying party, the indemnifying party will be
entitled to participate in and, to the extent that it shall elect, jointly
with all other indemnifying parties similarly notified, by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party; PROVIDED,
HOWEVER, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that a conflict may arise between the positions of the
indemnifying party and the indemnified party in conducting the defense of
any such action or that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall
have the right to select separate counsel to assume such legal defenses and
to otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of such indemnifying party's election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof
unless (i) the indemnified party shall have employed separate counsel in
accordance with the
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proviso to the next preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than
one separate counsel (together with local counsel), approved by the
indemnifying party (NationsBanc Montgomery Securities LLC in the case of
Section 8(b) and Section 9), representing the indemnified parties who are
parties to such action) or (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of
the action, in each of which cases the fees and expenses of counsel shall
be at the expense of the indemnifying party.
(d) SETTLEMENTS. The indemnifying party under this Section 8 shall
not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party against any loss, claim, damage, liability or expense by
reason of such settlement or judgment. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 8(c) hereof, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding
effected without its written consent if (i) such settlement is entered into
more than 30 days after receipt by such indemnifying party of the aforesaid
request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement, compromise or consent to
the entry of judgment in any pending or threatened action, suit or
proceeding in respect of which any indemnified party is or could have been
a party and indemnity was or could have been sought hereunder by such
indemnified party, unless such settlement, compromise or consent includes
an unconditional release of such indemnified party from all liability on
claims that are the subject matter of such action, suit or proceeding.
SECTION 9. CONTRIBUTION. If the indemnification provided for in
Section 8 is for any reason held to be unavailable to or otherwise insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount paid or payable by such indemnified party, as
incurred, as a result of any losses, claims, damages, liabilities or expenses
referred to therein (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 pursuant to
this Agreement or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company, on the one hand, and the Initial Purchasers, on the other
hand, in connection with the statements or omissions or inaccuracies in the
representations and warranties herein which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant
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equitable considerations. The relative benefits received by the Company, on the
one hand, and the Initial Purchasers, on the other hand, in connection with the
offering of the Securities pursuant to this Agreement shall be deemed to be in
the same respective proportions as the total net proceeds from the offering of
the Securities pursuant to this Agreement (before deducting expenses) received
by the Company, and the total discount received by the Initial Purchasers bear
to the aggregate initial offering price of the Securities. 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 any such untrue
or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact or any such inaccurate or alleged inaccurate
representation or warranty 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 amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 8(c), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim. The provisions set forth in Section 8(c) with
respect to notice of commencement of any action shall apply if a claim for
contribution is to be made under this Section 9; PROVIDED, HOWEVER, that no
additional notice shall be required with respect to any action for which notice
has been given under Section 8(c) for purposes of indemnification.
The Company and the Initial Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 9 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 this Section 9.
Notwithstanding the provisions of this Section 9, no Initial Purchaser
shall be required to contribute any amount in excess of the discount received by
such Initial Purchaser in connection with the Securities distributed by it. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The Initial
Purchasers' obligations to contribute pursuant to this Section 9 are several,
and not joint, in proportion to their respective commitments as set forth
opposite their names in SCHEDULE A. For purposes of this Section 9, each
officer and employee of an Initial Purchaser and each person, if any, who
controls an Initial Purchaser within the meaning of the Securities Act and the
Exchange Act shall have the same rights to contribution as such Initial
Purchaser, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company with the meaning of the Securities Act and the Exchange Act shall have
the same rights to contribution as the Company.
SECTION 10. TERMINATION OF THIS AGREEMENT. Prior to the Closing Date,
this
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Agreement maybe terminated by the Initial Purchasers by notice given to the
Company if at any time (i) trading or quotation in any of the Company's
securities shall have been suspended or limited by the Commission or by the
Nasdaq Stock Market, or trading in securities generally on either the Nasdaq
Stock Market or the New York Stock Exchange shall have been suspended or
limited, or minimum or maximum prices shall have been generally established on
any of such stock exchanges by the Commission or the NASD; (ii) a general
banking moratorium shall have been declared by any of federal, New York or
California authorities; (iii) there shall have occurred any outbreak or
escalation of national or international hostilities or any crisis or calamity,
or any change in the United States or international financial markets, or any
substantial change or development involving a prospective substantial change in
United States' or international political, financial or economic conditions, as
in the judgment of the Initial Purchasers is material and adverse and makes it
impracticable to market the Securities in the manner and on the terms described
in the Offering Memorandum or to enforce contracts for the sale of securities;
(iv) in the judgment of the Initial Purchasers there shall have occurred any
Material Adverse Change; or (v) the Company shall have sustained a loss by
strike, fire, flood, earthquake, accident or other calamity of such character as
in the judgment of the Initial Purchasers may interfere materially with the
conduct of the business and operations of the Company regardless of whether or
not such loss shall have been insured. Any termination pursuant to this
Section 10 shall be without liability on the part of (a) the Company to any
Initial Purchaser, except that the Company shall be obligated to reimburse the
expenses of the Initial Purchasers pursuant to Sections 4 and 6 hereof, (b) any
Initial Purchaser to the Company, or (c) of any party hereto to any other party
except that the provisions of Section 8 and Section 9 shall at all times be
effective and shall survive such termination.
SECTION 11. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Initial Purchasers
set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Initial
Purchaser or the Company or any of its or their partners, officers or directors
or any controlling person, as the case may be, and will survive delivery of and
payment for the Securities sold hereunder and any termination of this Agreement.
SECTION 12. NOTICES. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Initial Purchasers:
NationsBanc Montgomery Securities LLC
600 Montgomery Street
San Francisco, California 94111
Facsimile: (415) 249-5558
30
<PAGE>
Attention: Richard A. Smith
with a copy (which shall not constitute notice) to:
NationsBanc Montgomery Securities LLC
600 Montgomery Street
San Francisco, California 94111
Facsimile: (415) 249-5553
Attention: David A. Baylor, Esq.
and a copy (which shall not constitute notice) to:
Latham & Watkins
505 Montgomery Street, Suite 1900
San Francisco, California 94111
Facsimile: (415) 395-8095
Attention: Gregory K. Miller
If to the Company:
Hutchinson Technology Incorporated
40 West Highland Park
Hutchinson, Minnesota 55350
Facsimile: (320) 587-1810
Attention: John A. Ingleman
with a copy (which shall not constitute notice) to:
Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Facsimile: (612) 336-3026
Attention: Peggy Abram
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
SECTION 13. SUCCESSORS. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Initial Purchasers
pursuant to Section 16 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 8 and Section 9, and in
each case their respective successors, and no other person will have any right
or obligation hereunder. The term "successors" shall not include any purchaser
of the Securities as such from any of the Initial Purchasers merely by reason of
such purchase.
31
<PAGE>
SECTION 14. PARTIAL UNENFORCEABILITY. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement
shall not affect the validity or enforceability of any other Section,
paragraph or provision hereof. If any Section, paragraph or provision of
this Agreement is for any reason determined to be invalid or unenforceable,
there shall be deemed to be made such minor changes (and only such minor
changes) as are necessary to make it valid and enforceable.
SECTION 15. (a) GOVERNING LAW PROVISIONS. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.
(b) CONSENT TO JURISDICTION. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions
contemplated hereby ("Related Proceedings") may be instituted in the
federal courts of the United States of America located in the City and
County of San Francisco or the courts of the State of California in each
case located in the City and County of San Francisco (collectively, the
"Specified Courts"), and each party irrevocably submits to the exclusive
jurisdiction (except for proceedings instituted in regard to the
enforcement of a judgment of any such court (a "Related Judgment"), as to
which such jurisdiction is non-exclusive) of such courts in any such suit,
action or proceeding. Service of any process, summons, notice or document
by mail to such party's address set forth above shall be effective service
of process for any suit, action or other proceeding brought in any such
court. The parties irrevocably and unconditionally waive any objection to
the laying of venue of any suit, action or other proceeding in the
Specified Courts and irrevocably and unconditionally waive and agree not to
plead or claim in any such court that any such suit, action or other
proceeding brought in any such court has been brought in an inconvenient
forum. Each party not located in the United States irrevocably appoints CT
Corporation System, which currently maintains a San Francisco office at 49
Stevenson Street, San Francisco, California 94105, United States of
America, as its agent to receive service of process or other legal summons
for purposes of any such suit, action or proceeding that may be instituted
in any state or federal court in the City and County of San Francisco.
(c) WAIVER OF IMMUNITY. With respect to any Related Proceeding, each
party irrevocably waives, to the fullest extent permitted by applicable
law, all immunity (whether on the basis of sovereignty or otherwise) from
jurisdiction, service of process, attachment (both before and after
judgment) and execution to which it might otherwise be entitled in the
Specified Courts, and with respect to any Related Judgment, each party
waives any such immunity in the Specified Courts or any other court of
competent jurisdiction, and will not raise or claim or cause to be pleaded
any such immunity at or in respect of any such Related Proceeding or
Related Judgment, including, without limitation, any immunity pursuant to
the United States Foreign Sovereign Immunities Act of 1976, as amended.
SECTION 16. DEFAULT OF ONE OR MORE OF THE SEVERAL INITIAL
PURCHASERS. If
32
<PAGE>
any one or more of the several Initial Purchasers shall fail or refuse to
purchase Securities that it or they have agreed to purchase hereunder on
the Closing Date, and the aggregate number of Securities which such
defaulting Initial Purchaser or Initial Purchasers agreed but failed or
refused to purchase does not exceed 10% of the aggregate number of the
Securities to be purchased on such date, the other Initial Purchasers shall
be obligated, severally, in the proportions that the number of Securities
set forth opposite their respective names on SCHEDULE A bears to the
aggregate number of Securities set forth opposite the names of all such
non-defaulting Initial Purchasers, or in such other proportions as may be
specified by the Initial Purchasers with the consent of the non-defaulting
Initial Purchasers, to purchase the Securities which such defaulting
Initial Purchaser or Initial Purchasers agreed but failed or refused to
purchase on such date. If any one or more of the Initial Purchasers shall
fail or refuse to purchase Securities and the aggregate number of
Securities with respect to which such default occurs exceeds 10% of the
aggregate number of Securities to be purchased on the Closing Date, and
arrangements satisfactory to the Initial Purchasers and the Company for the
purchase of such Securities are not made within 48 hours after such
default, this Agreement shall terminate without liability of any party to
any other party except that the provisions of Section 4, Section 6,
Section 8 and Section 9 shall at all times be effective and shall survive
such termination. In any such case either the Initial Purchasers or the
Company shall have the right to postpone the Closing Date, as the case may
be, but in no event for longer than seven days in order that the required
changes, if any, to the Offering Memorandum or any other documents or
arrangements may be effected.
As used in this Agreement, the term "Initial Purchaser" shall be
deemed to include any person substituted for a defaulting Initial Purchaser
under this Section 16. Any action taken under this Section 16 shall not
relieve any defaulting Initial Purchaser from liability in respect of any
default of such Initial Purchaser under this Agreement.
SECTION 17. GENERAL PROVISIONS. This Agreement constitutes the
entire agreement of the parties to this Agreement and supersedes all prior
written or oral and all contemporaneous oral agreements, understandings and
negotiations with respect to the subject matter hereof. This Agreement may
be executed in two or more counterparts, each one of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement may not be amended or modified
unless in writing by all of the parties hereto, and no condition herein
(express or implied) may be waived unless waived in writing by each party
whom the condition is meant to benefit. The Table of Contents and the
section headings herein are for the convenience of the parties only and
shall not affect the construction or interpretation of this Agreement.
Each of the parties hereto acknowledges that it is a sophisticated
business person who was adequately represented by counsel during
negotiations regarding the provisions hereof, including, without
limitation, the indemnification provisions of Section 8 and the
contribution provisions of Section 9, and is fully informed regarding said
provisions. Each of the parties hereto further acknowledges that the
provisions of Sections 8 and 9
33
<PAGE>
hereto fairly allocate the risks in light of the ability of the parties to
investigate the Company, its affairs and its business in order to assure
that adequate disclosure has been made in the Registration Statement, any
preliminary Offering Memorandum and the Offering Memorandum (and any
amendments and supplements thereto), as required by the Securities Act and
the Exchange Act.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company the enclosed copies
hereof, whereupon this instrument, along with all counterparts hereof,
shall become a binding agreement in accordance with its terms.
34
<PAGE>
Very truly yours,
HUTCHINSON TECHNOLOGY INCORPORATED
By: /s/ Wayne M. Fortun
-----------------------------------------
Title: CEO
The foregoing Purchase Agreement is hereby confirmed and accepted by
the Initial Purchasers in San Francisco, California as of the date first above
written.
NATIONSBANC MONTGOMERY SECURITIES LLC
FIRST CHICAGO CAPITAL MARKETS, INC.
As the several Initial Purchasers
By NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ D.A. DeRuff
--------------------------------------
Name: David A. DeRuff
Title: Senior Managing Director
35
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
AMOUNT OF SECURITIES TO
INITIAL PURCHASERS BE PURCHASED
<S> <C>
NationsBanc Montgomery Securities LLC $ 126,000,000
First Chicago Capital Markets, Inc. 14,000,000
Total . . . . . . . . . . . . $140,000,000
</TABLE>
<PAGE>
EXHIBIT A
OPINION OF COUNSEL FOR THE COMPANY TO BE DELIVERED PURSUANT
TO SECTION 5(C) OF THE PURCHASE AGREEMENT
References to the Offering Memorandum in this EXHIBIT A include any
supplements thereto at the Closing Date.
(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Minnesota.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the Offering
Memorandum and to enter into and perform its obligations under the Purchase
Agreement, the Shelf Registration Agreement, the Indenture, the Securities and
the DTC Agreement.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except for such jurisdictions where the
failure to so qualify or to be in good standing would not, individually or in
the aggregate, result in a Material Adverse Change.
(iv) Each significant subsidiary (as defined in Rule 405 under the
Securities Act) has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering Memorandum
and, to the best knowledge of such counsel, is duly qualified as a foreign
corporation to transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except for such jurisdictions
where the failure to so qualify or to be in good standing would not,
individually or in the aggregate, result in a Material Adverse Change.
(v) All of the issued and outstanding capital stock of each such
significant subsidiary has been duly authorized and validly issued, is fully
paid and non-assessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance or, to the best knowledge of such counsel, any pending or threatened
claim.
(vi) The authorized, issued and outstanding capital stock of the
Company conform in all material respects to the descriptions thereof set forth
or incorporated by reference in the Offering Memorandum. All of the outstanding
shares of Common Stock have been duly authorized and validly issued, are fully
paid and nonassessable. The description of the Company's stock option, stock
bonus and other stock plans or arrangements, and the options or other rights
granted and exercised thereunder, set forth in the Offering Memorandum
accurately and fairly describes such plans, arrangements, options and rights.
<PAGE>
(vii) No shareholder of the Company or any other person has any
preemptive right, right of first refusal or other similar right to subscribe for
or purchase securities of the Company arising (i) by operation of the charter or
by-laws of the Company or the Minnesota Business Corporation Act or (ii) to the
best knowledge of such counsel, otherwise.
(viii) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(ix) Each of the Shelf Registration Agreement and the DTC Agreement
has been duly authorized, executed and delivered by, and is a valid and binding
agreement of, the Company, enforceable against the Company in accordance with
its terms, except (with respect to the Shelf Registration Agreement) as rights
to indemnification thereunder may be limited by applicable laws and except as
the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights and remedies of creditors or by general equitable principles.
(x) The Indenture has been duly authorized, executed and delivered by
the Company and (assuming the due authorization, execution and delivery thereof
by the Trustee) constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general principles of equity.
(xi) The Securities are in the form contemplated by the Indenture,
have been duly authorized by the Company for issuance and sale pursuant to this
Agreement and the Indenture and, when executed by the Company and authenticated
by the Trustee in the manner provided in the Indenture (assuming the due
authorization, execution and delivery of the Indenture by the Trustee) and
delivered against payment of the purchase price therefor, will constitute valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting enforcement of the rights and remedies of creditors or
by general principles of equity and will be entitled to the benefits of the
Indenture.
(xii) The Securities and the Indenture conform in all material respects
to the descriptions thereof contained in the Offering Memorandum.
(xiii) The documents incorporated by reference in the Offering
Memorandum (other than the financial statements and supporting schedules
therein, as to which no opinion need be rendered), when they were filed with the
Commission, complied as to form in all material respects with the requirements
of the Exchange Act and such counsel has no reason to believe that any such
documents, when they were so filed, contained an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made
when such documents were so filed, not misleading.
<PAGE>
(xiv) The statements in the Offering Memorandum under the captions
"Risk Factors--Increased Leverage; Financial Covenants", "Management's
Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources", "Business--Intellectual Properties"
and "--Legal Proceedings", "Description of Certain Indebtedness and Other
Financing Agreements", "Description of Notes", "Description of Common Stock" and
"Certain United States Federal Income Tax Consequences", insofar as such
statements constitute matters of law, summaries of legal matters, the Company's
charter or by-law provisions, documents or legal proceedings, or legal
conclusions, have been reviewed by such counsel and fairly present and
summarize, in all material respects, the matters referred to therein.
(xv) No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental authority or
agency, is required for the Company's execution, delivery and performance of the
Purchase Agreement, the Shelf Registration Agreement, the DTC Agreement, the
Securities or the Indenture, or consummation of the transactions contemplated
thereby and by the Offering Memorandum, except as required under applicable
state securities or blue sky laws.
(xvi) The execution and delivery of the Purchase Agreement, the
Shelf Registration Agreement, the DTC Agreement, the Securities and the
Indenture by the Company and the performance by the Company of its obligations
thereunder (other than performance by the Company of its obligations under the
indemnification sections of the Purchase Agreement and the Shelf Registration
Agreement, as to which no opinion need be rendered) (i) have been duly
authorized by all necessary corporate action on the part of the Company;
(ii) will not result in any violation of the provisions of the charter or
by-laws of the Company or any subsidiary; (iii) will not constitute a breach of,
or Default or a Debt Repayment Triggering Event under, or result in the creation
or imposition of any lien, charge or encumbrance upon any property or assets of
the Company or any of its subsidiaries pursuant to, (A) the Company's 7.46%
Senior Notes due 2004 in the original principal amount of $30,000,000, (B) the
Company's 7.85% Senior Notes due 2003 in the original aggregate principal amount
of $25,000,000, (C) the Company's 8.07% Senior Note due 2006 in the original
aggregate principal amount of $25,000,000, (D) the Company's 10.31% Senior Notes
due 1998 in the original aggregate principal amount of $10,000,000, (E) the
Company's Promissory Notes due 2006 in the original aggregate principal amount
of $1,000,000, (F) the Company's Master Lease Agreement with General Electric
Capital Corporation, as amended, (G) the Company's variable rate demand note
with the City of Hutchinson and the related letter of credit, dated March 1,
1993, as amended, or (H) to the best knowledge of such counsel, any other
material agreement, instrument, contract or obligation; or (iv) to the best
knowledge of such counsel, will not result in any violation of any law,
administrative regulation or administrative or court decree applicable to the
Company or any subsidiary.
(xvii) The Company is not, and after receipt of payment for the
Securities will not be, an "investment company" within the meaning of Investment
Company Act.
(xviii) To the best knowledge of such counsel, neither the Company nor
any subsidiary is in violation of its charter or by-laws or any law,
administrative regulation or
<PAGE>
administrative or court decree applicable to the Company or any subsidiary or is
in Default in the performance or observance of any obligation, agreement,
covenant or condition contained in any material agreement, instrument, contract
or obligation, except in each such case for such violations or Defaults as would
not, individually or in the aggregate, result in a Material Adverse Change.
(xix) No registration of the Securities under the Securities Act, and
no qualification of an indenture under the Trust Indenture Act with respect
thereto, is required for in connection with the purchase of the Initial
Securities by the Initial Purchasers or the initial resale of the Initial
Securities by the Initial Purchasers to Qualified Institutional Buyers or
Institutional Accredited Investors in the manner contemplated by this Agreement
and the Offering Memorandum other than any registration or qualification that
may be required in connection with the Shelf Registration Agreement. Such
counsel need express no opinion, however, as to when or under what circumstances
any Initial Securities initially sold by the Initial Purchasers may be reoffered
or resold.
(xx) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, and each amendment or supplement thereto, as of its
date (except for the financial statements included or incorporated by reference
therein, as to which no opinion need be expressed), contained all of the
information required under Rule 144A(d)(4) of the Securities Act.
(xxi) Upon issuance and delivery of the Securities in accordance with
the Purchase Agreement and the Indenture, the Securities will be convertible at
the option of the holders thereof for shares of Common Stock in accordance with
the terms of the Securities and the Indenture; the shares of Common Stock
issuable upon conversion of the Securities have been duly authorized and
reserved for issuance upon such conversion by all necessary corporate action;
such shares, when issued upon such conversion, will be validly issued and will
be fully paid and nonassessable and no holder of such Common Stock is or will be
subject to personal liability by reason of being such a holder.
(xxii) To the best knowledge of such counsel, the Company owns 38 issued
U.S. Patents (the "U.S. Patents") and 76 pending U.S. Applications (the "U.S.
Applications"). Such counsel knows of no claims of third parties or lien with
respect to the Company's ownership interest in any of the U.S. Patents or U.S.
Applications.
(xxiii) To the best knowledge of such counsel, the Company owns 8 issued
foreign patents (the "Non-U.S. Patents") and 32 pending foreign patent
applications (the "Non-U.S. Applications"). Such counsel knows of no claims of
third parties or lien with respect to the Company's ownership interest in any of
the Non-U.S. Patents or Non-U.S. Applications.
(xxiv) To such counsel's knowledge, the statements under the Offering
Memorandum captions "Risk Factors--Intellectual Properties," "Business--Research
and Development" and "Business--Intellectual Properties" (collectively, the
"Intellectual Property Portion") in the Offering Memorandum and any amendment or
supplement thereto, insofar as such statements constitute a summary of the
Company's U.S. Patents, Non-U.S. Patents, U.S.
<PAGE>
Applications, Non-U.S. Applications and other intellectual property, fairly and
accurately summarize in all material respects the legal matters, documents and
proceedings relating to such U.S. Patents, Non-U.S. Patents, U.S. Applications,
Non-U.S. Applications and other intellectual property described therein.
(xxv) To such counsel's knowledge, the Company or the Company's
customers own or possess sufficient rights to patents, patent applications,
copyrights, trade secrets and other intellectual property rights necessary to
the conduct of its disk drive suspension business as now or proposed to be
conducted by the Company as described in the Offering Memorandum.
(xxvi) Such counsel knows of no pending or threatened action, suit,
proceeding or claim by governmental authorities or others that the Company is
infringing or otherwise violating any patents or trade secrets.
(xxvii) Such counsel is not aware of any material defects of form in the
preparation or filing of the U.S. Applications and Non-U.S. Applications on
behalf of the Company. The U.S. Applications and Non-U.S. Applications are
being diligently pursued by the Company. Such counsel is not aware of any
pending or threatened actions, suits, proceedings or claims by governmental
authorities or others challenging the validity of the U.S. Patents or Non-U.S.
Patents.
(xxviii) Such counsel is not aware of any infringement on the part of any
third party of the U.S. Patents or Non-U.S. Patents, trade secrets, know-how or
other proprietary rights of the Company.
(xxix) To such counsel's knowledge, there are no contracts or other
documents relating to the Company's intellectual property of a character
required to be filed as an exhibit to the Company's filings with the SEC or
required to be described in the Company's filings with the SEC that are not
filed or described as required.
(xxx) To such counsel's knowledge, the Patent License Agreement and the
Technology Transfer and Development Agreement have been executed and delivered
by the Company and, assuming the due authorization, execution and delivery
thereof by the other party or parties thereto, are valid and binding agreements
of the Company, enforceable in accordance with their terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting the rights and remedies of
creditors or by general equitable principles.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified public accountants for
the Company and with representatives of the Initial Purchasers at which the
contents of the Offering Memorandum, and any supplements or amendments thereto,
and related matters were discussed and, although such counsel is not passing
upon and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Offering Memorandum (other than as
specified above), and any supplements or amendments thereto, on the basis of the
foregoing, nothing has come to their attention which
<PAGE>
would lead them to believe that either the Offering Memorandum, as of its date
or at the Closing Date, contained or contains an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express no
belief as to the financial statements or other financial data derived therefrom,
included or incorporated by reference in the Offering Memorandum or any
amendments or supplements thereto).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the laws of the
State of Minnesota or the federal law of the United States, to the extent they
deem proper and specified in such opinion, upon the opinion (which shall be
dated the Closing Date shall be satisfactory in form and substance to the
Initial Purchasers, shall expressly state that the Initial Purchasers may rely
on such opinion as if it were addressed to them and shall be furnished to the
Initial Purchasers) of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the Initial Purchasers;
PROVIDED, HOWEVER, that such counsel shall further state that they believe that
they and the Initial Purchasers are justified in relying upon such opinion of
other counsel, and (B) as to matters of fact, to the extent they deem proper, on
certificates of responsible officers of the Company and public officials.
<PAGE>
EXHIBIT B
OPINION OF SPECIAL NEW YORK COUNSEL FOR THE COMPANY TO BE
DELIVERED PURSUANT TO SECTION 5(D) OF THE PURCHASE AGREEMENT
References to the Offering Memorandum in this EXHIBIT B include any
supplements thereto at the Closing Date.
(i) Each of the Shelf Registration Agreement and the DTC Agreement is
a valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except (with respect to the Shelf Registration
Agreement) as rights to indemnification thereunder may be limited by applicable
law.
(ii) The Indenture constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms.
(iii) The Securities, when executed by the Company and authenticated by
the Trustee in the manner provided in the Indenture (assuming the due
authorization, execution and delivery of the Indenture by the Trustee) and
delivered against payment of the purchase price therefor, will constitute valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms.
Our opinions are subject to (i) applicable bankruptcy, insolvency,
moratorium, fraudulent conveyance and other similar 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.
<PAGE>
EXHIBIT C
FORM OF LOCK-UP AGREEMENT
March 12, 1998
NationsBanc Montgomery Securities LLC
First Chicago Capital Market, Inc.
c/o NationsBanc Montgomery Securities LLC
600 Montgomery Street
San Francisco, California 94111
RE: HUTCHINSON TECHNOLOGY INCORPORATED
CONVERTIBLE SUBORDINATED NOTES DUE 2005
Ladies and Gentlemen:
The undersigned understands that you, as Initial Purchasers (the "Initial
Purchasers") propose to enter into a Purchase Agreement dated the date hereof
(the "Purchase Agreement") with Hutchinson Technology Incorporated (the
"Company") providing for issuance of up to $161,000,000 aggregate principal
amount of the Company's Convertible Subordinated Notes due 2005 (the "Notes")
and the offering and sale of the Notes, severally, to the Initial Purchasers.
The Notes are convertible into Common Stock of the Company ("Common Stock").
In consideration of the Initial Purchasers' agreement to purchase the
Notes, and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the undersigned agrees that, without the prior written
consent of NationsBanc Montgomery Securities LLC, it will not, for a period of
90 days subsequent to the date of the Purchase Agreement (the "Lock-Up Period"),
(1) offer, pledge, sell, contract to sell (including, without limitation, any
short sale), sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase, establish an
open "put equivalent position" within the meaning of Rule 16a-1(h) under the
Securities Exchange Act of 1934, as amended, 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 owned directly
by the undersigned or with respect to which the undersigned has or acquires
beneficial ownership within the meaning of the rules and regulations of the
Commission (collectively, the "Undersigned's Shares") or (2) enter into any swap
or similar agreement that transfers, in whole or in part, the economic risk of
ownership of the Common Stock, whether any such transaction described in clause
(1) above or this clause (2) is to be settled by delivery of Common Stock or
such other securities, in cash or otherwise or (3) publicly announce the
undersigned's intention to do any of the foregoing.
<PAGE>
Notwithstanding the foregoing, if the undersigned is an individual, he or
she may transfer any securities of the Company either during his or her lifetime
or on death by gift, will or intestacy to his or her immediate family or to a
trust, the beneficiaries of which are exclusively the undersigned and/or a
member or members of his or her immediate family; PROVIDED, HOWEVER, that in
each such case described in this paragraph the transferee agrees in writing to
be bound by the provisions of this agreement. For purposes of this agreement,
"immediate family" shall mean spouse, lineal descendant, father, mother, brother
or sister of the transferor.
The undersigned now has and except as contemplated by the preceding
paragraph, for the duration of the Lock-Up Period will have, good and marketable
title to the Undersigned's Shares.
The undersigned hereby acknowledges that this agreement is valid and
binding notwithstanding any prior agreements relating to this matter and further
agrees and consents to the entry of stop-transfer instructions with the
Company's transfer agent against the transfer of shares of Common Stock held by
the undersigned except in compliance with this agreement. The undersigned also
understands that the Company and the Underwriters will proceed with the Public
Offering in reliance on this agreement.
This agreement is irrevocable and will be binding on the undersigned and
the successors, heirs, person representatives, and assigns of the undersigned.
Very truly yours,
-------------------------------------------------------
SIGNATURE
-------------------------------------------------------
PLEASE PRINT NAME
-------------------------------------------------------
PLEASE PRINT TITLE, IF APPLICABLE
-------------------------------------------------------
ADDITIONAL SIGNATURE(S), IF STOCK JOINTLY HELD
<PAGE>
ANNEX I
RESALE PURSUANT TO REGULATION S OR RULE 144A. Each Initial Purchaser
understands that:
(a) Such Initial Purchaser agrees that it has not offered or sold and
will not offer or sell the Securities in the United States or to, or for the
benefit or account of, a U.S. Person (other than a distributor), in each case,
as defined in Rule 902 under the Securities Act (i) as part of its distribution
at any time and (ii) otherwise until 40 days after the later of the commencement
of the offering of the Securities pursuant hereto and the Closing Date, other
than in accordance with Regulation S of the Securities Act or another exemption
from the registration requirements of the Securities Act. Such Initial
Purchaser agrees that, during such 40-day restricted period, it will not cause
any advertisement with respect to the Securities (including any "tombstone"
advertisement) to be published in any newspaper or periodical or posted in any
public place and will not issue any circular relating to the Securities, except
such advertisements as are permitted by and include the statements required by
Regulation S.
(b) Such Initial Purchaser agrees that, at or prior to confirmation
of a sale of Securities by it to any distributor, dealer or person receiving a
selling concession, fee or other remuneration during the 40-day restricted
period referred to in Rule 903(c)(2) under the Securities Act, it will send to
such distributor, dealer or person receiving a selling concession, fee or other
remuneration a confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and may not
be offered and sold within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of your distribution at any
time or (ii) otherwise until 40 days after the later of the
commencement of the Offering and the Closing Date, except in either
case in accordance with Regulation S under the Securities Act (or Rule
144A or to Accredited Institutions in transactions that are exempt
from the registration requirements of the Securities Act), and in
connection with any subsequent sale by you of the Notes covered hereby
in reliance on Regulation S during the period referred to above to any
distributor, dealer or person receiving a selling concession, fee or
other remuneration, you must deliver a notice to substantially the
foregoing effect. Terms used above have the meanings assigned to them
in Regulation S."
<PAGE>
6% CONVERTIBLE
SUBORDINATED NOTES DUE 2005
SHELF REGISTRATION AGREEMENT
DATED AS OF MARCH 18, 1998
BY AND AMONG
HUTCHINSON TECHNOLOGY INCORPORATED
AND
NATIONSBANC MONTGOMERY SECURITIES LLC
AND
FIRST CHICAGO CAPITAL MARKETS, INC.
<PAGE>
This Shelf Registration Agreement (this "AGREEMENT") is made and
entered into as of March 18, 1998, by and among Hutchinson Technology
Incorporated, a Minnesota corporation (the "COMPANY"), and NationsBanc
Montgomery Securities LLC and First Chicago Capital Markets, Inc. (each an
"INITIAL PURCHASER" and, collectively, the "INITIAL PURCHASERS"), each of whom
has agreed to purchase the Company's 6% Convertible Subordinated Notes due 2005
(the "NOTES") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
March 12, 1998 (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 Section 5(i) of the
Purchase Agreement. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them the Indenture, dated March 18, 1998,
between the Company and U.S. Bank National Association, 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:
AFFILIATE: As defined in Rule 144 of the Securities
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 Securities Act, to
institutional "accredited investors," as
such term is defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities
Act, and
2
<PAGE>
pursuant to Regulation S under the
Securities Act.
FILING DEADLINE: As defined in Section 3(a) hereof.
HOLDERS: As defined in Section 2 hereof.
NOTES: The up to $161,000,000 aggregate
principal amount of 6% Convertible
Subordinated Notes due 2005 being
issued pursuant to the Purchase
Agreement.
OFFERING MEMORANDUM: The Company's Offering Memorandum
dated March 12, 1998 pertaining to
the offer and sale of the Notes.
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
Securities Act.
RECOMMENCEMENT DATE: As defined in Section 5(c) hereof.
REGISTRATION DEFAULT: As defined in Section 4 hereof.
REGULATION S: Regulation S under the Securities
Act.
RULE 144: Rule 144 under the Securities Act.
SECURITIES ACT: The Securities Act of 1933, as
amended.
SHELF REGISTRATION STATEMENT: As defined in Section 3 hereof.
SUSPENSION NOTICE: As defined in Section 5(c) hereof.
TIA: The Trust Indenture Act of 1939 (15
U.S.C. Section 77aaa-77bbbb, as
amended, 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
3
<PAGE>
such Notes or shares of Common Stock,
(a) the date on which such Notes or
shares of Common Stock have been
registered under and 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 salable pursuant to
Rule 144(k) (or, in each case,
similar provisions then in effect)
under the Securities Act and all
legends relating to transfer
restrictions have been removed 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 (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 30 days after the Closing Date (the such 30th
day, "FILING DEADLINE"), the Company shall file with the Commission a shelf
registration statement pursuant to Rule 415 under the Securities 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 90 days after the Closing Date (such 90th day, the
"EFFECTIVENESS DEADLINE").
The Company shall use all commercially reasonable 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 Sections 5(a) and (b) hereof to the extent necessary to ensure that it is
available for sales of Transfer Restricted 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 Securities Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least two years (as extended in the event such Shelf Registration
Statement is not available for use as provided in Section 5(b)(i) or Section
3(b)), or such shorter period as will terminate when there cease to be
outstanding any Transfer Restricted Securities.
(b) DELAY OR SUSPENSION OF REGISTRATION. Notwithstanding the
provisions of Section 3(a), but subject to compliance with Section 4, the
Company may, by delivering written notice to the Holders, prohibit offers and
sales of Transfer Restricted Securities pursuant to the Shelf Registration
Statement at any time (and the Holders hereby agree not to use any Shelf
Registration Statement during such period) if, but only for so long as:
4
<PAGE>
(i) the Company is in possession of material non-public
information relating to the Company and determines, based on the advice of
counsel, that such prohibition is necessary in order to avoid a requirement
to disclose such material non-public information to the public; and
(ii) the Company determines in good faith that public disclosure
of such material non-public information would not be in the best interests
of the Company and its subsidiaries PROVIDED that promptly following the
public disclosure by the Company of such material non-public information,
or the date that the foregoing provisions are no longer applicable, the
suspension of the use of the Shelf Registration Statement shall cease and
the Company shall promptly comply with Section 5(b)(ii) hereof and notify
the Holders that dispositions of Transfer Restricted Securities may be
resumed.
(c) 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 the information specified in Item 507 or 508 of
Regulation S-K, as applicable, of the Securities Act for use in connection with
any Shelf Registration Statement or Prospectus or preliminary Prospectus
included therein. IN ORDER TO FURNISH SUCH INFORMATION, A HOLDER OF TRANSFER
RESTRICTED SECURITIES MUST COMPLETE, AND RETURN TO THE COMPANY, THE FORM OF
SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE (THE "NOTICE AND QUESTIONNAIRE")
IN THE FORM ATTACHED AS APPENDIX B AND APPENDIX B-1 TO THE OFFERING MEMORANDUM
OR OTHERWISE PROVIDE THE COMPANY IN WRITING WITH THE INFORMATION AND
UNDERTAKINGS PROVIDED FOR THEREIN. In this regard, the Company covenants to use
its best efforts to mail to each Holder of Transfer Restricted Securities as
soon as practicable, but in no event later than 20 days prior the filing of the
Shelf Registration Statement, a copy of the Notice and Questionnaire, and
further covenants to diligently seek to obtain responses thereto. 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 (other than for a period
in the aggregate not to exceed 60 days in any 12-month period during which the
Company is complying with the specific provisions of Section 3(b)) 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"), then the Company hereby agrees to pay to each Holder of
Transfer Restricted Securities affected thereby liquidated damages in an amount
equal to $.05 per week per $1,000
5
<PAGE>
aggregate principal amount of Transfer Restricted Securities, or, if applicable,
an equivalent amount per week per share (subject to adjustment as set forth in
the Indenture) of Common Stock representing Transfer Restricted Securities, held
by such Holder for each week or portion thereof that the Registration Default
continues for the first 90-day period immediately following the occurrence of
such Registration Default. The amount of the liquidated damages shall increase
by an additional $.05 per week per $1,000 aggregate principal amount (or, as
noted above, an equivalent amount per week per share) of Transfer Restricted
Securities with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of liquidated damages of $.50
per week per $1,000 aggregate principal amount (or as noted above, an equivalent
amount per week per share) of Transfer Restricted Securities; PROVIDED that the
Company shall in no event be required to pay liquidated damages for more than
one Registration Default at any given time. 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 the 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, 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.
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
semi-annual payment dates that correspond to interest payment dates for the
Notes. All obligations of the Company set forth in the preceding paragraph that
are outstanding with respect to any Transfer Restricted Security at the time
such Notes and/or shares of Common Stock cease to be Transfer Restricted
Securities shall survive until such time as all such obligations with respect to
such Notes and/or shares of Common Stock shall have been satisfied in full.
SECTION 5. REGISTRATION PROCEDURES
(a) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Company shall comply with all the provisions of
Section 5(b) below and shall use all commercially reasonable 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 Securities 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.
(b) GENERAL PROVISIONS. In connection with any Shelf Registration
Statement and any related Prospectus required by this Agreement, the Company
shall:
(i) use all commercially reasonable efforts to keep such Shelf
Registration Statement continuously effective and provide all requisite
financial
6
<PAGE>
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 a material
misstatement or omission or (B) not to be effective and usable for the
resale of Transfer Restricted Securities during the period required by this
Agreement, the Company shall (except as permitted by Section 3(b)) promptly
file 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;
(ii) 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 Securities Act, and to comply
fully with Rules 424, 430A and 462, as applicable, under the Securities Act
in a timely manner; and comply with the provisions of the Securities 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;
(iii) advise the selling 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 Securities 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, (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
all commercially reasonable efforts to obtain the withdrawal or lifting of
such order at the earliest possible time;
(iv) subject to Section 5(b)(i), and except as permitted by
Section 3(b),
7
<PAGE>
if any fact or event contemplated by Section 5(b)(iii)(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;
(v) furnish to the Initial Purchasers, each selling Holder named
in any Shelf Registration Statement or Prospectus and underwriters, 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, which documents (other than any document incorporated or deemed
to be incorporated by reference in such Shelf Registration Statement or any
supplement filed solely to identify additional selling Holders as
contemplated by Section 5(b)(vii) hereof) 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 (other than any
document that would be incorporated or deemed to be incorporated by
reference in such Shelf Registration Statement or any supplement filed
solely to identify additional selling Holders as contemplated by Section
5(b)(vii) hereof) to which the Holders of a majority of the Transfer
Restricted Securities (determined on a fully converted basis), their
counsel, the underwriters or the Initial Purchasers shall reasonably object
within five Business Days after the receipt thereof. Any such Person shall
be deemed to have reasonably objected to such filing if such Registration
Statement, amendment, Prospectus or supplement, as applicable, as proposed
to be filed, contains a material misstatement or omission or fails to
comply with the applicable requirements of the Securities Act;
(vi) make available at reasonable times for inspection by the
selling Holders and underwriters, if any, and any attorney or accountant
retained by such selling Holders, 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 selling 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;
(vii) if requested by any selling Holders, or underwriters, if
any, in connection with such sale, promptly (subject to Section 3(b))
include in any Shelf Registration Statement or Prospectus, pursuant to a
supplement or post-effective amendment if necessary, such information as
such selling 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
8
<PAGE>
Prospectus supplement or post-effective amendment. Without limiting the
generality of the foregoing, upon receipt of a completed Notice and
Questionnaire from a beneficial owner following the effectiveness of the
Shelf Registration Statement, the Company will, as promptly as practicable,
file such amendments to the Shelf Registration Statement or supplements to
the related prospectus as are necessary to permit such Holders to deliver
such prospectus to purchasers of the previously Transfer Restricted
Securities;
(viii) furnish to each selling Holder and each 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, including
all documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(ix) deliver to each selling Holder and each 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 selling 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;
(x) enter into such agreements (including underwriting
agreements in form, scope and substance as are customary in underwritten
offerings) 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 any underwriter, if any, or the Holders of a majority of the
Transfer Restricted Securities being sold (determined on a fully converted
basis) in connection with any sale or resale pursuant to any applicable
Shelf Registration Statement and in such connection, the Company shall:
(A) upon request of the Holders of a majority of the Transfer
Restricted Securities (determined on a fully converted basis) or any
underwriter, if any, furnish (or in the case of paragraphs (2) and (3)
below, use its best efforts to cause to be furnished) to each selling
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 5(b) and 5(f) of the Purchase Agreement and such other
similar matters as the Holders of a majority of the Transfer
Restricted Securities (determined on a fully converted basis) may
reasonably request;
(2) an opinion, dated the date of the effectiveness of the
Shelf Registration Statement, of counsel for the Company covering
matters similar to those set forth in EXHIBIT A to the Purchase
Agreement and such
9
<PAGE>
other matters as the Holders of a majority of the Transfer
Restricted Securities (determined on a fully converted basis) may
reasonably request; and
(3) 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 Sections 5(a) and 5(g) of the
Purchase Agreement; and
(B) deliver such other documents and certificates as may be
reasonably requested by the Holders of a majority of the Transfer
Restricted Securities (determined on a fully converted basis) being
sold and underwriters, if any, to evidence compliance with clause (A)
above and with any customary conditions contained in the any agreement
entered into by the Company pursuant to this clause (x);
(xi) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling 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 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;
(xii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling 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 selling Holders may request at least two Business
Days prior to such sale of Transfer Restricted Securities;
(xiii) (i) 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 (ii) 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.
(xiv) use its best efforts to cause the disposition of the
Transfer
10
<PAGE>
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 (xi) above;
(xv) 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;
(xvi) 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
Securities Act);
(xvii) with respect to an underwritten offering, make appropriate
officers of the Company available to the selling Holders and underwriters,
if any, 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, PROVIDED, that
such officers shall not be required to participate in more than one "road
show" in any six-month period; and
(xviii) 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 commercially reasonable efforts to cause the Trustee to
execute, all documents that may be required to effect such changes and all
other forms and documents required to be filed with the Commission to
enable such Indenture to be so qualified in a timely manner; and
(xix) provide promptly to any Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(c) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 5(b)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 5(b)(iii)(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 has received copies of the supplemented or amended
Prospectus contemplated by Section 5(b)(iv) hereof, or (ii) such Holder is
advised in writing by the Company that the use of the
11
<PAGE>
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, as applicable, 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 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, to
the extent set forth in Section 6(b) below, the Holders of Transfer Restricted
Securities; (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 public accountants of the Company (including the expenses of any
special audit and comfort letters required by or incident to such performance).
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, who shall be Latham &
Watkins unless another firm shall be chosen by the Holders of a majority in
principal amount 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 Securities Act and Section 20 of the
Exchange Act) (each such person being
12
<PAGE>
sometimes referred to herein as an "INDEMNIFIED HOLDER"), from and against any
and all losses, claims, damages, liabilities, judgments, (including without
limitation, any 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.
(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 Securities Act or Section 20 of the Exchange Act) the Company,
to the same extent as the foregoing indemnity from the Company to each of the
Indemnified Holders, but only with reference to information relating to such
Indemnified Holder furnished in writing to the Company by such Indemnified
Holder expressly for use in any Shelf Registration Statement. In no event shall
any Indemnified Holder be liable or responsible for any amount in excess of the
amount by which the total amount received by such Indemnified Holder with
respect to its sale of Transfer Restricted Securities pursuant to a Shelf
Registration Statement exceeds (i) the amount paid by such Indemnified Holder
for such Transfer Restricted Securities and (ii) the amount of any damages that
such Indemnified 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), an Indemnified 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 Indemnified 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
13
<PAGE>
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 shall be reimbursed as
they are incurred. Such firm shall be designated in writing by a majority of
the Indemnified 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 indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i) effected
with its written consent or (ii) effected without its written consent if the
settlement is entered into more than twenty business days after the indemnifying
party shall have received a request from the indemnified party for reimbursement
for the fees and expenses of counsel (in any case where such fees and expenses
are at the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. 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 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 Indemnified Holder, 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 Indemnified Holder, 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 Indemnified Holder, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result
of the losses, claims, damages, liabilities and judgments referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with
14
<PAGE>
investigating or defending any action or claim.
The Company and each Holder and underwriter, if any, 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 and underwriter, if
any, 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
reasonably 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 Shelf Registration Statement
exceeds the sum of (A) the amount paid by such Holder for such Transfer
Restricted Securities PLUS (B) 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 Securities 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 144 AND RULE 144A
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 Securities 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.
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).
15
<PAGE>
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 or waived) granting any registration rights with respect to its
securities to any Person. The rights granted to the Holders hereunder do not in
any 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.
16
<PAGE>
(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, or permit any of its security
holders that have piggyback registration rights, to include any of such
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 their 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: Hutchinson Technology Incorporated
40 West Highland Park
Hutchinson, Minnesota 55350
Telecopier No.: (320) 587-1810
Attention: Wayne M. Fortun
With a copy (which
shall not constitute
notice) to: Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Telecopier No.: (612) 336-3026
Attention: Peggy Steif Abram, 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.
17
<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.
18
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
HUTCHINSON TECHNOLOGY INCORPORATED
By: /s/ John A. Ingleman
-------------------------------
Name: John A. Ingleman
Title: Vice President and
Chief Financial Officer
NATIONSBANC MONTGOMERY SECURITIES LLC
FIRST CHICAGO CAPITAL MARKETS, INC.
By: NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ David DeRuff
------------------------------------
Name: David DeRuff
Title: Senior Managing Director
19
<PAGE>
EXHIBIT 5.1
[Faegre & Benson Letterhead]
April 15, 1998
Hutchinson Technology Incorporated
40 West Highland Park
Hutchinson, Minnesota 55350
Ladies and Gentlemen:
This opinion is furnished to you in connection with the proposed
registration under the Securities Act of 1933, as amended (the "Securities
Act"), by Hutchinson Technology Incorporated, a Minnesota corporation (the
"Company"), of $150,000,000 aggregate principal amount of 6% Convertible
Subordinated Notes due 2005 (the "Notes"), issued under an Indenture dated as of
March 18, 1998 (the "Indenture") between the Company and U.S. Bank National
Association, as trustee (the "Trustee"), and the proposed registration under the
Securities Act of shares of Common Stock, par value $.01 per share, of the
Company (the "Shares") into which the Notes are convertible.
As counsel to the Company, we have examined such corporate records,
certificates and other documents, including the Registration Statement on Form
S-3 to be filed with the Securities and Exchange Commission (the "Registration
Statement"), and have reviewed such matters of law as we have considered
necessary or appropriate for purposes of this opinion. In addition, we have
made such inquiries of officers and representatives of the Company as we have
deemed relevant or necessary as the basis for this opinion.
Based upon the foregoing and subject to the qualifications and assumptions
stated herein, we are of the opinion that:
1. The Indenture has been duly authorized, executed and delivered by the
Company and (assuming the due authorization thereof by the Trustee)
constitutes a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting the rights and remedies of creditors or by general
principles of equity.
2. The Notes are in the form contemplated by the Indenture, have been
duly authorized, issued and delivered by the Company and constitute
valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting enforcement
of the rights and remedies of creditors or by general principles of
equity, and are entitled to the benefits of the Indenture.
<PAGE>
Page 2
3. The Shares have been duly authorized and reserved by the Company.
When the Shares have been issued upon conversion of duly issued Notes,
the Shares will be validly issued, fully paid and nonassessable.
The opinions expressed herein are subject to the following qualifications,
assumptions, expectations and limitations:
(a) In connection with rendering the opinions set forth herein, we have
assumed the genuineness of all signatures (other than those of signatories on
behalf of the Company), the authenticity of all documents submitted to us as
originals, the conformity to the original documents of all documents submitted
to us as copies thereof, and the authenticity of the originals of such latter
documents.
(b) We have not reviewed and do not opine as to (i) local laws, (ii)
banking laws, or (iii) state securities or blue sky laws, rules or regulations.
(c) We express no opinion as to the governing law or the choice of law
provisions of the Indenture or the Notes.
We are members of the Bar of the State of Minnesota and the foregoing
opinion is limited to the laws of the State of Minnesota and the federal laws of
the United States of America. We note that the Notes and Indenture are governed
by, and construed in accordance with the laws of, the State of New York. With
respect to the opinions as to the Notes and Indenture set forth in paragraphs 1
and 2 above, we have assumed with your consent that the laws of the State of
Minnesota are identical to the laws of the State of New York.
Our opinions set forth in this letter are based upon the facts in existence
and laws in effect on the date hereof and we expressly disclaim any obligation
to update our opinions herein, regardless of whether changes in such facts or
laws come to our attention after the delivery hereof.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of our name under the heading "Legal Matters" in the
prospectus constituting a part of the Registration Statement and to the
references to our firm wherever appearing therein.
Very truly yours,
/s/ Faegre & Benson LLP
--------------------------
FAEGRE & BENSON LLP
<PAGE>
EXHIBIT 12.1
HUTCHINSON TECHNOLOGY INCORPORATED
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Fiscal Years Ended(a)
-------------------- -----------------------------------------------------
Dec. 28, Dec. 29, Sept. 28, Sept. 29, Sept. 24, Sept. 25, Sept. 26,
1997 1996 1997 1996 1995 1994 1993
--------- -------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
CALCULATION OF FIXED CHARGES:
Interest expense (b) $ 287 $ 866 $ 3,285 $ 2,142 $ 2,670 $ 1,012 $ 266
Capitalized interest 1,441 455 2,946 1,206 512 1,142 932
Interest component of rentals (c) 1,535 817 4,126 2,476 1,606 1,386 1,241
-------- -------- --------- --------- --------- --------- ---------
Total fixed charges: $ 3,263 $ 2,138 $ 10,357 $ 5,824 $ 4,788 $ 3,540 $ 2,439
-------- -------- --------- --------- --------- --------- ---------
-------- -------- --------- --------- --------- --------- ---------
CALCULATION OF EARNINGS
BEFORE INCOME TAXES AND FIXED
CHARGES:
Income (loss) before income
taxes $(15,506) $13,903 $53,716 $17,253 $27,747 $7,956 $11,110
Interest expense (b) 287 866 3,285 2,142 2,670 1,012 266
Interest component of rentals (c) 1,535 817 4,126 2,476 1,606 1,386 1,241
-------- -------- --------- --------- --------- --------- ---------
Earnings (loss) before income
taxes and fixed charges $(13,684) $ 15,586 $ 61,127 $ 21,871 $ 32,023 $ 10,354 $ 12,617
-------- -------- --------- --------- --------- --------- ---------
-------- -------- --------- --------- --------- --------- ---------
Ratio of earnings to fixed
charges --(d) 7.3x 5.9x 3.8x 6.7x 2.9x 5.2x
-------- -------- --------- --------- --------- --------- ---------
-------- -------- --------- --------- --------- --------- ---------
</TABLE>
- -------------------
(a) The Company operates on a 52 or 53 week fiscal year ending on the last
Sunday in September in each year. Fiscal 1997, 1995, 1994 and 1993
contained 52 weeks and fiscal 1996 contained 53 weeks.
(b) Includes amortization of deferred financing costs.
(c) Includes one-third of rental expense from operating leases.
(d) Earnings were inadequate to cover fixed charges by $17.0 million for the
thirteen weeks ended December 28, 1997.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report included in Hutchinson
Technology Incorporated and Subsidiaries' Form 10-K for the year ended
September 28, 1997 and to all references to our Firm included in this
registration statement.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
April 10, 1998
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM T-1
Statement of Eligibility and Qualification Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
U.S. BANK NATIONAL ASSOCIATION
F.K.A. FIRST BANK NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
United States 41-0417860
(State of Incorporation) (I.R.S. Employer
Identification No.)
U.S. Bank Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
HUTCHINSON TECHNOLOGY INCORPORATED
(Exact name of registrant as specified in its charter)
Minnesota 41-0901840
(State of Incorporation) (I.R.S. Employer
Identification No.)
40 West Highland Park
Hutchinson, MN 55350
(Address of Principal Executive Offices) (Zip Code)
6% CONVERTIBLE SUBORDINATED NOTES DUE 2005
(Title of the Indenture Securities)
<PAGE>
GENERAL
1. GENERAL INFORMATION Furnish the following information as to the Trustee.
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe each
such affiliation.
None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which the
Trustee acts as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this statement
of eligibility and qualification.
1. Copy of Articles of Association.*
2. Copy of Certificate of Authority to Commence Business.*
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).*
4. Copy of existing By-Laws.*
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321(b) of the act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority incorporated by reference to File Number 333-26679.
* Incorporated by reference to File Number 333-30939.
<PAGE>
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligors or affiliates, are based
upon information furnished to the Trustee by the obligors. While the Trustee
has no reason to doubt the accuracy of any such information, it cannot accept
any responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, U.S. Bank National Association, an Association organized and existing
under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested,
all in the City of Saint Paul and State of Minnesota on the 9th day of April,
1998.
U.S. BANK NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
------------------------
Richard H. Prokosch
Assistant Vice President
/s/ Kathe Barrett
- ------------------
Kathe Barrett
Assistant Secretary
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned, U.S. BANK NATIONAL ASSOCIATION hereby consents that reports of
examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Dated: April 9, 1998
U.S. BANK NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
------------------------
Richard H. Prokosch
Assistant Vice President
