<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 1997
REGISTRATION NO. 333-32379
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
SILICON GRAPHICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 3571 94-2789662
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NO.) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
2011 NORTH SHORELINE BOULEVARD
MOUNTAIN VIEW, CALIFORNIA 94043-1389
(415) 960-1980
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
SANDRA M. ESCHER
DIRECTOR, CORPORATE LEGAL SERVICES
SILICON GRAPHICS, INC.
2011 NORTH SHORELINE BOULEVARD
MOUNTAIN VIEW, CALIFORNIA 94043-1389
(415) 960-1980
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------
COPIES TO:
WILLIAM H. HINMAN, JR. JOHN A. FORE
SHEARMAN & STERLING WILSON SONSINI GOODRICH & ROSATI
555 CALIFORNIA STREET PROFESSIONAL CORPORATION
SAN FRANCISCO, CALIFORNIA 94104 650 PAGE MILL ROAD
(415) 616-1100 PALO ALTO, CALIFORNIA 94304-1050
(415) 493-9300
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: [_]
----------------
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 SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
PROSPECTUS
LOGO/(R)/ Silicon Graphics, Inc.
Offer To Exchange Its
5 1/4% Senior Convertible Notes Due 2004
For Its Zero Coupon Convertible Subordinated
Debentures Due 2013
---------------
THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON SEPTEMBER 4, 1997, UNLESS EXTENDED.
---------------
Silicon Graphics, Inc., a Delaware corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal" which, together with the Prospectus, constitute the
"Exchange Offer"), to exchange the Company's 5 1/4% Senior Convertible Notes
due 2004 (the "Senior Notes") for up to all of its outstanding Zero Coupon
Convertible Subordinated Debentures due 2013 (the "Zero Coupon Debentures").
The Senior Notes, unlike the Zero Coupon Debentures, which are subordinated to
Senior Indebtedness (as defined herein) of the Company, will be unsubordinated
senior obligations of the Company and will rank pari passu with all existing
and future unsecured and unsubordinated Senior Indebtedness of the Company.
The Exchange Offer will be effected on the basis of that principal amount of
Senior Notes equal to the accreted value of each $1,000 principal amount at
maturity Zero Coupon Debenture as of the Expiration Date (as defined herein)
for each such Zero Coupon Debenture validly tendered and accepted for exchange
in the Exchange Offer. Senior Notes will not be issued in denominations of
less than $1,000, and the Company will pay cash in lieu of issuing fractional
Senior Notes to holders of validly tendered Zero Coupon Debentures. The
accreted value of each $1,000 principal amount at maturity Zero Coupon
Debenture, to but excluding September 4, 1997, will be $514.904, and the
aggregate accreted value of all outstanding Zero Coupon Debentures will be
$234,281,320.
The Senior Notes will be convertible at any time following the date of
issuance thereof and prior to maturity, unless previously redeemed, into
shares of common stock, par value $0.001 per share, of the Company ("Common
Stock") at a Conversion Price of $36 1/4 per share, subject to adjustment in
certain events. See "Description of Senior Notes--Conversion of Senior Notes."
The reported last sale price of the Common Stock on the New York Stock
Exchange on August 6, 1997 was $27 11/16 per share.
The Senior Notes are not redeemable prior to September 7, 2000. On or after
September 7, 2000 and prior to September 7, 2002, the Senior Notes will not be
redeemable at the option of the Company unless the closing price of the Common
Stock shall have exceeded 140% of the Conversion Price for 20 trading days
within a period of 30 consecutive trading days ending within five trading days
prior to the notice of redemption. Subject to the foregoing, the Senior Notes
will be redeemable on at least 30 days notice at the option of the Company, in
whole or in part, on or after September 7, 2000, at the redemption prices set
forth herein, in each case together with accrued interest. The Senior Notes
may also be redeemed at the option of the holder if there is a Fundamental
Change (as defined herein), at declining prices, subject to adjustment in
certain events as described herein, together with accrued interest. See
"Description of Senior Notes--Redemption of the Senior Notes at the Option of
the Company" and "--Redemption at the Option of the Holder upon a Fundamental
Change."
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will accept for exchange all Zero Coupon Debentures validly tendered
and not withdrawn prior to 12:00 midnight, New York City time, on September 4,
1997, or if extended by the Company, in its sole discretion, the latest date
and time to which extended (the "Expiration Date"). The Exchange Offer will
expire on the Expiration Date. Tenders of Zero Coupon Debentures may be
withdrawn at any time prior to the Expiration Date and, unless accepted for
exchange by the Company, may be withdrawn at any time after 40 business days
after the date of this Prospectus.
(continued on next page)
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------
Morgan Stanley & Co. Incorporated has been retained to act as Dealer Manager
to solicit exchanges of Zero Coupon Debentures for Senior Notes. See "The
Exchange Offer--Dealer Manager." State Street Bank and Trust Company of
California, N.A. has been retained to act as Exchange Agent in connection with
the Exchange Offer. Georgeson & Company Inc. has been retained to act as
Information Agent to assist in connection with the Exchange Offer.
---------------
The Dealer Manager for the Exchange Offer:
MORGAN STANLEY DEAN WITTER
August 7, 1997
<PAGE>
(continued from previous page)
NONE OF THE BOARD OF DIRECTORS OF THE COMPANY OR THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF ZERO COUPON DEBENTURES AS TO WHETHER TO TENDER OR
REFRAIN FROM TENDERING IN THE EXCHANGE OFFER. HOLDERS OF ZERO COUPON
DEBENTURES ARE URGED TO CONSULT THEIR FINANCIAL AND TAX ADVISORS IN MAKING
THEIR DECISIONS ON WHAT ACTION TO TAKE IN LIGHT OF THEIR OWN PARTICULAR
CIRCUMSTANCES.
IN ORDER TO PARTICIPATE IN THE EXCHANGE OFFER, HOLDERS OF ZERO COUPON
DEBENTURES MUST SUBMIT A LETTER OF TRANSMITTAL AND COMPLY WITH THE OTHER
PROCEDURES FOR TENDERING IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED HEREIN
AND IN THE LETTER OF TRANSMITTAL PRIOR TO THE EXPIRATION DATE. SEE "THE
EXCHANGE OFFER--PROCEDURES FOR TENDERING" AND "--LETTER OF TRANSMITTAL."
For a description of the other terms of the Exchange Offer, see "The
Exchange Offer--Terms of the Exchange Offer," "--Expiration Date; Extensions;
Amendments; Termination," and "--Withdrawal of Tenders." Consummation of the
Exchange Offer is conditioned on, among other things, receipt of validly
tendered Zero Coupon Debentures representing at least $200,000,000 aggregate
principal amount at maturity (which condition may be waived by the Company).
See "The Exchange Offer--Expiration Date; Extensions; Amendments;
Termination."
The Company expressly reserves the right, in its sole discretion, subject to
applicable law, to (i) terminate the Exchange Offer, and not accept for
exchange any Zero Coupon Debentures and promptly return all Zero Coupon
Debentures at any time for any reason, including (without limitation) if less
than $200,000,000 aggregate principal amount at maturity of Zero Coupon
Debentures are tendered or upon the failure of any of the conditions specified
in "The Exchange Offer--Procedures for Tendering," (ii) waive any condition to
the Exchange Offer and accept all Zero Coupon Debentures previously tendered
pursuant to the Exchange Offer, (iii) extend the Expiration Date and retain
all Zero Coupon Debentures tendered pursuant to the Exchange Offer until the
Expiration Date, subject, however, to all withdrawal rights of Holders (see
"The Exchange Offer--Withdrawal of Tenders") or (iv) amend or modify the terms
of the Exchange Offer in any manner, including (without limitation), the form
of the consideration or the formula for calculating the amount of the
consideration to be paid pursuant to the Exchange Offer. Any amendment
applicable to the Exchange Offer will apply to all Zero Coupon Debentures
tendered pursuant to the Exchange Offer. The minimum period during which the
Exchange Offer must remain open following a material change in the terms of
the Exchange Offer or a waiver by the Company of a material condition of the
Exchange Offer, other than a change in the principal amount at maturity of
Zero Coupon Debentures being sought or in the consideration offered, will
depend upon the facts and circumstances, including the relative materiality of
the change or waiver. See "The Exchange Offer--Expiration Date; Extensions;
Amendments; Termination."
The Zero Coupon Debentures trade in the over-the-counter market. Application
will be made to list the Senior Notes on the New York Stock Exchange. However,
there can be no assurance that an active public market for the Senior Notes
will develop and continue after the Exchange Offer.
ii
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE DEALER MANAGER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
EXCHANGE CONTEMPLATED HEREBY SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE RESPECTIVE DATES AS OF WHICH INFORMATION IS GIVEN HEREIN. THE EXCHANGE
OFFER IS NOT BEING MADE TO (NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF)
HOLDERS OF ZERO COUPON DEBENTURES IN ANY JURISDICTION IN WHICH THE MAKING OF
THE EXCHANGE OFFER OR THE ACCEPTANCE OF TENDERS THEREIN WOULD NOT BE IN
COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. HOWEVER, THE COMPANY MAY, AT
ITS DISCRETION, TAKE SUCH ACTION AS IT MAY DEEM NECESSARY FOR THE COMPANY TO
MAKE THE EXCHANGE OFFER IN ANY SUCH JURISDICTION AND EXTEND THE EXCHANGE OFFER
TO HOLDERS OF ZERO COUPON DEBENTURES IN SUCH JURISDICTION. IN ANY JURISDICTION
THE SECURITIES LAWS OR BLUE SKY LAWS OF WHICH REQUIRE THE EXCHANGE OFFER TO BE
MADE BY A LICENSED BROKER OR DEALER, THE EXCHANGE OFFER IS BEING MADE ON
BEHALF OF THE COMPANY BY THE DEALER MANAGER OR ONE OR MORE REGISTERED BROKERS
OR DEALERS WHICH ARE LICENSED UNDER THE LAWS OF SUCH JURISDICTION.
----------------
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Prospectus and the documents incorporated
herein by reference may constitute forward-looking statements and as such may
involve known and unknown risks, uncertainties, and other factors which may
cause the actual results, performance, or achievements of the Company to be
materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed under
"Risks That Affect Our Business" in the Company's Quarterly Report on Form 10-
Q for the quarter ended March 31, 1997.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by Reference............................ 2
Prospectus Summary......................................................... 3
Market Price of the Common Stock........................................... 9
Dividends on the Common Stock.............................................. 9
Capitalization............................................................. 10
Selected Consolidated Financial Data....................................... 11
The Exchange Offer......................................................... 12
Description of Senior Notes................................................ 18
Description of Zero Coupon Debentures...................................... 25
Description of Capital Stock............................................... 34
Book-Entry System--The Depository Trust Company............................ 37
Certain Federal Income Tax Considerations.................................. 38
Legal Matters.............................................................. 43
Experts.................................................................... 44
Available Information...................................................... 44
</TABLE>
1
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
and are incorporated herein by reference (Commission File No. 1-10441):
1. The Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1996.
2. The Company's Amendment on Form 10-K/A to its Annual Report on Form
10-K for the fiscal year ended June 30, 1996.
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996.
4. The Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1996.
5. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997.
6. The Company's Current Report on Form 8-K dated July 24, 1997.
7. The description of the Company's Common Stock contained in its
registration statement on Form 8-A filed on March 16, 1990, and the
description of the Company's Preferred Share Purchase Rights contained
in its Form 8-A filed on November 12, 1992, as amended by an amendment
on Form 8-A/A filed on July 20, 1995.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), subsequent to the date of this Prospectus and prior to
the termination of the offering of the securities 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 herein by reference 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 and superseded, to
constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH
PERSON, INCLUDING ANY BENEFICIAL OWNER OF ZERO COUPON DEBENTURES, TO WHOM THIS
PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED HEREIN BY
REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). THESE DOCUMENTS
ARE AVAILABLE UPON REQUEST FROM SILICON GRAPHICS, INC., 2011 NORTH SHORELINE
BOULEVARD, MOUNTAIN VIEW, CALIFORNIA 94039-7311, ATTENTION: INVESTOR RELATIONS
((415) 933-2607). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUEST SHOULD BE MADE NOT LATER THAN FIVE BUSINESS DAYS PRIOR TO THE
EXPIRATION DATE.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified in its
entirety by the detailed information contained elsewhere in this Prospectus or
by documents incorporated by reference into this Prospectus.
THE COMPANY
Silicon Graphics is a leader in high-performance computing. The Company's
broad range of workstations and graphics servers deliver advanced 3D graphics
and computing capabilities for engineering and creative professionals. Silicon
Graphics and Cray Research-branded servers are the market leaders in technical
computing applications. The Company's highly scalable servers also have a
growing presence in the enterprise market, with a particular emphasis on
Internet, large corporate data and telecommunications applications.
The Company's MIPS Group designs and markets the world's highest volume
computer RISC microprocessors. The Company also markets applications software
targeted at engineering and creative professionals in the digital content
creation and manufacturing sectors.
The Company sells and services its products through a worldwide direct sales
and support organization and a network of resellers.
The Company was originally incorporated as a California corporation in
November 1981 and reincorporated in Delaware in January 1990. The principal
offices of the Company are located at 2011 North Shoreline Boulevard, Mountain
View, California, and its telephone number at that address is (415) 960-1980.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The purpose of the Exchange Offer is to refinance the Zero Coupon Debentures
with the Senior Notes. The Company has undertaken this refinancing to take
advantage of what it believes to be favorable conditions in the market for
convertible securities. In addition, to the extent that the Company may become
obligated to repurchase the Zero Coupon Debentures on or after November 2,
1998, the refinancing will enable the Company to avoid the related cash outlay
and/or the potentially dilutive effect of such repurchase if it is effected
using Common Stock.
THE EXCHANGE OFFER; SECURITIES OFFERED
Upon the terms and subject to the conditions of the Exchange Offer, the
Company hereby offers to exchange Senior Notes for up to all outstanding Zero
Coupon Debentures.
The Exchange Offer will be effected on the basis of that principal amount of
Senior Notes equal to the accreted value of each $1,000 principal at maturity
Zero Coupon Debenture as of the Expiration Date for each such Zero Coupon
Debenture validly tendered and accepted for exchange in the Exchange Offer.
Senior Notes will not be issued in denominations of less than $1,000, and the
Company will pay cash in lieu of issuing a fractional Senior Note to holders of
validity tendered Zero Coupon Debentures. The accreted value of each $1,000
principal amount at maturity Zero Coupon Debenture, to but excluding September
4, 1997, will be $514.904, and the aggregate accreted value of all outstanding
Zero Coupon Debentures will be $234,281,320.
The Senior Notes will be convertible at any time following the date of
issuance thereof and prior to maturity, unless previously redeemed, into shares
of Common Stock at a Conversion Price of $36.25 per share, subject to
adjustment in certain events.
3
<PAGE>
EXPIRATION DATE; WITHDRAWALS
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will accept for exchange all Zero Coupon Debentures validly tendered
and not withdrawn prior to the Expiration Date, or if extended by the Company,
in its sole discretion, the latest date and time to which extended. The
Exchange Offer will expire on the Expiration Date. Tenders of Zero Coupon
Debentures pursuant to the Exchange Offer may be withdrawn at any time prior to
the Expiration Date and, unless accepted for exchange by the Company, may be
withdrawn at any time after 40 business days after the date of this Prospectus.
See "The Exchange Offer--Withdrawal of Tenders" and "--Expiration Date;
Extensions; Amendments; Termination."
EXTENSIONS, AMENDMENTS, AND TERMINATION
The Company expressly reserves the right to (i) extend, amend, or modify the
terms of the Exchange Offer in any manner and (ii) withdraw or terminate the
Exchange Offer and not accept for exchange any Zero Coupon Debentures, at any
time for any reason, including (without limitation) if less than $200,000,000
aggregate principal amount at maturity of Zero Coupon Debentures are tendered
(which condition may be waived by the Company). See "The Exchange Offer--
Expiration Date; Extensions; Amendments; Termination."
PROCEDURES FOR TENDERING
Each holder of Zero Coupon Debentures wishing to accept the Exchange Offer
must (i) properly complete and sign the Letter of Transmittal or a facsimile
thereof (all references in this Prospectus to the Letter of Transmittal shall
be deemed to include a facsimile thereof) in accordance with the instructions
contained herein and therein, together with any required signature guarantees,
and deliver the same to State Street Bank and Trust Company of California,
N.A., as Exchange Agent, at either of its addresses set forth in "The Exchange
Offer--Exchange Agent and Information Agent" and either (a) certificates for
the Zero Coupon Debentures held by such holder must be received by the Exchange
Agent at either of such addresses or (b) such Zero Coupon Debentures must be
transferred pursuant to the procedures for book-entry transfer described herein
and a confirmation of such book-entry transfer must be received by the Exchange
Agent, in each case prior to the Expiration Date, or (ii) comply with the
guaranteed delivery procedures described herein. See "The Exchange Offer--
General" and "--Procedures for Tendering."
SPECIAL PROCEDURES FOR BENEFICIAL OWNERS
Any beneficial owner whose Zero Coupon Debentures are registered in the name
of a broker, dealer, commercial bank, trust company, or other nominee and who
wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on its own behalf, such owner must, prior to
completing and executing a Letter of Transmittal and delivering its Zero Coupon
Debentures, either make appropriate arrangements to register the ownership of
such shares in such owner's name or obtain a properly completed bond power from
the registered holder. The transfer of registered ownership may take
considerable time and may not be able to be completed prior to the Expiration
Date. See "The Exchange Offer--Procedures for Tendering--Signature Guarantees."
GUARANTEED DELIVERY PROCEDURES
If a holder of Zero Coupon Debentures desires to accept the Exchange Offer
and time will not permit a Letter of Transmittal or Zero Coupon Debentures to
reach the Exchange Agent before the Expiration Date or the procedure for book-
entry transfer cannot be completed on a timely basis, a tender may be effected
in accordance with the guaranteed delivery procedures set forth in "The
Exchange Offer--Procedures for Tendering--Guaranteed Delivery."
4
<PAGE>
ACCEPTANCE OF ZERO COUPON DEBENTURES AND DELIVERY OF SENIOR NOTES
Upon the terms and subject to the conditions of the Exchange Offer, including
the reservation by the Company of the right to withdraw or terminate the
Exchange Offer and certain other rights, the Company will accept for exchange
all Zero Coupon Debentures validly tendered and not withdrawn, and will deliver
the Senior Notes to exchanging holders of Zero Coupon Debentures as promptly as
practicable after the Expiration Date. See "The Exchange Offer--Terms of the
Exchange Offer" and "--Expiration Date; Extensions; Amendments; Termination."
TAX CONSEQUENCES OF EXCHANGE
The Company believes that the exchange of Zero Coupon Debentures for Senior
Notes should constitute a recapitalization for United States federal income tax
purposes. Accordingly, holders of Zero Coupon Debentures who participate in the
Exchange Offer generally will not recognize a loss. However, such holders may
recognize gain to the extent, if any, that the fair market value of the Senior
Notes as of the Expiration Date exceeds the accreted value of the Zero Coupon
Debentures. See "Certain Federal Income Tax Considerations." INVESTORS
CONSIDERING THE EXCHANGE OF ZERO COUPON DEBENTURES IN THE EXCHANGE OFFER ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THEIR PARTICULAR TAX
CONSEQUENCES OF THE EXCHANGE OFFER AND THE OWNERSHIP AND DISPOSITION OF THE
SENIOR NOTES UNDER FEDERAL AND APPLICABLE STATE, LOCAL AND FOREIGN TAX LAWS.
UNTENDERED ZERO COUPON DEBENTURES
Holders of Zero Coupon Debentures who do not tender their Zero Coupon
Debentures in the Exchange Offer or whose Zero Coupon Debentures are not
accepted for exchange will continue to hold such Zero Coupon Debentures and
will be entitled to all the rights, and will be subject to all of the
limitations, applicable thereto. See "The Exchange Offer--Trading of Senior
Notes and Zero Coupon Debentures." On and after November 2, 1998, the Company
may exercise its optional redemption rights on any Zero Coupon Debentures which
are not tendered and exchanged in the Exchange Offer. In addition, on each
Purchase Date (as defined herein), the Company is obligated, at the holder's
option, to purchase any untendered outstanding Zero Coupon Debenture, subject
to certain conditions. See "Description of Zero Coupon Debentures." To the
extent that Zero Coupon Debentures are tendered and exchanged in the Exchange
Offer, a holder's ability to sell untendered Zero Coupon Debentures could be
adversely affected.
EXCHANGE AGENT AND INFORMATION AGENT
State Street Bank and Trust Company of California, N.A. has been appointed as
Exchange Agent in connection with the Exchange Offer. Questions and requests
for assistance, requests for additional copies of this Prospectus or of the
Letter of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to Georgeson & Company Inc., which has been retained by the Company to
act as Information Agent for the Exchange Offer. The addresses and telephone
numbers of the Exchange Agent and Information Agent are set forth in "The
Exchange Offer--Exchange Agent and Information Agent."
DEALER MANAGER
Morgan Stanley & Co. Incorporated has been retained to act as Dealer Manager
to solicit exchanges of Zero Coupon Debentures for Senior Notes. Questions with
respect to the Exchange Offer may be directed to Morgan Stanley & Co.
Incorporated at (800) 835-9668 (extension 2262).
5
<PAGE>
COMPARISON OF SENIOR NOTES AND ZERO COUPON DEBENTURES
The following is a brief summary of certain terms of the Senior Notes and the
Zero Coupon Debentures. For a more complete description of the Senior Notes,
see "Description of Senior Notes."
<TABLE>
<CAPTION>
SENIOR NOTES ZERO COUPON DEBENTURES
------------ ----------------------
<S> <C> <C>
Issuer................ Silicon Graphics, Inc. Silicon Graphics, Inc.
Maturity Date......... September 1, 2004 November 2, 2013
Interest Rate......... 5 1/4% per annum, payable in There are no periodic cash
cash semi-annually on March 1 payments of interest. However,
and September 1 of each year, the Zero Coupon Debentures are
commencing March 1, 1998. subject to the accrual of
original issue discount (the
difference between the original
issue price and the principal
amount at maturity).
Conversion............ Convertible at the option of the Convertible at the option of
holder into shares of Common the holder into shares of
Stock at a Conversion Price Common Stock at the rate of
equal to $36.25 per share, sub- 16.2690 shares per $1,000
ject to adjustment in certain principal amount at maturity of
events. See "Description of Se- Zero Coupon Debentures
nior Notes--Conversion of Senior (equivalent to a conversion
Notes." price of $31.65 as of September
4, 1997). The conversion rate
for the Zero Coupon Debentures
is subject to adjustment in
certain events. See
"Description of Zero Coupon
Debentures--Conversion of Zero
Coupon Debentures."
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
SENIOR NOTES ZERO COUPON DEBENTURES
------------ ----------------------
<S> <C> <C>
Redemption at the Op-
tion of the Company.. The Senior Notes are redeemable The Zero Coupon Debentures are
at the option of the Company on redeemable at the option of
and after September 7, 2000, in the Company on and after
whole or in part, upon not less November 2, 1998, in whole or
than 30 days notice nor more than in part, upon not less than 30
60 days notice, at the following days notice nor more than 60
redemption prices in effect days notice, at a redemption
during the 12-month period price per Zero Coupon
beginning September 1 of Debentures equal to the
each of the following years accreted value of such Zero
(expressed as percentages of Coupon Debentures as of the
the principal amount), plus redemption date. See
accrued and unpaid interest "Description of Zero Coupon
thereon to, but excluding, Debentures--Redemption of the
the redemption date: 103.00% Zero Coupon Debentures at the
in 2000; 102.25% in 2001; Option of the Company."
101.50% in 2002; 100.75% in 2003
and 100% at September 1, 2004;
provided however, that on or
after September 7, 2000 and prior
to September 7, 2002, the Senior
Notes will not be redeemable at
the option of the Company unless
the closing price of the Common
Stock shall have exceeded 140% of
the Conversion Price then in
effect for 20 trading days within
a period of 30 consecutive
trading days ending within five
trading days prior to the notice
of redemption. See "Description
of Senior Notes--Redemption of
the Senior Notes at the Option of
the Company."
Redemption at the
Option of the Holder
Upon a Fundamental
Change............... If a Fundamental Change occurs at If a Fundamental Change occurs
any time prior to September 1, at any time prior to November
2004, each holder of Senior Notes 2, 2013, each holder of Zero
shall have the right, at such Coupon Debentures shall have
holder's option, to require the the right, at such holder's
Company to redeem any or all of option, to require the Company
such holder's Senior Notes at the to redeem any or all of such
following redemption prices in holder's Zero Coupon
effect during the 12-month Debentures at a price equal to
period beginning September 1 the accreted value of the Zero
of each of the following years Coupon Debentures as for the
(expressed as percentages of the redemption date, subject to
principal amount), subject to adjustment in certain events.
adjustment in certain events, See "Description of Zero
plus accrued and unpaid interest Coupon Debentures--Redemption
thereon to, but excluding, the at the Option of the Holder
Repurchase Date: 105.25% in 1997; Upon a Fundamental Change."
104.50% in 1998; 103.75% in 1999
and thereafter at the redemption
price applicable to a redemption
at the option of the Company as
set forth above. See "Description
of Senior Notes--Redemption at
the Option of the Holder Upon a
Fundamental Change."
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
SENIOR NOTES ZERO COUPON DEBENTURES
------------ ----------------------
<S> <C> <C>
Subordination......... The Senior Notes are Subordinated in right of payment
unsubordinated and will rank to the prior payment in full of
pari passu with all other all existing and future Senior
unsubordinated indebtedness of Indebtedness of the Company. As
the Company. of March 31, 1997, the Company
had total Senior Indebtedness of
approximately $76.1 million. See
"Description of Zero Coupon
Debentures--Subordination of
Zero Coupon Debentures."
Purchase at Holder's
Option............... None. Subject to certain conditions,
the Company will become
obligated to purchase, at the
option of the holder thereof,
any outstanding Zero Coupon
Debenture on the following dates
at the following prices per
$1,000 principal amount at
maturity, representing the
original issue price plus
accrued original issue discount:
November 2, 1998: $540.03;
November 2, 2003: $663.15; and
November 2, 2008: $814.34. The
Company may elect to purchase
the Zero Coupon Debentures in
cash or shares of Common Stock,
or any combination thereof. See
"Description of Zero Coupon
Debentures--Purchase of Zero
Coupon Debentures at the Option
of the Holder."
Trading............... Application will be made to The Zero Coupon Debentures trade
list the Senior Notes on the in the over-the-counter market.
New York Stock Exchange.
</TABLE>
8
<PAGE>
MARKET PRICE OF THE COMMON STOCK
The following table sets forth the high and low sales prices of a share of
the Common Stock reported on the New York Stock Exchange Composite
Transactions listing during the indicated periods.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Fiscal Year 1995
First Quarter............................................. $26 7/8 $21 1/4
Second Quarter............................................ 33 1/8 24 1/8
Third Quarter............................................. 38 29 1/8
Fourth Quarter............................................ 42 33 3/4
Fiscal Year 1996
First Quarter............................................. $45 5/8 $33
Second Quarter............................................ 38 3/4 26 7/8
Third Quarter............................................. 30 3/8 21 1/8
Fourth Quarter............................................ 30 1/8 23 1/8
Fiscal Year 1997
First Quarter............................................. $26 $20
Second Quarter............................................ 27 5/8 17 7/8
Third Quarter............................................. 28 3/8 19 1/4
Fourth Quarter............................................ 20 3/8 12 5/8
Fiscal Year 1998
First Quarter (through August 6, 1997).................... $28 13/16 $15
</TABLE>
A recent reported last sale price per share of the Common Stock on the New
York Stock Exchange is set forth on the cover page of this Prospectus. Holders
of Zero Coupon Debentures are urged to obtain a current market price for the
Common Stock.
DIVIDENDS ON THE COMMON STOCK
The Company has not paid any dividends on its Common Stock. The Company
currently intends to retain earnings for use in its business and does not
anticipate paying cash dividends to holders of its Common Stock.
9
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company (i) at March 31, 1997, and (ii) as adjusted to give effect to the
issuance of the Senior Notes in the Exchange Offer on the assumption that all
of the outstanding Zero Coupon Debentures were validly tendered and accepted
for exchange as of such date. To the extent that Zero Coupon Debentures are
not validly tendered or accepted in the Exchange Offer, the amount attributed
to the Senior Notes would decrease and the amount attributed to the Zero
Coupon Debentures would increase. The financial data at March 31, 1997 in the
following table are derived from the Company's unaudited financial statements
for the nine months ended March 31, 1997.
<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------
ACTUAL AS ADJUSTED
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt(1):................... $ 17,788 $ 17,788
========== ==========
Long-term debt(1):
Senior Notes.......................................... $ -- $ 230,250
Zero Coupon Debentures................................ 230,250 --
Other long-term debt.................................. 123,269 123,269
---------- ----------
Total long-term debt................................ 353,519 353,519
Stockholders' equity(1):
Preferred stock, par value $0.001 per share, issuable
in series; 2,000,000 shares authorized, 17,500 shares
issued and outstanding............................... 16,998 16,998
Common stock, par value $0.001 per share; 500,000,000
shares authorized, 176,744,669 shares issued and
outstanding(2)....................................... 176 176
Additional paid-in capital............................ 1,230,715 1,230,715
Retained earnings(3).................................. 435,424 432,819
Accumulated translation adjustment and other.......... 17,805 17,805
---------- ----------
Total stockholders' equity.......................... 1,701,118 1,698,513
---------- ----------
Total capitalization.............................. $2,054,637 $2,052,032
========== ==========
</TABLE>
- --------
(1) For additional information regarding long-term debt and stockholders'
equity, see notes 1, 9 and 12 to the audited consolidated financial
statements included in the Company's Annual Report to Stockholders for the
fiscal year ended June 30, 1996. See "Incorporation of Certain Documents
by Reference."
(2) Outstanding shares exclude shares reserved for issuance upon conversion of
the Senior Notes and 54,057,017 shares issuable under the Company's stock
award and purchase plans.
(3) Retained earnings "as adjusted" reflects an earnings charge for debt
issuance costs expected to be incurred in connection with the Exchange
Offer.
10
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected operating data for each of the three years in the period ended
June 30, 1996 and the balance sheet data at June 30, 1995 and 1996 are derived
from the audited Consolidated Financial Statements of the Company audited by
Ernst & Young LLP, independent auditors, which are incorporated by reference in
this Prospectus and are qualified by reference to such Consolidated Financial
Statements and related Notes thereto. The selected operating data for the years
ended June 30, 1992 and 1993 and the balance sheet data at June 30, 1992, 1993
and 1994 have been derived from audited Consolidated Financial Statements of
the Company audited by Ernst & Young LLP that are not included or incorporated
by reference herein. The selected operating data for the nine months ended
March 31, 1996 and 1997 and the selected balance sheet data at March 31, 1997
are derived from unaudited Consolidated Financial Statements incorporated by
reference in this Prospectus. The unaudited Consolidated Financial Statements
include all adjustments, consisting only of normal recurring accruals, which
the Company considers necessary for a fair statement of the information set
forth therein. Operating results for the nine months ended March 31, 1997 are
not necessarily indicative of the results that may be expected for the full
year or for any future period. The data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and
related Notes thereto incorporated by reference herein.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED MARCH 31, FISCAL YEAR ENDED JUNE 30,
---------------------- ------------------------------------------------------
1997 1996 1996(1) 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenue........... $2,500,284 $1,943,943 $2,921,316 $2,228,268 $1,537,766 $1,132,869 $ 906,713
Costs and expenses:
Cost of revenue........ 1,424,924 934,044 1,482,439 1,032,059 735,388 532,213 437,575
Research and
development........... 353,905 231,546 353,461 247,678 190,796 143,981 137,134
Selling, general and
administrative........ 740,601 561,237 807,830 619,259 417,753 336,054 329,204
Write-off of acquired
in-process technology
and merger-related
expenses.............. 7,647 1,275 103,193 22,000 -- -- 110,000
Restructuring costs.... -- -- -- -- -- 650 28,895
---------- ---------- ---------- ---------- ---------- ---------- ---------
Operating income (loss)
from continuing
operations............. (26,793) 215,841 174,393 307,272 193,829 119,971 (136,095)
Interest and other,
net.................... (4,371) 14,780 10,413 9,447 4,779 520 5,961
Minority interest in net
loss of Cray Research.. -- -- 3,982 -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------
Income (loss) from
continuing operations
before income taxes.... (31,164) 230,621 188,788 316,719 198,608 120,491 (130,134)
Provision (benefit) for
income taxes........... (7,312) 66,880 73,751 91,863 57,194 37,688 (28,951)
---------- ---------- ---------- ---------- ---------- ---------- ---------
Income (loss) from
continuing operations.. (23,852) 163,741 115,037 224,856 141,414 82,803 (101,183)
Discontinued
operations............. -- -- -- -- 400 (9,263) --
---------- ---------- ---------- ---------- ---------- ---------- ---------
Net income (loss)....... $ (23,852) $ 163,741 $ 115,037 $ 224,856 $ 141,814 $ 73,540 $(101,183)
========== ========== ========== ========== ========== ========== =========
Income per share:
Income (loss) from
continuing
operations............ $ (0.14) $ 0.93 $ 0.65 $ 1.28 $ 0.86 $ 0.53 $ (0.89)
Net income loss........ $ (0.14) $ 0.93 $ 0.65 $ 1.28 $ 0.86 $ 0.47 $ (0.89)
Common and common
equivalent shares used
in the calculation of
income (loss) per
share.................. 174,761 176,663 175,790 175,435 165,149 154,887 119,233
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, AT JUNE 30,
------------ ----------------------------------------------------------
1997 1996 1995 1994 1993 1992
------------ ----------- ----------- ---------- ---------- --------
(IN THOUSANDS, EXCEPT RATIOS)
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C> <C>
Cash, cash equivalents
and marketable
securities............. $ 411,449 $ 456,937 $ 780,012 $ 604,444 $ 208,538 $195,088
Working capital......... 1,062,616 994,817 889,371 645,296 398,053 362,529
Total assets............ 3,132,143 3,158,246 2,206,619 1,567,052 1,048,294 892,673
Long-term debt and
other.................. 398,335 381,490 287,267 252,645 56,832 71,900
Stockholders' equity.... 1,701,118 1,675,318 1,346,170 937,169 696,649 562,230
RATIO OF EARNINGS TO
FIXED CHARGES(2)....... 0.1x 5.5x 11.4x 11.2x 9.2x --
</TABLE>
- --------
(1) Amounts reflect the April 2, 1996 acquisition of Cray Research which was
accounted for as a purchase.
(2) For purposes of this ratio, "earnings" consist of earnings before income
taxes and fixed charges. "Fixed charges" consist of interest on
indebtedness and capital lease obligations, amortization of debt discount
and issuance expense and that portion of operating lease rental expense
which is representative of the interest factor. Earnings (as defined) for
fiscal 1992 were insufficient to cover fixed charges by $18.4 million.
11
<PAGE>
THE EXCHANGE OFFER
GENERAL
Participation in the Exchange Offer is voluntary and holders of Zero Coupon
Debentures should carefully consider whether to accept. None of the Board of
Directors or the Company make any recommendation to holders of Zero Coupon
Debentures as to whether to tender or refrain from tendering in the Exchange
Offer. Holders of Zero Coupon Debentures are urged to consult their financial
and tax advisors in making their own decisions on what action to take in light
of their own particular circumstances.
Unless the context requires otherwise, the term "Holder" with respect to the
Exchange Offer means (i) any person in whose name any Zero Coupon Debentures
are registered on the books of the Company, (ii) any other person who has
obtained a properly completed bond power from the registered holder, or (iii)
any person whose Zero Coupon Debentures are held of record by The Depository
Trust Company ("DTC") who desires to deliver such Zero Coupon Debentures by
book-entry transfer at DTC.
PURPOSE OF THE EXCHANGE OFFER
The purpose of the Exchange Offer is to refinance the Zero Coupon Debentures
with the Senior Notes. The Company has undertaken to refinancing its Zero
Coupon Debentures at this time to take advantage of what it believes to be
favorable conditions in the market for convertible securities. In addition, to
the extent that the Company may become obligated to repurchase the Zero Coupon
Debentures on or after November 2, 1998, the refinancing will enable the
Company to avoid the related cash outlay and/or the potentially dilutive effect
of such repurchase if it is effected using Common Stock.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will exchange Senior Notes for up to all of the outstanding Zero Coupon
Debentures. The Exchange Offer will be effected on the basis of that principal
amount of Senior Notes equal to the accreted value of each $1,000 principal
amount at maturity Zero Coupon Debenture as of the Expiration Date for each
such Zero Coupon Debenture validly tendered and accepted for exchange in the
Exchange Offer. Senior Notes will not be issued in denominations of less than
$1,000, and the Company will pay cash in lieu of issuing a fractional Senior
Note to holders of validly tendered Zero Coupon Debentures.
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will accept for exchange all Zero Coupon Debentures validly tendered
and not withdrawn as promptly as practicable after the Expiration Date unless
the Exchange Offer has been withdrawn or terminated. The Company will not
accept Zero Coupon Debentures for exchange prior to the Expiration Date. The
Company expressly reserves the right, in its sole discretion, to delay
acceptance for exchange of Zero Coupon Debentures tendered under the Exchange
Offer or the exchange of Senior Notes for the Zero Coupon Debentures accepted
for exchange (subject to Rules 13e-4 and 14e-1 under the Exchange Act, which
require that the Company consummate the Exchange Offer or return the Zero
Coupon Debentures deposited by or on behalf of the Holders thereof promptly
after the termination or withdrawal of the Exchange Offer), or to withdraw or
terminate the Exchange Offer and not accept any Zero Coupon Debentures at any
time for any reason. In all cases, except to the extent waived by the Company,
delivery of the Senior Notes in exchange for the Zero Coupon Debentures
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of such Zero Coupon Debentures (or
confirmation of book-entry transfer thereof), a properly completed and duly
executed Letter of Transmittal, and any other documents required thereby.
As of the date of this Prospectus, there were $455,000,000 aggregate
principal amount at maturity of Zero Coupon Debentures outstanding, which, to
and including such date, had an aggregate accreted value of $233,562,420. This
Prospectus, together with the Letter of Transmittal, is being sent to all
registered Holders as of such date.
12
<PAGE>
The Company shall be deemed to have accepted validly tendered Zero Coupon
Debentures (or defectively tendered Zero Coupon Debentures with respect to
which the Company has waived such defect) when, as and if the Company has
given oral or written notice thereof to the Exchange Agent. The Exchange Agent
will act as agent for the tendering Holders for the purpose of receiving the
Senior Notes from the Company and remitting such Senior Notes to tendering
Holders. Upon the terms and subject to the conditions of the Exchange Offer,
delivery of Senior Notes in exchange for Zero Coupon Debentures will be made
as promptly as practicable after the Expiration Date.
If any tendered Zero Coupon Debentures are not accepted for exchange because
of an invalid tender, the occurrence of certain other events set forth herein,
or otherwise, unless otherwise requested by the Holder under "Special Delivery
Instructions" in the Letter of Transmittal, such Zero Coupon Debentures will
be returned, without expense, to the tendering Holder thereof (or in the case
of Zero Coupon Debentures tendered by book-entry transfer into the Exchange
Agent's account at DTC, such Zero Coupon Debentures will be credited to an
account maintained at DTC designated by the participant therein who so
delivered such Zero Coupon Debentures), as promptly as practicable after the
Expiration Date or the withdrawal or termination of the Exchange Offer.
The Company intends to conduct the Exchange Offer in accordance with the
applicable requirements of the Exchange Act and the rules and regulations of
the Commission thereunder.
Holders who tender Zero Coupon Debentures in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of
Zero Coupon Debentures pursuant to the Exchange Offer. See "--Fees and
Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The Exchange Offer will expire on the Expiration Date. The Company reserves
the right to extend the Exchange Offer in its sole discretion at any time and
from time to time by giving oral or written notice to the Exchange Agent and
by timely public announcement communicated, unless otherwise required by
applicable law or regulation, by issuing a press release. During any extension
of the Exchange Offer, all Zero Coupon Debentures previously tendered pursuant
to the Exchange Offer and not withdrawn will remain subject to the Exchange
Offer.
The Company expressly reserves the right to (i) extend, amend or modify the
terms of the Exchange Offer in any manner, including (without limitation) the
form of the consideration or the formula for calculating the amount of the
consideration to be paid pursuant to the Exchange Offer and (ii) withdraw or
terminate the Exchange Offer and not accept for exchange any Zero Coupon
Debentures, at any time for any reason, including (without limitation) if less
than $200,000,000 aggregate principal amount at maturity of Zero Coupon
Debentures are tendered (which condition may be waived by the Company). If the
Company makes a material change in the terms of the Exchange Offer or if it
waives a material condition of the Exchange Offer, the Company will extend the
Exchange Offer. The minimum period for which the Exchange Offer will be
extended following a material change or waiver, other than a change in the
amount of the Zero Coupon Debentures being sought for exchange or in the
consideration offered, will depend upon the facts and circumstances, including
the relative materiality of the change or waiver. With respect to a change in
the amount of the Zero Coupon Debentures being sought or in the consideration
offered, the Exchange Offer will be extended for a minimum of ten business
days following public announcement of such change. Any withdrawal or
termination of the Exchange Offer will be followed as promptly as practicable
by public announcement thereof. In the event the Company withdraws or
terminates the Exchange Offer, it will give immediate notice to the Exchange
Agent, and all Zero Coupon Debentures theretofore tendered pursuant to the
Exchange Offer will be returned promptly to the tendering Holders thereof. See
"--Withdrawal of Tenders."
13
<PAGE>
INTEREST ON THE SENIOR NOTES AND ORIGINAL ISSUE DISCOUNT ON THE ZERO COUPON
DEBENTURES
The Senior Notes will bear interest at the annual rate set forth on the
cover of this Prospectus from and including the Expiration Date. Original
issue discount on the Zero Coupon Debentures will accrete up to, but not
including, the Expiration Date.
PROCEDURES FOR TENDERING
The tender of Zero Coupon Debentures by a Holder thereof pursuant to one of
the procedures set forth below will constitute an agreement between such
Holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
Each Holder of Zero Coupon Debentures wishing to accept the Exchange Offer
must (i) properly complete and sign the Letter of Transmittal or a facsimile
thereof in accordance with the instructions contained herein and therein,
together with any required signature guarantees, and deliver the same to the
Exchange Agent, at either of its addresses set forth in "--Exchange Agent and
Information Agent" (unless such Zero Coupon Debentures are delivered in
accordance with the procedures set forth below under "--Book-Entry Transfer")
and either (a) certificates for the Zero Coupon Debentures held by such Holder
must be received by the Exchange Agent at either of such addresses or (b) such
Zero Coupon Debentures must be transferred pursuant to the procedures for
book-entry transfer described below and a confirmation of such book-entry
transfer must be received by the Exchange Agent, in each case prior to the
Expiration Date, or (ii) comply with the guaranteed delivery procedures
described below.
LETTERS OF TRANSMITTAL, ZERO COUPON DEBENTURES AND ANY OTHER REQUIRED
DOCUMENTS SHOULD BE SENT ONLY TO THE EXCHANGE AGENT, NOT TO THE COMPANY, THE
DEALER MANAGER, OR THE INFORMATION AGENT.
Signature Guarantees. If tendered Zero Coupon Debentures are registered in
the name of the signer of the Letter of Transmittal and the Senior Notes to be
issued in exchange therefor are to be issued (and any untendered Zero Coupon
Debentures are to be reissued) in the name of the registered Holder (which
term, for the purposes described herein, shall include any participant in DTC
whose name appears on a security listing as the owner of the Zero Coupon
Debentures), the signature of such signer need not be guaranteed. If the
tendered Zero Coupon Debentures are registered in the name of someone other
than the signer of the Letter of Transmittal, such tendered shares must be
endorsed or accompanied by written instruments of transfer in form
satisfactory to the Company and duly executed by the registered Holder, and
the signature on the endorsement or instrument of transfer must be guaranteed
by a financial institution (including most banks, savings and loan
associations, and brokerage houses) that is a participant in the Security
Transfer Agents Medallion Program or The New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (any of
the foregoing hereinafter referred to as an "Eligible Institution"). If the
Senior Notes and/or Zero Coupon Debentures not exchanged are to be delivered
to an address other than that of the registered Holder appearing on the
register for the Zero Coupon Debentures, the signature in the Letter of
Transmittal must be guaranteed by an Eligible Institution. Any beneficial
owner whose Zero Coupon Debentures are registered in the name of a broker,
dealer, commercial bank, trust company, or other nominee and who wishes to
tender should contact such registered Holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on its own behalf, such owner must, prior to
completing and executing a Letter of Transmittal and delivering its Zero
Coupon Debentures, either make appropriate arrangements to register the
ownership of such Zero Coupon Debentures in such owner's name or obtain a
properly completed bond power from the registered Holder. The transfer of
registered ownership may take considerable time and may not be able to be
completed prior to the Expiration Date.
THE METHOD OF DELIVERY OF ZERO COUPON DEBENTURES AND ALL OTHER DOCUMENTS IS
AT THE ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED
THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PRIOR INSURANCE BE
OBTAINED,
14
<PAGE>
AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO
PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
Book-Entry Transfer. The Company understands that the Exchange Agent will
make a request promptly after the date of this Prospectus to establish
accounts with respect to the Zero Coupon Debentures at DTC for the purpose of
facilitating the Exchange Offer, and subject to the establishment thereof, any
financial institution that is a participant in DTC's system may make book-
entry delivery of Zero Coupon Debentures by causing DTC to transfer such Zero
Coupon Debentures into the Exchange Agent's account with respect to the Zero
Coupon Debentures in accordance with DTC's Automated Tender Offer Program
("ATOP") procedures for such book-entry transfers. However, the exchange for
Zero Coupon Debentures so tendered will only be made after timely confirmation
(a "Book-Entry Confirmation") of such book-entry transfer of Zero Coupon
Debentures into the Exchange Agent's account, and timely receipt by the
Exchange Agent of an Agent's Message (as such term is defined in the next
sentence) and any other documents required by the Letter of Transmittal. The
term "Agent's Message" means a message, transmitted by DTC and received by the
Exchange Agent and forming a part of a Book-Entry Confirmation, which states
that DTC has received an express acknowledgement from a participant tendering
Zero Coupon Debentures that is the subject of such Book-Entry Confirmation
that such participant has received and agrees to be bound by the terms of the
Letter of Transmittal, and that the Company may enforce such agreement against
such participant. See "Book-Entry System--The Depository Trust Company."
Guaranteed Delivery. If a Holder desires to accept the Exchange Offer and
time will not permit a Letter of Transmittal or Zero Coupon Debentures to
reach the Exchange Agent before the Expiration Date or the procedure for book-
entry transfer cannot be completed on a timely basis, a tender may be effected
if the Exchange Agent has received at its office, prior to the Expiration
Date, a letter, a telegram, or facsimile transmission from an Eligible
Institution setting forth the name and address of the tendering Holder, the
name(s) in which the Zero Coupon Debentures are registered and, if the Zero
Coupon Debentures are held in certificated form, the certificate number of the
Zero Coupon Debentures to be tendered, and stating that the tender is being
made thereby and guaranteeing that within three trading days after the date of
execution of such letter, telegram, or facsimile transmission by the Eligible
Institution, the Zero Coupon Debentures, in proper form for transfer together
with a properly completed and duly executed Letter of Transmittal (and any
other required documents), or a confirmation of book-entry transfer of such
Zero Coupon Debentures into the Exchange Agent's account at DTC, will be
delivered by such Eligible Institution. Unless the Zero Coupon Debentures
being tendered by the above-described method are deposited with the Exchange
Agent within the time period set forth above (accompanied or preceded by a
properly completed Letter of Transmittal and any other required documents) or
a confirmation of book-entry transfer of such Zero Coupon Debentures into the
Exchange Agent's account at DTC in accordance with DTC's ATOP procedures is
received, the Company may, at its option, reject the tender. Copies of a
Notice of Guaranteed Delivery which may be used by Eligible Institutions for
the purposes described in this paragraph are available from the Exchange Agent
and the Information Agent.
Miscellaneous. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance for exchange of any tender of Zero
Coupon Debentures will be determined by the Company, whose determination will
be final and binding. The Company reserves the absolute right to reject any or
all tenders not in proper form or the acceptance for exchange of which may, in
the opinion of the Company's counsel, be unlawful. The Company also reserves
the absolute right to waive any defect or irregularity in the tender of any
Zero Coupon Debentures, and the Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding. None of the Company, the Exchange
Agent, the Dealer Manager, the Information Agent, or any other person will be
under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification.
Tenders of Zero Coupon Debentures involving any irregularities will not be
deemed to have been made until such irregularities have been cured or waived.
Zero Coupon Debentures received by the Exchange Agent that are not validly
tendered and as to which the irregularities have not been cured or waived will
be returned by the Exchange Agent to the tendering Holder (or in the case of
Zero Coupon Debentures tendered by book-entry transfer into the Exchange
Agent's account at DTC, such Zero Coupon Debentures will be credited to an
account
15
<PAGE>
maintained at DTC designated by the participant therein who so delivered such
Zero Coupon Debentures), unless otherwise requested by the Holder in the
Letter of Transmittal, as promptly as practicable after the Expiration Date or
the withdrawal or termination of the Exchange Offer.
LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Zero Coupon Debentures for exchange (the "Transferor")
exchanges, assigns, and transfers such Zero Coupon Debentures to the Company
and irrevocably constitutes and appoints the Exchange Agent as the
Transferor's agent and attorney-in-fact to cause such Zero Coupon Debentures
to be assigned, transferred, and exchanged. The Transferor represents and
warrants that it has full power and authority to tender, exchange, assign, and
transfer the Zero Coupon Debentures and to acquire Senior Notes issuable upon
the exchange of such tendered Zero Coupon Debentures, and that, when the same
are accepted for exchange, the Company will acquire good and unencumbered
title to the tendered Zero Coupon Debentures, free and clear of all liens,
restrictions, charges, and encumbrances and not subject to any adverse claim.
The Transferor also warrants that it will, upon request, execute, and deliver
any additional documents deemed by the Company to be necessary or desirable to
complete the exchange, assignment, and transfer of tendered Zero Coupon
Debentures or transfer ownership of such Zero Coupon Debentures on the account
books maintained by DTC. All authority conferred by the Transferor will
survive the death, bankruptcy, or incapacity of the Transferor, and every
obligation of the Transferor shall be binding upon the heirs, legal
representatives, successors, assigns, executors, and administrators of such
Transferor.
WITHDRAWAL OF TENDERS
Tenders of Zero Coupon Debentures pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date and, unless accepted for
exchange by the Company, may be withdrawn at any time after 40 business days
after the date of this Prospectus.
To be effective, a written notice of withdrawal delivered by mail, hand
delivery, or facsimile transmission must be timely received by the Exchange
Agent at the address set forth in the Letter of Transmittal. The method of
notification is at the risk and election of the Holder. Any such notice of
withdrawal must specify (i) the Holder named in the Letter of Transmittal as
having tendered Zero Coupon Debentures to be withdrawn, (ii) if Zero Coupon
Debentures are held in certificated form, the certificate numbers of such Zero
Coupon Debentures to be withdrawn, (iii) that such Holder is withdrawing his
election to have such Zero Coupon Debentures exchanged, and (iv) the name of
the registered Holder of such Zero Coupon Debentures, and must be signed by
the Holder in the same manner as the original signature on the Letter of
Transmittal (including any required signature guarantees) or be accompanied by
evidence satisfactory to the Company that the person withdrawing the tender
has succeeded to the beneficial ownership of the Zero Coupon Debentures being
withdrawn. The Exchange Agent will return the properly withdrawn Zero Coupon
Debentures promptly following receipt of notice of withdrawal. If Zero Coupon
Debentures have been tendered pursuant to the procedure for book-entry
transfer, any notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawn Zero Coupon Debentures and
otherwise comply with DTC's procedures. All questions as to the validity of
notice of withdrawal, including time of receipt, will be determined by the
Company, and such determination will be final and binding on all parties.
Withdrawals of tenders of Zero Coupon Debentures may not be rescinded and any
Zero Coupon Debentures withdrawn will thereafter be deemed not validly
tendered for purposes of the Exchange Offer. Properly withdrawn Zero Coupon
Debentures, however, may be retendered by following the procedures therefor
described elsewhere herein at any time prior to the Expiration Date.See "--
Procedures for Tendering."
16
<PAGE>
EXCHANGE AGENT AND INFORMATION AGENT
State Street Bank and Trust Company of California, N.A. has been appointed as
Exchange Agent for the Exchange Offer. Deliveries to the Exchange Agent should
be as follows:
THE EXCHANGE AGENT:
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
By Hand or Overnight Courier: By Mail:
C/O STATE STREET BANK AND TRUST STATE STREET BANK AND TRUST COMPANY
COMPANY, N.A. P.O. BOX 778
61 BROADWAY
NEW YORK, NEW YORK 10006 BOSTON, MASSACHUSETTS 02102
By Facsimile Transmission
(For Eligible Institutions Only):
(617) 664-5739
Confirm by Telephone:
(617) 664-5314
Georgeson & Company Inc. has been retained to act as Information Agent.
Questions and requests for assistance regarding the Exchange Offer, requests
for additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery may be directed to the Information
Agent at Wall Street Plaza, New York, New York 10005, telephone (800) 223-2064
or (212) 440-9800 (collect).
The Company will pay the Exchange Agent and Information Agent reasonable and
customary fees for their services and will reimburse them for all their
reasonable out-of-pocket expenses in connection therewith.
DEALER MANAGER
Morgan Stanley & Co. Incorporated, as Dealer Manager, has agreed to solicit
exchanges of Zero Coupon Debentures. The Company will pay the Dealer Manager a
fee of 0.875% of the accreted value as of the Expiration Date for each $1,000
principal amount at maturity Zero Coupon Debenture validly tendered and
accepted for exchange pursuant to the Exchange Offer. Additional solicitation
may be made by telecopier, by telephone, or in person by officers and regular
employees of the Company and its affiliates. No additional compensation will be
paid to any such officers and employees who engage in soliciting tenders.
The Dealer Manager engages in transactions with, and from time to time has
performed services for, the Company.
TRADING OF SENIOR NOTES AND ZERO COUPON DEBENTURES
Application will be made to list the Senior Notes on the New York Stock
Exchange. However, there can be no assurance that an active public market for
the Senior Notes will develop and continue after the Exchange Offer.
The Zero Coupon Debentures are traded in the over-the-counter market. The
Zero Coupon Debentures, and the underlying shares of Common Stock issuable upon
conversion thereof, have not been registered under the Securities Act of 1933,
as amended (the "Securities Act"). The Zero Coupon Debentures, and the
underlying shares of Common Stock issuable upon conversion thereof, which are
not (and have not been) held by an affiliate of the Company are no longer
subject to transfer restrictions. Holders of Zero Coupon Debentures who do not
tender their Zero Coupon Debentures in the Exchange Offer or whose Zero Coupon
Debentures are not accepted for exchange will continue to hold such Zero Coupon
Debentures and will be entitled to all the rights and preferences, and will be
subject to all of
17
<PAGE>
the limitations applicable thereto. To the extent that Zero Coupon Debentures
are tendered and accepted in the Exchange Offer, the liquidity and trading
market for the Zero Coupon Debentures outstanding following the Exchange
Offer, and the terms upon which such Zero Coupon Debentures could be sold,
could be adversely affected.
TRANSACTIONS AND ARRANGEMENTS CONCERNING THE ZERO COUPON DEBENTURES IN
CONNECTION WITH THE EXCHANGE OFFER
Except as described herein, there are no contracts, arrangements,
understandings, or relationships in connection with the Exchange Offer between
the Company or any of its directors or executive officers and any person with
respect to any securities of the Company, including the Senior Notes, the Zero
Coupon Debentures, and the Common Stock issuable upon conversion thereof.
FEES AND EXPENSES; TRANSFER TAXES
The expenses of soliciting tenders of Zero Coupon Debentures will be borne
by the Company. For compensation to be paid to the Dealer Manager, see "--
Dealer Manager." The total expenses to be incurred by the Company in
connection with the Exchange Offer, other than fees payable to the Dealer
Manager, but including the expenses of the Dealer Manager, printing,
accounting, and legal fees, rating agency fees and the fees and expenses of
the Exchange Agent, the Information Agent and the Senior Notes Trustee are
estimated to be approximately $555,000. The Dealer Manager has agreed to
reimburse the Company for certain of its expenses.
The Company shall pay all transfer taxes, if any, applicable to the transfer
and exchange of Zero Coupon Debentures to it or its order pursuant to the
Exchange Offer. If, however, certificates representing Senior Notes or Zero
Coupon Debentures are not tendered or accepted for exchange, are to be
delivered to, or are to be registered or issued in the name of, any person
other than the registered Holder(s) of such Zero Coupon Debentures tendered,
or if a transfer tax is imposed for any reason other than the exchange of Zero
Coupon Debentures to the Company or its order pursuant to the Exchange Offer,
the amount of any such transfer taxes (whether imposed on the registered
Holder(s) or any other person) will be payable by the tendering Holder(s). If
satisfactory evidence of payment of such taxes or exception therefrom is not
submitted, the amount of such transfer taxes will be billed directly to such
tendering Holder.
DESCRIPTION OF SENIOR NOTES
GENERAL
The Senior Notes are unsecured unsubordinated of the Company and mature on
September 1, 2004. The Senior Notes will be issued under an indenture dated as
of September 1, 1997 (the "Senior Notes Indenture"), between the Company and
State Street Bank and Trust Company of California, N.A., as trustee (the
"Senior Notes Trustee"), the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. The following
summaries of certain provisions of the Senior Notes and the Senior Notes
Indenture do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, all the provisions of the Senior Notes and
the Senior Notes Indenture, including the definitions therein. The Senior
Notes Indenture is subject to and governed by the Trust Indenture Act of 1939,
as amended. Wherever particular provisions or defined terms of the Senior
Notes Indenture (or of the form of Senior Note which is a part thereof) are
referred to, such provisions or defined terms are incorporated herein by
reference. As used in this "Description of Senior Notes," the "Company" refers
to Silicon Graphics, Inc. and does not, unless the context otherwise
indicates, include its subsidiaries.
The Senior Notes will bear interest at the annual rate set forth on the
cover page of this Prospectus, from and including the Expiration Date, payable
semi-annually on March 1 and September 1 of each year, commencing March 1,
1998, to the holders of record at the close of business on the preceding
February 15 and August 15, respectively. Interest will be computed on the
basis of a 360-day year consisting of twelve 30-day months. The Company may
not reissue a Senior Note that has matured or been converted, redeemed or
otherwise canceled (except for registration of transfer, exchange or
replacement thereof).
18
<PAGE>
Payments of principal and interest on the Senior Notes will be payable, the
transfer of the Senior Notes will be registrable, and Senior Notes will be
exchangeable for Senior Notes of other denominations of a like aggregate
principal amount, at the office or agency of the Senior Notes Trustee in New
York, New York; provided that the payment of interest may be made at the
option of the Company by check mailed to the address of, or by wire transfer
to the account of, the person entitled thereto and that the payment of
principal with respect to any Senior Note will be made only upon surrender of
such Senior Note to the Senior Notes Trustee.
The Senior Notes are obligations exclusively of the Company. Since the
operations of the Company are currently partially conducted through
subsidiaries, the cash flow and the consequent ability to service debt,
including the Senior Notes, of the Company, are partially dependent upon the
earnings of its subsidiaries and the distribution of those earnings to, or
upon loans or other payments of funds by those subsidiaries to, the Company.
The subsidiaries are separate and distinct legal entities and have no
obligation, contingent or otherwise, to pay any amounts due pursuant to the
Senior Notes or to make any funds available therefor, whether by dividends,
loans or other payments. In addition, the payment of dividends and the making
of loans and advances to the Company by its subsidiaries may be subject to
statutory or contractual restrictions, are contingent upon the earnings of
those subsidiaries and are subject to various business considerations.
Any right of the Company to receive assets of any of its subsidiaries upon
their liquidation or reorganization (and the consequent right of the holders
of the Senior 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.
The Senior Notes Indenture does not limit the ability of the Company to
incur additional indebtedness.
DTC will act as securities depositary for the Senior Notes. The Senior Notes
will be issued only as fully registered securities registered in the name of
Cede & Co., DTC's nominee ("Cede & Co."). One or more fully registered global
Senior Notes certificates, representing the total aggregate principal amount
of Senior Notes, will be issued and will be deposited with DTC. A Beneficial
Owner (as defined herein) in a global Senior Note certificate will not be
entitled to receive physical delivery of Senior Notes. Accordingly, each
Beneficial Owner must rely on the procedures of DTC to exercise any rights
under the Senior Notes. A more detailed description of the DTC book-entry
system is set forth in "Book-Entry System--The Depository Trust Company"
below.
CONVERSION OF SENIOR NOTES
A holder of a Senior Note may convert it into Common Stock of the Company at
any time through the close of business on September 1, 2004, unless previously
redeemed, at the Conversion Price set forth on the cover page of this
Prospectus, subject to adjustment as described below; provided that if a
Senior Note is called for redemption by the Company, the holder may convert it
only until the close of business on the last trading day prior to the
redemption date. A holder entitled to a fractional share of Common Stock upon
conversion of Senior Notes will receive cash equal to the then current market
value of such fractional share. Shares of Common Stock issued upon conversion
of Senior Notes in accordance with the terms of the Senior Notes Indenture,
and prior to the separation of the Rights (as defined herein) and the
redemption or expiration of the Rights, shall also be entitled to receive
Rights, under the terms and subject to the conditions of the Amended and
Restated Preferred Shares Rights Agreement dated as of May 6, 1992, as
amended, between the Company and the Rights Agent named therein (the
"Preferred Shares Rights Agreement"). A Senior Note in respect of which a
holder is exercising its option to require redemption upon a Fundamental
Change may be converted only if such holder withdraws its election to exercise
its option in accordance with the terms of the Senior Notes Indenture. A
holder may convert such holder's Senior Notes in part so long as such part is
$1,000 principal amount or a multiple thereof.
Except as described below, no adjustment will be made on conversion of any
Senior Notes for interest accrued thereon or for dividends on any Common Stock
issued. If any Senior Notes not called for redemption
19
<PAGE>
are converted after a record date for the payment of interest and prior to the
next succeeding interest payment date, such Senior Notes must be accompanied
by funds equal to the interest payable on such succeeding interest payment
date on the principal amount so converted.
To convert a Senior Note into shares of Common Stock, a holder must (i)
complete and manually sign the conversion notice on the back of the Senior
Note (or complete and manually sign a facsimile thereof) and deliver such
notice to the Conversion Agent, (ii) surrender the Senior Note to the
Conversion Agent, (iii) if required, furnish appropriate endorsements and
transfer documents, and (iv) if required, pay all transfer or similar taxes.
Pursuant to the Senior Notes Indenture, the date on which all of the foregoing
requirements have been satisfied is the Conversion Date.
The initial Conversion Price of $36.25 per share of Common Stock is subject
to adjustment under formulae as set forth in the Senior Notes Indenture in
certain events, including: (i) the issuance of Common Stock of the Company as
a dividend or distribution on the Common Stock; (ii) subdivisions and
combinations of the Common Stock; (iii) the issuance to all holders of Common
Stock of certain rights or warrants entitling them to subscribe for or
purchase Common Stock at less than the Current Market Price (as defined); (iv)
the distribution to all holders of Common Stock of shares of capital stock
(other than Common Stock) or evidences of indebtedness of the Company or of
assets (other than cash distributions covered by clause (v) below) or rights
or warrants to subscribe for or purchase any of its securities (excluding
rights or warrants to purchase Common Stock referred to in clause (iii)
above); (v) distributions consisting of cash, excluding any quarterly cash
dividend on the Common Stock to the extent that the aggregate cash dividend
per share of Common Stock in any quarter does not exceed the greater of
(x) the amount per share of Common Stock of the next preceding quarterly
dividend on the Common Stock to the extent that such preceding quarterly
dividend did not require an adjustment of the Conversion Rate pursuant to this
clause (v) (as adjusted to reflect subdivisions or combinations of the Common
Stock), and (y) 3.75 percent of the average of the last reported sales price
of the Common Stock during the ten trading days immediately prior to the date
of declaration of such dividend, and excluding any dividend or distribution in
connection with the liquidation, dissolution or winding up of the Company;
(vi) payment in respect of a tender or exchange offer by the Company or any
subsidiary of the Company for the Common Stock to the extent that the cash and
value of any other consideration included in such payment per share of Common
Stock exceeds the Current Market Price per share of Common Stock on the
trading day next succeeding the last date on which tenders or exchanges may be
made pursuant to such tender or exchange; and (vii) 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. If any
adjustment is required to be made as set forth in clause (v) above as a result
of a distribution that is a quarterly dividend, such adjustment would be based
upon the amount by which such distribution exceeds the amount of the quarterly
cash dividend permitted to be excluded pursuant to such clause (v). If an
adjustment is required to be made as set forth in clause (v) above as a result
of a distribution that is not a quarterly dividend, such adjustment would be
based upon the full amount of the distribution. The adjustment referred to in
clause (vii) will only be made if the tender offer or exchange offer 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 (vii) will generally not be made, however, if, as of the closing of the
offer, the offering documents with respect to such offer disclose a plan or an
intention to cause 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.
In the event that the Rights are separated from the Common Stock in
accordance with the provisions of the Preferred Shares Rights Agreement such
that the holders of Senior Notes would thereafter not be entitled to receive
any such Rights in respect to the Common Stock issuable upon conversion of
such Senior Notes, the Conversion Price will be adjusted as provided in clause
(iv) of the preceding paragraph (subject to readjustment in the event of the
expiration, termination or redemption of the Rights). In lieu of any such
adjustment, the
20
<PAGE>
Company may amend the Preferred Shares Rights Agreement to provide that upon
conversion of the Senior Notes the holders will receive, in addition to the
Common Stock issuable upon such conversion, the Rights which would have
attached to such shares of Common Stock if the Rights had not become separated
from the Common Stock pursuant to the provisions of the Preferred Shares
Rights Agreement.
No adjustment in the Conversion Price will be required unless such
adjustment would require a change of at least 1% in the Conversion Price then
in effect; provided that any adjustment that would otherwise be required to be
made shall be carried forward and taken into account in any subsequent
adjustment. The Company reserves the right to make such increase in the
Conversion Price in addition to those required in the foregoing provisions as
the Company in its discretion shall determine to be advisable in order that
certain stock-related distributions hereafter made by the Company to its
stockholders shall not be taxable. Except as stated above, the Conversion
Price will not be adjusted for the issuance of Common Stock or any securities
convertible into or exchangeable for Common Stock or carrying the right to
purchase any of the foregoing.
In the case of (i) any reclassification of the Common Stock, or (ii) a
consolidation or merger involving the Company or a sale or conveyance to
another corporation of the property and assets of the Company as an entirety
or substantially as an entirety, in each case as a result of which holders of
Common Stock shall be entitled to receive stock, other securities, other
property or assets (including cash) with respect to or in exchange for such
Common Stock, the holders of the Senior Notes then outstanding will be
entitled thereafter to convert such Senior Notes into the kind and amount of
shares of stock, other securities or other property or assets (including cash)
which they would have owned or been entitled to receive upon such
reclassification, consolidation, merger, sale or conveyance had such Senior
Notes been converted immediately prior to such reclassification,
consolidation, merger, sale or conveyance assuming that a holder of Senior
Notes would not have exercised any rights of election as to the stock, other
securities or other property or assets (including cash) receivable in
connection therewith.
In the event of a taxable distribution to holders of Common Stock or in
certain other circumstances requiring an adjustment to the Conversion Price,
the holders of Senior Notes may, in certain circumstances, be deemed to have
received a distribution subject to United States income tax as a dividend; in
certain other circumstances, the absence of such an adjustment may result in a
taxable dividend to the holders of Common Stock. See "Certain Federal Income
Tax Considerations."
The Company from time to time may to the extent permitted by law increase
the Conversion Price by any amount for any period of at least 20 days, in
which case the Company shall give at least 15 days' notice of such increase,
if the Board of Directors has made a determination that such increase would be
in the best interests of the Company, which determination shall be conclusive.
The Company may, at its option, make such increases in the Conversion Price,
in addition to those set forth above, as the Board of Directors deems
advisable to avoid or diminish any income tax to holders of Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes. See "Certain
Federal Income Tax Considerations."
REDEMPTION OF THE SENIOR NOTES AT THE OPTION OF THE COMPANY
No sinking fund is provided for the Senior Notes. Prior to September 7,
2000, the Senior Notes will not be redeemable at the option of the Company.
Beginning on September 7, 2000, the Company may redeem the Senior Notes for
cash as a whole at any time, or from time to time in part, upon not less than
30 days' nor more than 60 days' notice at the following prices (expressed as
percentages of the principal amount), together with accrued and unpaid
interest to, but excluding, the date fixed for redemption, except that on or
after September 7, 2000 and prior to September 7, 2002, the Senior Notes will
not be redeemable at the option of the Company unless the closing price of the
Common Stock shall have exceeded 140% of the Conversion Price then in effect
for 20 trading days within a period of 30 consecutive trading days ending
within five trading days prior to the notice of redemption.
21
<PAGE>
If redeemed during the 12-month period beginning September 1 (beginning on
September 7, 2000 and ending on August 31, 2001, in the case of the first such
period):
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2000..................................................... 103.00%
2001..................................................... 102.25
2002..................................................... 101.50
2003..................................................... 100.75
</TABLE>
and 100% at September 1, 2004; provided that any semi-annual payment of
interest becoming due on the date fixed for redemption shall be payable to the
holders of record on the relevant record date of the Senior Notes being
redeemed. No Senior Notes may be redeemed by the Company if an Event of Default
with respect to the payment of interest on the Senior Notes has occurred and is
continuing.
If fewer than all of the Senior Notes are to be redeemed, the Senior Notes
Trustee will select the Senior Notes to be redeemed by lot or, in its
discretion, on a pro rata basis. If any Senior Note is to be redeemed in part
only, a new Senior Note or Senior Notes in principal amount equal to the
unredeemed principal portion thereof will be issued. If a portion of a holder's
Senior Notes are selected for partial redemption and such holder converts a
portion of such Senior Notes, such converted portion shall be deemed to be
taken from the portion selected for redemption.
REDEMPTION AT THE OPTION OF THE HOLDER UPON A FUNDAMENTAL CHANGE
If a Fundamental Change (as defined) occurs at any time prior to September 1,
2004, each holder of Senior Notes shall have the right, at the holder's option,
to require the Company to redeem any or all of such holder's Senior Notes on
the date (the "Repurchase Date") that is 45 days after the date of the
Company's notice of such Fundamental Change. The Senior Notes will be
redeemable in multiples of $1,000 principal amount.
The Company shall redeem such Senior Notes at a price (expressed as a
percentage of the principal amount) equal to (i) 105.25% if the Repurchase Date
is during the 12-month period beginning September 1, 1997; (ii) 104.50% if the
Repurchase Date is during the 12-month period beginning September 1, 1998;
(iii) 103.75% if the Repurchase Date is during the 12-month period beginning
September 1, 1999 and (iv) thereafter at the redemption price set forth under
"Redemption of the Senior Notes at the Option of the Company" which would be
applicable to a redemption at the option of the Company on the Repurchase Date;
provided that if the Applicable Price (as defined) in connection with the
Fundamental Change is less than the Reference Market Price (as defined), the
Company shall redeem such Senior Notes at a price equal to the foregoing
redemption price multiplied by the fraction obtained by dividing the Applicable
Price by the Reference Market Price. In each case, the Company shall also pay
accrued interest on the redeemed Senior Notes to, but excluding, the Repurchase
Date; provided that, if such Repurchase Date is an interest payment date, then
the interest payable on such date shall be paid to the holder of record of the
Senior Notes on the relevant record date.
The Company shall mail to all holders of record of the Senior Notes a notice
of the occurrence of a Fundamental Change and of the redemption right arising
as a result thereof on or before the tenth day after the occurrence of such
Fundamental Change. The Company shall deliver to the Senior Notes Trustee a
copy of such notice. To exercise the redemption right, holders of Senior Notes
must deliver, on or before the 30th day after the date of the Company's notice
of a Fundamental Change, the Senior Notes to be so redeemed, duly endorsed for
transfer, together with the form entitled "Option to Elect Redemption Upon a
Fundamental Change" on the reverse thereof duly completed, to the Company (or
an agent designated by the Company for such purpose).
The term "Fundamental Change" means the occurrence of any transaction or
event in connection with which all or substantially all Common Stock shall be
exchanged for, converted into, acquired for or constitute solely the right to
receive consideration (whether by means of an exchange offer, liquidation,
tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) which is not all or substantially all common
stock listed (or, upon consummation of or immediately following such
transaction or event, which will be listed) on a United States national
securities exchange or approved for quotation on the
22
<PAGE>
Nasdaq National Market or any similar United States system of automated
dissemination of quotations of securities prices. The term "Applicable Price"
means (i) in the event of a Fundamental Change in which the holders of the
Common Stock receive only cash, the amount of cash received by the holder of
one share of Common Stock and (ii) in the event of any other Fundamental
Change, the average of the last reported sale price for the Common Stock
during the ten trading days prior to the record date for the determination of
the holders of Common Stock entitled to receive cash, securities, property or
other assets in connection with such Fundamental Change, or, if there is no
such record date, the date upon which the holders of the Common Stock shall
have the right to receive such cash, securities, property or other assets in
connection with the Fundamental Change. The term "Reference Market Price"
shall initially mean $18.33 (which is equal to 66 2/3% of the closing price of
the Common Stock on August 5, 1997) and, in the event of any adjustment to the
Conversion Price pursuant to the provisions of the Senior Notes Indenture, the
Reference Market Price shall also be adjusted so that the Reference Market
Price shall be equal to the initial Reference Market Price multiplied by a
fraction the numerator of which is the initial Conversion Price and the
denominator of which is the Conversion Price following such adjustment.
The Company will comply with the provisions of Rule 13e-4 and any other
tender offer rules under the Exchange Act which may then be applicable in
connection with the redemption rights of Senior Note holders in the event of a
Fundamental Change. The redemption rights of the holders of Senior Notes could
discourage a potential acquiror of the Company. The Fundamental Change
redemption feature, however, is not the result of management's knowledge of
any specific effort to obtain control of the Company by means of a merger,
tender offer, solicitation or otherwise, or part of a plan by management to
adopt a series of anti-takeover provisions.
No Senior Notes may be redeemed at the option of holders upon a Fundamental
Change if there has occurred and is continuing an Event of Default described
under "Events of Default; Notice and Waiver" (other than a default in the
payment of the redemption price in the event of a Fundamental Change with
respect to such Senior Notes).
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate with or merge into any other person or
convey, transfer or lease its properties and assets substantially as an
entirety to another person, unless, among other items, (i) the resulting,
surviving or transferee person (if other than the Company) is organized and
existing under the laws of the United States, any state thereof or the
District of Columbia and such person assumes all obligations of the Company
under the Senior Notes and the Senior Notes Indenture, and (ii) the Company or
such successor person shall not immediately thereafter be in default under the
Senior Notes Indenture. Upon the assumption of the Company's obligations by
such a person in such circumstances, subject to certain exceptions, the
Company shall be discharged from all obligations under the Senior Notes and
the Senior Notes Indenture. Certain such transactions which would constitute a
Fundamental Change would permit each holder to require the Company to redeem
the Senior Notes of such holder as described under "Redemption at the Option
of the Holder Upon a Fundamental Change."
EVENTS OF DEFAULT; NOTICE AND WAIVER
Under the Senior Notes Indenture, Events of Default are defined as: (i)
default in payment of the principal of, or premium, if any, on the Senior
Notes; (ii) default for 30 days in the payment of any installment of interest
on the Senior Notes; (iii) failure by the Company to comply with any of its
other agreements in the Senior Notes or the Senior Notes Indenture upon the
receipt by the Company of notice of such default by the Senior Notes Trustee
or by holders of not less than 25% in aggregate principal amount of the Senior
Notes then outstanding and the Company's failure to cure such default within
60 days after receipt by the Company of such notice; or (iv) certain events of
bankruptcy or insolvency.
The Senior Notes Indenture provides that, if an Event of Default specified
therein shall have happened and be continuing, either the Senior Notes Trustee
or the holders of not less than 25% in aggregate principal amount of the
Senior Notes then outstanding may declare the principal of and accrued
interest on the Senior Notes to be
23
<PAGE>
immediately due and payable. In the case of certain events of bankruptcy or
insolvency, the principal of, premium, if any, and accrued and unpaid interest
on the Senior Notes shall automatically become and be immediately due and
payable. However, if the Company shall cure all defaults (except the non-
payment of principal of, premium, if any, and interest on any of the Senior
Notes which shall have become due by acceleration) and certain other
conditions are met, with certain exceptions, such declaration may be canceled
and past defaults may be waived by the holders of a majority in principal
amount of the Senior Notes then outstanding. Interest shall accrue and be
payable on demand upon a default in the payment of the principal of, premium,
if any, accrued interest, or any redemption price to the extent that payment
of such interest shall be legally enforceable.
The Senior Notes Trustee shall give notice to holders of the Senior Notes of
any continuing default known to the Senior Notes Trustee within 90 days after
the occurrence thereof; provided that the Senior Notes Trustee may withhold
such notice if it determines in good faith that withholding the notice is in
the interests of the holders.
The holders of a majority in aggregate principal amount of the outstanding
Senior Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Senior Notes Trustee or exercising
any trust or power conferred on the Senior Notes Trustee, provided that such
direction shall not be in conflict with any law or the Senior Notes Indenture
and subject to certain other limitations. Before proceeding to exercise any
right or power under the Senior Notes Indenture at the direction of such
holders, the Senior Notes Trustee shall be entitled to receive from such
holders reasonable security or indemnity satisfactory to it against the costs,
expenses and liabilities which might be incurred by it in complying with any
such direction. No holder of any Senior Note will have any right to pursue any
remedy with respect to the Senior Notes Indenture or the Senior Notes, unless
(i) such holder shall have previously given the Senior Notes Trustee written
notice of a continuing Event of Default; (ii) the holders of at least 25% in
aggregate principal amount of the outstanding Senior Notes shall have made a
written request to the Senior Notes Trustee to pursue such remedy; (iii) such
holder or holders have offered to the Senior Notes Trustee reasonable
indemnity satisfactory to the Trustee; (iv) the holders of a majority in
aggregate principal amount of the outstanding Senior Notes have not given the
Senior Notes Trustee a direction inconsistent with such request within 60 days
after receipt of such request; and (v) the Senior Notes Trustee shall have
failed to comply with the request within such 60-day period.
However, the right of any holder (x) to receive payment of the principal
amount, premium, if any, and any interest in respect of a default in the
payment of any such amounts on a Senior Note, on or after the due date
expressed in such Senior Note, (y) to institute suit for the enforcement of
any such payments or conversion or (z) to convert Senior Notes shall not be
impaired or adversely affected without such holder's consent. The holders of
at least a majority in aggregate principal amount of the outstanding Senior
Notes may waive an existing default and its consequences, other than (i) any
default in any payment on the Senior Notes, (ii) any default with respect to
the conversion rights of the Senior Notes or (iii) any default in respect of
certain covenants or provisions in the Senior Notes Indenture which may not be
modified without the consent of the holder of each Senior Note as described in
"Modification" below.
The Company will be required to furnish to the Senior Notes Trustee annually
a statement as to any default by the Company in the performance and observance
of its obligations under the Senior Notes Indenture.
MODIFICATION
Without the consent of any holder of Senior Notes, the Company and the
Senior Notes Trustee may amend the Senior Notes Indenture to cure any
ambiguity, defect or inconsistency, to provide for the assumption by a
successor corporation of the obligations of the Company under the Senior Notes
Indenture or to make any change that does not adversely affect the rights of
any holder of Senior Notes.
Modification and amendment of the Senior Notes Indenture or the Senior Notes
may be effected by the Company and the Senior Notes Trustee with the consent
of the holders of not less than a majority in aggregate principal amount of
the Senior Notes then outstanding, except that no such modification or
amendment shall (i)
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<PAGE>
extend the fixed maturity of any Senior Note, reduce the rate or extend the
time for payment of interest thereon, reduce the principal amount thereof or
premium, if any, thereon, reduce any amount payable upon redemption thereof,
change the obligation of the Company to redeem any Senior Note upon the
happening of any Fundamental Change in a manner adverse to holders of Senior
Notes, impair the right of a holder to institute suit for the payment thereof
or impair the right to convert the Senior Notes into Common Stock subject to
the terms set forth in the Senior Notes Indenture, without the consent of each
holder of a Senior Note so affected, or (ii) reduce the aforesaid percentage
of Senior Notes whose holders are required to consent to any such supplemental
indenture, without the consent of the holders of all of the Senior Notes then
outstanding.
INFORMATION CONCERNING THE SENIOR NOTES TRUSTEE
State Street Bank and Trust Company of California, N.A., the Senior Notes
Trustee under the Senior Notes Indenture, has been appointed by the Company as
the paying agent, conversion agent, registrar and custodian with regard to the
Senior Notes, and is the trustee, paying agent conversion agent, registrar and
custodian with regard to the Zero Coupon Debentures. An affiliate of the
Senior Notes Trustee is the transfer agent and registrar of the Company's
Common Stock.
DESCRIPTION OF ZERO COUPON DEBENTURES
GENERAL
The Zero Coupon Debentures are unsecured obligations of the Company and
mature on November 2, 2013. The Zero Coupon Debentures were issued under an
indenture dated as of November 1, 1993 (the "Debenture Indenture"), between
the Company and State Street Bank and Trust Company of California, N.A., as
successor trustee (the "Debenture Trustee"). The following summaries of
certain provisions of the Zero Coupon Debentures and the Debenture Indenture
do not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Zero Coupon Debentures and
the Debenture Indenture, including the definitions therein. Wherever
particular provisions or defined terms of the Debenture Indenture (or of the
form of Zero Coupon Debenture which is a part thereof) are referred to, such
provisions or defined terms are incorporated herein by reference. As used in
this "Description of Zero Coupon Debentures," the "Company" refers to Silicon
Graphics, Inc. and does not, unless the context otherwise indicates, include
its subsidiaries.
The Zero Coupon Debentures were offered at a substantial discount from their
principal amount at maturity. The calculation of the accrual of original issue
discount is on a semi-annual bond equivalent basis using a year composed of
twelve 30-day months. Maturity, conversion, purchase by the Company at the
option of a holder thereof, or redemption of a Zero Coupon Debenture will
cause original issue discount and interest, if any, to cease to accrue on such
Zero Coupon Debenture, under the terms and subject to the conditions of the
Debenure Indenture. The Company may not reissue a Zero Coupon Debenture that
has matured or been converted, purchased by the Company at the option of a
holder, redeemed or otherwise canceled (except for registration of transfer,
exchange or replacement thereof).
The Zero Coupon Debentures and the shares of Common Stock issuable upon
conversion of the Zero Coupon Debentures have not been registered under the
Securities Act. The Zero Coupon Debentures, and the Common Stock issuable upon
conversion thereof, which are not (and have not been) held by an affiliate of
the Company are no longer subject to transfer restrictions.
SUBORDINATION OF ZERO COUPON DEBENTURES
Indebtedness evidenced by the Zero Coupon Debentures is subordinated in
right of payment, as set forth in the Debenture Indenture, to the prior
payment in full of all existing and future Senior Indebtedness of the Company.
Such subordination will not prevent the occurrence of any Event of Default
under the Debenture Indenture.
25
<PAGE>
Upon any distribution of assets of the Company upon any dissolution, winding
up, liquidation or reorganization, the payment of the principal amount at
maturity, issue price, accrued original issue discount, any redemption price,
Purchase Price, Debenture Fundamental Change Redemption Price and interest, if
any, on the Zero Coupon Debentures is to be subordinated to the extent
provided in the Debenture Indenture in right of payment to the prior payment
in full of all Senior Indebtedness. By reason of such subordination, in the
event of the Company's dissolution, holders of Senior Indebtedness may receive
more, ratably, and the holders of Zero Coupon Debentures may receive less,
ratably, than the other creditors of the Company.
In the event that the Zero Coupon Debentures are declared due and payable
prior to their stated maturity by reason of the occurrence of an Event of
Default, then the Company is obligated to notify promptly holders of Senior
Indebtedness of such acceleration. The Company may not pay the Zero Coupon
Debentures until 120 days have passed after such acceleration occurs and may
thereafter pay the Zero Coupon Debentures if the terms of the Debenture
Indenture otherwise permit payment at that time. During the continuance beyond
any applicable grace period of any default in the payment of principal,
premium, interest or any other payment due on any Senior Indebtedness, no
payment of the principal amount at maturity, issue price, accrued original
issue discount, any redemption price, Purchase Price, Debenture Fundamental
Change Redemption Price or interest, if any, on the Zero Coupon Debentures and
no payment for the purpose of any redemption, purchase or other acquisition of
the Zero Coupon Debentures shall be made by the Company. In addition, during
the continuance of any other event of default (other than a payment default)
with respect to Senior Indebtedness pursuant to which the maturity thereof may
be accelerated, from and after the date of receipt by the Debenture Trustee of
written notice from the holders of Designated Senior Indebtedness (or their
representative), no payment of the principal amount at maturity, issue price,
accrued original issue discount, any redemption price, Purchase Price,
Debenture Fundamental Change Redemption Price or interest, if any, in respect
of the Zero Coupon Debentures and no payment for the purpose of any
redemption, purchase or other acquisition of the Zero Coupon Debentures may be
made by the Company for a period ("Payment Blockage Period") commencing on the
date of delivery of such notice and, subject to certain exceptions, ending 180
days thereafter (unless such Payment Blockage Period shall be terminated by
written notice to the Debenture Trustee from the holders of such Designated
Senior Indebtedness (or their representative), or such event of default has
been cured or waived or has ceased to exist). If payments on the Zero Coupon
Debentures are permitted to resume under the Zero Coupon Debentures after a
Payment Blockage Period begins, payments on the Zero Coupon Debentures may not
be suspended again on account of a non-payment event of default on Senior
Indebtedness until the passage of 90 days after the payments on the Zero
Coupon Debentures are permitted to resume. The term "Designated Senior
Indebtedness" means a majority of the aggregate amount of Senior Indebtedness.
The term "Senior Indebtedness" means the principal of, premium, if any, and
interest on, and any other amounts due on or in connection with any
Indebtedness (as defined) of the Company (including, without limitation, fees,
costs and expenses), whether outstanding on the date of the Debenture
Indenture or thereafter created, incurred, assumed, guaranteed or in effect
guaranteed by the Company (including all deferrals, renewals, extensions or
refundings of, or amendments, modifications or supplements to, the foregoing);
provided, however, that Senior Indebtedness does not include (i) Indebtedness
evidenced by the Zero Coupon Debentures, (ii) Indebtedness of the Company to
any subsidiary of the Company, a majority of the voting stock of which is
owned by the Company, (iii) accounts payable or other indebtedness to trade
creditors created or assumed by the Company in the ordinary course of business
and (iv) any particular Indebtedness in which the instrument creating or
evidencing the same or the assumption or guarantee thereof expressly provides
that such Indebtedness shall not be senior in right of payment to, or is pari
passu with, or is subordinated or junior to, the Zero Coupon Debentures. The
term "Indebtedness" means, with respect to any person, (i) any obligation,
contingent or otherwise, of such person (a) for borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such person or
only to a portion thereof), (b) evidenced by a note, debenture, bond or
similar instrument issued for money, (c) for the payment of any money under a
lease required to be capitalized on the balance sheet of the lessee under
generally accepted accounting principles, (d) in respect of letters of credit
(including reimbursement obligations with respect thereto), local guarantees
or bankers' acceptances issued for the account of such person or (e) to pay
the deferred purchase price of property or services; (ii) any obligation
secured by a mortgage, pledge or other lien on the assets or property of such
person which is (x) given to secure
26
<PAGE>
all or a part of the purchase price of property subject thereto, whether given
to the vendor of such property or to another person, or (y) existing on
property at the time of acquisition thereof; (iii) obligations under currency
exchange or purchase agreements and interest rate protection agreements or
similar arrangements; (iv) obligations of such person under direct or indirect
guarantees in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a creditor against loss
in respect of, Indebtedness of others of the kinds referred to in clauses (i)
through (iii) above; and (v) any and all deferrals, renewals, extensions and
refundings of, or amendments, modifications or supplements to, any liability
of the kind described in any of the preceding clauses (i), (ii), (iii) or
(iv). The Senior Notes will constitute Senior Indebtedness under the Debenture
Indenture.
The Zero Coupon Debentures are obligations exclusively of the Company. Since
the operations of the Company are currently partially conducted through
subsidiaries, the cash flow and the consequent ability to service debt,
including the Zero Coupon Debentures, of the Company, are partially dependent
upon the earnings of its subsidiaries and the distribution of those earnings
to, or upon loans or other payments of funds by those subsidiaries to, the
Company. The subsidiaries are separate and distinct legal entities and have no
obligation, contingent or otherwise, to pay any amounts due pursuant to the
Zero Coupon Debentures or to make any funds available therefor, whether by
dividends, loans or other payments. In addition, the payment of dividends and
the making of loans and advances to the Company by its subsidiaries may be
subject to statutory or contractual restrictions, are contingent upon the
earnings of those subsidiaries and are subject to various business
considerations.
Any right of the Company to receive assets of any of its subsidiaries upon
their liquidation or reorganization (and the consequent right of the holders
of the Zero Coupon Debentures to participate in those assets) will be
effectively subordinated to the claims of that subsidiary's creditors
(including trade creditors), except to the extent that the Company is itself
recognized as a creditor of such subsidiary, in which case the claims of the
Company would still be subordinate to any security interests in the assets of
such subsidiary and any indebtedness of such subsidiary senior to that held by
the Company.
CONVERSION OF ZERO COUPON DEBENTURES
A holder of a Zero Coupon Debenture may convert it into Common Stock of the
Company at any time through the close of business on November 2, 2013;
provided that if a Zero Coupon Debenture is called for redemption, the holder
may convert it only until the close of business on the last trading day prior
to the redemption date. A Zero Coupon Debenture in respect of which a holder
has delivered a Purchase Notice exercising the option of such holder to
require the Company to purchase such Zero Coupon Debenture may be converted
only if such notice is withdrawn in accordance with the terms of the Debenture
Indenture. Similarly, a Zero Coupon Debenture in respect of which a holder is
exercising its option to require redemption upon a Fundamental Change may be
converted only if such holder withdraws its election to exercise its option in
accordance with the terms of the Debenture Indenture. A holder may convert
such holder's Zero Coupon Debentures in part so long as such part is $1,000
principal amount at maturity or a multiple thereof.
The conversion rate for the Zero Coupon Debentures as of the date of this
Prospectus is 16.2690 shares of Common Stock per $1,000 principal amount at
maturity of Zero Coupon Debentures, subject to adjustment upon the occurrence
of certain events. A holder entitled to a fractional share of Common Stock
upon conversion of Zero Coupon Debentures shall receive cash equal to the then
current market value of such fractional share. Shares of Common Stock issued
upon conversion of Zero Coupon Debentures in accordance with the terms of the
Debenture Indenture, and prior to the separation of the Rights and the
redemption or expiration of the Rights, shall also be entitled to receive
Rights, under the terms and subject to the conditions of the Preferred Shares
Rights Agreement.
On conversion of a Zero Coupon Debenture, a holder will not receive any cash
payment representing accrued original issue discount. The Company's delivery
to the holder of the fixed number of shares of Common Stock into which the
Zero Coupon Debenture is convertible (together with the cash payment, if any,
in lieu of fractional shares of Common Stock) will be deemed to satisfy the
Company's obligation to pay the principal
27
<PAGE>
amount of the Zero Coupon Debenture including the accrued original issue
discount attributable to the period from the issue date to the conversion
date. Thus, the accrued original issue discount is deemed to be paid in full
rather than canceled, extinguished or forfeited. The conversion rate of the
Zero Coupon Debentures will not be adjusted at any time during the term of the
Zero Coupon Debentures for such accrued original issue discount.
The conversion rate of the Zero Coupon Debentures is subject to adjustment
under formulae as set forth in the Debenture Indenture in certain events,
including: (i) the issuance of Common Stock of the Company as a dividend or
distribution on the Common Stock; (ii) subdivisions and combinations of the
Common Stock; (iii) the issuance to all holders of Common Stock of certain
rights or warrants entitling them to subscribe for or purchase Common Stock at
less than the Current Market Price (as defined); (iv) the distribution to all
holders of Common Stock of shares of capital stock (other than Common Stock)
or evidences of indebtedness of the Company or of assets (other than cash
distributions covered by clause (v) below) or rights or warrants to subscribe
for or purchase any of its securities (excluding rights or warrants to
purchase Common Stock referred to in clause (iii) above); (v) distributions
consisting of cash, excluding any quarterly cash dividend on the Common Stock
to the extent that the aggregate cash dividend per share of Common Stock in
any quarter does not exceed the greater of (x) the amount per share of Common
Stock of the next preceding quarterly dividend on the Common Stock to the
extent that such preceding quarterly dividend did not require an adjustment of
the conversion rate pursuant to this clause (v) (as adjusted to reflect
subdivisions or combinations of the Common Stock), and (y) 3.75 percent of the
average of the last reported sales price of the Common Stock during the ten
trading days immediately prior to the date of declaration of such dividend,
and excluding any dividend or distribution in connection with the liquidation,
dissolution or winding up of the Company; and (vi) payment in respect of a
tender or exchange offer by the Company or any subsidiary of the Company for
the Common Stock to the extent that the cash and value of any other
consideration included in such payment per share of Common Stock exceeds the
Current Market Price (as defined) per share of Common Stock on the trading day
next succeeding the last date on which tenders or exchanges may be made
pursuant to such tender or exchange. If any adjustment is required to be made
as set forth in clause (v) above as a result of a distribution that is a
quarterly dividend, such adjustment would be based upon the amount by which
such distribution exceeds the amount of the quarterly cash dividend permitted
to be excluded pursuant to such clause (v). If an adjustment is required to be
made as set forth in clause (v) above as a result of a distribution that is
not a quarterly dividend, such adjustment would be based upon the full amount
of the distribution.
In the event that the Rights are separated from the Common Stock in
accordance with the provisions of the Preferred Shares Rights Agreement such
that the holders of Zero Coupon Debentures would thereafter not be entitled to
receive any such Rights in respect to the Common Stock issuable upon
conversion of such Zero Coupon Debentures, the conversion rate of the Zero
Coupon Debentures will be adjusted as provided in clause (iv) of the preceding
paragraph (subject to readjustment in the event of the expiration, termination
or redemption of the Rights). In lieu of any such adjustment, the Company may
amend the Preferred Shares Rights Agreement to provide that upon conversion of
the Zero Coupon Debentures the holders will receive, in addition to the Common
Stock issuable upon such conversion, the Rights which would have attached to
such shares of Common Stock if the Rights had not become separated from the
Common Stock pursuant to the provisions of the Preferred Shares Rights
Agreement.
No adjustment in the conversion rate of the Zero Coupon Debentures will be
required unless such adjustment would require a change of at least 1% in the
conversion rate then in effect; provided that any adjustment that would
otherwise be required to be made shall be carried forward and taken into
account in any subsequent adjustment. The Company reserves the right to make
such increase in the conversion rate in addition to those required in the
foregoing provisions as the Company in its discretion shall determine to be
advisable in order that certain stock-related distributions hereafter made by
the Company to its stockholders shall not be taxable. Except as stated above,
the conversion rate of the Zero Coupon Debentures will not be adjusted for the
issuance of Common Stock or any securities convertible into or exchangeable
for Common Stock or carrying the right to purchase any of the foregoing.
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<PAGE>
In the case of (i) any reclassification of the Common Stock, or (ii) a
consolidation or merger involving the Company or a sale or conveyance to
another corporation of the property and assets of the Company as an entirety
or substantially as an entirety, in each case as a result of which holders of
Common Stock shall be entitled to receive stock, other securities, other
property or assets (including cash) with respect to or in exchange for such
Common Stock, the holders of the Zero Coupon Debentures then outstanding will
be entitled thereafter to convert such Zero Coupon Debentures into the kind
and amount of shares of stock, other securities or other property or assets
(including cash) which they would have owned or been entitled to receive upon
such reclassification, consolidation, merger, sale or conveyance had such Zero
Coupon Debentures been converted immediately prior to such reclassification,
consolidation, merger, sale or conveyance assuming that a holder of Zero
Coupon Debentures would not have exercised any rights of election as to the
stock, other securities or other property or assets (including cash)
receivable in connection therewith.
In the event of a taxable distribution to holders of Common Stock or in
certain other circumstances requiring an adjustment to the conversion rate of
the Zero Coupon Debentures, the holders of Zero Coupon Debentures may, in
certain circumstances, be deemed to have received a distribution subject to
United States income tax as a dividend; in certain other circumstances, the
absence of such an adjustment may result in a taxable dividend to the holders
of Common Stock.
The Company from time to time may to the extent permitted by law increase
the conversion rate of the Zero Coupon Debentures by any amount for any period
of at least 20 days, in which case the Company shall give at least 15 days'
notice of such increase, if the Board of Directors has made a determination
that such increase would be in the best interests of the Company, which
determination shall be conclusive. The Company may, at its option, make such
increases in the conversion rate, in addition to those set forth above, as the
Board of Directors of the Company deems advisable to avoid or diminish any
income tax to holders of Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated
as such for income tax purposes.
REDEMPTION OF ZERO COUPON DEBENTURES AT THE OPTION OF THE COMPANY
No sinking fund is provided for the Zero Coupon Debentures. Prior to
November 2, 1998, the Zero Coupon Debentures are not redeemable at the option
of the Company. Beginning on November 2, 1998, the Company may redeem the Zero
Coupon Debentures for cash as a whole at any time, or from time to time in
part, upon not less than 30 days' nor more than 60 days' notice of redemption
given by mail to holders of Zero Coupon Debentures. The Zero Coupon Debentures
will be redeemable in multiples of $1,000 principal amount at maturity.
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The table below shows redemption prices of Zero Coupon Debentures per $1,000
principal amount at maturity thereof at November 2, 1998 and at each November
2 thereafter prior to maturity and at maturity on November 2, 2013 which
prices reflect the accrued original issue discount calculated to each such
date. The redemption price of a Zero Coupon Debenture redeemed between such
dates would include an additional amount reflecting the additional original
issue discount accrued since the next preceding date in the table to the
actual redemption date.
<TABLE>
<CAPTION>
(2)
ACCRUED
ORIGINAL (3)
(1) ISSUE REDEMPTION
DEBENTURE DISCOUNT PRICE
REDEMPTION DATE ISSUE PRICE AT 4.15% (1) + (2)
- --------------- ----------- -------- ----------
<S> <C> <C> <C>
November 2, 1998................................ $439.77 $100.26 $ 540.03
November 2, 1999................................ 439.77 122.91 562.68
November 2, 2000................................ 439.77 146.50 586.27
November 2, 2001................................ 439.77 171.08 610.85
November 2, 2002................................ 439.77 196.69 636.46
November 2, 2003................................ 439.77 223.38 663.15
November 2, 2004................................ 439.77 251.19 690.96
November 2, 2005................................ 439.77 280.16 719.93
November 2, 2006................................ 439.77 310.35 750.12
November 2, 2007................................ 439.77 341.80 781.57
November 2, 2008................................ 439.77 374.57 814.34
November 2, 2009................................ 439.77 408.72 848.49
November 2, 2010................................ 439.77 444.29 884.06
November 2, 2011................................ 439.77 481.36 921.13
November 2, 2012................................ 439.77 519.99 959.76
November 2, 2013................................ 439.77 560.23 1,000.00
</TABLE>
If less than all of the outstanding Zero Coupon Debentures are to be
redeemed, the Debenture Trustee shall select the Zero Coupon Debentures to be
redeemed in principal amounts at maturity of $1,000 or multiples thereof by
lot, pro rata or by another method the Debenture Trustee considers fair and
appropriate. If a portion of a holder's Zero Coupon Debentures is selected for
partial redemption and such holder converts a portion of such Zero Coupon
Debentures, such converted portion shall be deemed to be of the portion
selected for redemption.
REDEMPTION AT THE OPTION OF THE HOLDER UPON A FUNDAMENTAL CHANGE
If a Fundamental Change occurs at any time prior to November 2, 2013, each
holder of Zero Coupon Debentures shall have the right, at the holder's option,
to require the Company to redeem any or all of such holder's Zero Coupon
Debentures on the Repurchase Date. The Zero Coupon Debentures will be
redeemable in multiples of $1,000 principal amount at maturity.
The Company shall redeem such Zero Coupon Debentures at a price (the
"Debenture Fundamental Change Redemption Price") equal to the issue price plus
accrued original issue discount to the date of redemption; provided that if
the Applicable Price in connection with the Fundamental Change is less than
the Debenture Reference Market Price (as defined), the Company shall redeem
such Zero Coupon Debentures at a price equal to the foregoing redemption price
multiplied by the fraction obtained by dividing the Applicable Price by the
Debenture Reference Market Price. As of the date of this Prospectus, the
"Debenture Reference Market Price" is $14.415, and, in the event of any
adjustment to the conversion rate applicable to the Zero Coupon Debentures
pursuant to the provisions of the Debenture Indenture, the Debenture Reference
Market Price shall also be adjusted so that it shall be equal to the Debenture
Reference Market Price multiplied by a fraction the numerator of which is
8.1345 and the denominator of which is the conversion rate applicable to the
Zero Coupon Debentures following such adjustment. The redemption rights of the
holders of Zero Coupon Debentures could discourage a potential acquiror of the
Company.
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No Zero Coupon Debentures may be redeemed at the option of the holders
thereof upon a Fundamental Change if there has occurred and is continuing an
Event of Default described under "Events of Default; Notice and Waiver" (other
than a default in the payment of the Debenture Fundamental Change Redemption
Price with respect to such Zero Coupon Debentures). Further, the payment of
the Debenture Fundamental Change Redemption Price on the Zero Coupon
Debentures is subordinated to the prior payment of Senior Indebtedness as
described under "Subordination of Zero Coupon Debentures" above.
PURCHASE OF ZERO COUPON DEBENTURES AT THE OPTION OF THE HOLDER
On November 2, 1998, November 2, 2003 and November 2, 2008 (each, a
"Purchase Date"), the Company is obligated to purchase, at the option of the
holder thereof, any outstanding Zero Coupon Debenture for which a written
Purchase Notice (containing such information as is required by the Debenture
Indenture) has been delivered by the holder thereof to the office of the
Paying Agent at any time from the opening of business on the date that is 20
Business Days prior to such Purchase Date until the close of business on such
Purchase Date and for which such Purchase Notice has not been withdrawn,
subject to certain additional conditions. Any Purchase Notice may be withdrawn
by a written notice of withdrawal delivered to the Paying Agent prior to the
close of business on the Purchase Date.
The Purchase Price payable in respect of a Zero Coupon Debenture shall be
equal to the issue price plus accrued original issue discount to the Purchase
Date. The table below shows the Purchase Prices of a Zero Coupon Debenture as
of the specified Purchase Dates. The Company may elect to pay the Purchase
Price payable as of any Purchase Date in cash or shares of Common Stock, or
any combination thereof.
<TABLE>
<CAPTION>
PURCHASE
PURCHASE DATE PRICE
------------- --------
<S> <C>
November 2, 1998.................................................... $540.03
November 2, 2003.................................................... $663.15
November 2, 2008.................................................... $814.34
</TABLE>
If the Company elects to pay the Purchase Price, in whole or in part, in
shares of Common Stock, the number of shares to be delivered in respect of the
portion of the Purchase Price to be paid in shares of Common Stock shall be
equal to such portion of the Purchase Price divided by the Market Price (as
defined) of the Common Stock. Shares of Common Stock issued upon purchase of
Zero Coupon Debentures in accordance with the provisions of the Debenture
Indenture, and prior to the date the Rights trade separately from the Common
Stock and the redemption or expiration of the Rights, shall also be entitled
to receive Rights, under the terms and subject to the conditions of the
Preferred Shares Rights Agreement. However, no fractional shares of Common
Stock will be delivered upon any purchase by the Company of Zero Coupon
Debentures through the delivery of shares of Common Stock in payment, in whole
or in part, of the Purchase Price. Instead, the Company will pay cash based on
the Market Price for all fractional shares of Common Stock.
The Company will give notice (the "Company Notice") not less than 20
Business Days prior to the Purchase Date (the "Company Notice Date") to all
holders of Zero Coupon Debentures at their addresses shown in the register of
the Registrar (and to beneficial owners as required by applicable law)
stating, among other things, whether the Company will pay the Purchase Price
of the Zero Coupon Debentures in cash or Common Stock, or any combination
thereof (specifying the percentage of each) and, if the Company elects to pay
in Common Stock, in whole or in part, the method of calculating the Market
Price of the Common Stock.
The "Market Price" means the average of the Sale Prices (as defined) of the
Common Stock for the five trading day period ending on (if the third Business
Day prior to the applicable Purchase Date is a trading day or, if not, then on
the last trading day prior to) the third Business Day prior to the applicable
Purchase Date, appropriately adjusted to take into account the occurrence
during the period commencing on the first of such trading days during such
five trading day period and ending on such Purchase Date of certain events
that would result in an adjustment of the conversion rate of the Zero Coupon
Debentures with respect to the Common Stock.
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The "Sale Price" of the Common Stock on any date means the closing per share
sale price (or if no closing sale price is reported, the average bid and ask
prices or, if more than one in either case, the average of the average bid and
average ask prices) on such date as reported in the composite transactions for
the principal United States securities exchange on which the Common Stock is
traded or, if the Common Stock is not listed on a United States national or
regional stock exchange, as reported on the Nasdaq National Market System.
Because the Market Price of the Common Stock is determined prior to the
applicable Purchase Date, holders of Zero Coupon Debentures bear the market
risk with respect to the value of the Common Stock to be received from the
date such Market Price is determined to such Purchase Date. The Company may
elect to pay the Purchase Price in Common Stock only if the information
necessary to calculate the Market Price is reported in a daily newspaper of
national circulation. Upon determination of the actual number of shares of
Common Stock in accordance with the foregoing provisions, the Company will
publish such determination in a daily newspaper of national circulation.
The Company's right to purchase Zero Coupon Debentures with shares of Common
Stock is subject to the Company satisfying various conditions, including: (i)
the registration of the Common Stock under the Securities Act, if required;
and (ii) compliance with other applicable federal and state securities laws,
if any. If such conditions are not satisfied by a Purchase Date, the Company
will pay the Purchase Price of the Zero Coupon Debentures to be purchased on
such Purchase Date entirely in cash.
No Zero Coupon Debentures may be purchased at the option of the holder
thereof for cash if there has occurred (prior to, on or after the giving, by
the holders of such Zero Coupon Debentures, of the required Purchase Notice)
and is continuing an Event of Default described under "Events of Default;
Notice and Waiver" (other than a default in the payment of the Purchase Price
with respect to such Zero Coupon Debentures).
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate with or merge into any other person or
convey, transfer or lease its properties and assets substantially as an
entirety to another person, unless, among other items, (i) the resulting,
surviving or transferee person (if other than the Company) is organized and
existing under the laws of the United States, any state thereof or the
District of Columbia and such person assumes all obligations of the Company
under the Zero Coupon Debentures and the Debenture Indenture, and (ii) the
Company or such successor person shall not immediately thereafter be in
default under the Indenture. Upon the assumption of the Company's obligations
by such a person in such circumstances, subject to certain exceptions, the
Company shall be discharged from all obligations under the Zero Coupon
Debentures and the Debenture Indenture. Certain such transactions which would
constitute a Fundamental Change would permit each holder to require the
Company to redeem the Zero Coupon Debentures of such holder as described under
"Redemption at the Option of the Holder Upon a Fundamental Change."
EVENTS OF DEFAULT; NOTICE AND WAIVER
Under the Debenture Indenture, Events of Default are defined as: (i) default
in payment of the principal amount at maturity, issue price, accrued original
issue discount, any redemption price, Purchase Price or Debenture Fundamental
Change Redemption Price with respect to any Zero Coupon Debenture when such
becomes due and payable (whether or not payment is prohibited by the
provisions of the Debenture Indenture); (ii) failure by the Company to comply
with any of its other agreements in the Zero Coupon Debentures or the
Debenture Indenture upon the receipt by the Company of notice of such default
by the Debenture Trustee or by holders of not less than 25% in aggregate
principal amount at maturity of the Zero Coupon Debentures then outstanding
and the Company's failure to cure such default within 60 days after receipt by
the Company of such notice; or (iii) certain events of bankruptcy or
insolvency.
The Debenture Indenture provides that, if an Event of Default specified
therein shall have happened and be continuing, either the Debenture Trustee or
the holders of not less than 25% in aggregate principal amount at maturity of
the Zero Coupon Debentures then outstanding may declare the issue price of the
Zero Coupon
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Debentures plus the original issue discount on the Zero Coupon Debentures
accrued to the date of such declaration to be immediately due and payable. In
the case of certain events of bankruptcy or insolvency, the Issue Price of the
Zero Coupon Debentures plus the original issue discount accrued thereon to the
occurrence of such event shall automatically become and be immediately due and
payable. See "Subordination of Zero Coupon Debentures." Under certain
circumstances, the holders of a majority in aggregate principal amount at
maturity of the outstanding Zero Coupon Debentures may rescind any such
acceleration with respect to the Zero Coupon Debentures and its consequences.
Interest shall accrue and be payable on demand upon a default in the payment
of the issue price, accrued original issue discount, or any redemption price,
Purchase Price or Debenture Fundamental Change Redemption Price to the extent
that payment of such interest shall be legally enforceable.
The Debenture Trustee shall give notice to holders of the Zero Coupon
Debentures of any continuing default known to the Debenture Trustee within 90
days after the occurrence thereof; provided that the Debenture Trustee may
withhold such notice if it determines in good faith that withholding the
notice is in the interests of the holders.
The holders of a majority in aggregate principal amount at maturity of the
outstanding Zero Coupon Debentures may direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee or
exercising any trust or power conferred on the Debenture Trustee, provided
that such direction shall not be in conflict with any law or the Debenture
Indenture and subject to certain other limitations. Before proceeding to
exercise any right or power under the Debenture Indenture at the direction of
such holders, the Debenture Trustee shall be entitled to receive from such
holders reasonable security or indemnity satisfactory to it against the costs,
expenses and liabilities which might be incurred by it in complying with any
such direction. No holder of any Zero Coupon Debenture will have any right to
pursue any remedy with respect to the Debenture Indenture or the Zero Coupon
Debentures, unless (i) such holder shall have previously given the Debenture
Trustee written notice of a continuing Event of Default; (ii) the holders of
at least 25% in aggregate principal amount at maturity of the outstanding Zero
Coupon Debentures shall have made a written request to the Debenture Trustee
to pursue such remedy; (iii) such holder or holders have offered to the
Debenture Trustee reasonable indemnity satisfactory to the Debenture Trustee;
(iv) the holders of a majority in aggregate principal amount at maturity of
the outstanding Zero Coupon Debentures have not given the Debenture Trustee a
direction inconsistent with such request within 60 days after receipt of such
request; and (v) the Debenture Trustee shall have failed to comply with the
request within such 60-day period.
However, the right of any holder (x) to receive payment of the principal
amount at maturity, issue price, accrued original issue discount, any
redemption price, Purchase Price, Debenture Fundamental Change Redemption
Price and any interest in respect of a default in the payment of any such
amounts on a Zero Coupon Debenture, on or after the due date expressed in such
Zero Coupon Debenture, (y) to institute suit for the enforcement of any such
payments or conversion or (z) to convert Zero Coupon Debentures shall not be
impaired or adversely affected without such holder's consent. The holders of
at least a majority in aggregate principal amount at maturity of the
outstanding Zero Coupon Debentures may waive an existing default and its
consequences, other than (i) any default in any payment on the Zero Coupon
Debentures, (ii) any default with respect to the conversion rights of the Zero
Coupon Debentures or (iii) any default in respect of certain covenants or
provisions in the Debenture Indenture which may not be modified without the
consent of the holder of each Zero Coupon Debenture as described in
"Modification" below.
The Company will be required to furnish to the Debenture Trustee annually a
statement as to any default by the Company in the performance and observance
of its obligations under the Debenture Indenture.
MODIFICATION
Without the consent of any holder of Zero Coupon Debentures, the Company and
the Debenture Trustee may amend the Debenture Indenture to cure any ambiguity,
defect or inconsistency, to provide for the assumption by a successor
corporation of the obligations of the Company under the Debenture Indenture or
to make any change that does not adversely affect the rights of any holder of
Zero Coupon Debentures. No amendment may be made to the subordination
provisions of the Indenture that adversely affects the rights of any
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<PAGE>
holder of Senior Indebtedness then outstanding, unless the holders of such
Senior Indebtedness (as required pursuant to the terms of such Senior
Indebtedness) consent to such change.
Modification and amendment of the Debenture Indenture or the Zero Coupon
Debentures may be effected by the Company and the Debenture Trustee with the
consent of the holders of not less than a majority in aggregate principal
amount at maturity of the Zero Coupon Debentures then outstanding. However,
without the consent of each holder affected thereby, no amendment may, among
other things: (i) reduce the principal amount at maturity, issue price,
Purchase Price, Debenture Fundamental Change Redemption Price or any
redemption price, or extend the stated maturity of any Zero Coupon Debenture
or alter the manner or rate of accrual of original issue discount or interest,
or make any Zero Coupon Debenture payable in money or securities other than
that stated in the Zero Coupon Debenture; (ii) make any change to the
principal amount at maturity of Zero Coupon Debentures whose holders must
consent to an amendment or any waiver under the Debenture Indenture or modify
the Debenture Indenture provisions relating to such amendments or waivers;
(iii) make any change that adversely affects the right to convert any Zero
Coupon Debenture or the right to require the Company to purchase a Zero Coupon
Debenture or the right to require the Company to redeem a Zero Coupon
Debenture upon a Fundamental Change; (iv) modify the provisions of the
Debenture Indenture relating to the subordination of the Zero Coupon
Debentures in a manner adverse to the holders of the Zero Coupon Debentures;
or (v) impair the right to institute suit for the enforcement of any payment
with respect to, or conversion of, the Zero Coupon Debentures.
LIMITATIONS OF CLAIMS IN BANKRUPTCY
If a bankruptcy proceeding is commenced in respect of the Company, the claim
of the holder of a Zero Coupon Debenture is, under Title 11 of the United
States Code, limited to the issue price of the Zero Coupon Debenture plus that
portion of the original issue discount that has accrued from the date of issue
to the commencement of the proceeding. In addition, the holders of the Zero
Coupon Debentures will be subordinated in right of payment to Senior
Indebtedness and effectively subordinated to the indebtedness and other
obligations of the Company's subsidiaries. See "Subordination of Zero Coupon
Debentures."
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
State Street Bank and Trust Company of California, N.A., the Debenture
Trustee under the Debenture Indenture, is the paying agent, conversion agent,
registrar and custodian with regard to the Zero Coupon Debentures, and will be
the Senior Notes Trustee and the paying agent, conversion agent, registrar and
custodian with regard to the Senior Notes. An affiliate of the Debenture
Trustee is also the transfer agent and registrar of the Company's Common
Stock.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 200,000,000 shares
of Common Stock, $.001 par value, and 2,000,000 shares of Preferred stock,
$.001 par value. As of March 31, 1997, 176,744,669 shares of Common Stock were
outstanding and 17,500 shares of Series A Preferred Stock were outstanding.
COMMON STOCK
Each share of Common Stock entitles the holder to one vote on matters
submitted to a vote of the stockholders (cumulative voting may be invoked in
connection with the election of directors), and, subject to the prior
preferences of the Company's Preferred Stock, a pro rata share of such
dividends as may be declared on the Common Stock and a pro rata share of
assets remaining available for distribution to stockholders upon a liquidation
of the Company. Certain rights of the Common Stock are subject to the prior
preferences of the Company's outstanding Series A Preferred Stock and any
other series of Preferred Stock which may be issued in the future. The Common
Stock is not convertible and has no preemptive rights. There are no redemption
provisions with respect to the Common Stock. All of the outstanding shares of
Common Stock are, and the shares
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<PAGE>
of Common Stock issuable upon conversion of the Senior Notes and the Zero
Coupon Debentures will be, fully paid and non-assessable.
The transfer agent for the Company's Common Stock is BankBoston, N.A.
PREFERRED STOCK
The Company's Certificate of Incorporation and Bylaws provides that
Preferred Stock may be issued from time-to-time in one or more series. The
Company's Board of Directors has authority to fix or alter the dividend
rights, dividend rate, conversion rights, voting rights, rights and terms of
redemption (including sinking fund provisions), redemption price or prices,
and liquidation preferences of any wholly unissued series of Preferred Stock,
as well as the number of shares constituting any such unissued series and the
designation thereof, and to increase or decrease the number of shares of any
outstanding series (but not below the number of shares of such series then
outstanding), without any further vote or action by the Company's
stockholders.
Series A Preferred Stock. The Series A Preferred Stock is owned by a wholly-
owned subsidiary of NKK Corporation, a Japanese corporation ("NKK"). The
Series A Preferred Stock receives a 3% cumulative annual dividend and a
preference upon liquidation in the amount of its original purchase price, has
aggregate voting rights equivalent to 1,400,000 shares of Common Stock, and is
convertible into Common Stock at certain times at the then-current market
price of the Common Stock. The Series A Preferred Stock is perpetual, but is
subject to redemption at certain times after the initial conversion date in
certain events if the market price of the Common Stock is below $8.75 per
share at such times.
NKK is subject to certain contractual restrictions on its right to transfer
shares of Series A Preferred Stock (or shares of Common Stock issuable upon
conversion thereof). The Company has rights of first refusal to purchase the
shares on certain proposed transfers of stock by NKK. NKK has agreed to limit
its ownership of the Company's voting stock to 10% of the Company's
outstanding voting stock. NKK has also agreed, so long as it holds more than
3% of the outstanding voting stock, to be present at all stockholder meetings
so that all shares held by it may be counted for purposes of determining a
quorum. In addition, NKK has agreed to vote for management's nominees in all
elections of directors and in the manner recommended by management on all
other issues, except for certain significant events. NKK has also agreed to
restrictions on soliciting proxies and acting in concert with others.
Preferred Shares Rights Agreement. Effective February 1991, the Board of
Directors of the Company approved the Preferred Shares Rights Agreement and
declared a dividend distribution payable March 1, 1991 of one Preferred Share
Purchase Right (the "Rights") for each share of its Common Stock outstanding
on March 1, 1991 and each share of its Common Stock issued thereafter (subject
to certain limitations). The Preferred Shares Rights Agreement was amended
effective as of May 24, 1991 and again effective as of May 6, 1992 and again
effective as of May 2, 1995.
Currently, the Rights trade with the shares of Common Stock. When the Rights
become exercisable, each Right will entitle the holder to buy one one-
thousandth of a share of Series B Participating Preferred Stock, $0.001 par
value, at an exercise price of $200 per one one-thousandth of a share. The
Rights will become exercisable and will trade separately from the Common Stock
(unless postponed by action of the disinterested directors of the Company) on
the earlier of (i) 10 days following a public announcement that a person or
group has acquired, or obtained the right to acquire, beneficial ownership of
15% or more of the outstanding Common Stock or (ii) 10 days following the
commencement or announcement of a tender offer or exchange offer which, if
consummated, would result in the beneficial ownership by a person or group of
15% or more of the Company's outstanding Common Stock.
In general, if any person or group acquires 15% or more of the Company's
Common Stock without approval of the Company's Board of Directors, each Right
not held by the acquiring person will entitle its holder to purchase $400
worth of the Company's Common Stock for an effective purchase price of $200.
If, after any
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<PAGE>
person or group acquires 15% or more of the Company's Common Stock without the
approval of the Board of Directors, the Company is acquired in a merger or
other business combination transaction, each Right not held by the acquiring
person would entitle its holder to purchase $400 worth of the common stock of
the acquiring company for $200. Under certain conditions, the Company may
elect to redeem the Rights for $.005 per Right or cause the exchange of each
Right not held by the acquiring person for one share of the Company's Common
Stock. Additionally, the exercise price, number of Rights, and number of
shares of Series B Participating Preferred or Common Stock that may be
acquired for the exercise price are subject to adjustment from time to time to
prevent dilution. The Rights expire on March 1, 2001, unless previously
exchanged or redeemed as described above, or terminated in connection with the
acquisition of the Company by consolidation or merger approved by the Board of
Directors and satisfying certain conditions.
The Rights are designed to protect and maximize the value of the outstanding
equity interests in the Company in the event of an unsolicited attempt by an
acquiror to take over the Company in a manner or on terms not approved by the
Board of Directors. Takeover attempts frequently include coercive tactics to
deprive a corporation's Board of Directors and its stockholders of any real
opportunity to determine the destiny of the corporation. The Rights have been
declared by the Board in order to deter such tactics, including a gradual
accumulation of shares in the open market of a 15% or greater position to be
followed by a merger or a partial or two-tier tender offer that does not treat
all stockholders equally. These tactics could unfairly pressure stockholders,
squeeze them out of their investment without giving them any real choice or
deprive them of the full value of their shares.
The Rights are not intended to prevent a takeover of the Company and will
not do so. Nevertheless, the Rights may have the effect of rendering more
difficult or discouraging an acquisition of the Company deemed undesirable by
the Board of Directors. The Rights may cause substantial dilution to a person
or group that attempts to acquire the Company on terms or in a manner not
approved by the Company's Board of Directors, except pursuant to an offer
conditioned upon the negation, purchase or redemption of the Rights.
The description above is qualified in its entirety by reference to the
Preferred Shares Rights Agreement.
CERTAIN CHARTER PROVISIONS
The Company's Certificate of Incorporation and Bylaws contain procedural
provisions that could have the effect of delaying, deferring or preventing a
change in control of the Company. These include the following: (i) a provision
requiring that special meetings of the stockholders be called only by the
Board of Directors, the Chairman of the Board, the Secretary or an executive
officer of the Company; (ii) a provision permitting only a majority of the
remaining members of the Board of Directors to fill vacancies on the Board of
Directors; (iii) a provision requiring stockholders to give advance notice of
proposals for action by the stockholders at meetings of the stockholders; (iv)
a provision classifying the Board of Directors into three classes and
requiring that directors may be removed only for "cause"; and (v) a provision
requiring stockholders to give advance notice of director nominations.
DELAWARE GENERAL CORPORATION LAW SECTION 203
As a corporation organized under the laws of the State of Delaware, the
Company is subject to Section 203 of the Delaware General Corporation Law,
which restricts certain business combinations between the Company and an
"interested stockholder" (in general, a stockholder owning 15% or more of the
Company's outstanding voting stock) or such stockholder's affiliates or
associates for a period of three years following the date on which the
stockholder becomes an "interested stockholder." The restrictions do not apply
if (i) prior to an interested stockholder becoming such, the Board of
Directors approves either the business combination or the transaction in which
the stockholder becomes an interested stockholder, (ii) upon consummation of
the transaction in which such stockholder becomes an interested stockholder,
such interested stockholder owns at least 85% of the voting stock of the
Company outstanding at the time the transaction commenced (excluding shares
owned by certain employee stock ownership plans and persons who are both
directors and officers of the Company) or (iii) on or
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<PAGE>
subsequent to the date an interested stockholder becomes such, the business
combination is both approved by the Board of Directors and authorized at an
annual or special meeting of the Company's stockholders (and not by written
consent) by the affirmative vote of at least 66 2/3% of the outstanding voting
stock not owned by the interested stockholder.
BOOK-ENTRY SYSTEM--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") acts as securities depositary (the
"Depositary") for the Zero Coupon Debentures and will act as the Depository
for the Senior Notes. DTC is a limited-purpose trust company organized under
the New York Banking Law, a "banking organization" within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC holds securities that its participants (the "Participants")
deposit with DTC. DTC also facilitates the settlement among Participants of
securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in Participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. Direct Participants include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations
(the "Direct Participants"). DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, the American Stock Exchange,
Inc., and the National Association of Securities Dealers, Inc. Access to the
DTC system is also available to others, such securities brokers and dealers,
banks, and trust companies that clear transactions through or maintain a
direct or indirect custodial relationship with a Direct Participant ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Commission.
The ownership interest of each actual owner of a Senior Note ("Beneficial
Owner") within the DTC system is recorded on the Direct and Indirect
Participants' records and is credited to the Direct Participant on DTC's
records. Beneficial Owners do not receive written confirmation from DTC of
their transactions, but Beneficial Owners are expected to receive written
confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which the Beneficial Owners exchanged or hold Senior Notes. Transfers of
ownership interests in the Senior Notes are to be accomplished by entries made
on the books of Participants acting on behalf of Beneficial Owners.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the Senior Notes represented
by a global certificate.
To facilitate subsequent transfers, all the Senior Notes deposited by
Participants with DTC will be registered in the name of Cede & Co. The deposit
of Senior Notes with DTC and their registration in the name of Cede & Co.
effect no change in beneficial ownership. DTC has no knowledge of the identity
of the Beneficial Owners of the Senior Notes, as its records reflect only the
identity of the Direct Participants to whose accounts such Senior Notes are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communication by DTC to Direct Participants,
by Direct Participants to Indirect Participants and by Direct Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements that may be in
effect from time to time.
Redemptions are coordinated through DTC. Redemption notices shall be sent to
Cede & Co. If less than all of the Senior Notes held by DTC are being
redeemed, DTC will reduce the amount of the interest of each Direct
Participant in such Senior Notes in accordance with its procedures.
Conversions are coordinated through DTC. Conversion notices shall be sent to
Cede & Co. by a Direct Participant for the benefit of Beneficial Owners. DTC
will reduce the amount of interest of a Direct Participant in the Senior Notes
as a result of any such conversions in accordance with its procedures.
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<PAGE>
Distribution payments on the Senior Notes are made to DTC. DTC's practice is
to credit Direct Participants' accounts on the relevant payment date in
accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the account of customers in bearer form or registered in "street name," and
such payments will be the responsibility of such Participant and not of DTC or
the Company, subject to any statutory or regulatory requirements to the
contrary that may be in effect from time to time. Payment of distributions to
DTC is the responsibility of the Company, disbursement of such payments to the
Beneficial Owners is the responsibility of Direct and Indirect Participants.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of the Senior Notes only at the direction of one or more
Participants to whose account with DTC interests in Senior Notes represented
by a global certificate are credited and only in respect of such principal
amount of the Senior Notes represented by a global certificate as to which
such Participants have given such direction.
Except as provided herein, a Beneficial Owner in a global Senior Note
certificate will not be entitled to receive physical delivery of such
securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under such securities. Because DTC can only act on
behalf of Participants, who in turn act on behalf of Indirect Participants,
the ability of a person having a beneficial interest in shares represented by
a global certificate 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 of such
interest.
DTC may discontinue providing its services as a Depositary with respect to
the Senior Notes at any time by giving reasonable notice to the Company. Under
such circumstances, in the event that a successor securities depositary is not
obtained, certificates for the Senior Notes for which DTC has discontinued its
services are required to be printed and delivered. Additionally, the Company
may decide to discontinue use of the system of book-entry transfers through
DTC (or any successor depositary) with respect to the Senior Notes. In that
event, certificates for the Senior Notes will be printed and delivered.
Notwithstanding any provision of the Senior Notes Indenture, no global
Senior Note may be exchanged in whole or in part for Senior Notes registered,
and no transfer of a global Senior Note in whole or in part may be registered,
in the name of any person other than DTC or its nominee unless (i) DTC has
notified the Company that it is unwilling or unable to continue as Depositary
for such global Senior Note or has ceased to be qualified to act as such as
required by the Senior Notes Indenture, or (ii) there shall have occurred and
be continuing an Event of Default with respect to the Senior Notes. All
securities issued in exchange for a Senior Note or any portion thereof will be
registered in such names as the Depositary may direct.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material, anticipated United States
federal income tax consequences relating to the Exchange Offer and the
ownership and disposition of the Senior Notes (and Common Stock received upon
a conversion of Senior Notes) by holders that receive their Senior Notes in
the Exchange Offer. In addition, portions of this discussion are based on
areas in which the Internal Revenue Code of 1986, as amended (the "Code") and
the Income Tax Regulations promulgated thereunder (the "Regulations") do not
provide any clear guidance, and the administrative rulings and judicial
decisions do not provide a clear resolution. This discussion does not purport
to address all aspects of United States federal income taxation that may be
relevant to particular holders in light of their personal circumstances, the
United States federal income tax consequences to certain types of holders
subject to special treatment under the Code (e.g., life insurance companies,
tax exempt organizations, financial institutions, dealers in securities or
currencies, and persons holding Zero Coupon
38
<PAGE>
Debentures or Senior Notes as a part of a hedging or conversion transaction or
a straddle), or the effect of any applicable state, local or foreign tax laws.
The discussion assumes that the Zero Coupon Debentures are held, and the
Senior Notes will be held, as "capital assets" within the meaning of Section
1221 of the Code.
This discussion is based upon provisions of the Code, the Regulations, and
judicial and administrative interpretations thereof, all as in effect as of
the date hereof, and all of which are subject to change (possibly on a
retroactive basis) or different interpretation. There can be no assurance that
the Internal Revenue Service (the "Service") will not challenge one or more of
the tax consequences described herein, and the Company has not obtained, nor
does it intend to obtain, a ruling from the Service with respect to the
federal income tax consequences of the Exchange Offer. INVESTORS CONSIDERING
THE EXCHANGE OF ZERO COUPON DEBENTURES IN THE EXCHANGE OFFER ARE URGED TO
CONSULT THEIR OWN TAX ADVISOR TO DETERMINE THEIR PARTICULAR TAX CONSEQUENCES
OF THE EXCHANGE OFFER AND THE OWNERSHIP AND DISPOSITION OF THE SENIOR NOTES
UNDER FEDERAL AND APPLICABLE STATE, LOCAL AND FOREIGN TAX LAWS.
As used herein, a "U.S. Holder" means a beneficial holder of Zero Coupon
Debentures or Senior Notes received in the Exchange Offer that is a citizen or
resident (within the meaning of Section 7701(b) of the Code) of the United
States, a corporation, partnership or other entity formed under the laws of
the United States or any political subdivision thereof, an estate the income
of which is subject to United States federal income taxation regardless of its
source and a trust subject to the primary supervision of a court within the
United States and the control of a United States fiduciary as described in
Section 7701(a)(30) of the Code and any other person whose income or gain with
respect to a Senior Note is effectively connected with the conduct of a United
States trade or business. A "non-U.S. Holder" is any holder other than a U.S.
Holder.
TREATMENT OF EXCHANGE OFFER
The tax treatment of a U.S. Holder's exchange of Zero Coupon Debentures for
Senior Notes pursuant to the Exchange Offer may vary depending on whether that
exchange is treated as part of a recapitalization, which is generally
nontaxable except to the extent of the lesser of any gain realized or "boot"
(i.e., non-qualifying consideration) received. Under the Code, the exchange of
Zero Coupon Debentures for Senior Notes pursuant to the Exchange Offer will be
treated as a recapitalization only if both the Zero Coupon Debentures and the
Senior Notes constitute "securities" within the meaning of the provisions of
the Code governing reorganizations. This, in turn, depends upon the facts and
circumstances surrounding the origin and nature of these debt instruments and
upon the interpretation of numerous judicial decisions.
Assuming the exchange of Zero Coupon Debentures for Senior Notes constitutes
a recapitalization, a U.S. Holder will not recognize loss upon the exchange. A
U.S. Holder will recognize gain, if any, to the extent that the U.S. Holder
receives "boot." Under a literal interpretation of the Code, a U.S. Holder
would not be considered to receive "boot" because the principal amount of the
Senior Notes will not exceed the principal amount at maturity of the Zero
Coupon Debentures exchanged therefor. However, a reasonable interpretation of
these rules, and the interpretation the Company intends to take is that the
principal amount should be determined by reference to the "adjusted issue
price," in the case of the Zero Coupon Debentures, and the "issue price," in
the case of the Senior Notes. The adjusted issue price of the Zero Coupon
Debentures will equal the accreted value of the Zero Coupon Debentures. The
issue price of the Senior Notes will equal the fair market value of the Senior
Notes as of the Expiration Date. Accordingly, under this interpretation, a
U.S. Holder (i) would be considered to receive "boot" to the extent that the
fair market value of the Senior Notes exceeds the accreted value of the Zero
Coupon Debentures and (ii) would recognize gain equal to the lesser of (a) the
amount of boot received, or (b) the excess of the fair market value of the
Senior Notes over the U.S. Holders' adjusted basis in the Zero Coupon
Debentures.
Assuming the exchange of Zero Coupon Debentures for Senior Notes constitutes
a recapitalization, a U.S. Holder will receive a tax basis in the Senior Notes
equal to the U.S. Holder's adjusted tax basis in the Zero Coupon Debentures
exchanged therefor, plus any gain recognized by the U.S. Holder in the
Exchange Offer, and
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<PAGE>
the U.S. Holder's holding period for the Senior Notes will include the period
in which the U.S. Holder held the Zero Coupon Debentures.
If the exchange of Zero Coupon Debentures for Senior Notes does not
constitute a recapitalization, a U.S. Holder generally will recognize gain or
loss on the exchange of Zero Coupon Debentures for Senior Notes equal to the
difference between (i) the issue price of the Senior Notes received and (ii)
the U.S. Holder's adjusted tax basis in the Zero Coupon Debentures. A U.S.
Holder will receive a tax basis in the Senior Notes equal to the fair market
value of the Senior Notes, and the U.S. Holder's holding period for the Senior
Notes will commence on the date after the Exchange Offer is consummated.
Any gain or loss recognized by a U.S. Holder (including amounts attributable
to any "boot" considered received) will be long-term capital gain or loss if
the U.S. Holder has held the Zero Coupon Debentures for more than one year.
However, under the market discount rules, any gain recognized by a U.S. Holder
will be ordinary income to the extent of the accrued market discount which has
not previously been included in income.
A non-U.S. Holder generally will not recognize gain or loss for United
States federal income tax purposes on the exchange of Zero Coupon Debentures
for Senior Notes, except in the instances comparable to those described in
"Non-U.S. Holders--Gain on Disposition of Senior Notes and Common Stock" with
respect to sales of the Senior Notes and Common Stock.
For tax purposes, the Exchange Offer should generally be considered to take
place on the Expiration Date. Thus, for example, holders of Zero Coupon
Debentures will continue to accrue original issue discount on the Zero Coupon
Debentures after the Zero Coupon Debentures have been tendered but prior to
the Expiration Date.
The remainder of this discussion assumes the Exchange Offer constitutes a
recapitalization.
TAX TREATMENT OF THE OWNERSHIP AND DISPOSITION OF SENIOR NOTES AND COMMON
STOCK
Stated Interest and Original Issue Discount on the Senior Notes
The stated interest on the Notes will be includable in a U.S. Holder's gross
income as ordinary income for United States federal income tax purposes at the
time it is paid or accrued in accordance with the U.S. Holder's regular method
of tax accounting.
The Company anticipates that the Senior Notes will be issued with de minimis
original issue discount (as defined below). Accordingly, the Company
anticipates that a U.S. Holder will not be subject to tax on original issue
discount but instead will be subject to tax only on stated interest on the
Senior Notes in the manner set forth above. If, however, the issue price of
the Senior Notes is determined to be significantly less than the stated
redemption price at maturity of the Senior Notes amount determined by the
Company as described above with the effect that the original issue discount on
the Senior Notes is no longer considered to be de minimis, the United States
federal income tax consequences set forth below will apply.
The amount of original issue discount on a debt instrument generally is
equal to the difference between the stated redemption price at maturity of the
debt instrument and the debt instrument's issue price. However, if the
original issue discount on a debt instrument is less than 1/4 of 1 percent of
the stated redemption price at maturity of the debt instrument multiplied by
the number of complete years to maturity, the original issue discount on the
debt instrument is considered de minimis and will be deemed to be zero. The
stated redemption price at maturity of a debt instrument will equal the sum of
all amounts provided under the debt instrument, regardless of whether
denominated as principal or interest, other than "qualified stated interest"
payments. For such purposes, "qualified stated interest" generally means
stated interest that is unconditionally payable in cash or property (other
than debt instruments of the issuer) at least annually at a single fixed rate.
The stated interest on the Senior Notes will constitute "qualified stated
interest."
40
<PAGE>
A U.S. Holder (other than Holders with amortizable bond premium or
offsetting acquisition premium) must include any original issue discount on
the Senior Notes as ordinary interest income as it accrues (in advance of the
receipt of any cash payments attributable to such income) in accordance with a
constant yield method based on a compounding of interest, regardless of such
U.S. Holder's regular method of tax accounting. Subject to making an
appropriate election, a U.S. Holder generally will be permitted to include all
interest that accrues or is to be paid on the Senior Notes (including stated
interest, acquisition discount, original issue discount, de minimis original
issue discount, market discount, de minimis market discount and unstated
interest as adjusted by any amortizable bond premium or acquisition premium)
in income under the constant yield method applicable to original issue
discount, subject to certain limitations and exceptions.
Amortizable Bond Premium and Acquisition Premium
As discussed above, a U.S. Holder's initial tax basis in the Senior Notes
will depend in part on the tax treatment of the Exchange Offer to such U.S.
Holder, including whether the U.S. Holder reports a gain as a result thereof.
If a U.S. Holder's initial tax basis in the Senior Notes is greater than the
stated redemption price at maturity, such U.S. Holder generally will not be
required to include original issue discount, if any, in income. In addition,
such U.S. Holder will have "amortizable bond premium" with respect to the
Senior Notes, to the extent that the premium is not attributable to the
conversion feature on the Senior Note, which may be deductible to the U.S.
Holder over the term of the Senior Notes.
If a U.S. Holder's initial tax basis in the Senior Notes is greater than the
issue price of the Senior Notes but less than the state redemption price at
maturity, such U.S. Holder generally will be considered to have "acquisition
premium" with respect to the Senior Notes, which may reduce the amount of
original issue discount, if any, that the U.S. Holder is required to include
in income.
Sale, Exchange or Retirement of the Senior Notes
A U.S. Holder generally will recognize gain or loss on the sale, exchange or
retirement of Senior Notes equal to the difference between the amount realized
on the sale, exchange or retirement of the Senior Notes and the U.S. Holder's
adjusted tax basis in the Senior Notes. Any gain or loss recognized on the
sale, exchange or retirement of Senior Notes will generally be long-term
capital gain or loss if the U.S. Holder has held the Senior Notes for more
than one year (other than amounts attributable to accrued interest). However,
under the market discount rules, any gain recognized by a U.S. Holder will be
ordinary income to the extent of the accrued market discount which has not
previously been included in income. For these purposes, the market discount
that the U.S. Holder had in the Zero Coupon Debentures, which has not been
previously included in income, will be considered to be market discount with
respect to the Senior Notes.
Constructive Dividend
If at any time the Company makes a distribution of property to shareholders
that would be taxable to such shareholders as a dividend for United States
federal income tax purposes (for example, distributions of evidences of
indebtedness or assets of the Company, but generally not stock dividends or
rights to subscribe for Common Stock) and, pursuant to the anti-dilution
provisions of the Indenture, the Conversion Price of the Senior Notes is
increased, such increase may be deemed to be the payment of a taxable dividend
to U.S. Holders of Senior Notes. If the Conversion Price is increased at the
discretion of the Company or in certain other circumstances, such increase may
be deemed to be the payment of the taxable dividend to U.S. Holders of Senior
Notes.
Conversion of Senior Notes into Common Stock
A U.S. Holder's conversion of Senior Note into Common Stock will generally
not be a taxable event. The U.S. Holder's tax basis in the Common Stock
received on conversion of Senior Notes will be the same as the U.S. Holder's
adjusted tax basis in the Senior Notes at the time of conversion (exclusive of
any tax basis
41
<PAGE>
allocable to a fractional share), and the holding period for the Common Stock
received on conversion will include the holding period of the Senior Notes
converted. The receipt of cash in lieu of fractional shares of Common Stock
should generally result in capital gain or loss (measured by the difference
between the cash received for the fractional share interest and the U.S.
Holder's tax basis in the fractional share interest).
The Common Stock
Distributions, if any, paid on the Common Stock after a conversion, to the
extent made from current or accumulated earnings and profits of the Company,
as determined for United States federal income tax purposes, will be included
in a U.S. Holder's income as ordinary income as they are paid. Gain or loss
realized on a sale or exchange of Common Stock will equal the difference
between the amount realized on such sale or exchange and the Holder's adjusted
tax basis in such shares. Such gain or loss will generally be long-term
capital gain or loss if the U.S. Holders's holding period in the Common Stock
is more than one year. However, under the market discount rules, any gain
recognized by a U.S. Holder will be ordinary income to the extent of the
accrued market discount which has not previously been included in income. For
these purposes, the market discount that the U.S. Holder had in the Zero
Coupon Debentures and carried over to the Senior Notes, which has not been
previously included in income, will be considered to be market discount with
respect to the Common Stock.
RECENT LEGISLATION
On August 5, 1997, legislation was enacted which reduces, in the case of an
individual, the rate of tax on long-term capital gains on property held for
more than 18 months.
NON-U.S. HOLDERS
The following discussion is a summary of the principal United States federal
income and estate tax consequences resulting from the ownership of the Senior
Notes or Common Stock by Non-U.S. Holders.
Withholding Tax on Payments of Principal and Interest on Senior Notes
The payment of principal and interest on Senior Notes to a non-U.S. Holder
will not be subject to United States federal withholding tax, provided that
(i) the Non-U.S. Holder does not actually or constructively own 10% or more of
the total voting power of all voting stock of the Company and is not a
controlled foreign corporation that is related to the Company within the
meaning of the Code and (ii) the beneficial owner of the Senior Notes
certifies to the Company or its agent, under penalties of perjury, that it is
not a U.S. Holder and provides its name and address on United States Treasury
Form W-8 (or a suitable substitute form) or a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and holds the Debenture certifies under penalties of perjury
that such a Form W-8 (or suitable substitute form) has been received from the
beneficial owner by it or by a financial institution between it and the
beneficial owner and furnishes the payor with a copy thereof.
Gain on Disposition of the Senior Notes and Common Stock
Provided that the Company is at no time a United States real property
holding corporation within the meaning of Section 897(c) of the Code (a
"USRPHC"), Non-U.S. Holder generally will not be subject to United States
federal income tax on gain or income realized on the sale, exchange or
redemption of Senior Notes, including the conversion of Senior Notes for
Common Stock, or the sale or exchange of Common Stock unless in the case of an
individual Non-U.S. Holder such Holder is present in the United States for 183
days or more in the year of such sale, exchange or redemption and either (a)
has a "tax home" in the United States and the gain or income is not
attributable to an office or other fixed place of business maintained by such
non-U.S. Holder outside of the United States, or (b) the gain from the
disposition is attributable to an office or other fixed place of business in
the United States. Even if the Company is determined to be a USRPHC, a Non-
U.S. Holder not described in the preceding sentence will not be subject to
United States federal income tax on any such gain or income provided that such
Holder does not actually or constructively own more than 5% of the Common
Stock (including any Common Stock that may be received as a result of the
conversion of Senior Notes) and does not own, on any date on which the Holder
acquires Senior Notes, Senior Notes with an aggregate value of 5% or
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<PAGE>
more of the aggregate value of the outstanding Common Stock on such date.
Under present law the Company would not at any time within a specified
(generally five-year) period be a USRPHC so long as during a specified
(general five-year) period (i) the fair market value of its United States real
property interests is less than (ii) 50% of the sum of the fair market value
of its United States real property interests, interests in real property
located outside the United States and other of its assets that are used or
held for use in a trade or business.
The Company believes that it is not presently a USRPHC, but there can be no
assurance that it will not become a USRPHC in the future.
The Common Stock
Dividends, if any, paid on the Common Stock to a Non-U.S. Holder generally
will be subject to a 30% United States federal withholding tax, subject to
reduction for non-U.S. Holders eligible for the benefits of certain income tax
treaties. For purposes of determining whether tax is to be withheld at a 30%
rate or at a reduced rate as specified by an income tax treaty, the Company
ordinarily will presume that dividends paid to an address in a foreign country
are paid to a resident of such country absent knowledge that such presumption
is not warranted. Common Stock held by an individual who at the time of death
is not a citizen or resident of the United States (as specially defined for
United States federal estate tax, subject to reduction of such estate tax if
the individual is eligible for the benefits of an estate tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Payments on the Senior Notes made by the Company or any paying agent of the
Company, and payments of dividends on the Common Stock, to certain non-
corporate holders of the Senior Notes or Common Stock generally will be
subject to information reporting and possible to "backup withholding" at a
rate of 31%. Information reporting and backup withholding will not apply,
however, to payments made on a Senior Note if the certification described in
clause (i) under "Non-U.S. Holders--Withholding Tax on Payments of Principal
and Interest on the Senior Notes" above is received, provided in each case
that the payor does not have actual knowledge that the holder is a U.S.
Holder, or to payments made on the Common Stock if such payments are subject
to the 30% (or reduced treaty rate) withholding tax described above under
"Non-U.S. Holders--The Common Stock."
Payment of proceeds from the sale of a Senior Note or Common Stock to or
through the United States office of a broker is subject to information
reporting and backup withholding unless the holder or beneficial owner
certifies as to its non-United States status or otherwise establishes an
exemption from information reporting and backup withholding. Payment outside
the United States of the proceeds of the sale of a Senior Note or Common Stock
to or through a foreign office of a "broker" (as defined in applicable U.S.
Treasury Department regulations) will not be subject to information reporting
or backup withholding, except that if the broker is a U.S. person, a
controlled foreign corporation for United States tax purposes or a foreign
person 50 percent or more of whose gross income is from a United States trade
or business, information reporting will apply to such payment unless the
broker has documentary evidence in its records that the beneficial owner is
not a U.S. Holder and certain other conditions are met, or the beneficial
owner otherwise establishes an exemption.
Any amounts withheld from a payment to a non-U.S. Holder under the backup
withholding rules will be allowed as a credit against such holder's United
States federal income tax, and may entitle such holder to a refund, provided
that the required information is furnished to the Service.
LEGAL MATTERS
Certain matters relating to the validity of the Senior Notes offered hereby
will be passed upon for the Company by Shearman & Sterling, San Francisco,
California. Certain legal matters will be passed upon for the Dealer Manager
by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California. Certain tax matters will be passed upon for the Company by
Shearman & Sterling, San Francisco, California.
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EXPERTS
The consolidated financial statements and financial statement schedule of
the Company and its subsidiaries incorporated by reference and included in the
Company's Annual Report on Form 10-K for the year ended June 30, 1996 have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon incorporated by reference and included therein, and
incorporated by reference herein. Such consolidated financial statements and
financial statement schedule are incorporated by reference herein in reliance
upon such reports given upon the authority of such firm as experts in
accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements, and other information concerning the Company
can be inspected and copied at the public reference facilities maintained by
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511; and 7 World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission also maintains a Web site at
http://www.sec.gov that contains reports, proxy statements, and other
information concerning the Company, which files electronically with the
Commission. The Common Stock is listed on the New York Stock Exchange, Inc.
(the "NYSE") and the Pacific Stock Exchange (the "PSE"). Reports, proxy
statements, and other information concerning the Company can be inspected and
copied at the offices of the NYSE, 20 Broad Street, New York, New York 10005
and at the offices of the PSE, 115 Sansome Street, 3rd Floor, San Francisco,
California 94104.
This Prospectus constitutes a part of a combined registration statement on
Form S-4 (together with all amendments and exhibits, the "Registration
Statement") filed by the Company with the Commission under the Securities Act.
This Prospectus does not contain all of the information included in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. Statements contained herein
concerning the provisions of any document do not purport to be complete and,
in each instance, are qualified in all respects by reference to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is subject to and qualified in
its entirety by such reference. Reference is made to such Registration
Statement and to the exhibits relating thereto for further information with
respect to the Company and the securities offered hereby.
44
<PAGE>
The Exchange Agent:
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
By Hand or Overnight Courier: By Mail
(Registered or Certified Mail
Recommended):
C/O STATE STREET BANK AND TRUST STATE STREET BANK AND TRUST COMPANY
COMPANY, N.A. P.O. BOX 778
61 BROADWAY BOSTON, MASSACHUSETTS 02102
NEW YORK, NEW YORK 10006
By Facsimile Transmission
(For Eligible Institutions Only):
(617) 664-5739
Confirm by Telephone:
(617) 664-5314
The Information Agent:
GEORGESON
& COMPANY INC.
--------------
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9800
Call Toll Free: (800) 223-2064
Any questions or requests for assistance or additional copies of this
Prospectus and the Letter of Transmittal may be directed to the Information
Agent at its telephone number and location set forth above. You may also
contact your broker, dealer, commercial bank or trust company or other nominee
for assistance concerning the Exchange Offer.
The Dealer Manager for the Exchange Offer:
MORGAN STANLEY DEAN WITTER
1585 Broadway
New York, New York 10036
(800) 835-9668 (extension 2262) (Toll-Free)
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("DGCL") authorizes
Silicon Graphics, Inc., a Delaware corporation (the "Company") to indemnify
directors and officers in certain circumstances against liabilities, including
expenses, incurred while acting in such capacities; provided, generally, that
any such indemnified director or officer acted in good faith and in a manner
he or she reasonably believed to be in the best interests of the corporation
and, in the case of a criminal proceeding, had no reasonable cause to believe
his or her conduct was unlawful. The Bylaws of the Company provide for the
indemnification of directors and officers to the maximum extent permitted by
the DGCL.
In addition, the Company has provided in its Certificate of Incorporation
that it shall eliminate the personal liability of its directors to the fullest
extent permitted by the DGCL, and the Company has entered into indemnification
agreements with its executive officers and directors providing for additional
indemnification. The Company has policies of directors' and officers'
liability insurance which insure directors and officers against liabilities
which a director or officer may incur in his or her capacity as such.
Section 11 of the form of Dealer Manager Agreement filed as Exhibit 1.1 to
this registration statement provides for indemnification of the Company and
its directors and officers who sign this registration statement, and each
person, if any, who controls the Company within the meaning of either Section
15 of the Securities Act of 1933, as amended (the "Securities Act"), or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") by the dealer manager with respect to information relating to the dealer
manager furnished to the Company in writing by the dealer manager expressly
for use in this registration statement and certain other materials prepared in
connection with the exchange offer contemplated hereby.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
NUMBER EXHIBIT
------ -------
<C> <S>
1.1 Form of Dealer Manager Agreement.
4.1 Form of Indenture between the Company and State Street Bank and Trust
Company of California, N.A., as trustee.
4.2 Restated Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1994).
4.3 Bylaws of the Company, as amended (incorporated by reference to Exhibit
3.2 to the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996).
4.4 Amended and Restated Preferred Shares Rights Agreement, dated as of May
6, 1992 (the "Rights Agreement"), between the Company and State Street
Bank and Trust Company of California, N.A. as successor rights agent
(incorporated by reference to Exhibit 4.5 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 1992).
4.5 First Amendment to the Rights Agreement, dated as of May 2, 1995,
between the Company and State Street Bank and Trust Company of
California, N.A., as successor rights agent (incorporated by reference
to Exhibit 4.7 to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1995).
5.1 Opinion of Shearman & Sterling.*
8.1 Opinion of Shearman & Sterling regarding certain tax matters.*
12.1 Statement re: computation of ratio of earnings to fixed charges.*
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consents of Shearman & Sterling (contained in its opinions filed as
Exhibits 5.1 and 8.1 to this registration statement).*
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
NUMBER EXHIBIT
------ -------
<C> <S>
24.1 Power of Attorney.*
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of State Street Bank and Trust Company of California,
N.A.*
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Letter to Registered Holders and Depository Trust Company
Participants.*
99.4 Form of Letter to Clients.*
</TABLE>
- --------
* Previously filed.
(b) Financial Statement Schedules
<TABLE>
<S> <C>
Schedule II Valuation and Qualifying Accounts (incorporated by reference to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1996).
</TABLE>
ITEM 22. UNDERTAKINGS
(a) The Company hereby undertakes to respond to requests for information
that is incorporated by reference into the Prospectus pursuant to Item 4,
10(b), 11 or 13 of Form S-4, within one business day of receipt of such
request, and to send the incorporated documents by first-class mail or equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement throughout the
date responding to the request.
(b) The undersigned registrants each hereby undertake to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(c) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of any employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrants pursuant to the provisions described under Item 20 above, or
otherwise, the registrants have each been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the registrants of expenses incurred or paid by a
director, officer or controlling person of the registrants 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 registrants will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by them is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(e) 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:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding
II-2
<PAGE>
the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in
the maximum aggregate price represent no more than a 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN
THE CITY OF MOUNTAIN VIEW, STATE OF CALIFORNIA ON AUGUST 7, 1997.
SILICON GRAPHICS, INC.
/s/ William M. Kelly
By: _________________________________
Name: William M. Kelly
Title: Senior Vice President,
Corporate Operations
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Edward R. McCracken* Chairman, Chief Executive August 7, 1997
____________________________________ Officer and Director
EDWARD R. MCCRACKEN (Principal Executive
Officer)
Robert R. Bishop* Chairman, Silicon Graphics August 7, 1997
____________________________________ World Trade Corporation, and
ROBERT R. BISHOP Director
/s/ William M. Kelly Senior Vice President, August 7, 1997
____________________________________ Corporate Operations
WILLIAM M. KELLY (Principal Financial
Officer)
Dennis P. McBride* Vice President, Controller August 7, 1997
____________________________________ (Principal Accounting
DENNIS P. MCBRIDE Officer)
Allen F. Jacobson* Director August 7, 1997
____________________________________
ALLEN F. JACOBSON
C. Richard Kramlich* Director August 7, 1997
____________________________________
C. RICHARD KRAMLICH
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Robert A. Lutz* Director August 7, 1997
____________________________________
ROBERT A. LUTZ
James A. McDivitt* Director August 7, 1997
____________________________________
JAMES A. MCDIVITT
Lucille Shapiro* Director August 7, 1997
____________________________________
LUCILLE SHAPIRO
Robert B. Shapiro* Director August 7, 1997
____________________________________
ROBERT B. SHAPIRO
James G. Treybig* Director August 7, 1997
____________________________________
JAMES G. TREYBIG
*By: /s/ William M. Kelly
____________________________________
(WILLIAM M. KELLY,
ATTORNEY-IN-FACT)
</TABLE>
II-5
<PAGE>
FORM OF DEALER MANAGER AGREEMENT
August ___, 1997
Morgan Stanley & Company Incorporated
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
1. General. Silicon Graphics, Inc., a Delaware corporation (the "Company"),
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proposes to exchange _____% Senior Convertible Notes due 2004 (the "Notes") of
the Company to be issued pursuant to an Indenture (the "Indenture") to be dated
as of ___________, 1997 between the Company and State Street Bank and Trust
Company of California, N.A., as Trustee (the "Trustee"), for that amount of
aggregate principal amount at maturity of the Zero Coupon Convertible
Subordinated Debentures due 2013 (the "Debentures") of the Company determined as
set forth in the Prospectus (as hereinafter defined). The exchange offer, as it
may be amended and supplemented, described above is herein referred to as the
"Exchange Offer." The Notes will be convertible on the terms and subject to the
conditions set forth in the Indenture and Notes into common stock, par value
$0.001 per share, of the Company (the "Common Stock") together with the rights
(the "Rights") evidenced by such Common Stock to the extent provided in the
Second Amended and Restated Preferred Shares Rights Agreement, dated as of May
6, 1992 between the Company and State Street Bank and Trust Company, as amended
(the "Rights Agreement").
2. Engagement as Dealer Manager. By this Dealer Manager Agreement (the
----------------------------
"Agreement"), the Company hereby engages and appoints you as the exclusive
Dealer Manager for the Exchange Offer and authorizes you to act as such in
connection with the Exchange Offer. As Dealer Manager you agree, in accordance
with your customary practice to use reasonable efforts to perform in connection
with the Exchange Offer those services as are customarily performed by
investment banking concerns in connection with similar offers, including,
without limitation, providing certain advice to the Company regarding the terms
and timing of the Exchange Offer and soliciting from individuals and
institutions the tender of the Debentures pursuant to and in accordance with the
terms and conditions of the Exchange Offer. You shall act as independent
contractors in connection with the Exchange Offer with duties solely to the
Company and nothing herein contained shall constitute you as an agent of the
Company in connection with the solicitation of such Debentures pursuant to and
in accordance with the terms and conditions of the Exchange Offer; provided,
however, that the Company hereby authorizes the Dealer Manager, and/or one or
more registered brokers or dealers chosen by the Dealer Manager, to act as the
Company's agent in making the Exchange Offer to residents of any jurisdiction in
which such agent designation may be necessary to comply with applicable law.
Nothing in this Agreement shall constitute the Dealer Manager
<PAGE>
or partner or joint venturer with the Company or any of its subsidiaries. On the
basis of the representations and warranties and agreements of the Company
contained herein and subject to and in accordance with the terms and conditions
hereof and of the Exchange Offer, the Dealer Manager agrees to act in such
capacity.
3. Registration Statement, Prospectus and Offering Materials. (a) The
---------------------------------------------------------
Company has prepared and filed with the Securities and Exchange Commission (the
"Commission"), under the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder (collectively, the
"Securities Act"), and the Trust Indenture Act of 1939, as amended, and the
rules and regulations of the Commission promulgated thereunder (the "Trust
Indenture Act"), a registration statement on Form S-4 covering the registration
of the Notes and shares of the Common Stock issuable upon conversion of the
Notes. Such registration statement, including the exhibits thereto and any
documents incorporated by reference therein, as amended at the time it becomes
effective or as thereafter amended or supplemented from time to time, is herein
called the "Registration Statement." The final prospectus included in the
Registration Statement (including any documents incorporated in the prospectus
by reference) is herein called the "Prospectus," except that if the final
prospectus furnished to the Dealer Manager for use in connection with the
Exchange Offer differs from the prospectus set forth in the Registration
Statement (whether or not such prospectus is required to be filed pursuant to
Rule 424(b)), the term "Prospectus" shall refer to the final prospectus
furnished to the Dealer Manager for such use. The terms "supplement" and
"amendment" or "supplemented" and "amended" as used herein with respect to the
Prospectus shall include all documents deemed to be incorporated by reference in
the Prospectus that are filed subsequent to the date of the Prospectus and prior
to the termination of the Exchange Offer by the Company with the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
(b) The Company has prepared and filed, or agrees that prior to or on the
date of commencement of the Exchange Offer (the "Commencement Date") it will
file, with the Commission under the Exchange Act and the rules and regulations
promulgated thereunder a Statement on Schedule 13E-4 with respect to the
Exchange Offer (including the exhibits thereto and any documents incorporated by
reference therein, the "Schedule 13E-4").
(c) The Registration Statement, Prospectus and the related letters from
the Dealer Manager to securities brokers, dealers, commercial banks, trust
companies and other nominees, letters to beneficial owners of Debentures,
letters of transmittal (the "Letters of Transmittal"), notice of guaranteed
delivery (the "Notice of Guaranteed Delivery") and any newspaper announcements,
press releases and other offering materials and information the Company may use
or prepare, approve or authorize for use in connection with the Exchange Offer,
including the Schedule 13E-4 as amended or supplemented from time to time, are
herein collectively referred to as the "Exchange Offer Materials."
4. Use of Exchange Offer Material. (a) The Exchange Offer Materials have
------------------------------
been or will be prepared and approved by, and are the sole responsibility of,
the Company. The Company
2
<PAGE>
shall, to the extent permitted by law, use its reasonable efforts to disseminate
the Exchange Offer Materials to each registered holder of any Debentures, as
soon as practicable after the Commencement Date, pursuant to Rule 13e-4 under
the Exchange Act and comply in all material respects with its obligations
thereunder. Thereafter, to the extent practicable until three days prior to the
Expiration Date of the Exchange Offer, the Company shall use its reasonable
efforts to cause copies of such Exchange Offer Materials and a return envelope
to be mailed to each person who becomes a holder of record of any Debentures.
The Company acknowledges and agrees that you may use the Exchange Offer
Materials as specified herein without assuming any responsibility for
independent verification on your part and the Company represents and warrants to
you that you may rely on the accuracy and completeness of any information
delivered to you by or on behalf of the Company without assuming any
responsibility for independent verification of such information or without
performing or receiving any appraisal or evaluation of the assets or liabilities
of the Company.
(b) The Company agrees to provide you as many copies as you may reasonably
request of the Exchange Offer Materials. The Company agrees that within a
reasonable time prior to using or filing with the Commission or any governmental
or regulatory entity or agency, including the New York Stock Exchange, Inc. (the
"NYSE") ("Other Agency"), of any Exchange Offer Materials, it will submit copies
of such materials to you and will give reasonable consideration to your and your
counsel's comments, if any, thereon. The Company agrees prior to the termination
of the Exchange Offer, before amending or supplementing the Registration
Statement or the Prospectus, to furnish copies of drafts to, and consult with,
the Dealer Manager and its counsel within a reasonable time in advance of filing
with the Commission of any amendment or supplement to the Registration
Statement, the Prospectus or the other Exchange Offer Materials. The Company
shall not file any such amendment or supplement to which the Dealer Manager
shall reasonably object.
(c) The Company has furnished or shall use its best efforts to furnish to
you, or cause the transfer agents or registrars for the Debentures to furnish to
you, as soon as practicable after the date hereof (to the extent not previously
furnished), cards or lists in reasonable quantities or copies thereof showing
the names of persons who were the holders of record or, to the extent available
to the Company, the beneficial owners of the Debentures as of a recent date,
together with their addresses and the aggregate principal amount at maturity of
the Debentures held by them. Additionally, the Company shall update, or cause
the transfer agents or registrars referred to above to update, such information
from time to time during the term of this Agreement as may be reasonably
requested by you. Except as otherwise provided herein, you agree to use such
information only in connection with the Exchange Offer.
(d) The Company authorizes the Dealer Manager to use the Exchange Offer
Materials in connection with the Exchange Offer and for such period of time as
any such materials are required by law to be delivered in connection therewith.
The Dealer Manager shall not have any obligation to cause any Exchange Offer
Materials to be transmitted generally to the holders of Debentures.
3
<PAGE>
(e) The Company authorizes the Dealer Manager to communicate with any
information agent (the "Information Agent") or exchange agent (the "Exchange
Agent") appointed by the Company to act in such capacity in connection with the
Exchange Offer. The Company will arrange for the Exchange Agent to advise you at
least daily as to such matters relating to the Exchange Offer as you may
reasonably request.
(f) The Company agrees that any reference to the Dealer Manager in any
Exchange Offer Materials or in any newspaper announcement or press release or
other public document or communication is subject to the Dealer Manager's prior
consent, which consent shall not be unreasonably withheld.
5. Withdrawal. In the event that (i) the Company uses or permits the use of,
----------
or files with the Commission or any Other Agency, any Exchange Offer Materials
and such document (a) has not been submitted to you previously for your and your
counsel's comments or (b) has been so submitted, and you have or your counsel
has made comments which have not been reflected in a manner reasonably
satisfactory to you or your counsel; or (ii) the Company shall have breached, in
any material respect, any of its representations, warranties, agreements or
covenants herein, then you shall be entitled to withdraw as Dealer Manager in
connection with the Exchange Offer without any liability or penalty to you or
any other indemnified person (as defined in Section 11 below) and without loss
of any right to indemnification or contribution provided in Section 11 or to the
payment of all fees and expenses payable under Section 6 below which have
accrued to the date of such withdrawal (it being agreed that in the event of any
such withdrawal, for the purpose of determining the fees payable to you pursuant
to Section 6, (a) the aggregate principal amount at maturity of Debentures
deposited pursuant to the Exchange Offer as of the close of business on the date
of such withdrawal which are thereafter acquired by the Company or any of its
subsidiaries or affiliates pursuant to the Exchange Offer or otherwise shall be
deemed to have been acquired as of the date of such withdrawal and (b) the
aggregate principal amount at maturity of other Debentures the Company or any of
its subsidiaries or affiliates have acquired or have a right to acquire as of
such close of business which are thereafter acquired by the Company or any of
its subsidiaries or affiliates shall be deemed to have been acquired as of the
date of such withdrawal).
6. Fees. As compensation for your services in connection with the Exchange
----
Offer, the Company will pay you a fee of 0.875% of the aggregate accreted value
as of the Expiration Date of the Debentures validly tendered and accepted for
exchange pursuant to the Exchange Offer. If the Exchange Offer is consummated,
such fee shall be paid by the Company on the Closing Date.
7. Expenses and Reimbursement of Expenses. The Company agrees to pay the
--------------------------------------
reasonable costs and expenses incident to the performance of the obligations
hereunder, including, without limitation, all costs and expenses (i) incurred by
dealers and brokers (including yourself), commercial banks, trust companies and
nominees for their customary mailing and handling expenses incurred in
forwarding the Exchange Offer Materials to their customers, (ii) incident to the
preparation, issuance, execution and delivery of the Notes, (iii) incident to
4
<PAGE>
the preparation, printing and filing under the Securities Act of the
Registration Statement, the Prospectus (including, without limitation, in each
case all exhibits, amendments and supplements thereto), (iv) incurred in
connection with the registration or qualification of the Notes under the laws of
such jurisdictions as the Dealer Manager may designate (including, without
limitation, reasonable fees of counsel for the Dealer Manager and its reasonable
disbursements), (v) in connection with the printing (including word processing
and duplication costs) and delivery of all Exchange Offer Materials (including,
without limitation, any preliminary and supplemental blue sky memoranda)
including, without limitation, mailing and shipping, and (vi) the fees and
disbursements of Shearman & Sterling, counsel to the Company; provided,
however, that the Dealer Manager shall pay all of its out-of-pocket expenses
incurred in connection with the Exchange Offer (including, without limitation,
the legal fees and expenses of counsel to the Dealer Manager).
8. Representations, Warranties and Certain Agreements of the Company. The
------------------------------------------------------------------
Company represents and warrants to you, and agrees with you, that as of the
Commencement Date and at all times on or prior to date when the Exchange Offer
is consummated (the "Closing Date"):
(a) the Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or, to the Company's knowledge,
threatened by the Commission;
(b) (i) the Exchange Offer Materials, including the Registration
Statement, the Schedule 13E-4 and the Prospectus, comply and, as amended or
supplemented, if applicable, will comply in all material respects with the
Securities Act, the Exchange Act and the Trust Indenture Act, and the applicable
rules and regulations of the Commission thereunder; (ii) the Registration
Statement, when it became effective, did not contain and as amended or
supplemented, if applicable, will not contain, any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and (iii) none of the
other Exchange Offer Materials or the Prospectus contains, and, as amended or
supplemented, if applicable, will contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
except that the representations and warranties set forth in this paragraph 8(b)
do not apply (A) to statements or omissions in the Exchange Offer Materials
based upon information relating to the Dealer Manager furnished to the Company
in writing by the Dealer Manager expressly for use therein or (B) to that part
of the Registration Statement that constitutes the Statements of Eligibility and
Qualification (Form T-1) under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), of the Trustee under the Indenture.
(c) the Company has the corporate power and authority to execute, deliver
and perform its obligations under this Agreement, the Indenture and the Notes
and to consummate the Exchange Offer;
5
<PAGE>
(d) the Exchange Offer, this Agreement and all other actions by the
Company contemplated in the Exchange Offer Materials and this Agreement, have
been duly and validly authorized by all necessary corporate action by the
Company, and no other corporate proceedings by the Company are necessary to
authorize any such actions;
(e) this Agreement has been duly and validly executed and delivered by the
Company and is a legal, valid and binding obligation of the Company;
(f) the Prospectus as amended or supplemented in relation to the Exchange
Offer has been filed with the Commission pursuant to Rule 424(b), if required,
within the applicable time period prescribed for such filing by the rules and
regulations under the Act;
(g) the Exchange Agent Agreement and Information Agent Agreement are, or
will be within two (2) business days of the Commencement Date, in full force and
effect;
(h) the Indenture has been duly authorized by the Company, has been duly
qualified under the Trust Indenture Act, and assuming due authorization,
execution and delivery of the Indenture by the Trustee, when executed and
delivered by the Company, will constitute a valid and binding agreement of the
Company, enforceable in accordance with its terms, except as the enforcement
thereof may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws affecting enforcement of
creditors' rights generally and (ii) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity);
(i) the Notes to be issued pursuant to the Exchange Offer have been duly
authorized, and, assuming due authorization, execution and delivery of the
Indenture by the Trustee, when executed and authenticated in accordance with the
provisions of the Indenture and delivered in accordance with the terms of the
Exchange Offer, will be entitled to the benefits of the Indenture and will be
valid and binding obligations of the Company enforceable in accordance with
their terms, except as the enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other similar
laws affecting enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity); the Notes will conform in all material respects
to the description thereof contained in the Prospectus;
(j) the Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of Delaware, has the
corporate power and authority to own its property and to conduct its business as
described in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or to be in good standing would not
have a material adverse effect on the Company and its subsidiaries, taken as a
whole;
6
<PAGE>
(k) each subsidiaries of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to own
its property and to conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole;
(l) the authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus;
(m) the shares of Common Stock outstanding have been duly authorized and
are validly issued, fully paid and non-assessable;
(n) (1) the shares of Common Stock initially issuable upon conversion of
the Debentures (the "Shares") have been duly authorized and, when issued and
delivered in accordance with the terms of the Notes, will be validly issued,
fully paid and non-assessable, and the issuance of such shares is not subject to
any preemptive or similar rights and (2) the Rights, if any, issuable upon
conversion of the Debentures have been duly authorized and, when and if issued
upon conversion in accordance with the terms of the Indenture and the Rights
Agreement, will have been validly issued;
(o) the execution and delivery by the Company of, and the performance by
the Company of its obligations under this Agreement, the Indenture and the
Notes, the Exchange Offer, the issuance and delivery by the Company of the Notes
pursuant to the Exchange Offer and consummation of the Exchange Offer, and the
fulfillment of the terms hereof and thereof, do not and will not contravene,
violate, conflict with, result in the breach of, or constitute a default under
(i) any provision of applicable law or regulation; (ii) the certificate of
incorporation or by-laws of the Company; (iii) any agreement or other instrument
binding upon the Company or any of its subsidiaries; or (iv) any judgment,
determination, order or decree of any governmental body, agency or court having
jurisdiction over the Company or any of its subsidiaries other than, in the case
of clauses (i), (iii) and (iv), any such contravention, violation, conflict,
breach, or default that individually or in the aggregate would not have a
material adverse effect on the Company and its subsidiaries, taken as a whole,
or on the ability of the Company to perform its obligations hereunder or
thereunder and commence and consummate the Exchange Offer; no consent, approval,
authorization, permit or order of, or the qualification with, the Commission or
any Other Agency is required for the performance by the Company of its
obligations under this Agreement, the Indenture and the Notes, the Exchange
Offer, the issuance and delivery of the Notes pursuant to the Exchange Offer and
the consummation of the Exchange Offer, except (i) such as have been made or
will be made when required as contemplated hereby under the Securities Act, the
Exchange Act and the Trust Indenture Act, (ii) such filings and notifications
with or to the NYSE as have been made or will be made when required, and (iii)
such as may be required by
7
<PAGE>
the securities or Blue Sky laws of the various states or the securities laws of
non-U.S. jurisdictions, in each case, in connection with the Exchange Offer;
(p) there has not occurred any material adverse change or any development
involving a prospective material adverse change in the condition, financial or
otherwise, or in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive
of any amendments or supplements thereto subsequent to the date of this
Agreement);
(q) there are no legal or governmental proceedings pending or, to the
Company's knowledge, threatened to which the Company or any of its subsidiaries
is a party or to which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in the Registration
Statement or the Prospectus and are not so described, other than such
proceedings that individually or in the aggregate would not have a material
adverse effect on the Company and its subsidiaries taken as a whole, or any
statutes, regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement that are not described or filed as
required;
(r) each of the Company and its subsidiaries has all necessary consents,
authorizations, approvals, orders, certificates and permits of and from, and has
made all declarations and filings with, all federal, state, local and other
governmental authorities, all self-regulatory organizations and all courts and
other tribunals, to own, lease, license and use its properties and assets and to
conduct its business in the manner described in the Prospectus, except to the
extent that the failure to obtain or file would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole;
(s) the Company is not, and after giving effect to the consummation of the
Exchange Offer, will not be an "investment company" or an entity "controlled" by
an "investment company" as such terms are defined in the Investment Company Act
of 1940, as amended;
(t) there are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
include such securities with the Notes registered pursuant to the Registration
Statement;
(u) each of the Company and its subsidiaries is (i) in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) has received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) is in compliance with all terms and conditions
of any such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the
8
<PAGE>
terms and conditions of such permits, licenses or approvals would not, singly or
in the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(v) except as disclosed in the Prospectus, each of the Company and its
subsidiaries owns or possesses, or can acquire on reasonable terms, all material
patents, patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks and
trade names necessary to the conduct of the business as now operated by them,
and neither the Company nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to any
of the foregoing which, singly or in the aggregate, would have a material
adverse effect on the Company and its subsidiaries, taken as a whole; and
(w) each document filed or to be filed under the Exchange Act and
incorporated by reference in the Prospectus complied or will comply when so
filed in all material respects with the Exchange Act and the rules and
regulations of the Commission thereunder.
9. Conditions to Dealer Manager's Obligations. The obligations of the Dealer
------------------------------------------
Manager hereunder are subject, as of the Commencement Date and at all times on
or prior to the Closing Date, to the accuracy of the representations and
warranties on the part of the Company herein, to the accuracy of the statements
of officers of the Company made pursuant to the provisions hereof, to the
performance by the Company, in all material respects, of its obligations
hereunder and to the following additional conditions:
(a) subsequent to the execution and delivery of this Agreement and prior
to the Closing Date,
(i) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of any review
for a possible change that does not indicate the direction of the possible
change, in the rating or preliminary rating accorded the Notes or of any other
securities of or guaranteed by the Company or any of its subsidiaries by any
"nationally recognized statistical rating organization," as such term is defined
for purposes of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or otherwise, or in
the earnings, business or operations, of the Company and its subsidiaries, taken
as a whole, from that described in the Prospectus that, in the Dealer Manager's
judgment, is material and adverse and that makes it, in the Dealer Manager's
judgment, impracticable to recommend that holders of Debentures participate in
the Exchange Offer on the terms and in the manner contemplated in the
Registration Statement;
(b) on the Commencement Date and the Closing Date, you shall have received
a certificate, dated such date and signed by an executive officer of the Company
acceptable to
9
<PAGE>
you, to the effect set forth in clause (a) above, and to the effect that the
representations and warranties of the Company contained in this Agreement are
true and correct as of the date thereof and that the Company has performed, in
all material respects, all of its obligations to be performed hereunder on or
prior to such date. The officer signing and delivering such certificate on
behalf of the Company may rely upon the best of such officer's knowledge as to
proceedings threatened;
(c) the Company shall have furnished to you on each of the Commencement
Date and the Closing Date, such additional certificates or other documents as
are typically delivered in connection with a transaction of this type and which
you may reasonably request;
(d) on the Closing Date and, except as to clauses (iii), (iv), (v) and
(viii), on the Commencement Date, the Dealer Manager shall have received a
signed opinion of Shearman & Sterling, counsel for the Company, dated as of such
date, to the effect that:
(i) the Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of Delaware and has the
corporate power and authority to own its property and to conduct its business as
described in the Prospectus;
(ii) this Agreement has been duly authorized, executed and delivered
by the Company;
(iii) the Exchange Agent Agreement and Information Agent Agreement
have been duly authorized, executed and delivered by the Company;
(iv) the Indenture has been duly qualified under the Trust Indenture
Act, has been duly authorized, executed and delivered by the Company and,
assuming due authorization, execution and delivery of the Indenture by the
Trustee, constitutes a valid and binding agreement of the Company enforceable in
accordance with its terms except as the enforcement thereof may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium fraudulent transfer or
other similar laws relating to or affecting the enforcement of creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity);
(v) the Notes when executed and authenticated in accordance with the
provisions of the Indenture, assuming due authorization, execution and delivery
of the Indenture by the Trustee, and delivered pursuant to the terms of the
Exchange Offer will be entitled to the benefits of the Indenture and will be
valid and binding obligations of the Company enforceable in accordance with
their terms except as the enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other similar
laws relating to or affecting the enforcement of creditors' rights generally and
(ii) general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity);
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(vi) (a) the shares of Common Stock initially issuable on conversion
of the Notes have been duly authorized and reserved for issuance upon such
conversion and, when issued upon conversion in accordance with the terms of the
Indenture, will have been validly issued, fully paid and non-assessable, and the
issuance of such shares is not subject to any preemptive or similar rights under
the Company's certificate of incorporation, by-laws or applicable law and (b)
the Rights, if any, issuable upon conversion of the Notes have been duly
authorized and, when, and if, issued upon conversion in accordance with the
terms of the Indenture and Rights Agreement, will have been validly issued.
(vii) the statements made in the Prospectus under the captions,
"Prospectus Summary -- Comparison of Senior Notes and Zero Coupon Debentures,"
"Description of Senior Notes," "Description of Zero Coupon Debentures,"
"Description of Capital Stock" and "Certain Federal Income Tax Considerations"
insofar as such statements constitute a summary of the legal matters, documents
or proceedings referred to therein, fairly present the information called for
with respect to such legal matters, documents and proceedings and are accurate
in all material respects;
(viii) the Company is not, or after giving effect to the consummation
the Exchange Offer, will not be, and the Company is not directly or indirectly
"controlled" by, an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended;
(ix) after due inquiry of the officers of the Company, to the best of
such counsel's knowledge, such counsel does not know of any legal or
governmental proceeding pending or threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties of the Company or any
of its subsidiaries is subject that is required to be described in the
Registration Statement or the Prospectus and is not so described, other than
such proceedings that individually or in the aggregate would not have a material
adverse effect on the Company and its subsidiaries taken as a whole, or of any
statutes, regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described or filed as
required;
(x) the Schedule 13E-4 and the documents required by Item 9 thereof
(except for any financial or statistical information contained or incorporated
by reference therein, as to which such counsel has not been requested to express
an opinion) comply as to form in all material respects with the requirements of
the Exchange Act and the rules and regulations thereunder;
(xi) such counsel (1) is of the opinion that each document
incorporated by reference in the Registration Statement and Prospectus (except
for financial statements and schedules and other financial and statistical data
included therein or incorporated by reference therein as to which such counsel
need not express any opinion), complied as to form when filed
with the Commission in all material respects with the Exchange Act and the rules
and
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regulations of the Commission thereunder, (2) is of the opinion that the
Registration Statement and Prospectus (except for financial statements and
schedules and other financial and statistical data included or incorporated
therein as to which such counsel need not express an opinion and except for that
part of the Registration Statement that constitutes the Form T-1) comply as to
form in all material respects with the Securities Act and the applicable rules
and regulations of the Commission thereunder, (3) has no reason to believe that
(except for financial statements and schedules and other financial and
statistical data included or incorporated by reference therein as to which such
counsel need not express any belief) the Registration Statement and the
Prospectus included therein at the time the Registration Statement became
effective contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading and (4) has no reason to believe that (except
for financial statements and schedules, and other financial and statistical data
as to which such counsel need not express any belief) the Prospectus at the date
of such opinion contains any untrue statement of a material fact 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.
In rendering such opinion, such counsel may rely as to matters of fact
on certificates of officers of the Company and of public officials and may state
that such counsel expresses no opinion as to the laws of any jurisdiction other
than the State of California, the State of New York, the federal law of the
United States and the Delaware General Corporation Law.
With respect to paragraph (xi) above, counsel may state their opinion
and belief are based upon their participation in the preparation of the
Registration Statement and the Prospectus (and any amendments or supplements
thereto) other than documents incorporated therein by reference and review and
discussion of the contents thereof, including incorporated documents, but are
without independent check or verification except as specified.
(e) On the Commencement Date and the Closing Date, the Dealer Manager
shall have received a signed opinion of the Director, Corporate Legal Services,
of the Company, dated as of such date, to the effect that:
(i) the Company is duly qualified to transact business and is
in good standing in each jurisdiction in which the conduct of its
business or the ownership or leasing of its property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole;
(ii) Each of the "significant subsidiaries" (as defined in Rule
1-02(w) of Regulation S-X under the Securities Act) of the
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Company has been duly incorporated, is validly existing as a
corporation good standing under the laws of the jurisdiction of its
incorporation and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that failure to be so qualified or
be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(iii) the authorized capital stock of the Company conforms as
to legal matters to the description thereof contained in the
Prospectus;
(iv) the execution and delivery by the Company of, and the
performance by the Company of its obligations under this Agreement,
the Indenture and the Notes, the Exchange Offer, the issuance and
delivery by the Company of the Notes pursuant to the Exchange Offer
and consummation of the Exchange Offer, and the fulfillment of the
terms hereof and thereof, do not and will not contravene, violate,
conflict with, result in the breach of, or constitute a default under
(i) any provision of applicable law or regulation; (ii) the
certificate of incorporation or by-laws of the Company; (iii) to such
counsel's knowledge, any agreement or other instrument binding upon
the Company or any of its subsidiaries; or (iv) any judgment,
determination, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any of its subsidiaries
known to such counsel other than, in the case of clauses (i), (iii)
and (iv), any such contravention, violation, conflict, breach, or
default that individually or in the aggregate would not have a
material adverse effect on the Company and its subsidiaries, taken as
a whole, or on the ability of the Company to perform its obligations
hereunder or thereunder and commence and consummate the Exchange
Offer; no consent, approval, authorization, permit or order of, or the
qualification with, the Commission or any Other Agency is required for
the performance by the Company of its obligations under this
Agreement, the Indenture and the Notes, the Exchange Offer, the
issuance and delivery of the Notes pursuant to the Exchange Offer and
the consummation of the Exchange Offer, except (i) such as have been
made or will be made when required as contemplated hereby under the
Securities Act, the Exchange Act and the Trust Indenture Act, (ii)
such filings and notifications with or to the NYSE as have been made
or will be made when
13
<PAGE>
required, and (iii) such as may be required by the securities or Blue
Sky laws of the various states or the securities laws of non-U.S.
jurisdictions, in each case, in connection with the Exchange Offer;
(v) after due inquiry, to the best of such counsel's knowledge,
such counsel does not know of any legal or governmental proceeding
pending or threatened to which the Company or any of its subsidiaries
is a party or to which any of the properties of the Company or any of
its subsidiaries is subject that is required to be described in the
Registration Statement or the Prospectus and is not so described,
other than such proceedings that individually or in the aggregate
would not have a material adverse effect on the Company and its
subsidiaries taken as a whole, or of any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement that are not described or filed as
required;
(vi) the statements made in "Item 3-Legal Proceedings" of the
Company's most recent annual report on Form 10-K, in "Other
Information Item 1-Legal Proceedings" of any quarterly report on Form
10-Q and in "Item 5-Other Events" of any current report on Form 8-K
included or incorporated by reference in the Prospectus, insofar as
such statements constitute a summary of legal matters, documents or
proceedings referred to therein, fairly present the information called
for with respect to such legal matters, documents and proceedings and
are accurate in all material respects.
In rendering such opinion, such counsel may rely as to certain matters
of fact on certificates of officers of the Company and of public officials and
may state that such counsel expresses no opinion as to the laws of any
jurisdiction other than the State of California, the federal law of the United
States and the Delaware General Corporation Law.
(f) The Dealer Manager shall have received the opinion of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, counsel for the Dealer Manager,
dated as of the Commencement Date and the Closing Date, covering the
incorporation and legal existence of the Company, the issuance and delivery of
the Notes, this Agreement, the Registration Statement, the Prospectus and such
other related matters as the Dealer Manager may require.
(g) You shall have received, on the Commencement Date and the Closing
Date, letters, dated the Commencement Date and the Closing Date, as the case may
be,
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<PAGE>
reasonably satisfactory to you of Ernst & Young, LLP, containing statements
and information of the type ordinarily included in accountants' "comfort
letters" with respect to the consolidated financial statements of the Company
and certain financial information contained in the Registration Statement and
the Prospectus.
The Company will furnish you with such executed or conformed copies of
such opinions, certificates, letters and documents as you may reasonably
request.
10. Covenants of the Company. The Company covenants with the Dealer Manager:
------------------------
(a) To use its reasonable efforts to cause the Registration Statement,
including any post-effective amendment thereto, to become effective promptly and
will notify the Dealer Manager immediately and, if requested by the Dealer
Manager, will confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement shall have become effective, or any
supplement to the Prospectus or any amended Prospectus or any amended or
additional Exchange Offer Materials shall have been filed, (ii) of the receipt
of any comments from the Commission relating to the Exchange Offer, (iii) of any
request by the Commission to amend the Registration Statement or amend or
supplement the Prospectus or the other Exchange Offer Materials or for
additional information relating to the Exchange Offer and (iv) of (A) the
issuance by the Commission of any stop order suspending the use of any Exchange
Offer Materials or any qualification of the Notes for offering or sale in
connection with the Exchange Offer in any jurisdiction, (B) the institution or
threatening of any proceedings for any of such purposes or (C) the occurrence of
any event which could cause the Company to withdraw, rescind, terminate or
modify the Exchange Offer or would permit the Company to exercise any right not
to accept Debentures tendered pursuant to the Exchange Offer. The Company will
use its reasonable efforts to prevent the issuance of any such stop order, the
issuance of any order preventing or suspending such use and the suspension of
any such qualification and, if any such order is issued or qualification
suspended, to obtain the lifting of such order or suspension at the earliest
practicable time;
(b) To comply in all material respects with the Securities Act, the
Exchange Act and the Trust Indenture Act in connection with the Exchange Offer
Materials, the Exchange Offer and the transactions contemplated hereby and
thereby, as applicable. If at any time when the Prospectus is required by the
Securities Act or Exchange Act to be delivered in connection with the Exchange
Offer, any event shall occur or condition shall exist as a result of which it is
necessary, in the opinion of counsel for the Dealer Manager or counsel for the
Company, to amend the Registration Statement or amend or supplement the
Prospectus or any other Exchange Offer Materials in order that the Prospectus or
such other Exchange Offer Materials will not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements in the Prospectus or such other Exchange Offer Materials, in the
light of the circumstances under which they were made, not misleading or if, in
the opinion of either such counsel, it shall be necessary to amend the
Registration Statement or amend or supplement the Prospectus or any other
Exchange Offer Materials to
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<PAGE>
comply with the requirements of the Securities Act or Exchange Act, the Company
will promptly prepare, file with the Commission, subject to Section 4(b) hereof,
and furnish, at its own expense, to the Dealer Manager and to the dealers (whose
names and address will be furnished to the Company by the Dealer Manager) to
which Debentures may have been exchanged, such amendment or supplement as may be
necessary to correct such untrue statement or omission or to make the
Registration Statement or the Prospectus or such other Exchange Offer Materials
comply with such requirements;
(c) To endeavor, in cooperation with the Dealer Manager, to qualify the
Notes for offering and sale in connection with the Exchange Offer under the
applicable securities or Blue Sky laws of such jurisdictions as the Dealer
Manger may reasonably request and to maintain such qualifications in effect for
such time as may be required for the consummation of the Exchange Offer,
provided, however the Company shall not be required to file a general consent to
service of process, qualify as a foreign corporation or as a dealer in
securities or subject itself to taxation in any such jurisdiction to the extent
not otherwise required;
(d) To make generally available to its security holders and to the Dealer
Manager as soon as practicable an earnings statement covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement that satisfies
the provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder; and
(e) To use its best efforts to advise or cause the Exchange Agent to
advise the Dealer Manager at 5:00 P.M., New York City time, or promptly
thereafter, daily (or more frequently if requested), by telephone or facsimile
transmission, with respect to Debentures tendered as follows: (i) the aggregate
principal amount of Debentures at maturity validly tendered and represented by
certificates physically held by the Exchange Agent or confirmations of receipt
of book-entry transfer of Debentures pursuant to the procedures set forth in the
Exchange Offer on such day; (ii) the aggregate principal amount at maturity of
Debentures represented by Notices of Guaranteed Delivery on such day; (iii) the
aggregate principal amount at maturity of any Debentures properly withdrawn on
such day; and (iv) the cumulative totals of the principal amount of Debentures
in categories (i) through (iii), inclusive, above.
11. Indemnification and Contribution; Settlement of Litigation; Release.
-------------------------------------------------------------------
The Company agrees to indemnify and hold harmless you and your affiliates and
the partners, directors, officers, employees and agents of you and your
affiliates, and each person, if any, who controls you or any of your affiliates
("Indemnified Persons") within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act (i) from and against any and
all losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred by any such Indemnified Person in
connection with defending or investigating any such action or claim) (A) caused
by any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or any
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<PAGE>
amendment thereof, any related preliminary prospectus, the Prospectus, the
Schedule 13E-4 or any Exchange Offer Materials (as amended or supplemented if
the Company shall have furnished any amendments or supplements thereto), or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading (except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon and in conformity with information relating to the Dealer
Manager furnished to the Company in writing by the Dealer Manager expressly for
use therein); or (B) which arises out of or is based upon a withdrawal,
rescission or modification of or a failure to make or consummate the Exchange
Offer; and (ii) against any other loss, claim, damage or liability (or expenses
related thereto) which is related to, otherwise arises out of or is based upon
or asserted in connection with your acting as a Dealer Manager in connection
with the Exchange Offer, rendering financial advisory services to the Company in
connection with the Exchange Offer or which arises in connection with any other
matter referred to in this Agreement, except, as to any such Indemnified Person,
to the extent any such losses, damages, liabilities, claims or expenses referred
to in this clause (ii) result from such Indemnified Person's gross negligence,
willful misconduct or bad faith in performing the services that are the subject
of this Agreement. The Company also agrees that no Indemnified Person shall have
any liability (whether direct or indirect, in contract or tort or otherwise) to
the Company or any person asserting claims on behalf of or in right of the
Company for or in connection with any matter referred to in this Agreement
except to the extent that any such liability for losses, claims, damages or
liabilities incurred by the Company (or expenses related thereto) results from
such person's gross negligence, willful misconduct or bad faith.
(b) The Dealer Manager agrees to indemnify and hold harmless the Company,
its directors, trustees and officers who sign the Registration Statement or the
Schedule 13E-4, and each person, if any, who controls the Company within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act to the same extent as the foregoing indemnity from the Company to the Dealer
Manager contained in Section 11(a)(i)(A) above, but only with reference to
information relating to the Dealer Manager furnished to the Company in writing
by the Dealer Manager expressly for use in the Registration Statement, any
preliminary prospectus, the Prospectus, the Schedule 13E-4, any other Exchange
Offer Material or any amendment or supplement thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to paragraphs (a) or (b) of this Section 11, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (A) the indemnifying
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<PAGE>
party and the indemnified party shall have mutually agreed to the retention of
such counsel or (B) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all such indemnified
parties and that all such fees and expenses shall be reimbursed as they are
incurred. In the case of any such separate firm for the Dealer Manager and such
partners, directors, officers and control persons of the Dealer Manager or its
affiliates, such firm shall be designated in writing by Morgan Stanley & Co.
Incorporated. In the case of any such separate firm for the Company, and such
directors, officers, trustees and control persons of the Company, such firm
shall be designated in writing by the Company. The indemnifying party shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
No indemnifying party shall, without the prior written consent of the
indemnified party, which consent shall not be unreasonably withheld, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) If the indemnification provided for above is unavailable to an
indemnified party or insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then each indemnifying party under such
paragraph, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (A) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on one
hand, and the Dealer Manager, on the other hand, from the Exchange Offer or (B)
if the allocation provided by clause (A) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (A) above but also the relative fault of the
Company, on the one hand, and of the Dealer Manager, on the other hand, in
connection with the statements or omissions or any other matter that resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company, on the
one hand, and the Dealer Manager, on the other hand, in connection with the
Exchange Offer shall be deemed to be in the same respective proportions as the
maximum aggregate principal amount of the Notes issuable pursuant to the
Exchange Offer bears to the total Dealer Manager's fee attributable to the
Exchange Offer payable to the Dealer Manager pursuant to Section 6 hereof. The
relative fault of the Company, on the one hand, and the Dealer Manager, on the
other hand, (A) in the case of any untrue statement of a material fact or
omission or alleged omission to state a material fact, 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
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omission to state a material fact relates to information supplied by the
Company, on the one hand, or by the Dealer Manager, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission and (B) in the case of any other
action or omission, shall be determined by reference to, among other things,
whether such action or omission was taken or omitted to be taken by the Company
or its affiliates or by the Dealer Manager, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action or omission.
(e) The Company and the Dealer Manager agree that it would not be just and
equitable if contribution pursuant to Section 11(d) above were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in Section 11(d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in Section 11(d) above shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Agreement, the Dealer Manager shall not be required to contribute any amount in
excess of the fee paid to the Dealer Manager in connection with the Exchange
Offer pursuant to Section 6 hereof. 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.
(f) The remedies provided for in this Agreement are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
(g) The indemnity and contribution provisions contained in this Agreement
and the representations and warranties of the Company contained in this
Agreement shall remain operative and in full force and effect regardless of (A)
any termination of this Agreement, (B) any investigation made by or on behalf of
the Dealer Manager or its officers, directors, partners or any person
controlling the Dealer Manager, or by or on behalf of the Company, any of its
respective officers, directors, trustees or any person controlling the Company
or (C) consummation of the Exchange Offer.
12. Termination. This Agreement shall terminate upon the earliest to
-----------
occur of (i) thirty days after the Expiration Date, (ii) any of the conditions
specified in Section 9 has not been fulfilled as of any date such condition is
required to be fulfilled pursuant to Section 9 (and the Dealer Manager shall
have notified the Company thereof) or (iii) the date on which the Company
terminates or withdraws the Exchange Offer for any reason (the earliest to occur
of clauses (i), (ii) and (iii) being referred to as the "Termination Date").
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(b) Notwithstanding termination of this Agreement pursuant to subsection
(a) above, the obligations of the parties pursuant to Sections 6, 7 and 11 shall
survive any termination of this Agreement; provided that the obligations of the
parties pursuant to Section 6 shall not survive termination of this Agreement
pursuant to clause (ii) of subsection (a) of this Section 12 if such termination
is solely attributable to a condition specified in Section 9(a) not having been
fulfilled as of any date such condition is required to be fulfilled pursuant to
Section 9.
13. Severability. If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic and legal substance of the agreements
contained herein is not affected in any manner adverse to any party.
14. Counterparts. This Agreement may be executed by the different parties
------------
hereto in one or more separate counterparts, each of which when executed shall
be deemed an original, but all of which together shall constitute one and the
same agreement.
15. Binding Effect. This Agreement shall be binding upon and inure solely
--------------
to the benefit of each party hereto and the Indemnified Persons, and nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy.
16. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
17. Consent to Jurisdiction. The Company (i) agrees that any legal suit,
-----------------------
action or proceeding brought by the Dealer Manager arising out of or relating to
this Agreement, the Indenture, the Notes, the Exchange Offer Materials or the
transactions contemplated hereby or thereby may be instituted in any federal or
state court in New York City, (ii) irrevocably waives, to the fullest extent it
may effectively do so, any objection (x) which it may now or hereafter have to
the laying of the venue of any such suit, action or proceeding in any federal or
state court in New York City or (y) that any such suit, action or proceeding has
been brought in an inconvenient forum, and (iii) irrevocably submits to the non-
exclusive jurisdiction of any such court in any such suit, action or proceeding.
(b) The Company irrevocably designates and appoints [ ] as its authorized
agent upon which process may be served in any legal suit, action or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby which may be instituted in any federal or state court in New York City,
and agrees that service of process upon such agent, and written notice of said
service to the Company, by the person serving the same, shall be deemed in every
respect effective service of process upon the Company in any such suit or
proceeding. The Company further agrees to take any and all actions as may be
necessary to maintain such designation and appointment of such agent in full
force and effect.
(c) The Company agrees that a final judgment in any such legal suit,
action or proceeding arising out of or relating to this Agreement or the
transactions contemplated
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hereby shall be conclusive and may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law.
18. Entire Agreement. This Agreement, together with that certain letter
----------------
dated ______________, 1997, from the Dealer Manager to the Company, constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and undertakings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof.
19. Amendment. This Agreement may not be amended except in a writing signed by
---------
each party to be bound thereby.
20. Notices. All notices and other communications required or permitted
-------
to be given under this Agreement shall be in writing and shall be deemed to have
been duly given if delivered in person, by cable, fax, telegram or telex or by
registered or certified mail (postage prepaid, return receipt requested) to the
parties hereto as follows (or, as to each party, at such other address as shall
be designated by such party in a written notice complying as to delivery with
the terms of this paragraph):
(a) If to you:
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Fax No: (212) 761-0367
Attention: Equity Syndicate
With a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Fax No.: (415) 493-6811
Attention: John A. Fore, Esq.
and:
(b) If to the Company,
Silicon Graphics, Inc.
2011 N. Shoreline Blvd.
Mountain View, California 94043-1389
Fax No.: (415) 961-0595
21
<PAGE>
Attention: Director, Corporate Legal Services
With a copy to:
Shearman & Sterling
555 California Street
Suite 2000
San Francisco, California 94104
Fax No.: (415) 616-1199
Attention: William H. Hinman, Esq.
21. Subheadings. The descriptive headings contained in this Agreement are
-----------
included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
Please indicate your willingness to act as Dealer Manager on the terms
set forth herein and your acceptance of the foregoing provisions by signing in
the space provided below for that purpose and returning to us a copy of this
letter, whereupon this letter and your acceptance shall constitute a binding
agreement among us.
Very truly yours,
SILICON GRAPHICS, INC.
By:
----------------------------
Name:
Title:
Accepted and agreed as of the date
first above written:
MORGAN STANLEY & CO. INCORPORATED
By:
Name:
Title:
22
<PAGE>
Exhibit 4.1
SILICON GRAPHICS, INC.
___% Senior Convertible Notes due 2004
INDENTURE
Dated as of __________, 1997
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.,
TRUSTEE
<PAGE>
SILICON GRAPHICS, INC.
Reconciliation and tie between
Trust Indenture Act of 1939 and
Indenture, dated as of __________, 1997
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
--------------- -----------------
<S> <C>
(S) 310(a)(1) ........................... 7.10
(a)(2) ........................... 7.10
(a)(3) ........................... Not Applicable
(a)(4) ........................... Not Applicable
(b) ........................... 7.06, 7.08
(S) 311(a) ........................... 7.11
(b) ........................... 7.11
(c) ........................... Not Applicable
(S) 312(a) ........................... 2.05, 2.14
(b) ........................... 2.14(b), 11.03
(c) ........................... 2.14(c), 11.03
(S) 313(a) ........................... 7.12(a)
(b) ........................... 7.12(a)
(c) ........................... 7.12(a)
(d) ........................... 7.12(b)
(S) 314(a) ........................... 4.02
(b) ........................... Not Applicable
(c)(1) ........................... 11.04
(c)(2) ........................... 11.04
(c)(3) ........................... Not Applicable
(d) ........................... Not Applicable
(e) ........................... 11.04
(f) ........................... Not Applicable
(S) 315(a) ........................... 7.01
(b) ........................... 7.05, 7.12(a)
(c) ........................... 7.01
(d) ........................... 6.11
(S) 316(a)(1)(A) ........................... 6.02
(a)(1)(B) ........................... 6.04
(a)(2) ........................... Not Applicable
(b) ........................... 6.07
(c) ........................... Not Applicable
(S) 317(a)(1) ........................... 6.08
(a)(2) ........................... 6.09
(b) ........................... 3.03
(S) 318(a) ........................... 11.1
</TABLE>
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS/1/
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE.................................................... 1
Section 1.01. Definitions.......................................................................... 1
Section 1.02. Other Definitions.................................................................... 6
Section 1.03. Incorporation by Reference of TIA.................................................... 7
Section 1.04. Rules of Construction................................................................ 7
ARTICLE 2 THE SECURITIES................................................................................ 8
Section 2.01. Form and Dating...................................................................... 8
Section 2.02. Execution and Authentication......................................................... 8
Section 2.03. Registrar, Paying Agent and Conversion Agent......................................... 8
Section 2.04. Paying Agent to Hold Money and Securities in Trust................................... 9
Section 2.05. Securityholder Lists................................................................. 9
Section 2.06. Exchange and Registration of Transfer of Securities; Depositary......................10
Section 2.07. Replacement Securities...............................................................12
Section 2.08. Outstanding Securities; Determinations of Holders' Action............................12
Section 2.09. Temporary Securities.................................................................13
Section 2.10. Cancellation.........................................................................14
Section 2.11. Persons Deemed Owners................................................................14
Section 2.12. Payment of Interest; Interest Rights Preserved.......................................14
Section 2.13. Computation of Interest..............................................................16
Section 2.14. Preservation of Information; Communications to Holders...............................16
ARTICLE 3 REDEMPTION AND PURCHASES......................................................................16
Section 3.01. Right to Redeem; Notices to Trustee..................................................16
Section 3.02. Selection of Securities to be Redeemed...............................................17
Section 3.03. Notice of Redemption.................................................................17
Section 3.04. Effect of Notice of Redemption.......................................................18
Section 3.05. Deposit of Redemption Price..........................................................18
Section 3.06. Securities Redeemed in Part..........................................................18
Section 3.07. Conversion Arrangement on Call for Redemption........................................18
Section 3.08. Redemption at Option of the Holder upon a Fundamental Change.........................19
ARTICLE 4 COVENANTS.....................................................................................22
Section 4.01. Payment of Securities................................................................22
Section 4.02. SEC Reports..........................................................................22
Section 4.03. Compliance Certificate...............................................................22
Section 4.04. Further Instruments and Acts.........................................................23
</TABLE>
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/1/ This Table of Contents shall not, for any purpose, be deemed to be part of
the Indenture.
-i-
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
Section 4.05. Maintenance of Office or Agency..................................................... 23
ARTICLE 5 SUCCESSOR CORPORATION........................................................................ 23
Section 5.01. When Company May Merge or Transfer Assets........................................... 23
ARTICLE 6 DEFAULTS AND REMEDIES........................................................................ 24
Section 6.01. Events of Default................................................................... 24
Section 6.02. Acceleration........................................................................ 25
Section 6.03. Other Remedies...................................................................... 26
Section 6.04. Waiver of Past Defaults............................................................. 26
Section 6.05. Control by Majority................................................................. 26
Section 6.06. Limitation on Suits................................................................. 26
Section 6.07. Rights of Holders to Receive Payment................................................ 27
Section 6.08. Collection Suit by Trustee.......................................................... 27
Section 6.09. Trustee May File Proofs of Claim.................................................... 27
Section 6.10. Priorities.......................................................................... 28
Section 6.11. Undertaking for Costs............................................................... 29
Section 6.12. Waiver of Stay, Extension or Usury Laws............................................. 29
ARTICLE 7 TRUSTEE...................................................................................... 29
Section 7.01. Duties of Trustee................................................................... 29
Section 7.02. Rights of Trustee................................................................... 30
Section 7.03. Individual Rights of Trustee........................................................ 31
Section 7.04. Trustee's Disclaimer................................................................ 31
Section 7.05. Notice of Defaults.................................................................. 31
Section 7.06. Disqualification; Conflicting Interests............................................. 31
Section 7.07. Compensation and Indemnity.......................................................... 31
Section 7.08. Replacement of Trustee.............................................................. 32
Section 7.09. Successor Trustee by Merger......................................................... 33
Section 7.10. Eligibility; Disqualification....................................................... 33
Section 7.11. Preferential Collection of Claims Against Company................................... 33
Section 7.12. Reports by Trustee.................................................................. 33
ARTICLE 8 DISCHARGE OF INDENTURE....................................................................... 34
Section 8.01. Discharge of Liability on Securities................................................ 34
Section 8.02. Repayment to the Company............................................................ 34
ARTICLE 9 AMENDMENTS................................................................................... 34
Section 9.01. Without Consent of Holders.......................................................... 34
Section 9.02. With Consent of Holders............................................................. 35
Section 9.03. Compliance with TIA................................................................. 36
Section 9.04. Revocation and Effect of Consents, Waivers and Actions.............................. 36
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 9.05. Notation on or Exchange of Securities............................................. 36
Section 9.06. Trustee to Sign Supplemental Indentures........................................... 36
Section 9.07. Effect of Supplemental Indentures................................................. 36
ARTICLE 10 CONVERSION................................................................................. 37
Section 10.01. Conversion Privilege.............................................................. 37
Section 10.02. Conversion Procedure.............................................................. 37
Section 10.03. Fractional Shares................................................................. 38
Section 10.04. Taxes on Conversion............................................................... 38
Section 10.05. Company to Provide Stock.......................................................... 39
Section 10.06. Adjustment for Change in Capital Stock............................................ 39
Section 10.07. Adjustment for Rights Issue....................................................... 39
Section 10.08. Adjustment for Other Distributions................................................ 40
Section 10.09. When Adjustment May be Deferred................................................... 44
Section 10.10. When no Adjustment Required....................................................... 44
Section 10.11. Notice of Adjustment.............................................................. 44
Section 10.12. Voluntary Increase................................................................ 44
Section 10.13. Notice of Certain Transactions.................................................... 45
Section 10.14. Effect of Reclassification, Consolidation, Merger or Sale......................... 45
Section 10.15. Company Determination Final....................................................... 46
Section 10.16. Trustee's Adjustment Disclaimer................................................... 46
Section 10.17. Simultaneous Adjustments.......................................................... 46
Section 10.18. Successive Adjustments............................................................ 46
Section 10.19. Rights Issued in Respect of Common Stock Issued Upon Conversion................... 46
Section 10.20. General Considerations............................................................ 47
ARTICLE 11 MISCELLANEOUS.............................................................................. 48
Section 11.01. Conflict with TIA................................................................. 48
Section 11.02. Notices........................................................................... 48
Section 11.03. Communication by Holders with Other Holders....................................... 49
Section 11.04. Certificate and Opinion as to Conditions Precedent................................ 49
Section 11.05. Statements Required in Certificate or Opinion..................................... 49
Section 11.06. Separability Clause............................................................... 50
Section 11.07. Rules by Trustee, Paying Agent, Conversion Agent and Registrar.................... 50
Section 11.08. Legal Holidays.................................................................... 50
Section 11.09. Governing Law..................................................................... 50
Section 11.10. No Recourse Against Others........................................................ 50
Section 11.11. Successors........................................................................ 50
Section 11.12. Multiple Originals................................................................ 50
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
EXHIBIT A--Form of Security A-1
</TABLE>
-iv-
<PAGE>
INDENTURE, dated as of ________, 1997, between SILICON GRAPHICS, INC.,
a Delaware corporation (the "Company"), and STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, N.A., a national banking association organized and existing under
the laws of the United States of America (the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's ___% Senior
Convertible Notes due 2004 (the "Securities"):
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. For the purposes of this definition,
"control," when used with respect to any specified Person means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Applicable Price" means (i) in the event of a Fundamental Change in
which the holders of the Common Stock receive only cash, the amount of cash
received by the holder of one share of Common Stock and (ii) in the event of any
other Fundamental Change, the average of the last reported sales price for the
Common Stock (determined as set forth in the definition of Current Market Price)
during the ten Trading Days prior to the record date for the determination of
the holders of Common Stock entitled to receive cash, securities, property or
other assets in connection with such Fundamental Change, or, if there is no such
record date, the date upon which the holders of Common Stock shall have the
right to receive such cash, securities, property or other assets in connection
with a Fundamental Change.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of such board.
"Business Day" means each day of the year on which banking
institutions are not required or authorized to close in The City of New York or
at the principal corporate trust office of the Trustee.
"Closing Price" means with respect to any securities on any day the
closing sale price regular way on such day or, in case no such sale takes place
on such day, the average of the reported closing bid and asked prices, regular
way, in each case on the New
<PAGE>
York Stock Exchange, or, if such security is not listed or admitted to trading
on such Exchange, on the principal national security exchange or quotation
system on which such security is quoted or listed or admitted to trading, or, if
not quoted or listed or admitted to trading on any national securities exchange
or quotation system, the average of the closing bid and asked prices of such
security on the over-the-counter market on the day in question as reported by
the National Quotation Bureau Incorporated, or a similar generally accepted
reporting service, or if not so available, in such manner as furnished by any
New York Stock Exchange member firm selected from time to time by the Board of
Directors for that purpose, or a price determined in good faith by the Board of
Directors or, to the extent permitted by applicable law, a duly authorized
committee thereof, whose determination shall be conclusive.
"Common Stock" means any stock of any class of the Company which has
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company. Subject to the
provisions of Section 10.14, however, shares issuable on conversion of the
Securities shall include only shares of Common Stock, par value $.001 per share,
of the Company as it exists on the date of this Indenture or shares of any class
or classes resulting from any reclassification or reclassifications thereof and
which have no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which are not subject to redemption by the Company; provided
--------
that if at any time there shall be more than one such resulting class, the
shares of each such class then so issuable shall be substantially in the
proportion which the total number of shares of such class resulting from all
such reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
"Company" means the party named as the "Company" in the first
paragraph of this Indenture until a successor replaces it pursuant to the
applicable provisions of this Indenture and, thereafter, shall mean such
successor. The foregoing sentence shall likewise apply to any subsequent such
successor or successors.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, a Vice Chairman,
its President or a Vice President, and by its Treasurer, an Assistant Treasurer,
its Secretary or an Assistant Secretary, and delivered to the Trustee.
"Conversion Price" has the meaning specified in Section 10.01.
"Current Market Price" per share of Common Stock at any date shall be
the average of the last reported sale prices for the ten consecutive Trading
Days preceding the day before the record date with respect to any distribution,
issuance or other event requiring such computation. The last reported sale
price for each day shall be (i) the last reported sale price of Common Stock on
the Nasdaq National Market or any similar system of automated dissemination of
quotations of securities prices then in common use,
2
<PAGE>
if so quoted, or (ii) if not quoted as described in clause (i), the mean between
the high bid and low asked quotations for Common Stock as reported by the
National Quotation Bureau Incorporated if at least two securities dealers have
inserted both bid and asked quotations for the Common Stock on at least 5 of the
10 preceding days, or (iii) if the Common Stock is listed or admitted for
trading on any national securities exchange, the last sale price, or the closing
bid price if no sale occurred, of the Common Stock on the principal securities
exchange on which the Common Stock is listed. If the Common Stock is quoted on a
national securities or central market system, in lieu of a market or quotation
system described above, the last reported sale price shall be determined in the
manner set forth in clause (ii) of the preceding sentence if bid and asked
quotations are reported but actual transactions are not, and in the manner set
forth in clause (iii) of the preceding sentence if actual transactions are
reported. If none of the conditions set forth above is met, the last reported
sale price of Common Stock on any day or the average of such last reported sale
prices for any period shall be the fair market value of the Common Stock as
determined by a member firm of the New York Stock Exchange, Inc. selected by the
Company.
"Custodian" means State Street Bank and Trust Company of California,
N.A., as custodian with respect to any Global Security, or any successor.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 2.12.
"Depositary" means, with respect to the Securities issuable or issued
in whole or in part in global form, the person specified in Section 2.06 as the
Depositary with respect to the Securities, until a successor shall have been
appointed and become such pursuant to the applicable provisions of this
Indenture, and thereafter, "Depositary" shall mean or include such successor.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Fundamental Change" means the occurrence of any transaction or event
in connection with which all or substantially all the Common Stock shall be
exchanged for, converted into, acquired for or constitute solely the right to
receive (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise) consideration which is not all or substantially all common stock
listed (or, upon consummation of such transaction or event, will be listed) on a
United States national securities exchange or approved for quotation in the
Nasdaq National Market or any similar system of automated dissemination of
quotations of securities prices.
3
<PAGE>
"Global Security" means a Security that is registered in the Security
Register in the name of the Depository or a nominee thereof.
"Holder" or "Securityholder" means a Person in whose name a Security
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.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Period" shall have the meaning set forth in Section 10.02.
"Maturity" when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Officer" means the Chairman of the Board, any Vice Chairman, the
President, any Senior Vice President, any Vice President, the Treasurer or the
Secretary or any Assistant Treasurer or Assistant Secretary of the Company.
"Officers' Certificate" means a written certificate containing the
information specified in Sections 11.04 and 11.05, signed in the name of the
Company by its Chairman of the Board, a Vice Chairman, its President, a Senior
Vice President or a Vice President, and by its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary, and delivered to the
Trustee.
"Opinion of Counsel" means a written opinion containing the
information specified in Sections 11.04 and 11.05, from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of, or counsel to, the
Company or the Trustee.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
or government or any agency or political subdivision thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 2.06 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
4
<PAGE>
"Reference Market Price" shall initially mean $_____ and in the event
of any adjustment to the Conversion Price pursuant to Article 10, the Reference
Market Price shall be adjusted to equal the initial Reference Market Price
multiplied by a fraction the numerator of which is the Conversion Price
specified in the form of Security attached as Exhibit A hereto (without regard
to any adjustment thereto) and the denominator of which is the Conversion Price
following such adjustment.
"Redemption Date" shall mean a date specified for redemption of the
Securities (other than redemption upon a Fundamental Change at the option of the
Securityholder) in accordance with the terms of the Securities and Section 3.01
of this Indenture.
"Redemption Price" shall have the meaning set forth in paragraph 5 of
the Securities.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the __________ or _________ (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
"Rights Agreement" means that certain Amended and Restated Preferred
Shares Rights Agreement, dated as of May 6, 1992, between the Company and State
Street Bank and Trust Company of California, N.A., as successor rights agent
thereunder, as amended from time to time.
"Rights" shall mean "Rights" as such term is defined in the Rights
Agreement.
"SEC" means the Securities and Exchange Commission.
"Securities" means any of the Company's ___% Senior Convertible Notes
due 2004, as amended or supplemented from time to time, issued under this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Securityholder" or "Holder" means a person in whose name a Security
is registered on the Registrar's books.
"Security Register" has the meaning specified in Section 2.05.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 2.12.
5
<PAGE>
"Stated Maturity" when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Subsidiary" means a corporation of which a majority of the capital
stock (which for purposes of this definition means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) stock issued by such
corporation) having voting power under ordinary circumstances to elect a
majority of the board of directors of such corporation is owned directly or
indirectly by (i) the Company, (ii) the Company and one or more Subsidiaries or
(iii) one or more Subsidiaries.
"TIA" means the Trust Indenture Act of 1939 as in effect on the date
of this Indenture, except as provided in Section 9.03.
"Trading Day" means a day during which trading in securities generally
occurs on the New York Stock Exchange or, if the applicable security is not
listed on the New York Stock Exchange, on the principal other national or
regional securities exchange on which the applicable security is then listed or,
if the applicable security is not listed on a national or regional securities
exchange, on the Nasdaq National Market or, if the applicable security is not
quoted on the Nasdaq National Market, on the principal other market on which the
applicable security is then traded.
"Trust Officer" means any officer of the Trustee assigned by the
Trustee to administer its corporate trust matters.
"Trustee" means the party named as the "Trustee" in the first
paragraph of this Indenture until a successor replaces it pursuant to the
applicable provisions of this Indenture and, thereafter, shall mean such
successor. The foregoing sentence shall likewise apply to any subsequent such
successor or successors.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
DEFINED IN
TERM SECTION
----------
<S> <C>
"Bankruptcy Law" 6.01
"Conversion Agent" 2.03
"Event of Default" 6.01
"Fundamental Change Repurchase Date" 3.08(a)
"Fundamental Change Redemption Notice" 3.08(a)
"Fundamental Change Redemption Price" 3.08(a)
"Legal Holiday" 11.08
"Notice of Default" 6.01
"Paying Agent" 2.03
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
"Registrar" 2.03
</TABLE>
SECTION 1.03. INCORPORATION BY REFERENCE OF TIA. Whenever this
Indenture refers to a provision of the TIA, the provision is incorporated by
reference in and made a part of this Indenture. The following TIA terms used in
this Indenture have the following meanings:
"Commission" means the SEC.
"Indenture Securities" means the Securities.
"Indenture Security Holder" means a Securityholder.
"Indenture to be Qualified" means this Indenture.
"Indenture Trustee" or "Institutional Trustee" means the Trustee.
"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 generally accepted accounting principles as in effect
from time to time;
(3) "or" is not exclusive;
(4) "including" means including, without limitation; and
(5) words in the singular include the plural, and words in the plural
include the singular.
ARTICLE 2
THE SECURITIES
7
<PAGE>
SECTION 2.01. FORM AND DATING. The Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A,
which is a part of this Indenture. The Securities may have notations, legends
or endorsements required by law, stock exchange rule or usage (provided that any
such notation, legend or endorsement required by usage is in a form acceptable
to the Company). The Company shall provide any such notations, legends or
endorsements to the Trustee in writing. Each Security shall be dated the date
of its authentication.
SECTION 2.02. EXECUTION AND AUTHENTICATION. The Securities shall
be executed on behalf of the Company by its Chairman of the Board, one of its
Vice Chairman, its President, one of its Senior Vice Presidents or one of its
Vice Presidents, under its corporate seal reproduced thereon and attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper Officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of authentication of such Securities.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee by manual signature of an authorized officer, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder.
The Trustee shall authenticate and deliver Securities for original
issue in an aggregate principal amount of up to $___________ upon a Company
Order without any further action by the Company. The aggregate principal amount
of Securities outstanding at any time may not exceed the amount set forth in the
foregoing sentence, subject to the proviso set forth therein, except as provided
in Section 2.07.
SECTION 2.03. REGISTRAR, PAYING AGENT AND CONVERSION AGENT. The
Company shall maintain an office or agency where Securities may be presented for
registration of transfer or for exchange ("Registrar"), an office or agency
where Securities may be presented for purchase or payment ("Paying Agent") and
an office or agency where Securities may be presented for conversion
("Conversion Agent"). The Registrar shall keep a register (the "Security
Register") of the Securities and of their transfer and exchange. The Company
may have one or more co-registrars, one or more additional paying agents and one
or more additional conversion agents. The term Paying Agent includes any
additional paying agent. The term Conversion Agent includes any additional
conversion agent.
8
<PAGE>
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent, Conversion Agent or co-registrar (if not the Trustee).
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
Conversion Agent, 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,
Conversion Agent or co-registrar.
The Company initially appoints the Trustee as Registrar, Conversion
Agent and Paying Agent in connection with the Securities.
SECTION 2.04. PAYING AGENT TO HOLD MONEY AND SECURITIES IN TRUST.
Except as otherwise provided herein, prior to or on each due date of payments in
respect of any Security, the Company shall deposit with the Paying Agent a sum
of money or securities sufficient to make such payments when so becoming due.
The Company shall require each Paying Agent (other than the Trustee) to agree in
writing that the Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee all money and securities held by the Paying Agent
for the making of payments in respect of the Securities and shall notify the
Trustee of any default by the Company in making any such payment. At any time
during the continuance of any such default, the Paying Agent shall, upon the
written request of the Trustee, forthwith pay to the Trustee all money and
securities so held in trust. If the Company, a Subsidiary or an Affiliate of
either of them acts as Paying Agent, it shall segregate the money and securities
held by it as Paying Agent and hold it as a separate trust fund. The Company at
any time may require a Paying Agent to pay all money and securities held by it
to the Trustee and to account for any funds and securities disbursed by it.
Upon doing so, the Paying Agent shall have no further liability for the money or
securities.
SECTION 2.05. SECURITYHOLDER LISTS. The Trustee shall preserve in
as current a form as is reasonably practicable the most recent list available to
it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall cause to be furnished to the Trustee at least
semiannually on ___________ and _________ a listing of Holders dated within 15
days of the date on which the list is furnished and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.
SECTION 2.06. EXCHANGE AND REGISTRATION OF TRANSFER OF SECURITIES;
DEPOSITARY. Upon surrender for registration of transfer of any Security at any
office or agency of the Company designated as Registrar or co-registrar pursuant
to Section 2.03 and satisfaction of the requirements for such transfer set forth
in this Section 2.06, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of any authorized denominations and of a
like aggregate principal amount.
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Securities may be exchanged for a like aggregate principal amount of
Securities of other authorized denominations. Securities to be exchanged shall
be surrendered at any office or agency to be maintained by the Company
designated as Registrar or co-registrar pursuant to Section 2.03 and the Company
shall execute and register and the Trustee shall authenticate and deliver in
exchange therefor the Security or Securities which the Securityholder making the
exchange shall be entitled to receive, bearing registration numbers not
contemporaneously outstanding.
All Securities presented for registration of transfer or for exchange,
purchase, redemption, conversion or payment shall (if so required by the
Company, the Trustee, the Registrar or any co-registrar) be duly endorsed by, or
be accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company and the Trustee, duly executed by the Holder or his
attorney duly authorized in writing.
No service charge shall be charged to the Securityholder for any
exchange or registration of transfer of Securities, but the Company may require
payment of a sum sufficient to cover any tax, assessments or other governmental
charges that may be imposed in connection therewith.
None of the Company, the Trustee, the Registrar or any co-registrar
shall be required to exchange or register a transfer of (a) any Securities for a
period of 15 days next preceding any selection of Securities to be redeemed or
(b) any Securities or portions thereof selected or called for redemption or (c)
any Securities or portion thereof surrendered for conversion or (d) any
Securities or portion thereof surrendered for redemption (and not withdrawn)
pursuant to Section 3.08.
All Securities issued upon any transfer or exchange of Securities
shall be valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture as the Securities surrendered
upon such exchange or transfer.
The provisions of Clauses (1), (2), (3), (4) and (5) below shall apply
only to Global Securities:
(1) Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such Global
Security or a nominee thereof and delivered to such Depositary or a nominee
thereof or Custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered,
and no transfer of a Global Security in whole or in party may be
registered, in the name of any Person other than the Depositary for such
Global Security or a nominee thereof unless (A) such Depositary (i) has
notified the Company that it is unwilling or unable to continue as
Depositary for such Global Security or (ii) has ceased to
10
<PAGE>
be a clearing agency registered under the Exchange Act, or (B) there shall
have occurred and be continuing an Event of Default with respect to such
Global Security.
(3) Subject to Clause (2) above, any exchange of a Global Security for
other Securities may be made in whole or in part, and all Securities issued
in exchange for a Global Security or any portion thereof shall be
registered in such names as the Depositary for such Global Security shall
direct.
(4) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any
portion thereof, whether pursuant to this Article Two or otherwise, shall
be authenticated and delivered in the form of, and shall be, a Global
Security, unless such Security is registered in the name of a Person other
than the Depositary for such Global Security or a nominee thereof.
(5) The Depositary or its nominee, as registered own of a Global
Security, shall be the Holder of such Global Security for all purposes
under the Indenture and the Securities, and owners of beneficial interests
in a Global Security shall hold such interests pursuant to the applicable
procedures. Accordingly, any such owner's beneficial interest in a Global
Security will be shown only on, and the transfer of such interest shall be
effected only through, records maintained by the Depositary or its nominee
or its agent members and such owners of beneficial interests in a Global
Security will not be considered the owners or holders thereof.
The Depositary shall be a clearing agency registered under the
Exchange Act. The Company initially appoints The Depository Trust Company to
act as Depositary with respect to the Securities in global form. Initially, the
Global Security shall be issued to the Depositary, registered in the name of
Cede & Co., as the nominee of the Depositary, and deposited with the Trustee as
custodian for Cede & Co.
If at any time the Depositary for the Global Security notifies the
Company that it is unwilling or unable to continue as Depositary for such Global
Security, the Company may appoint a successor Depositary with respect to such
Security. If a successor Depositary for the Global Security is not appointed by
the Company within 90 days after the Company receives such notice, the Company
will execute, and the Trustee, upon receipt of an Officers' Certificate for
authentication and delivery of Securities, will authenticate and deliver,
Securities in definitive form, in an aggregate principal amount equal to the
principal amount of the Global Security, in exchange for the such Security in
the global form.
SECTION 2.07. REPLACEMENT SECURITIES. If (a) any mutilated
Security is surrendered to the Trustee, or (b) the Company and the Trustee
receive evidence to their satisfaction of the destruction, loss or theft of any
Security, and there is delivered to the Company and the Trustee such security or
indemnity as may be required by them to save
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<PAGE>
each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute and upon its written request the Trustee shall
authenticate and deliver, in exchange for any such mutilated Security or in lieu
of any such destroyed, lost or stolen Security, a new Security of like tenor and
Principal amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, or is about to be purchased or
redeemed by the Company pursuant to Article 3 hereof, the Company in its
discretion may, instead of issuing a new Security, pay, purchase or redeem such
Security, as the case may be.
Upon the issuance of any new Securities under this Section, 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) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
The provisions of this Section 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 SECURITIES; DETERMINATIONS OF HOLDERS'
ACTION. Securities outstanding at any time are all the Securities authenticated
by the Trustee except for those canceled by it, those delivered to it for
cancellation and those described in this Section 2.08 as not outstanding. A
Security does not cease to be outstanding because the Company or an Affiliate
thereof holds the Security; provided, however, that in determining whether the
-------- -------
Holders of the requisite principal amount of Securities have given or concurred
in any request, demand, authorization, direction, notice, consent or waiver
hereunder, Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or such other obligor shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Subject to the foregoing,
only Securities outstanding at the time of such determination shall be
considered in any such determination (including, without limitation,
determinations pursuant to Articles 6 and 9).
12
<PAGE>
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent holds, in accordance with this Indenture, on a
Redemption Date, on a Fundamental Change Repurchase Date or on Stated Maturity,
money or securities, if permitted hereunder, sufficient to pay Securities
payable on that date, then on and after that date such Securities shall cease to
be outstanding and interest on such Securities shall cease to accrue; provided,
--------
that if such Securities are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made.
If a Security is converted in accordance with Article 10, then from
and after such conversion such Security shall cease to be outstanding and
interest shall cease to accrue on such Security.
SECTION 2.09. TEMPORARY SECURITIES. Pending the preparation of
definitive Securities, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 2.03,
without charge to the Holder. Upon surrender for cancellation of any one or
more temporary Securities the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
SECTION 2.10. CANCELLATION. All Securities surrendered for
payment, conversion, redemption 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 Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and all Securities so delivered shall be promptly canceled by the
Trustee. The Company may not issue new Securities to replace Securities it has
paid or delivered to the Trustee for cancellation or that any Holder has
converted pursuant to Article 10. No Securities shall be authenticated in lieu
of or in exchange for any Securities
13
<PAGE>
canceled as provided in this Section, except as expressly permitted by this
Indenture. All canceled Securities held by the Trustee shall be destroyed by the
Trustee and evidence of their destruction delivered to the Company unless the
Company directs by Company Order that the Trustee deliver canceled Securities to
the Company.
SECTION 2.11. PERSONS DEEMED OWNERS. Prior to due presentment of a
Security for registration of transfer, the Company, the Trustee and any agent of
the Company or the Trustee may treat the Person in whose name such Security is
registered as the owner of such Security for the purpose of receiving payment of
principal amount, interest, Redemption Price and Fundamental Change Redemption
Price in respect thereof, for the purpose of conversion and for all other
purposes whatsoever, whether or not such Security be overdue, and none of the
Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 2.12. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the person in whose
name that Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or dully provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in Clause (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Security and
the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit on or prior to
the date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted Interest as
in this Clause provided. Thereupon the Trustee shall fix a Special Record
Date for the payment of such Defaulted Interest which shall be not more
than 15 days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee of the
notice of the proposed payment. The Trustee shall promptly notify the
Company of such Special Record Date and, in the name and at the expense of
the Company, shall cause notice of proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed, first-class
postage prepaid, to each Holder at
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<PAGE>
his address as it appears in the Security Register, not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose names
the Securities (or their respective Predecessor Securities) are registered
at the close of business on such Special Record Date and shall no longer be
payable pursuant to the following Clause (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange or market on which the Securities may be listed, and
upon such notice as may be required by such exchange or market, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this Clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
In the case of any Security which is converted after any Regular
Record Date on or prior to the close of business on the next succeeding Interest
Payment Date (other than any Security whose Maturity is prior to such Interest
Payment Date), interest whose Stated Maturity is on such Interest Payment Date
shall be payable on such Interest Payment Date notwithstanding such conversion,
and such interest (whether or not punctually paid or dully provided for) shall
be paid to the Person whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on such Regular Record Date.
Except as otherwise expressly provided in the immediately preceding sentence, in
the case of any Security which is converted, interest whose State Maturity is
after the date of conversion of such Security shall not be payable.
SECTION 2.13. COMPUTATION OF INTEREST. Interest on the Securities
shall be computed on the basis of a 360-day year of twelve 30-day months.
SECTION 2.14. PRESERVATION OF INFORMATION; COMMUNICATIONS TO
HOLDERS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 2.05 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 2.05 upon receipt of a new list so furnished.
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<PAGE>
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding right and duties of the Trustee, shall be as provided in the TIA.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of the
disclosure of information as to names and addresses of the Holders made pursuant
to the TIA.
ARTICLE 3
REDEMPTION AND PURCHASES
SECTION 3.01. RIGHT TO REDEEM; NOTICES TO TRUSTEE. The Company, at
its option, may redeem the Securities in accordance with the provisions of
paragraphs 5 and 7 of the Securities. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the Redemption Date, the principal amount of Securities to
be redeemed and the Redemption Price.
The Company shall give the notice to the Trustee provided for in this
Section 3.01 (i) in the case of any redemption of fewer than all of the
Securities, at least 45 days before the Redemption Date and (ii) in the case of
a redemption of all of the Securities, no later than the Company is required to
give notice to the Holders pursuant to Section 3.03, in each case unless a
shorter notice shall be satisfactory to the Trustee.
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED. If less than
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed pro rata or by lot or by a method the Trustee considers fair and
--- ----
appropriate (as long as such method is not prohibited by the rules of any stock
exchange or automated quotation system on which the Securities are then listed).
The Trustee shall make the selection at least 35 days, but not more than 60
days, before the Redemption Date from outstanding Securities not previously
called for redemption. The Trustee may select for redemption portions of the
principal amount of Securities that have denominations larger than $1,000.
Securities and portions of them the Trustee selects shall be in principal
amounts of $1,000 or a multiple of $1,000. Provisions of this Indenture that
apply to Securities called for redemption also apply to portions of Securities
called for redemption. The Trustee shall notify the Company promptly of the
Securities or portions of Securities to be redeemed.
If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed (so
far as may be) to be the portion selected for redemption. Securities which have
been converted during a selection
16
<PAGE>
of Securities to be redeemed may be treated by the Trustee as outstanding for
the purpose of such selection.
SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more
than 60 days before a Redemption Date, the Company shall mail a notice of
redemption by first-class mail, postage prepaid, to each Holder of Securities to
be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the Conversion Price;
(4) the name and address of the Paying Agent and Conversion Agent;
(5) that Securities called for redemption may be converted at any
time before the close of business on the last Trading Day prior to the
Redemption Date;
(6) that Holders who want to convert Securities must satisfy the
requirements set forth in paragraph 8 of the Securities;
(7) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(8) if fewer than all the outstanding Securities are to be redeemed,
the certificate number and principal amounts of the particular Securities
to be redeemed; and
(9) that interest on Securities called for redemption will cease to
accrue on and after the Redemption Date.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of
redemption is given, Securities called for redemption become due and payable on
the Redemption Date and at the Redemption Price stated in the notice except for
Securities which are converted in accordance with the terms of this Indenture.
Upon the later of the Redemption Date or the date such Securities are
surrendered to the Paying Agent, such Securities shall be paid at the Redemption
Price stated in the notice.
17
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SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. Prior to or on the
Redemption Date, the Company shall deposit with the Paying Agent (or if the
Company or a Subsidiary or an Affiliate of either of them is the Paying Agent,
shall segregate and hold in trust) money sufficient to pay the Redemption Price
of all Securities to be redeemed on that date other than Securities or portions
of Securities called for redemption which prior thereto have been delivered by
the Company to the Trustee for cancellation or have been converted. The Paying
Agent shall as promptly as practicable return to the Company any money, with
interest, if any, thereon (subject to the provisions of Section 7.01(f)), not
required for that purpose because of conversion of Securities. If such money is
then held by the Company in trust and is not required for such purpose it shall
be discharged from such trust.
SECTION 3.06. SECURITIES REDEEMED IN PART. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate and deliver to the Holder a new Security in an authorized
denomination equal in principal amount to the unredeemed portion of the Security
surrendered.
SECTION 3.07. CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION. In
connection with any redemption of Securities, the Company may arrange for the
purchase and conversion of any Securities called for redemption by an agreement
with one or more investment bankers or other purchasers to purchase such
Securities by paying to the Paying Agent in trust for the Securityholders, on or
before the close of business on the Redemption Date, an amount that, together
with any amounts deposited with the Paying Agent by the Company for the
redemption of the Securities, is not less than the Redemption Price, together
with interest, if any, accrued to the Redemption Date, of such Securities.
Notwithstanding anything to the contrary contained in this Article 3, the
obligation of the Company to pay the Redemption Price of such Securities,
including all accrued interest, shall be deemed to be satisfied and discharged
to the extent such amount is so paid by such purchasers. If such an agreement
is entered into, any Securities not duly surrendered for conversion by the
Holders thereof may, at the option of the Company, be deemed, to the fullest
extent permitted by law, acquired by such purchasers from such Holders and
(notwithstanding anything to the contrary contained in Article 10) surrendered
by such purchasers for conversion, all immediately prior to the close of
business on the Redemption Date, subject to payment of the above amount as
aforesaid. The Paying Agent shall hold and pay to the Holders whose Securities
are selected for redemption any such amount paid to it in the same manner as it
would moneys deposited with it by the Company for the redemption of Securities.
Without the Paying Agent's prior written consent, no arrangement between the
Company and such purchasers for the purchase and conversion of any Securities
shall increase or otherwise affect any of the powers, duties, responsibilities
or obligations of the Paying Agent as set forth in this Indenture, and the
Company agrees to indemnify the Paying Agent from, and hold it harmless against,
any loss, liability or expense arising out of or in connection with any such
arrangement for the purchase and conversion of any Securities between the
Company and such purchasers, including the costs and expenses incurred by the
Paying Agent in the defense of any claim or liability arising out of or in
connection with the exercise or
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performance of any of its powers, duties, responsibilities or obligations under
this Indenture.
SECTION 3.08. REDEMPTION AT OPTION OF THE HOLDER UPON A FUNDAMENTAL
CHANGE. (a) If a Fundamental Change shall occur at any time prior to
___________, 2004, each Holder of Securities shall have the right, at such
Holder's option, to require the Company to redeem such Holder's Securities on
the date (the "Fundamental Change Repurchase Date") (or if such date is not a
Business Day, the next succeeding Business Day) that is 45 days after the date
of the Company's notice of such Fundamental Change. The Securities will be
redeemable in part in multiples of $1,000 of principal amount. Such repayment
shall be made at the following prices (such price, together with accrued
interest to, but excluding, the Fundamental Change Repurchase Date, the
"Fundamental Change Redemption Price") (expressed as percentages of the
principal amount) in the event of a Fundamental Change occurring the 12-month
period beginning ___________:
<TABLE>
<CAPTION>
Year Percentage Year Percentage
---- ------------ ---- ------------
<S> <C> <C> <C>
1997................ % 2001 ..................%
1998................ 2002................
1999................ 2003................
2000................
</TABLE>
and 100% at ____________, 2004; provided that if the Applicable Price with
--------
respect to the Fundamental Change is less than the Reference Market Price, the
Company shall redeem such Securities at a price equal to the foregoing
redemption price multiplied by the fraction obtained by dividing the Applicable
Price by the Reference Market Price; provided that if such Fundamental Change
--------
Repurchase Date is an Interest Payment Date, then the interest payable on such
date shall be paid to the Holder of the Security on the next preceding the
Regular Record Date. In each case, the Company shall also pay to such Holders
accrued interest to, but excluding, the Fundamental Change Repurchase Date on
the redeemed Securities.
(b) The Company or, at its request (which must be received by the
Trustee at least three Business Days prior to the date the Trustee is requested
to give such notice as described below) the Trustee in the name of and at the
expense of the Company, shall mail to all Holders of record of the Securities a
notice of the occurrence of a Fundamental Change and of the redemption right
arising as a result thereof on or before the tenth day after the occurrence of
such Fundamental Change. The Company shall promptly furnish the Trustee a copy
of such notice.
(c) For a Security to be so redeemed at the option of the Holder, the
Paying Agent must receive such Security with the form entitled "Option to Elect
Redemption Upon a Fundamental Change" on the reverse thereof duly completed (a
"Fundamental Change Redemption Notice"), together with such Security duly
endorsed
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for transfer, on or before the 30th day after the date of such notice (or if
such 30th day is not a Business Day, the immediately preceding Business Day).
All questions as to the validity, eligibility (including time of receipt) and
acceptance of any Security for redemption shall be determined by the Company,
whose determination shall be final and binding.
(d) Upon receipt by the Company of the Fundamental Change Redemption
Notice specified in Section 3.08(c), the Holder of the Security in respect of
which such Fundamental Change Redemption Notice was given shall (unless such
Fundamental Change Redemption Notice is withdrawn as specified in the following
two paragraphs) thereafter be entitled to receive solely the Fundamental Change
Redemption Price with respect to such Security. Such Fundamental Change
Redemption Price shall be paid to such Holder promptly following the later of
(x) the Fundamental Change Repurchase Date with respect to such Security
(provided the conditions in Section 3.08(c), as applicable, have been satisfied)
and (y) the time of delivery of such Security to the Paying Agent by the Holder
thereof in the manner required by Section 3.08(c), as applicable. Securities in
respect of which a Fundamental Change Redemption Notice has been given by the
Holder thereof may not be converted into shares of Common Stock on or after the
date of the delivery of such Fundamental Change Redemption Notice, unless such
Fundamental Change Redemption Notice has first been validly withdrawn as
specified in the following two paragraphs.
A Fundamental Change Redemption Notice may be withdrawn by the Holder
by means of a written notice of withdrawal delivered to the office of the Paying
Agent at any time prior to the close of business on the Fundamental Change
Repurchase Date to which it relates specifying:
(1) the certificate number of the Security in respect of which such
notice of withdrawal is being submitted,
(2) the principal amount of the Security with respect to which such
notice of withdrawal is being submitted, and
(3) the principal amount, if any, of such Security which remains
subject to the original Fundamental Change Redemption Notice and which has
been or will be delivered for purchase by the Company.
There shall be no redemption pursuant to Section 3.08 if there has
occurred prior to, on or after, as the case may be, the giving, by the Holders
of such Securities, of the required Fundamental Change Redemption Notice and is
continuing an Event of Default (other than a default in the payment of the
Fundamental Change Redemption Price with respect to such Securities).
(e) On or before the Business Day following a Fundamental Change
Repurchase Date the Company shall deposit with the Trustee or with the Paying
Agent
20
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(or, if the Company or a Subsidiary or an Affiliate of either of them is acting
as the Paying Agent, shall segregate and hold in trust as provided in Section
2.04) an amount of money and/or securities, if permitted hereunder, sufficient
to pay the aggregate Fundamental Change Redemption Price of all the Securities
or portions thereof which are to be purchased as of such Fundamental Change
Repurchase Date.
(f) Any Security that is to be redeemed upon a Fundamental Change only
in part shall be surrendered at the office of the Paying Agent (with, if the
Company or the Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or such Holder's attorney duly authorized in writing) and
the Company shall execute and the Trustee shall authenticate and deliver to the
Holder of such Security, without service charge, a new Security or Securities,
of any authorized denomination as requested by such Holder in aggregate
principal amount equal to, and in exchange for, the portion of the principal
amount of the Security so surrendered which is not purchased.
(g) In connection with any offer to redeem Securities under Section
3.08 hereof, the Company shall (i) comply with Rule 13e-4 (which term, as used
herein, includes any successor provision thereto) under the Exchange Act, if
applicable, (ii) file the related Schedule 13E-4 (or any successor schedule,
form or report) under the Exchange Act, if applicable, and (iii) otherwise
comply with all Federal and state securities laws so as to permit the rights and
obligations under Section 3.08 to be exercised in the time and in the manner
specified in Section 3.08.
(h) The Trustee and the Paying Agent shall return to the Company any
cash that remains unclaimed as provided in paragraph 12 of the Securities,
together with interest or dividends, if any, thereon, held by them for the
payment of a Fundamental Change Redemption Price; provided, however, that to the
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extent that the aggregate amount of cash deposited by the Company pursuant to
Section 3.08 exceeds the aggregate Fundamental Change Redemption Price of the
Securities or portions thereof which the Company is obligated to purchase as of
the Fundamental Change Repurchase Date then promptly after the Business Day
following the Fundamental Change Repurchase Date the Trustee and the Paying
Agent shall return any such excess to the Company together with interest or
dividends, if any, thereon.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES. The Company shall promptly
make all payments in respect of the Securities on the dates and in the manner
provided in the Securities or pursuant to this Indenture. The principal amount,
accrued interest, Redemption Price and Fundamental Change Redemption Price shall
be considered paid on
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the applicable date due if on such date the Trustee or the Paying Agent holds,
in accordance with this Indenture, money or securities, if permitted hereunder,
sufficient to pay all such amount then due.
The Company shall pay interest at the rate set forth in paragraph 1 of
the Securities and it shall pay interest on overdue interest at the same rate
compounded semiannually (to the extent that the payment of such interest shall
be legally enforceable), which interest on overdue interest shall accrue from
the date such amounts became overdue.
SECTION 4.02. SEC REPORTS. The Company shall file with the
Trustee, within 15 days after it files such annual and quarterly reports,
information, documents and other reports with the SEC, copies of its annual
report and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which the Company is required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act.
SECTION 4.03. COMPLIANCE CERTIFICATE. The Company shall deliver to
the Trustee within 120 days after the end of each fiscal year of the Company
(beginning with the fiscal year ending on June 30, 1998) an Officers'
Certificate stating whether or not the signers know of any Default that occurred
during such period. If they do, such Officers' Certificate shall describe the
Default and its status.
SECTION 4.04. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.
SECTION 4.05. MAINTENANCE OF OFFICE OR AGENCY. The Company will
maintain in the Borough of Manhattan, The City of New York, an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer, exchange, redemption or
conversion and where notices and demands to or upon the Company in respect of
the Securities and this Indenture may be served. The office of State Street
Bank and Trust Company, N.A., an Affiliate of the Trustee, at 61 Broadway,
Concourse Level, Corporate Trust Window, New York, New York 10006, shall be such
office or agency for all of the aforesaid purposes unless the Company shall
maintain some other office or agency for such purposes and shall give prompt
written notice to the Trustee of the location, and any change in the location,
of such other office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the address of the Trustee set forth in Section 12.02.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all
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such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes.
ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.01. WHEN COMPANY MAY MERGE OR TRANSFER ASSETS. The
Company shall not consolidate with or merge with or into any other Person (other
than in a merger or consolidation in which the Company is the surviving Person)
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, unless:
(a) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance, transfer or lease the properties and assets of the
Company substantially as an entirety (i) shall be a corporation,
partnership or trust organized and validly existing under the laws of the
United States or any State thereof or the District of Columbia and (ii)
shall expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all of the
obligations of the Company under the Securities and this Indenture;
(b) immediately after giving effect to such transaction, no Default
shall have occurred and be continuing; and
(c) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture, comply with this Article and that all conditions
precedent herein provided for relating to such transaction have been
satisfied.
The successor Person formed by such consolidation or into which the
Company is merged or the successor Person to which such conveyance, transfer or
lease is made shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as if
such successor had been named as the Company herein; and thereafter, except in
the case of (i) a lease of its properties and assets substantially as an
entirety and (ii) obligations the Company may have under a supplemental
indenture pursuant to Section 10.14, the Company shall be discharged from all
obligations and covenants under this Indenture and the Securities.
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ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" occurs if:
(1) the Company defaults in the payment of the principal amount,
Redemption Price or a Fundamental Change Redemption Price on any Security
when the same becomes due and payable at its Stated Maturity, upon
redemption, upon declaration or otherwise;
(2) the Company defaults in the payment of any installment of interest
upon any of the Securities as and when the same shall become due and
payable, and continuance of such default for 30 days;
(3) the Company fails to comply with any of its agreements in the
Securities or this Indenture (other than those referred to in clause (1)
above) and such failure continues for 60 days after receipt by the Company
of a Notice of Default;
(4) a decree or order by a court having jurisdiction in the premises
shall have been entered adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization of the
Company under any Bankruptcy Law, and such decree or order shall have
continued undischarged and unstayed for a period of 60 consecutive days; or
a decree or order of a court having jurisdiction in the premises of the
appointment of a receiver or liquidator or trustee or assignee in
bankruptcy or insolvency of the Company or of its property, or for the
winding-up or liquidation of its affairs, shall have been entered, and such
decree or order shall have remained in force undischarged and unstayed of a
period of 60 consecutive days; or
(5) the Company shall institute proceedings to be adjudicated a
voluntary bankrupt, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent
seeking reorganization under any Bankruptcy Law, or shall consent to the
filing of any such petition, or shall consent to the appointment of a
receiver or liquidator or trustee or assignee in bankruptcy or insolvency
of it or of its property or shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts
generally as they become due.
"Bankruptcy Law" means Title 11, United States Code, or any similar
Federal or state law for the relief of debtors.
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A Default under clause (3) above is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 25% in aggregate
principal amount of the Securities at the time outstanding notify the Company
and the Trustee, of the Default and the Company does not cure such Default (and
such Default is not waived) within the time specified in clause (3) above after
actual receipt of such notice (a "Notice of Default"). Any such notice must
specify the Default, demand that it be remedied and state that such notice is a
Notice of Default.
SECTION 6.02. ACCELERATION. If an Event of Default (other than an
Event of Default specified in Section 6.01(4) or (5)) occurs and is continuing,
the Trustee by notice to the Company, or the Holders of at least 25% in
aggregate principal amount of the Securities at the time outstanding by notice
to the Company and the Trustee, may declare the principal amount on all the
Securities and the interest accrued thereon to be immediately due and payable.
Upon such a declaration, such principal amount and interest accrued thereon
shall be due and payable immediately. If an Event of Default specified in
Section 6.01(4) or (5) occurs and is continuing, the principal amount on all the
Securities and the interest accrued thereon shall become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Securityholders. The Holders of a majority in aggregate principal amount of
the Securities at the time outstanding, by notice to the Trustee (and without
notice to any other Securityholder) may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived except
nonpayment of the principal amount and interest accrued thereon that has become
due solely as a result of acceleration and if all amounts due to the Trustee
under Section 7.07 have been paid. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of the principal amount on the Securities and interest accrued thereon or to
enforce the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if the Trustee does not
possess any of the Securities or does not produce any of the Securities in the
proceeding. A delay or omission by the Trustee or any Securityholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of, or acquiescence in, the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative.
SECTION 6.04. WAIVER OF PAST DEFAULTS. The Holders of a majority
in aggregate principal amount of the Securities at the time outstanding, by
notice to the Trustee (and without notice to any other Securityholder), may
waive an existing Default and its consequences except (1) an Event of Default
described in Section 6.01(1) or 6.01(2), (2) a Default in respect of a provision
that under Section 9.02 cannot be amended without the consent of each
Securityholder affected or (3) a Default that constitutes a
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failure to convert any Security in accordance with the terms of Article 10. When
a Default is waived, it is deemed cured, but no such waiver shall extend to any
subsequent or other Default or impair any consequent right.
SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority in
aggregate principal amount of the Securities at the time outstanding may direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee or of exercising any trust or power conferred on the Trustee.
However, the Trustee may refuse to follow any direction that conflicts with law
or this Indenture or that the Trustee determines in good faith is unduly
prejudicial to the rights of other Securityholders or would involve the Trustee
in personal liability unless the Trustee is offered indemnity satisfactory to
it.
SECTION 6.06. LIMITATION ON SUITS. A Securityholder may not pursue
any remedy with respect to this Indenture or the Securities 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
Securities at the time outstanding make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense satisfactory to the
Trustee;
(4) the Trustee does not comply with the request within 60 days after
receipt of the notice, the request and the offer of security or indemnity;
and
(5) the Holders of a majority in aggregate principal amount of the
Securities at the time outstanding do not give the Trustee a direction
inconsistent with the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
any other Securityholder or to obtain a preference or priority over any other
Securityholder.
SECTION 6.07. 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, accrued interest, Redemption Price
or Fundamental Change Redemption Price in respect of the Securities held by such
Holder, on or after the respective due dates expressed in the Securities or any
Redemption Date or Fundamental Change Repurchase Date, as the case may be, and
to convert the Securities in accordance with Article 10, or to bring suit for
the enforcement of any such payment on or after such respective dates or the
right to convert, shall not be impaired or affected adversely without the
consent of each such Holder.
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SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default
described in Section 6.01(1) or 6.01(2) occurs and is continuing, the Trustee
may recover judgment in its own name and as trustee of an express trust against
the Company for the whole amount owing with respect to the Securities and the
amounts provided for in Section 7.07.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any other obligor upon the Securities or
the property of the Company or of such other obligor or their creditors, the
Trustee (irrespective of whether the principal amount, accrued interest,
Redemption Price or Fundamental Change Redemption Price in respect of the
Securities shall then be due and payable as therein expressed or by declaration
or otherwise and irrespective of whether the Trustee shall have made any demand
on the Company for the payment of any such amount) shall be entitled and
empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of the principal
amount, accrued interest, Redemption Price or Fundamental Change Redemption
Price and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim
for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel) and of the Holders allowed in such
judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claims of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES. If the Trustee collects any money
pursuant to this Article 6, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
-----
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Second: to Securityholders for amounts due and unpaid on the
------
Securities for the principal amount, accrued interest, Redemption Price or
Fundamental Change Redemption Price, as the case may be, ratably, without
preference or priority of any kind, according to such amounts due and
payable on the Securities; and
Third: the balance, if any, to the Company.
-----
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 6.10. At least 15 days before such
record date, the Company shall mail to each Securityholder and the Trustee a
notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant (other than the Trustee)
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.07 or a suit by Holders of more than 10% in aggregate principal amount of the
Securities at the time outstanding.
SECTION 6.12. WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury or other law
wherever enacted, now or at any time hereafter in force, which would prohibit or
forgive the Company from paying all or any portion of the principal amount,
accrued interest, Redemption Price or Fundamental Change Redemption Price in
respect of Securities as contemplated herein, or which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
laws and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by
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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.
(b) Except during the continuance of an Event of Default:
(1) the Trustee need perform only those duties that are specifically
set forth in this Indenture and no others; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) this paragraph (c) does not limit the effect of paragraph (b) of
this Section 7.01;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 7.01.
(e) The Trustee may refuse to perform any duty or exercise any right
or power or extend or risk its own funds or otherwise incur any financial
liability unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting, it may require a
Company Order, an Officers' Certificate or an Opinion of Counsel. The Trustee
shall not
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be liable for any action it takes or omits to take in good faith in reliance on
such Company Order, Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) Subject to the provisions of Section 7.01(c), the Trustee shall
not be liable for any action it takes or omits to take in good faith which it
believes to be authorized or within its rights or powers.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, Conversion
Agent or co-registrar may do the same with the like rights. However, the
Trustee must comply with Section 7.10.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee makes no
representation as to the validity or adequacy of this Indenture or the
Securities, it shall not be accountable for the Company's use of the proceeds
from the Securities, it shall not be responsible for any statement in the
Prospectus for the Securities or in the Indenture or the Securities (other than
its certificate of authentication), the acts of an prior Trustee hereunder, 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 give to each
Securityholder notice of the Default within 90 days after it occurs. Except in
the case of a Default described in Section 6.01(1) or 6.01(2), the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in good
faith determines that withholding the notice is in the interests of
Securityholders. The Trustee shall not give notice of a Default pursuant to
Section 6.01(3) until at least sixty (60) days have passed since its occurrence.
SECTION 7.06. DISQUALIFICATION; CONFLICTING INTERESTS. If the
Trustee has or shall acquire any conflicting interest within the meaning of the
TIA, it shall either eliminate such conflicting interest or resign, to the
extent and in the manner provided by, and subject to the provisions of the TIA
and this Indenture.
SECTION 7.07. COMPENSATION AND INDEMNITY. The Company agrees:
(a) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
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(b) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expense, advances and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(c) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of this trust, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay the principal
amount, accrued interest, Redemption Price or Fundamental Change Redemption
Price, as the case may be, on particular Securities.
The Company's payment obligations pursuant to this Section 7.07 shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 6.01(4) or (5), the 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; provided, however, no such resignation shall be effective
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until a successor Trustee has accepted its appointment pursuant to this Section
7.08. The Holders of a majority in aggregate principal amount of the Securities
at the time outstanding may remove the Trustee by so notifying the Trustee and
may appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with, or ceases to be eligible under,
Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or public officer takes charge of the Trustee or its
property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint, by
resolution of its Board of Directors, a successor Trustee.
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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 Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in aggregate principal amount of the Securities at the
time outstanding may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trustee business or assets to, another corporation, the
resulting, surviving or transferee corporation without any further act shall be
the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. The Trustee (or if a
Trustee is a member of a bank holding company, its bank holding company) shall
have a combined capital and surplus of at least $50,000,000 as set forth in its
most recent published annual report of conditions. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. If
and when the Trustee shall be or become a creditor of the Company (or any other
obligor upon the Securities), the Trustee shall be subject to the provisions of
the TIA regarding the collection of claims against the Company (or any such
other obligor).
SECTION 7.12. REPORTS BY TRUSTEE.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
TIA at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange or market upon
which the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange or market.
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ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. DISCHARGE OF LIABILITY ON SECURITIES. When (i) the
Company delivers to the Trustee all outstanding Securities (other than
Securities replaced pursuant to Section 2.07) for cancellation or (ii) all
outstanding Securities have become due and payable and the Company deposits with
the Trustee cash and/or securities, as permitted by the terms hereof, sufficient
to pay at Stated Maturity the principal amount of all outstanding Securities
(other than Securities replaced pursuant to Section 2.07), and if in either case
the Company pays all other sums payable hereunder by the Company, then this
Indenture shall, subject to Section 7.07, cease to be of further effect. The
Trustee shall join in the execution of a document prepared by the Company
acknowledging satisfaction and discharge of this Indenture on demand of the
Company accompanied by an Officers' Certificate and Opinion of Counsel and at
the cost and expense of the Company.
SECTION 8.02. REPAYMENT TO THE COMPANY. The Trustee and the Paying
Agent shall return to the Company upon written request any money or securities
held by them for the payment of any amount with respect to the Securities that
remains unclaimed for two years, provided, however, that the Trustee or such
Paying Agent, before being required to make any such return, shall at the
expense of the Company cause to be published once in a newspaper of general
circulation in The City of New York or mail to each such Holder notice that such
money or securities remains unclaimed and that, after a date specified therein,
which shall not be less than 30 days from the date of such publication or
mailing, any unclaimed money or securities then remaining will be returned to
the Company. After return to the Company, Holders entitled to the money or
securities must look to the Company for payment as general creditors unless an
applicable abandoned property law designates another person.
ARTICLE 9
AMENDMENTS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company and the
Trustee may amend this Indenture or the Securities without the consent of any
Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with Article 5 or Section 10.14;
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(3) to provide for uncertificated Securities in addition to
certificated Securities so long as such uncertificated Securities are in
registered form for purposes of the Internal Revenue Code of 1986, as
amended;
(4) to make any change that does not adversely affect the right of any
Securityholder; or
(5) to make any change to comply with the TIA, or any amendment
thereto, or to comply with any requirement of the SEC in connection with
the qualification, if any, of the Indenture under the TIA.
SECTION 9.02. WITH CONSENT OF HOLDERS. With the written consent of the
Holders of at least a majority in aggregate principal amount of the Securities
at the time outstanding, the Company and the Trustee may amend this Indenture or
the Securities. However, without the consent of each Securityholder affected, an
amendment or supplement to this Indenture or the Securities may not:
(1) make any change to the principal amount of Securities whose
Holders must consent to an amendment;
(2) make any change to the manner or rate of accrual in connection
with interest, reduce the rate of interest referred to in paragraph 1 of
the Securities or extend the time for payment of interest on any Security;
(3) reduce the principal amount or extend the Stated Maturity of any
Security;
(4) reduce the Redemption Price or Fundamental Change Redemption Price
of any Security;
(5) make any Security payable in money or securities other than that
stated in the Security;
(6) make any change in Section 6.04, Section 6.07 or this Section
9.02, except to increase any such percentage;
(7) make any change that adversely affects the right to convert any
Security; or
(8) make any change that adversely affects the right to require the
Company to redeem the Securities upon a Fundamental Change in accordance
with the terms thereof and this Indenture.
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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.
After an amendment under this Section 9.02 becomes effective, the
Company shall mail to each Holder a notice briefly describing the amendment.
SECTION 9.03. COMPLIANCE WITH TIA. Every supplemental indenture
executed pursuant to this Article shall comply 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 becomes effective, a
consent to it or any other action by a Holder of a Security hereunder is a
continuing consent by the Holder and every subsequent Holder of that Security or
portion of the Security that evidences the same obligation as the consenting
Holder's Security, even if notation of the consent, waiver or action is not made
on the Security. However, any such Holder or subsequent Holder may revoke the
consent, waiver or action as to such Holder's Security or portion of the
Security if the Trustee receives the notice or revocation before the date the
amendment, waiver or action becomes effective. After an amendment, waiver or
action becomes effective, it shall bind every Securityholder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES. Securities
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article may, and shall if required by the Trustee, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Company shall so determine, new Securities so
modified as to conform, in the opinion of the Trustee and the Board of
Directors, to any such supplemental indenture may be prepared and executed by
the Company and authenticated and delivered by the Trustee in exchange for
outstanding Securities.
SECTION 9.06. TRUSTEE TO SIGN SUPPLEMENTAL INDENTURES. The Trustee
shall sign any supplemental indenture authorized pursuant to this Article 9 if
the amendment does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. If it does, the Trustee may, but need not, sign such
supplemental indenture. In signing such amendment the Trustee shall be entitled
to receive, and (subject to the provisions of Section 7.01) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that such amendment is authorized or permitted by this Indenture.
SECTION 9.07. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the
execution of any supplemental indenture under this Article, this Indenture shall
be modified in accordance therewith, and such supplemental indenture shall form
a part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.
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ARTICLE 10
CONVERSION
SECTION 10.01. CONVERSION PRIVILEGE. A Holder of a Security may
convert such Security into Common Stock at any time during the period stated in
paragraph 8 of the Securities. The conversion price per share of Common Stock
(the "Conversion Price") shall be that set forth in paragraph 8 in the
Securities, subject to adjustment as herein set forth.
A Holder may convert a portion of the principal amount of a Security
if the portion is $1,000 or a multiple of $1,000. Provisions of this Indenture
that apply to conversion of all of a Security also apply to conversion of a
portion of a Security.
SECTION 10.02. CONVERSION PROCEDURE. To convert a Security a Holder
must satisfy the requirements in paragraph 8 of the Securities. The date on
which the Holder satisfies all those requirements is the conversion date (the
"Conversion Date"). Securities surrendered for conversion during the period from
the close of business on any Regular Record Date to the close of business on the
Business Day immediately prior to the next succeeding Interest Payment Date (the
"Interest Period") shall (except in the case of Securities or portions thereof
which have been called for redemption on a Redemption Date within the Interest
Period) be accompanied by payment in New York Clearing House funds or other
funds acceptable to the Company of an amount equal to the interest payable on
such Interest Payment Date on the principal amount of Securities being
surrendered for conversion. Subject to the provisions of Section 3.07 relating
to the payment of Defaulted Interest by the Company, the interest payment with
respect to a Security surrendered for conversion during the Interest Period
(except in the case of Securities or portions thereof which have been called for
redemption on a Redemption Date within the Interest Period) shall be payable on
such Interest Payment Date to the Holder of such Securities at the close of
business on such Regular Record Date notwithstanding the conversion of such
Securities during such Interest Period.
As soon as practicable after the Conversion Date, the Company shall
deliver to the Holder, through the Conversion Agent, a certificate for the
number of full shares of Common Stock issuable upon the conversion and cash in
lieu of any fractional share determined pursuant to Section 10.03. The person
in whose name the certificate is registered shall be treated as a stockholder of
record on and after the Conversion Date; provided, however, that no surrender of
-------- -------
a Security on any date when the stock transfer books of the Company shall be
closed shall be effective to constitute the person or persons entitled to
receive the shares of Common Stock upon such conversion as the record holder or
holders of such shares of Common Stock on such date, but such surrender shall be
effective to constitute the person or persons entitled to receive such shares of
Common Stock as the record holder or holders thereof for all purposes at the
close of business on the next succeeding day on which such stock transfer books
are open; such conversion
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shall be at the Conversion Price in effect on the date that such Security shall
have been surrendered for conversion, as if the stock transfer books of the
Company had not been closed. Upon conversion of a Security, such person shall no
longer be a Holder of such Security.
No payment or adjustment will be made for dividends on or other
distribution with respect to any Common Stock except as provided in this Article
10. On conversion of a Security, accrued interest with respect to the converted
Security shall not be canceled, extinguished or forfeited, but rather shall be
deemed to be paid in full to the Holder thereof through delivery of the Common
Stock (together with the cash payment, if any, in lieu of fractional shares) in
exchange for the Security being converted pursuant to the provisions hereof.
If the Holder converts more than one Security at the same time, the
number of shares of Common Stock issuable upon the conversion shall be based on
the total principal amount of the Securities converted.
Upon surrender of a Security that is converted in part, the Company
shall execute, and the Trustee shall authenticate and deliver to the Holder, a
new Security in an authorized denomination equal in principal amount to the
unconverted portion of the Security surrendered.
If the last day on which a Security may be converted is a Legal
Holiday in a place where a Conversion Agent is located, the Security may be
surrendered to that Conversion Agent on the next succeeding day that it is not a
Legal Holiday.
SECTION 10.03. FRACTIONAL SHARES. The Company will not issue a
fractional share of Common Stock upon conversion of a Security. Instead, the
Company will deliver cash for the current market value of the fractional share.
The current market value of a fractional share shall be determined to the
nearest 1/10,000th of a share by multiplying the last reported sale price
(determined as set forth in the definition of Current Market Price), on the last
Trading Day prior to the Conversion Date, of a full share by the fractional
amount and rounding the product to the nearest whole cent.
SECTION 10.04. TAXES ON CONVERSION. If a Holder converts a
Security, the Company shall pay any documentary, stamp or similar issue or
transfer tax due on the issue of shares of Common Stock upon the conversion.
However, the Holder shall pay any such tax which is due because the Holder
requests the shares to be issued in a name other than the Holder's name. The
Conversion Agent may refuse to deliver the certificates representing the Common
Stock being issued in a name other than the Holder's name until the Conversion
Agent receives a sum sufficient to pay any tax which will be due because the
shares are to be issued in a name other than the Holder's name. Nothing herein
shall preclude any tax withholding required by law or regulations.
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SECTION 10.05. COMPANY TO PROVIDE STOCK. The Company shall, prior
to issuance of any Securities hereunder, and from time to time as may be
necessary, reserve out of its authorized but unissued Common Stock a sufficient
number of shares of Common Stock to permit the conversion of the Securities.
All shares of Common Stock delivered upon conversion of the Securities
shall be newly issued shares or treasury shares, shall be duly and validly
issued and fully paid and nonassessable and shall be free from preemptive rights
and free of any lien or adverse claim.
The Company will endeavor promptly to comply with all Federal and
state securities laws regulating the offer and delivery of shares of Common
Stock upon conversion of Securities, if any, and will endeavor promptly, if
permitted by the rules of such exchange, over-the-counter market or other
market, to list or cause to have quoted such shares of Common Stock on each
national securities exchange or in the over-the-counter market or such other
market on which the Common Stock is then listed or quoted.
SECTION 10.06. ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. In case the
Company shall (i) pay a dividend, or make a distribution, in shares of its
Common Stock, on its Common Stock, (ii) subdivide its outstanding Common Stock
into a greater number of shares, or (iii) combine its outstanding Common Stock
into a smaller number of shares, the Conversion Price in effect immediately
prior thereto shall be adjusted so that the holder of any Security thereafter
surrendered for conversion shall be entitled to receive the number of shares of
Common Stock of the Company which he would have owned or have been entitled to
receive after the happening of any of the events described above had such
Security been converted immediately prior to the happening of such event. If
any dividend or distribution of the type described in clause (i) above is not so
paid or made, the Conversion Price shall again be adjusted to the Conversion
Price which would then be in effect if such dividend or distribution had not
been declared. An adjustment made pursuant to this Section 10.06 shall become
effective immediately after the record date in the case of a dividend and shall
become effective immediately after the effective date in the case of subdivision
or combination.
SECTION 10.07. ADJUSTMENT FOR RIGHTS ISSUE. In case the Company
shall issue rights or warrants to all holders of its Common Stock entitling them
(for a period expiring within 45 days after the record date mentioned below) to
subscribe for or purchase Common Stock at a price per share less than the
Current Market Price per share of Common Stock at the record date for the
determination of stockholders entitled to receive such rights or warrants, the
Conversion Price in effect immediately prior thereto shall be adjusted so that
the same shall equal the Conversion Price determined by multiplying the
Conversion Price in effect immediately prior to the date of issuance of such
rights or warrants by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding on the date of issuance of such rights or
warrants plus the number of shares which the aggregate offering price of the
total number of shares so
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offered would purchase at such Current Market Price, and of which the
denominator shall be the number of shares of Common Stock outstanding on the
date of issuance of such rights or warrants plus the number of additional shares
of Common Stock offered for subscription or purchase. Such adjustment shall be
made successively whenever any such rights or warrants are issued, and shall
become effective immediately after the opening of business on the day following
the record date for the determination of the stockholders entitled to receive
such rights or warrants. To the extent that shares of Common Stock are not
delivered after the expiration of such rights or warrants, the Conversion Price
shall be readjusted to the Conversion Price which would then be in effect had
the adjustments made upon the issuance of such rights or warrants been made on
the basis of delivery of only the number of shares of Common Stock actually
delivered. If such rights or warrants are not so issued, the Conversion Price
shall again be adjusted to be the Conversion Price which would then be in effect
if such record date for the determination of stockholders entitled to receive
such rights or warrants had not been fixed. In determining whether any rights or
warrants entitle the holders to subscribe for or purchase shares of Common Stock
at less than such Current Market Price, and in determining the aggregate
offering price of such shares of Common Stock, there shall be taken into account
any consideration received by the Company for such rights or warrants, the value
of such consideration, if other than cash, to be determined by the Board of
Directors.
SECTION 10.08. ADJUSTMENT FOR OTHER DISTRIBUTIONS. (a) In case the
Company shall distribute to all holders of its Common Stock (excluding any
distribution in connection with the liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary) any shares of any class of
capital stock of the Company (other than Common Stock) or evidences of its
indebtedness or assets (other than cash) or rights or warrants to subscribe for
or purchase any of its securities (excluding those referred to in Section 10.07
hereof) (any of the foregoing hereinafter in this Section 10.08(a) called the
"Distributed Securities"), then, in each case, the Conversion Price shall be
adjusted so that the same shall equal the Conversion Price determined by
multiplying the Conversion Price in effect immediately prior to the date of such
distribution by a fraction of which the numerator shall be the Current Market
Price per share of the Common Stock on such record date less the fair market
value on such record date (as determined by the Board of Directors of the
Company, whose determination shall be conclusive, and described in a certificate
filed with the Trustee) of the Distributed Securities so distributed applicable
to one share of Common Stock, and the denominator shall be the Current Market
Price per share of the Common Stock on the record date mentioned above. Such
adjustment shall become effective immediately after the record date for the
determination of shareholders entitled to receive such distribution.
Notwithstanding the foregoing, in the event the then fair market value (as so
determined) of the portion of the Distributed Securities so distributed
applicable to one share of Common Stock is equal to or greater than the Current
Market Price of the Common Stock on the relevant record date, in lieu of the
foregoing adjustment, adequate provision shall be made so that each
Securityholder shall have the right to receive upon conversion the amount of
Distributed Securities such Holder would have received had such Holder converted
each Security on such record date. In the event that such distribution is not
so paid or made, the Conversion Price shall
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again be adjusted to the Conversion Price which would then be in effect if such
distribution had not been declared. If the Board of Director determines the fair
market value of any distribution for purposes of this Section 10.08(a) by
reference to the actual or when issued trading market for any securities, it
must in doing so consider the prices in such market over the same period used in
computing the Current Market Price of the Common Stock.
Notwithstanding the foregoing provisions of this Section 10.08(a), no
adjustment shall be made thereunder for any distribution of Distributed
Securities if the Company makes proper provision so that each Holder of a
Security who converts such Security (or any portion thereof) after the record
date for such distribution shall be entitled to receive upon such conversion, in
addition to the shares of Common Stock issuable upon such conversion, the amount
and kind of Distributed Securities that such Holder would have been entitled to
receive if such Holder had, immediately prior to such record date, converted
such Security into Common Stock, provided that, with respect to any Distributed
--------
Securities that are convertible, exchangeable or exercisable, the foregoing
provision shall only apply to the extent (and so long as) the Distributed
Securities receivable upon conversion of such Security would be convertible,
exchangeable or exercisable, as applicable, without any loss of rights or
privileges for a period of at least 60 days following conversion of such
Security.
(b) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock cash (excluding (x) any quarterly cash dividend
on the Common Stock to the extent the aggregate cash dividend per share of
Common Stock in any fiscal quarter does not exceed the greater of (A) the amount
per share of Common Stock of the next preceding quarterly cash dividend on the
Common Stock to the extent such preceding quarterly dividend did not require any
adjustment of the Conversion Price pursuant to this Section 10.08(b) (as
adjusted to reflect subdivisions or combinations of the Common Stock), and (B)
3.75% of the average of the last reported sales prices of the Common Stock
(determined as provided in the definition of Current Market Price) during the
ten Trading Days next preceding the date of declaration of such dividend and (y)
any dividend or distribution in connection with the liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary), then, in such
case, unless the Company elects to reserve such cash for distribution to the
holders of the Securities upon the conversion of the Securities so that any such
holder converting Securities will receive upon such conversion, in addition to
the shares of Common Stock to which such holder is entitled, the amount of cash
which such holder would have received if such holder had, immediately prior to
the record date for such distribution of cash, converted its Securities into
Common Stock, the Conversion Price shall be decreased so that the same shall
equal the Conversion Price determined by multiplying the Conversion Price in
effect immediately prior to the record date by a fraction of which the numerator
shall be the Current Market Price of the Common Stock on the record date less
the amount of cash so distributed (and not excluded as provided below)
applicable to one share of Common Stock, and the denominator shall be such
Current Market Price of the Common Stock, such decrease to be effective
immediately prior to the opening of business on the day following the record
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date; provided, however, that in the event the portion of the cash so
-------- -------
distributed applicable to one share of Common Stock is equal to or greater than
the Current Market Price of the Common Stock on the record date, in lieu of the
foregoing adjustment, adequate provision shall be made so that each
Securityholder shall have the right to receive upon conversion the amount of
cash such holder would have received had such holder converted each Security on
the record date. If such dividend or distribution is not so paid or made, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such dividend or distribution had not been declared. If
any adjustment is required to be made as set forth in this Section 10.08(b) as a
result of a distribution that is a quarterly dividend, such adjustment shall be
based upon the amount by which such distribution exceeds the amount of the
quarterly cash dividend permitted to be excluded pursuant hereto. If an
adjustment is required to be made as set forth in this Section 11.08(b) above as
a result of a distribution that is not a quarterly dividend, such adjustment
shall be based upon the full amount of the distribution.
(c) In case a tender or exchange offer made by the Company or any
Subsidiary of the Company for all or any portion of the Common Stock shall
expire and such tender or exchange offer shall involve the payment by the
Company or such Subsidiary of consideration per share of Common Stock having a
fair market value (as determined by the Board of Directors or, to the extent
permitted by applicable law, a duly authorized committee thereof, whose
determination shall be conclusive, and described in a resolution of the Board of
Directors or such duly authorized committee thereof, as the case may be, at the
last time (the "Expiration Time") tenders or exchanges may be made pursuant to
such tender or exchange offer (as it shall have been amended)) that exceeds the
Current Market Price of the Common Stock on the Trading Day next succeeding the
Expiration Time, the Conversion Price shall be decreased so that the same shall
equal the Conversion Price determined by multiplying the Conversion Price in
effect immediately prior to the 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 Expiration Time multiplied by the
Current Market Price of the Common Stock on the Trading Day next succeeding the
Expiration Time, and the denomninator shall be the sum of (x) the fair market
value (determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the terms
of the tender or exchange offer) of all shares validly tendered or exchanged and
not withdrawn as of the Expiration Time (the shares deemed so accepted up to any
such maximum, being referred to as the "Purchased Shares") and (y) the product
of the number of shares of Common Stock outstanding (less any Purchased Shares)
on the Expiration Time and the Current Market Price of the Common Stock on the
Trading Day next succeeding the Expiration Time, such increase to become
effective immediately prior to the opening of business on the day following the
Expiration Time. In the event that the Company is obligated to purchase shares
pursuant to any such tender or exchange offer, but the Company is permanently
prevented by applicable law from effecting any such purchases or all such
purchases are rescinded, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be effect if such tender or exchange offer had
not been made.
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(d) In case of a tender or exchange offer made by a Person other than
the Company or any Subsidiary for an amount which increases the offeror's
ownership of Common Stock to more than 25% of the Common Stock outstanding and
shall involve the payment by such person of consideration per share of Common
Stock having a fair market value (as determined by the Board of Directors, whose
determination shall be conclusive, and described in a resolution of the Board of
Directors) at the last time (the "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 decreased so that the same shall equal
the Conversion 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
stockholders based on the acceptance (up to any maximum specified in the terms
of the tender or exchange offer) of all shares validly tendered or exchanged and
not withdrawn as of the Offer Expiration Time (the shares deemed so accepted, up
to any such maximum, being referred to as the "Accepted Purchased Shares") and
(y) the product of the number of shares of Common Stock outstanding (less and
Accepted Purchased Shares) on the Offer Expiration Time and the Current Market
Price of the Common Stock on the Trading Day next succeeding the Expiration
Time, such decrease 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 10.08(d) 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.
SECTION 10.09. WHEN ADJUSTMENT MAY BE DEFERRED. No adjustment in the
Conversion Price need be made unless the adjustment would require an increase or
decrease of at least 1% in the Conversion Price. Any adjustments that are not
made shall be carried forward and taken into account in any subsequent
adjustment.
All calculations under this Article 10 shall be made to the nearest
cent or to the nearest 1/10,000th of a share, as the case may be.
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SECTION 10.10. WHEN NO ADJUSTMENT REQUIRED. No adjustment need be
made for rights to purchase Common Stock pursuant to a Company plan for
reinvestment of dividends or interest.
No adjustment need be made for a change in the par value or no par
value of the Common Stock.
To the extent the Securities become convertible into cash, assets,
property or securities (other than capital stock of the Company), no adjustment
need be made thereafter as to the cash, assets, property or such securities.
Interest will not accrue on the cash.
SECTION 10.11. NOTICE OF ADJUSTMENT. Whenever the Conversion Price
is adjusted, the Company shall promptly mail to Securityholders a notice of the
adjustment. The Company shall file with the Trustee and the Conversion Agent
such notice. The certificate shall, absent manifest error, be conclusive
evidence that the adjustment is correct. Neither the Trustee nor any Conversion
Agent shall be under any duty or responsibility with respect to any such
certificate except to exhibit the same to any Holder desiring inspection
thereof.
SECTION 10.12. VOLUNTARY INCREASE. The Company may make such
decreases in the Conversion Price, in addition to those required by Sections
10.06, 10.07 and 10.08, as the Board of Directors considers to be advisable to
avoid or diminish any income tax to holders of Common Stock or rights to
purchase Common Stock resulting from any dividend or distribution of stock (or
rights to acquire stock) or from any event treated as such for income tax
purposes. To the extent permitted by applicable law, the Company from time to
time may decrease the Conversion Price by any amount for any period of time if
the period is at least 20 days, the decrease is irrevocable during the period
and the Board of Directors shall have made a determination that such decrease
would be in the best interests of the Company, which determination shall be
conclusive. Whenever the Conversion Price is so decreased, the Company shall
mail to Securityholders and file with the Trustee and the Conversion Agent a
notice of the increase. The Company shall mail the notice at least 15 days
before the date the increased Conversion Price takes effect. The notice shall
state the decreased Conversion Price and the period it will be in effect.
SECTION 10.13. NOTICE OF CERTAIN TRANSACTIONS. If:
(1) the Company makes any distribution or dividend that would require
an adjustment in the Conversion Price pursuant to Section 10.06, 10.07 or
10.08; or
(2) the Company takes any action that would require a supplemental
indenture pursuant to Section 10.14; or
(3) there is a liquidation or dissolution of the Company;
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then the Company shall mail to Securityholders and file with the Trustee and the
Conversion Agent a notice stating the proposed record date for a dividend or
distribution or the proposed effective date of a subdivision, combination,
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up. The Company shall file and mail the notice at least
15 days before such date. Failure to file or mail the notice or any defect in
it shall not affect the validity of the transaction.
SECTION 10.14. EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any of the following events occur, namely (i) any reclassification or
change of outstanding shares of Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation as a result of which
holders of Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, then the Company or the successor or purchasing corporation, as
the case may be, shall execute with the Trustee a supplemental indenture
providing that each Security shall be convertible into the kind and amount of
shares of stock and other securities or property or assets (including cash)
receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance by a holder of a number of shares of Common
Stock issuable upon conversion of such Securities immediately prior to such
reclassification, change, consolidation, merger, combination, sale or
conveyance. Such supplemental indenture shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Securities, at his address appearing on
the Security register provided for in Section 2.03 of this Indenture.
The above provisions of this Section shall similarly apply to
successive reclassifications, consolidations, mergers, combinations, and sales.
If this Section applies, neither Section 10.06, 10.07 nor 10.08
applies.
SECTION 10.15. COMPANY DETERMINATION FINAL. Any determination that
the Company or the Board of Directors must make pursuant to Section 10.03,
10.06, 10.07, 10.08, 10.09, 10.10, 10.14 or 10.17 is conclusive.
SECTION 10.16. TRUSTEE'S ADJUSTMENT DISCLAIMER. The Trustee has no
duty to determine when an adjustment under this Article 10 should be made, how
it should be made or what it should be. The Trustee has no duty to determine
whether a supplemental indenture under Section 10.14 need be entered into or
whether any
44
<PAGE>
provisions of any supplemental indenture are correct. The Trustee shall not be
accountable for and makes no representation as to the validity or value of any
securities or assets issued upon conversion of Securities. The Trustee shall
not be responsible for the Company's failure to comply with this Article 10.
Each Conversion Agent shall have the same protection under this Section 10.16 as
the Trustee.
SECTION 10.17. SIMULTANEOUS ADJUSTMENTS. In the event that this
Article 10 requires adjustments to the Conversion Price under more than one of
Sections 10.06, 10.07, 10.08(a) or 10.08(b), and the record dates for the
distributions giving rise to such adjustments shall occur on the same date, then
such adjustments shall be made by applying, first, the provisions of Section
10.08(a), second, the provisions of Section 10.08(b), third the provisions of
Section 10.06 and, fourth, the provisions of Section 10.07.
SECTION 10.18. SUCCESSIVE ADJUSTMENTS. After an adjustment to the
Conversion Price under this Article 10, any subsequent event requiring an
adjustment under this Article 10 shall cause an adjustment to the Conversion
Price as so adjusted.
SECTION 10.19. RIGHTS ISSUED IN RESPECT OF COMMON STOCK ISSUED UPON
CONVERSION. Each share of Common Stock issued upon conversion of Securities
pursuant to this Article 10 shall be entitled to receive the appropriate number
of Rights, if any, and the certificates representing the Common Stock issued
upon such conversion shall bear such legends, if any, in each case as provided
by and subject to the terms of the Rights Agreement as in effect at the time of
such conversion. If the Rights are separated from the Common Stock in
accordance with the provisions of the Rights Agreement such that the Holders of
Securities would thereafter not be entitled to receive any such Rights in
respect to the Common Stock issuable upon conversion of such Securities, the
Conversion Price will be adjusted as provided in Section 10.08(a) on the
separation date; provided that if such Rights expire, terminate or are redeemed
--------
by the Company, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such separation had not
occurred. In lieu of any such adjustment, the Company may amend the Rights
Agreement to provide that upon conversion of the Securities the Holders will
receive, in addition to the Common Stock issuable upon such conversion, the
Rights which would have attached to such shares of Common Stock if the Rights
had not become separated from the Common Stock pursuant to the provisions of the
Rights Agreement.
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of the
Company's capital stock (either initially or under certain circumstances), which
rights or warrants, until the occurrence of a specified event or events
("Trigger Event"):
(i) are deemed to be transferred with such shares of Common Stock,
(ii) are not exercisable, and
45
<PAGE>
(iii) are also issued in respect of future issuances of Common Stock,
shall not be deemed distributed for purposes of Section 10.08(a) until the
occurrence of the earliest Trigger Event. In addition, in the event of any
distribution of rights or warrants, or any Trigger Event with respect thereto,
that shall have resulted in an adjustment to the Conversion Price under Section
10.08(a), (1) in the case of any such rights or warrants which shall all have
been redeemed or repurchased without exercise by any holders thereof, the
Conversion Price shall be readjusted upon such final redemption or repurchase to
give effect to such distribution or Trigger Event, as the case may be, as though
it were a cash distribution, equal to the per share redemption or repurchase
price received by a holder of Common Stock with respect to such rights or
warrants (assuming such holder had retained such rights or warrants), made to
all holders of Common Stock as of the date of such redemption or repurchase, and
(2) in the case of any such rights or warrants all of which shall have expired
without exercise by any holder thereof, the Conversion Price shall be readjusted
as if such issuance had not occurred.
SECTION 10.20. GENERAL CONSIDERATIONS. Whenever successive
adjustments to the Conversion Price are called for pursuant to this Article 10,
such adjustments shall be made to the Current Market Price as may be necessary
or appropriate to effectuate the intent of this Article and to avoid unjust or
inequitable results as determined in good faith by the Board of Directors.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. CONFLICT WITH TIA. If any provision hereof limits,
qualifies or conflicts with a provision of the TIA that is required under the
TIA to be a part of and govern this Indenture, the latter provision shall
control. If any provision of this Indenture modifies or excludes any provision
of the TIA that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or excluded, as the case may
be.
SECTION 11.02. NOTICES. Any request, demand, authorization, notice,
waiver, consent or communication shall be in writing and delivered in person or
mailed by first class mail, postage prepaid, addressed as follows or transmitted
by facsimile transmission (confirmed by overnight courier) to the following
facsimile numbers:
46
<PAGE>
if to the Company:
Silicon Graphics, Inc.
2011 North Shoreline Boulevard
P.O. Box 7311
Mountain View, California 94309-7311
Attn: Director, Corporate Legal Services
Telephone Number: (415) 960-1980
Facsimile Number: (415) 969-6289
if to the Trustee:
State Street Bank and Trust Company of California, N.A.
725 South Figueroa Street
Suite 3100
Los Angeles, California 90017
Attention: Corporate Trust Department
Telephone Number: (213) 362-7338
Telefax Number: (213) 362-7357
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication given to a Securityholder shall be mailed
to the Securityholder, by first class mail, postage prepaid, at the
Securityholder's address as it appears on the registration books of the
Registrar and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not received by the addressee.
If the Company mails a notice or communication to the
Securityholders,, it shall mail a copy to the Trustee and each Registrar, Paying
Agent, Conversion Agent or co-registrar.
SECTION 11.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar, the Paying Agent, the
Conversion Agent and anyone else shall have the protection of TIA Section
312(c).
47
<PAGE>
SECTION 11.04. 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 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
Officers' Certificate or Opinion of Counsel with respect to compliance with a
covenant or condition provided for in this Indenture shall include:
(1) a statement that each 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.
SECTION 11.06. SEPARABILITY CLAUSE. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 11.07. RULES BY TRUSTEE, PAYING AGENT, CONVERSION AGENT AND
REGISTRAR. The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar, Conversion Agent and the Paying Agent may make
reasonable rules for their functions.
SECTION 11.08. 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 to the extent applicable no Original Issue Discount or
interest, if any, shall accrue for the intervening period.
48
<PAGE>
SECTION 11.09. GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK
SHALL GOVERN THIS INDENTURE AND THE SECURITIES.
SECTION 11.10. NO RECOURSE AGAINST OTHERS. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Securities.
SECTION 11.11. SUCCESSORS. All agreements of the Company in this
Indenture and the Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 11.12. 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.
49
<PAGE>
IN WITNESS WHEREOF, the undersigned, being duly authorized, have
executed this Indenture on behalf of the respective parties hereto as of the
date first written above.
SILICON GRAPHICS, INC.
By ________________________________
Title:
Attest:
_____________________________
Title:
[SEAL]
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A.
By ________________________________
Title:
Attest:
_____________________________
Title:
[SEAL]
50
<PAGE>
EXHIBIT A
[FORM OF FACE OF SECURITY]
[FORM OF LEGEND FOR GLOBAL SECURITY:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
SILICON GRAPHICS, INC.
___% SENIOR CONVERTIBLE NOTE DUE 2004
No. $
CUSIP
Silicon Graphics, Inc., a Delaware corporation, promises to pay to
or registered assigns, the principal amount of Dollars ($ ) on
__________, 2004 and to pay interest thereon from __________, 1997 or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for, semi-annually on __________ and __________ in each year,
commencing __________, 1998, at the rate of _____% per annum until the principal
hereof is paid or made available for payment. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest, which shall be the __________ or
__________ (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date. Any such interest not so punctually paid or duly
provided for will forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to Holders of Securities not less
than 10 days prior to such Special Record Date, or be paid at any time
A-1
<PAGE>
in any other lawful manner not inconsistent with the requirements of any
securities exchange or other market on which the Securities may be listed, and
upon such notice as may be required by such exchange or market, all as more
fully provided in said Indenture. Payment of the principal of (and premium, if
any) and interest on this Security will be made at the Corporate Trust Office or
the office or agency of the Company maintained for that purposes in the Borough
of Manhattan, The City of New York, New York in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that at the option of the
-------- -------
Company payment of interest may be made by check mailed to the address of, or by
wire transfer to the account of, the Person entitled thereto as such address
shall appear in the Security Register.
Additional provisions of this Security are set forth on the other side
of this Security.
IN WITNESS WHEREOF, Silicon Graphics, Inc. has caused this instrument
to be duly executed under its corporate seal.
SILICON GRAPHICS, INC.
By: _______________________________
By: ______________________________
Secretary
[SEAL]
Dated:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
as Trustee, certifies that this is one of
the Securities referred to in the within-
mentioned Indenture.
By: ______________________________
Authorized Signatory
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<PAGE>
[FORM OF REVERSE SIDE OF SECURITY]
SILICON GRAPHICS, INC.
___% SENIOR CONVERTIBLE NOTE DUE 2004
1. INTEREST
This Security shall bear interest at ___% per annum in the manner set
forth in the Indenture and the face of this Security. In the event that
principal hereof or any portion of such principal is not paid when due (whether
upon acceleration pursuant to Section 6.02 of the Indenture, upon the date set
for payment of the Redemption Price pursuant to paragraph 5 hereof, upon the
date set for payment of a Fundamental Change Redemption Price pursuant to
paragraph 6 hereof or upon the Stated Maturity of this Security), then in each
such case the overdue amount shall bear interest at the rate of ___% per annum,
compounded semiannually (to the extent that the payment of such interest shall
be legally enforceable), which interest shall accrue from the date such overdue
amount was due to the date payment of such amount, including interest thereon,
has been made or duly provided for. All such interest shall be payable on
demand.
2. METHOD OF PAYMENT
Subject to the terms and conditions of the Indenture, the Company will
make payments in respect of the Securities to the persons who are registered
Holders of Securities at the close of business on the Redemption Date or Stated
Maturity, as the case may be, or at the close of business on a Fundamental
Change Repurchase Date. Holders must surrender Securities to a Paying Agent to
collect such payments in respect of the Securities. The Company will pay cash
amounts in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may make
such cash payments by check payable in such money.
3. PAYING AGENT, CONVERSION AGENT AND REGISTRAR
Initially, State Street Bank and Trust Company of California, N.A., a
national banking association (the "Trustee"), will act as Paying Agent,
Conversion Agent and Registrar. The Company may appoint and change any Paying
Agent, Conversion Agent, Registrar or co-registrar without notice, other than
notice to the Trustee. The Company or any of its Subsidiaries or any of their
Affiliates may act as Paying Agent, Conversion Agent, Registrar or co-registrar.
4. INDENTURE
The Company issued the Securities under an Indenture dated as of
________, 1997 (the "Indenture"), between the Company and the Trustee.
Capitalized terms used herein and not defined herein have the meanings ascribed
thereto in the
<PAGE>
Indenture. The Securities are subject to all such terms, and Securityholders
are referred to the Indenture for a statement of those terms.
The Securities are general unsecured obligations of the Company
limited to $___________ aggregate principal amount (subject to Sections 2.02 and
2.07 of the Indenture).
5. REDEMPTION AT THE OPTION OF THE COMPANY
Prior to __________, 2000, the Securities will not be redeemable at
the option of the Company. Beginning on ___________, 2000, the Company may
redeem the Securities for cash as a whole at any time, or from time to time in
part, upon not less than 30 days' nor more than 60 days' notice at the following
prices (expressed as percentages of the principal amount), together with accrued
and unpaid interest to, but excluding, the Redemption Date, except that on or
after __________, 2000 and prior to __________, 2002, the Securities will not be
redeemable at the option of the Company unless the Closing Price of the Common
Stock shall have exceeded 140% of the Conversion Price then in effect for 20
Trading Days within a period of 30 consecutive Trading Days ending within five
Trading Days prior to the notice of redemption.
If redeemed during the 12-month period beginning __________ (beginning
__________, 2000 and ending on __________, 2001, in the case of the first such
period):
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---------- ----------------
<S> <C>
2000............................................. %
2001.............................................
2002.............................................
2003.............................................
</TABLE>
and 100% at __________, 2004; provided that if such Redemption Date is an
Interest Payment Date, then the interest payable on such date shall be paid to
the Holder of the Security on the next preceding Regular Record Date. No
Securities may be redeemed by the Company if an Event of Default respect to the
payment of interest on the Securities has occurred and is continuing.
No sinking fund is provided for the Securities.
6. REDEMPTION AT THE OPTION OF THE HOLDER UPON A FUNDAMENTAL CHANGE
(a) At the option of the Holder and subject to the terms and
conditions of the Indenture, the Company shall become obligated to redeem the
Securities held by such Holder on the date (the "Fundamental Change Repurchase
Date") (or if such date is not a Business Day, the next succeeding Business Day)
that is 45 days after the date of the Company's notice of such Fundamental
Change (as defined in the Indenture) occurring on or prior to ___________, 2004
at the following prices (expressed as percentages of the
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<PAGE>
principal amount) in the event of a Fundamental Change occurring during the 12-
month period beginning __________:
<TABLE>
<CAPTION>
Year Percentage Year Percentage
- ---- ---------- ---- ----------
<S> <C> <C> <C>
1997..................... % 2001.............. %
1998..................... 2002..............
1999..................... 2003..............
2000.....................
</TABLE>
and 100% at ____________, 2004; provided in each case that if the Applicable
Price (as defined in the Indenture) is less than the Reference Market Price (as
defined in the Indenture), the Company shall redeem such Securities at a price
equal to the foregoing repayment price multiplied by the fraction obtained by
dividing the Applicable Price by the Reference Market Price. In each case, the
Company shall also pay accrued interest, if any, on such Securities to, but
excluding, the Fundamental Change Repurchase Date; provided that if such
--------
Fundamental Change Repurchase Date is an Interest Payment Date, then the
interest payable on such date shall be paid to the Holder of the Security on the
next preceding Regular Record Date. Securities in denominations larger than
$1,000 of principal amount may be redeemed in part in connection with a
Fundamental Change, but only in multiples of $1,000 of principal amount.
(b) Holders have the right to withdraw any Fundamental Change
Redemption Notice by delivering to the Paying Agent a written notice of
withdrawal in accordance with the provisions of the Indenture.
(c) If cash sufficient to pay a Fundamental Change Redemption Price
of all Securities or portions thereof to be purchased as of the Fundamental
Change Repurchase Date is deposited with the Paying Agent on or prior to the
Fundamental Change Repurchase Date, interest ceases to accrue on such Securities
(or portions thereof) on and after the Fundamental Change Repurchase Date, and
the Holder thereof shall have no other rights as such (other than the right to
receive the Fundamental Change Redemption Price upon surrender of such
Security).
7. NOTICE OF REDEMPTION AT THE OPTION OF THE COMPANY
Notice of redemption at the option of the Company will be mailed at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at the Holder's registered address. If
money sufficient to pay the Redemption Price of all Securities (or portions
thereof) to be redeemed on the Redemption Date is deposited with the Paying
Agent prior to or on the Redemption Date, on and after such date interest ceases
to accrue on such Securities or portions thereof. Securities in denominations
larger than $1,000 of principal amount may be redeemed in part but only in
multiples of $1,000 of principal amount.
A-5
<PAGE>
8. CONVERSION
Subject to the next two succeeding sentences, a Holder of a Security
may convert it into Common Stock of the Company at any time after issuance and
before the close of business on __________, 2004. If the Security is called for
redemption, the Holder may convert it at any time before the close of the last
Trading Day prior to the Redemption Date. In the event the Security is
surrendered during the period from the close of business on any Regular Record
Date next preceding any Interest Payment Date to the close of business on the
Business Day immediately preceding the next succeeding Interest Payment Date
(except in the case of Security to be redeemed within such period), such
Securities must be accompanied by payment in New York Clearing House funds or
other funds acceptable to the Company of an amount equal to the interest payable
on such Interest Payment Date on the principal amount of this Security then
being converted. Subject to the aforesaid requirement for payment and, in the
case of a conversion after the Regular Record Date next preceding any Interest
Payment Date and on or before such Interest Payment Date, to the right of the
Holder of this Security (or any Predecessor Security) of record at such Regular
Record Date to receive an installment of interest payable on such Interest
Payment Date (except in the case of Securities whose Maturity is prior to such
Interest Payment Date), no payment or adjustment is to be made on conversion for
interest accrued hereon or for dividends on the Common Stock issued on
conversion. A Security in respect of which a Holder has delivered a notice of
exercise of the option to redeem such Security in the event of a Fundamental
Change may be converted only if the notice of exercise is withdrawn in
accordance with the terms of the Indenture.
The initial Conversion Price is $_____ per share of Common Stock,
subject to adjustment in certain events described in the Indenture. The Company
will deliver cash or a check in lieu of any fractional share of Common Stock.
To convert a Security a Holder must (1) complete and manually sign the
conversion notice on the back of the Security (or complete and manually sign a
facsimile of such notice) and deliver such notice to the Conversion Agent, (2)
surrender the Security to a Conversion Agent, (3) furnish appropriate
endorsements and transfer documents if required by the Conversion Agent, the
Company or the Trustee and (4) pay any transfer or similar tax, if required.
A Holder may convert a portion of a Security if the principal amount
of such portion is $1,000 or a multiple of $1,000. No payment or adjustment
will be made for dividends on the Common Stock except as provided in the
Indenture. On conversion of a Security, that portion of accrued interest with
respect to the converted Security shall not be canceled, extinguished or
forfeited, but rather shall be deemed to be paid in full to the Holder thereof
through the delivery of the Common Stock (together with any cash payment in lieu
of fractional shares) in exchange for the Security being converted pursuant to
the terms hereof.
A-6
<PAGE>
The Conversion Price is subject to adjustment as provided in the
Indenture. In addition, in the case of (i) any reclassification of the Common
Stock, or (ii) a consolidation or merger involving the Company or a sale or
conveyance to another corporation of the property and assets of the Company as
an entirety (or substantially as an entirety), in each case as a result of which
holders of Common Stock shall be entitled to receive stock, securities, other
property or assets (including cash) with respect to or in exchange for such
Common Stock, as set forth in the Indenture, or upon certain distributions
described in the Indenture, the right to convert a Security into Common Stock
may be changed, as set forth in the Indenture, into a right to convert it into
securities, cash or other assets of the Company or another person.
9. CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION
Any Securities called for redemption, unless surrendered for
conversion before the close of business on the last Trading Day prior to the
Redemption Date, may be deemed to be purchased from the Holders of such
Securities at an amount not less than the Redemption Price, by one or more
investment bankers or other purchasers who may agree with the Company to
purchase such Securities from the Holders, to convert them into Common Stock of
the Company and to make payment for such Securities to the Trustee in trust for
such Holders.
10. DENOMINATIONS; TRANSFER; EXCHANGE
The Securities are in registered form, without coupons, in
denominations of $1,000 of principal amount and multiples of $1,000. A Holder
may transfer or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not transfer or exchange
any Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or any
Securities in respect of which a Fundamental Change Redemption Notice has been
given and not withdrawn (except, in the case of a Security to be purchased in
part, the portion of the Security not to be purchased) or any Securities for a
period of 15 days before a selection of Securities to be redeemed.
11. PERSONS DEEMED OWNERS
The registered Holder of this Security may be treated as the owner of
this Security for all purposes.
12. UNCLAIMED MONEY OR SECURITIES
The Trustee and the Paying Agent shall return to the Company upon
written request any money or securities held by them for the payment of any
amount with respect to the Securities that remains unclaimed for two years,
provided, however, that the
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<PAGE>
Trustee or such Paying Agent, before being required to make any such return,
shall at the expense of the Company cause to be published once in a newspaper of
general circulation in The City of New York or mail to each such Holder notice
that such money or securities remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication
or mailing, any unclaimed money or securities then remaining will be returned to
the Company. After return to the Company, Holders entitled to the money or
securities must look to the Company for payment as general creditors unless an
applicable abandoned property law designates another person.
13. AMENDMENT; WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in aggregate principal amount of the Securities
at the time outstanding and (ii) certain defaults or noncompliance with certain
provisions may be waived with the written consent of the Holders of a majority
in aggregate principal amount of the Securities at the time outstanding.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Securityholder, the Company and the Trustee may amend the Indenture or the
Securities to cure any ambiguity, defect or inconsistency, or to comply with
Article 5 or Section 10.14 of the Indenture, to provide for uncertificated
Securities in addition to or in place of certificated Securities or to make any
change that does not adversely affect the rights of any Securityholder or to
comply with any requirement of the SEC in connection with the qualification of
the Indenture under the TIA.
14. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include (i) default in payment
of the principal amount, Redemption Price or Fundamental Change Redemption
Price, as the case may be, in respect of the Securities when the same becomes
due and payable; (ii) default for 30 days in the payment of any installment of
interest on the Securities; (iii) failure by the Company to comply with other
agreements in the Indenture or the Securities, subject to notice and lapse of
time; and (iv) certain events of bankruptcy or insolvency. If an Event of
Default occurs and is continuing, the Trustee, or the Holders of at least 25% in
aggregate principal amount of the Securities at the time outstanding, may
declare all the Securities to be due and payable immediately. Certain events of
bankruptcy or insolvency are Events of Default which will result in the
Securities being declared due and payable immediately upon the occurrence of
such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Securities unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in aggregate principal amount of
the Securities at the time outstanding may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Securityholders notice of any
continuing Default (except a Default in
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<PAGE>
payment of amounts specified in clause (i) above) if it determines that
withholding notice is in their interests.
15. TRUSTEE DEALINGS WITH THE COMPANY
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with and collect obligations owed to it by the Company or its Affiliates and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.
17. AUTHENTICATION
This Security shall not be valid until an authorized officer of the
Trustee manually signs the Trustee's Certificate of Authentication on the other
side of this Security.
18. ABBREVIATIONS
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. GOVERNING LAW
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THIS
SECURITY
------------------
The Company will furnish to any Securityholder upon written request
and without charge a copy of the Indenture which has in it the text of this
Security in larger type. Requests may be made to:
Silicon Graphics, Inc.
2011 North Shoreline Boulevard
P.O. Box 7311
Mountain View, California 94309-7311
Attn: Director, Corporate Legal Services
A-9
<PAGE>
[FORM OF CONVERSION NOTICE]
CONVERSION NOTICE
To: Silicon Graphics, Inc.
The undersigned registered holder of this Security hereby irrevocably
exercises the option to convert this Security, or portion hereof (which is
$1,000 principal amount or a multiple thereof) below designated, into shares of
Common Stock of Silicon Graphics, Inc. in accordance with the terms of the
Indenture referred to in this Security, and directs that the shares issuable and
deliverable upon such conversion, together with any check in payment for
fractional shares and any Securities representing any unconverted principal
amount hereof, be issued and delivered to the registered holder hereof unless a
different name has been indicated below. If shares or any portion of this
Security not converted are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto.
Dated: ___________________________________
___________________________________
Signature(s)
A-10
<PAGE>
Fill in for registration of shares if to
be delivered, and Securities if to
be issued other than to and in the
name of the registered holder:
__________________________________
(Name)
__________________________________
(Street Address)
__________________________________
(City, State and zip code)
Please print name and address
principal amount to be converted
(if less than all):
$_____,000
___________________________________
Social Security or Other
Taxpayer Identification Number
A-11
<PAGE>
[FORM OF OPTION TO ELECT REDEMPTION
UPON A FUNDAMENTAL CHANGE]
To: Silicon Graphics, Inc.
The undersigned registered holder of this Security hereby acknowledges
receipt of a notice from Silicon Graphics, Inc. (the "Company") as to the
occurrence of a Fundamental Change with respect to the Company and requests and
instructs the Company to redeem this Security, or the portion hereof (which is
$1,000 principal amount or a multiple thereof) below designated, in accordance
with the terms of the Indenture referred to in this Security.
Dated: ____________
___________________________________
___________________________________
Signature(s)
principal amount to be redeemed
(if less than all):
$_____________
___________________________________
Social Security or other
Taxpayer Identification Number
A-12
<PAGE>
[FORM OF ASSIGNMENT]
For value received ___________________ hereby sell(s), assign(s) and transfer(s)
unto______________________________________________________________
(Please insert social security or other taxpayer identification number of
assignee.)
the within Security and hereby irrevocably constitutes and appoints
______________ attorney to transfer the said Security on the books of the
Company, with full power of substitution in the premises.
Dated: ____________
___________________________________
___________________________________
Signature(s)
Signature(s) must be guaranteed by a
commercial bank or trust company or a
member firm of a major stock exchange.
___________________________________
Signature Guarantee
NOTICE: The above signatures of the holder(s) hereof must correspond with the
name as written upon the face of the Security in every particular without
alteration or enlargement or any change whatever.
A-13
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Data" and to the use of our report dated July
19, 1996 in Amendment No. 1 to the Registration Statement on Form S-4 (No.
333-32379) and related Prospectus of Silicon Graphics, Inc. for the Offer to
Exchange 5 1/4% Senior Convertible Notes Due 2004 for its Zero Coupon
Convertible Subordinated Debentures Due 2013.
/s/ Ernst & Young LLP
Palo Alto, California
August 6, 1997
