As filed with the Securities and Exchange Commission on November 10, 1999.
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
BENCHMARK ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
Texas 74-2211011
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3000 TECHNOLOGY DRIVE,
ANGLETON, TEXAS 77515
TELEPHONE NO. (409) 849-6550
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
COPY TO:
CARY T. FU JOHN R. BRANTLEY
EXECUTIVE VICE PRESIDENT BRACEWELL & PATTERSON, L.L.P.
BENCHMARK ELECTRONICS, INC. SOUTH TOWER PENNZOIL PLACE
3000 TECHNOLOGY DRIVE 711 LOUISIANA STREET, SUITE 2900
ANGLETON, TEXAS 77515 HOUSTON, TEXAS 77002-2781
(409) 849-6550 (713) 221-1301
FAX: (409) 848-5269 FAX: (713) 221-1212
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to public: As soon as
practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF SECURITIES TO AMOUNT TO BE PROPOSED MAXIMUM PROPOSED AMOUNT OF
BE REGISTERED AGGREGATE MAXIMUM REGISTRATION
REGISTERED PRICE PER AGGREGATE FEE
SECURITY OFFERING
PRICE
- - ----------------------- -------------- ----------------- -------------- ------------
<S> <C> <C> <C> <C>
6% Convertible $80,200,000 100% $80,200,000 $22,295.60
Subordinated
Notes due 2006
Common Stock, par 1,995,025 (2) (2) (2)
value $0.10 shares (1)
per share
</TABLE>
(1) This number represents the number of shares of common stock that are
issuable upon conversion of the 6% Convertible Subordinated Notes due 2006
registered hereby. Pursuant to Rule 416 under the Securities Act of 1933,
as amended, the amount to be registered includes an indeterminate number
of shares of common stock issuable as a result of stock splits, stock
dividends and antidilutive provisions.
(2) Pursuant to Rule 457(i), no registration fee is required for these shares
of common stock.
------------------------
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, AS AMENDED OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
================================================================================
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED NOVEMBER 10, 1999
PRELIMINARY PROSPECTUS
$80,200,000
BENCHMARK ELECTRONICS, INC.
6% CONVERTIBLE SUBORDINATED NOTES DUE 2006
1,995,025 SHARES OF COMMON STOCK ISSUABLE
UPON CONVERSION OF THE NOTES
--------------
This prospectus is part of a registration statement that has been filed
with the Securities and Exchange Commission and that covers $80,200,000
aggregate principal amount of our 6% Convertible Subordinated Notes due 2006 and
1,995,025 shares of our common stock issuable on conversion of the notes. These
shares may be offered and sold from time to time by certain of our shareholders,
which we refer to as the selling securityholders.
The Notes were issued and sold on August 13, 1999 to Qualified
Institutional Buyers (as defined under Rule 144A under the Securities Act of
1933, as amended), to Institutional Accredited Investors (as defined under Rule
501(a)(1), (2), (3) or (7) under the Securities Act) and outside the United
States in accordance with Regulation S under the Securities Act. At an initial
exercise price of $40.20, the Notes are convertible into 1,995,025 shares of
common stock of the Company.
The selling securityholders may offer the Notes and the common stock
issuable upon conversion of the Notes directly to purchasers or through agents,
underwriters, or broker-dealers on terms to be determined at the time of the
sale. See "Selling Securityholders" and "Plan of Distribution."
We will not receive any of the proceeds from the sale of the Notes or the
common stock issuable upon conversion of the Notes. We will, however, bear the
costs relating to the registration of these shares of common stock, which we
estimate to be $58,000.
Our common stock is quoted on the New York Stock Exchange under the symbol
"BHE." The average high and low prices of our common stock as reported in the
New York Stock Exchange composite transaction reporting system on November 9,
1999 was $19.00 per share.
The Notes are currently eligible for trading in The Portal Market.
INVESTING IN OUR SECURITIES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 5.
Neither the Securities Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is , 1999
<PAGE>
YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. THIS PROSPECTUS MAY ONLY BE USED WHERE IT IS LEGAL TO
SELL THE NOTES AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE
NOTES. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON
THE FRONT OF THOSE DOCUMENTS. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF
OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE THOSE DATES.
------------
TABLE OF CONTENTS
Where You Can Find More Information..........................................i
Cautionary Statements Regarding
Forward-Looking Statements................................................ii
About Benchmark..............................................................1
Recent Developments..........................................................1
Summary......................................................................3
Risk Factors.................................................................5
Use of Proceeds.............................................................11
Selling Securityholders.....................................................11
Plan of Distribution........................................................16
Description of Notes........................................................17
Description of Capital Stock................................................35
Certain United States Federal Income
Tax Considerations.......................................................37
Legal Matters...............................................................43
Experts.....................................................................43
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file at the SEC's public reference facilities in Washington,
D.C., New York, New York and Chicago, Illinois at the following addresses:
o 450 Fifth Street, N.W., Washington, D.C. 20549;
o Seven World Trade Center, 13th Floor, New York, New York 10048; and
o Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661.
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference facilities.
Reports, proxy statements and other information concerning Benchmark can
also be inspected and copied at the offices of the New York Stock Exchange at 20
Broad Street, New York, New York
10005.
We have elected to "incorporate by reference" certain information we file
with the SEC into this prospectus. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We
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<PAGE>
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until the offering of the Notes and common stock is
terminated:
o Our Annual Report on Form 10-K for the fiscal year ended December
31, 1998;
o Our Quarterly Reports on Form 10-Q for the quarters ended March
31, 1999 and June 30, 1999;
o The description of our capital stock that is contained in our
Registration Statements on Form 8-A/A filed on June 25, 1990 and
December 11, 1998, as amended December 22,
1998;
o Our Current Report on Form 8-K dated March 1, 1999 and filed on
March 12, 1999;
o Our Current Reports on Form 8-K dated and filed August 2, 1999, as
amended by Form 8-K/A dated August 13, 1999 and filed on August 18,
1999;
o Our Current Report on Form 8-K dated August 13, 1999 and filed on
August 16, 1999;
o Our Current Report on Form 8-K dated August 24, 1999 and filed on
September 8, 1999.
You may request a copy of these filings at no cost by writing or
telephoning us at the following address:
Corporate Secretary
Benchmark Electronics, Inc.
3000 Technology Drive
Angleton, Texas 77515
(409) 849-6550
CAUTIONARY STATEMENTS REGARDING
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements can be identified by the use of the future tense or
other forward-looking terms such as "may," "intend," "will," "expect,"
"anticipate," "objective," "projection," "forecast," "plan," "management
believes," "estimate," "continue," "should," "strategy" or "position" or the
negatives of those terms or other variations of them or by comparable
terminology. We have based these statements on our current expectations about
future events. Although we believe that our expectations reflected in or
suggested by our forward-looking statements are reasonable, we cannot assure you
that these expectations will be achieved. Our actual results may differ
materially from what we currently expect. Important factors which could cause
our actual results to differ materially from the forward-looking statements in
this prospectus or in the documents that we incorporate by reference in this
prospectus include, without limitation:
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<PAGE>
o integration of the operations of AVEX Electronics, Inc. and
Kilbride Holdings B.V.
(AVEX);
o incurrence of operating losses at AVEX after our acquisition of
AVEX;
o the integration of the operations of Lockheed Commercial
Electronics Company and the assets in Ireland purchased from Stratus
Computer Ireland;
o the loss of one or more of our major customers;
o changes in our customer concentration;
o the absence of long-term sales contracts with our customers;
o our dependence on the growth of the enterprise computer,
telecommunications, medical device, industrial control, testing and
instrumentation, networking/servers and high-end
video/audio/entertainment industries;
o risks associated with international operations;
o the availability and cost of customer specified components;
o our dependence on certain key executives;
o the effects of domestic and foreign environmental laws;
o Year 2000 problems;
o fluctuations in our quarterly results of operation;
o the volatility of the price of our common stock; and
o competition from other providers of electronics manufacturing
services;
each as set forth in the "Risk Factors" section of this prospectus, elsewhere in
this prospectus and in the documents that we incorporate by reference in this
prospectus.
We undertake no obligation to update or revise our forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.
iii
<PAGE>
ABOUT BENCHMARK
We are one of the leading independent providers of electronics
manufacturing services to the enterprise computer and peripherals,
telecommunications, medical device, industrial control, testing and
instrumentation, high-end video/audio/entertainment, and computer markets. We
are one of the largest publicly-held electronics manufacturing service providers
in the world, with 14 facilities in 8 countries. We offer a complete range of
integrated electronics manufacturing services, from initial product design to
volume production and order fulfillment. We believe that we have developed
particular strengths in the manufacturing process for large, complex
high-density assemblies. In addition, we offer advanced engineering services
including product design, printed circuit board layout, quickturn prototyping
and test development. Throughout the production process, we offer logistics
services, such as materials procurement, inventory management, packaging and
distribution.
We provide electronics manufacturing services to approximately 90 original
equipment manufacturers, including electronics industry leaders such as EMC
Corporation, Lucent Technologies, Stratus Computer and Sun Microsystems. These
customers rely on us to manufacture technologically complex products, including
telecommunications equipment, high-capacity computer storage devices and
fault-tolerant computer servers. We believe one of our primary strengths is the
fact that we have worked with several of our largest customers for many years.
We have established long-term relationships by exceeding customer expectations
and providing flexibility while responding to their needs.
Since the beginning of 1996, we have completed four acquisitions. We
acquired AVEX Electronics, Inc. and Kilbride Holdings B.V. in August of 1999,
Lockheed Commercial Electronics Company in February of 1998, EMD Technologies,
Inc. in July of 1996, and certain assets from Stratus Computer Ireland in March
of 1999. These acquisitions have broadened our service offerings, diversified
our customer base with leading OEMs and expanded our geographic presence.
Our principal executive offices are located at 3000 Technology Drive,
Angleton, Texas 77515, and our telephone number is (409) 849-6550.
RECENT DEVELOPMENTS
On October 22, 1999, we announced that we had earnings of $11,978,000 on
sales revenue of $539,037,000 for the nine-month period ended September 30,
1999, as compared to earnings of $11,660,000 on sales revenue of $380,327,000
for the same period during 1998. For the quarter ended September 30, 1999, we
reported earnings of $1,336,000 on sales revenue of $229,870,000, as compared to
earnings of $4,182,000 on sales revenue of $139,645,000 for the same period of
the prior year. We completed the acquisition of AVEX on August 24, 1999, and our
results for the three and nine-month periods ended September 30, 1999, include
the results of AVEX's operations from the date of acquisition. See "Risk Factors
- - -- The integration of acquired operations may pose difficulties for us" and "--
AVEX sustained losses in 1998 and 1997 and had negative EBIT in 1998." In
addition to the acquisition of AVEX, a variety of factors impacted Benchmark's
earnings, including the quality of certain components received and the failure
of suppliers to deliver other components in an timely manner, causing certain
shipments to be delayed until the fourth quarter. In addition, slower ramping up
of new projects resulted in significant underabsorption of costs. Quarterly
results also were adversely impacted by lower than
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expected contribution from AVEX, where higher costs levels have not yet been
brought in line with other operations. We anticipate continued challenges during
the fourth quarter with certain components, especially in light of the
earthquake that occurred in Taiwan in September 1999, which affected the
production of microchips and other components, specified by our customers for
their products. While the full effect of this natural disaster on us is not
known at this time, we expect that prices for such components will increase, and
that a temporary shortage of these components may occur. If such events were to
occur, they would have an adverse effect on our results of operations. At the
present time, however, Benchmark is unable to predict the extent of any
shortages or price increases or the effect on the Company. See "Risk Factors --
Shortages or price increases of components specified by our customers would
delay shipments and adversely affect our profitability" and "-- We may
experience fluctuations in quarterly results."
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SUMMARY
THE OFFERING
- - ------------
Issuer..................... Benchmark Electronics, Inc., a Texas
corporation.
Securities Offered......... $80,200,000 aggregate principal amount of 6.00%
Convertible Subordinated Notes due 2006
(the Notes) and 1,995,025 shares of our common
stock issuable upon conversion of the Notes.
Maturity................... August 15, 2006, unless earlier redeemed,
repurchased or converted.
Interest Payment Dates..... February 15 and August 15 of each year,
commencing on February 15, 2000.
Conversion................. The Notes are convertible, unless previously
redeemed or repurchased, at the option of the
holder, at any time after 90 days following the
date of original issuance thereof and prior to
maturity, into shares of common stock (Common
Stock) at a conversion price of $40.20 per share,
subject to adjustment in certain events. See
"Description of Notes -- Conversion." The right
to convert Notes that have been called for
redemption will terminate at the close of business
on the business day immediately preceding the
redemption day.
We have the option to convert the Notes into
shares of Common Stock at the conversion price if,
on or after August 19, 2002, the closing price of
our Common Stock has equaled or exceeded 150% of
the conversion price for at least 20 out of 30
consecutive days on which the New York Stock
Exchange is open for the transaction of business.
Provisional Redemption by
the Company............. After February 15, 2001 and prior to August 19,
2002, the Notes may be redeemed at our option (the
Provisional Redemption), in whole or in part, at
any time or from time to time, at a redemption
price equal to 104.286% of the principal amount
thereof, plus accrued and unpaid interest, to the
date of redemption (the Provisional Redemption
Date) if the closing price of the Common Stock
shall have equaled or exceeded 150% of the
conversion price then in effect for at least 20
out of 30 consecutive days on which the New York
Stock Exchange is open for the transaction of
business prior to the date of mailing the notice
of Provisional Redemption (the Notice Date). Upon
any Provisional Redemption, we will be obligated
to make an
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additional payment in an amount equal to the
present value of the aggregate value of the
interest payments that would thereafter have been
payable on the Notes from the Provisional
Redemption Date to, but excluding, August 19,
2002. The present value will be calculated using
the bond equivalent yield on U.S. Treasury notes
or bills having a term nearest in length to that
of the additional period as of the day immediately
preceding the date on which a notice of
Provisional Redemption is mailed. See "Description
of Notes - Provisional Redemption by the Company."
Optional Redemption........ On or after August 19, 2002 at any time or from
time to time, the Notes may be redeemed at our
option, in whole or in part, in cash at the
redemption prices set forth herein, plus accrued
and unpaid interest to the date of redemption. See
"Description of Notes-- Optional Redemption."
Mandatory Redemption....... None.
Repurchase at Holder's Option
upon Designated Event... Upon a Designated Event (as defined), holders
of the Notes will have the right, subject to
certain restrictions and conditions, to require
Benchmark to purchase all or any part of their
Notes at a purchase price equal to 100% of the
principal amount thereof, plus accrued and unpaid
interest to the date of the purchase. See
"Description of Notes-- Repurchase at the Option
of Holders" and "Risk Factors-- Our ability to
repurchase Notes if a Designated Event occurs is
limited."
Ranking.................... The Notes offered hereby will be general
unsecured obligations of Benchmark and will be
subordinated in right of payment to all existing
and future Senior Debt of Benchmark. The Notes
will be structurally subordinated to all existing
and future indebtedness and other liabilities of
subsidiaries of Benchmark. As of June 30, 1999,
Benchmark, after giving effect to the AVEX
acquisition and the refinancing of certain
indebtedness, had $176.8 million of debt that
constituted Senior Debt and our subsidiaries had
$171.5 million of debt and other such liabilities.
The Indenture contains no limitation on the
incurrence of indebtedness and other liabilities
by Benchmark or our subsidiaries. See
"Description of Notes--Subordination of Notes" and
"Risk Factors -- The Notes are subordinated to our
Senior Debt and all of the obligations of our
subsidiaries."
Trading.................... The Notes are currently eligible for trading in
The Portal Market. Our Common Stock is traded on
the NYSE under the symbol "BHE."
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RISK FACTORS
BEFORE YOU INVEST IN OUR COMMON STOCK, YOU SHOULD CAREFULLY CONSIDER THE
RISKS DESCRIBED BELOW AND THE OTHER INFORMATION INCLUDED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS.
THE INTEGRATION OF AVEX AND OTHER ACQUIRED OPERATIONS MAY POSE DIFFICULTIES FOR
US.
We have made three significant acquisitions in the last two years, and a
total of four significant acquisitions since 1996. The acquisition of AVEX
Electronics, Inc. and Kilbride Holdings, B.V. (AVEX) in August of 1999
represents our fourth significant acquisition and is much larger than any of our
prior acquisitions. In addition, we may acquire the stock or assets of other
companies in the future. The integration of acquired operations requires
substantial management, financial and other resources and involves a number of
risks and challenges, including:
o Potential loss of key employees or customers of the acquired
companies;
o Diversion of management's attention;
o Increased expenses and working capital requirements; and
o Increased exposure to Year 2000 or other risks, including the
integration of different information systems.
Our future success is dependent upon our ability to integrate the AVEX
acquisition, and other acquisitions we may make in the future, with our existing
operations.
The difficulties of integrating acquired businesses may be further
complicated by size and geographic distances. The AVEX acquisition represented a
significant expansion in the size and scope of our operations. In 1998, AVEX had
sales of $841.0 million compared to our 1998 sales of $524.1 million. Prior to
the AVEX acquisition, our only plant outside the United States was in Ireland,
where AVEX also has operations. In addition to its Ireland operations, AVEX has
foreign manufacturing plants or design centers in Brazil, Hungary, Mexico,
Ireland, Singapore, Scotland and Sweden.
During the integration process, other parts of our business could be
disrupted and the financial performance of our business could be adversely
affected. Our success is also dependent upon our ability to integrate any future
acquisitions. Additional expansion or acquisitions would require investment of
financial resources and may require debt or equity financing which could
increase our level of debt or dilute our shareholders' interest in us. No
assurance can be given that we will consummate any acquisitions in the future,
or that any debt or equity financing required for future acquisitions will be
available on terms acceptable to us.
AVEX SUSTAINED LOSSES IN THE FIRST HALF OF 1999, AND IN 1998 AND 1997 AND HAD
NEGATIVE EBIT IN 1998.
AVEX incurred a net loss of $9.7 million during the first half of 1999,
$84.2 million during 1998 and $15.8 million during 1997. In addition, AVEX had
negative earnings before interest and taxes (EBIT) of $76.5 million and a
negative gross margin of $16.4 million in 1998. Prior to our acquisition of
AVEX, AVEX took a number of actions intended to reduce its fixed and other costs
and reverse this trend. As a result of these actions, AVEX incurred
restructuring and related charges of $33.4 million in 1998. We cannot assure you
that these actions will be sufficient and AVEX may continue to sustain losses.
In part due to AVEX's losses, on a pro forma basis for 1998 we would have had a
net loss of $41.2 million, as compared to historical net income of $16.4
million.
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THE LOSS OF A MAJOR CUSTOMER WOULD ADVERSELY AFFECT US.
A substantial percentage of our sales have been to a relatively small
number of customers, and the loss of a major customer would adversely affect us.
In 1998, our three largest customers each represented in excess of 10% of our
sales and together represented 53% of our sales. In 1998, AVEX's four largest
customers each represented in excess of 10% of AVEX's sales and together
represented approximately 72% of its sales. After giving effect to the
acquisition of AVEX, our five largest customers accounted for 58% of our pro
forma combined 1998 sales. For the six months ended June 30, 1999, after giving
effect to the acquisition of AVEX, our five largest customers accounted for 51%
of pro forma combined sales.
One of AVEX's largest customers in 1998 has the right to terminate its
turnkey manufacturing agreement with AVEX in the event of a change of control of
AVEX. The acquisition of AVEX by Benchmark constituted a change of control of
AVEX, entitling such customer to terminate its agreement with AVEX. This
customer, like any other customer, is not obligated to continue using AVEX in
the future, even if the agreement remains in effect after the closing of the
acquisition.
We expect to continue to depend on the sales from our largest customers
and any material delay, cancellation or reduction of orders from these or other
significant customers would have a material adverse effect on our results of
operations. For example, our operating results were adversely affected in 1998
when a major customer reduced its orders significantly during a period of
organizational change within that company. Similarly, AVEX's largest customer in
1998 has substantially reduced its purchases from AVEX during 1999 as a result
of changed circumstances affecting this customer's products, and another large
customer is currently undergoing a period of organizational change and may
reduce its purchases as a result. In addition, we generate significant accounts
receivable in connection with providing manufacturing services to our customers.
If one or more of our customers were to become insolvent or otherwise unable to
pay for the manufacturing services provided by us, our operating results and
financial condition would be adversely affected.
WE ARE DEPENDENT ON THE SUCCESS OF INDUSTRIES WE SERVE.
We are dependent on the continued growth, viability and financial
stability of our customers. Our customers operate in the following industries:
o Enterprise computer and peripherals;
o Telecommunications;
o Medical device;
o Networking/servers;
o High-end video/audio/entertainment;
o Computers;
o Industrial control; and
o Testing and instrumentation.
These industries are, to a varying extent, subject to rapid technological
change, vigorous competition and short product life cycles. When our customers
are adversely affected by these factors, we may be similarly affected.
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LONG-TERM CONTRACTS ARE UNUSUAL IN OUR BUSINESS AND CANCELLATIONS, REDUCTIONS OR
DELAYS IN CUSTOMER ORDERS WOULD AFFECT OUR PROFITABILITY.
We do not typically obtain firm long-term purchase orders or commitments
from our customers. Instead, we work closely with our customers to develop
forecasts for future orders, which are not binding. Customers may cancel their
orders, change production quantities from forecast volumes or delay production
for a number of reasons beyond our control. Cancellations, reductions or delays
by a significant customer or by a group of customers would have an adverse
effect on us. As many of our costs and operating expenses are relatively fixed,
a reduction in customer demand can disproportionately affect our gross margins
and operating income. Our customer's products have life cycles of varying
duration. In the ordinary course of business, production starts, increases,
declines and stops in accordance with a product's life cycle. Should we fail to
replace products reaching the end of their life cycles with new programs, or if
there should be a substantial time difference between the loss of a product and
the receipt of revenue from replacement production, our revenues could be
adversely affected.
WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY.
We compete against many providers of electronics manufacturing services.
Certain of our competitors have substantially greater resources and more
geographically diversified international operations than we do. We also face
competition from the manufacturing operations of our current and future
customers. To compete effectively, we must continue to provide technologically
advanced manufacturing services, maintain strict quality standards, respond
flexibly and rapidly to customers' design and schedule changes and deliver
products globally on a reliable basis at competitive prices. Our inability to do
so could have an adverse effect on us.
OUR INTERNATIONAL OPERATIONS MAY BE SUBJECT TO CERTAIN RISKS.
We currently operate outside the United States in Brazil, Hungary, Mexico,
Ireland, Singapore, Scotland and Sweden. After giving effect to the AVEX
acquisition, we would have derived 22% of our pro forma combined 1998 sales from
our international operations, and 47% of our pro forma combined sales in the
first half of fiscal year 1999. These international operations may be subject to
a number of risks, including:
o difficulties in staffing and managing foreign operations;
o political and economic instability;
o unexpected changes in regulatory requirements and laws;
o longer customer payment cycles and difficulty collecting accounts
receivable;
o export duties, import controls and trade barriers (including
quotas);
o governmental restrictions on the transfer of funds;
o burdens of complying with a wide variety of foreign laws and
labor practices;
o fluctuations in currency exchange rates, which could affect
component costs, local payroll, utility and other expenses; and
o inability to utilize net operating losses incurred by our foreign
operations to reduce our U.S. income taxes.
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Prior to our acquisition of AVEX, the scope of our foreign operations did not
require that we hedge our foreign exchange risks. However, we may now be
required to engage in hedging transactions to attempt to mitigate our exposure
to fluctuations in foreign exchange rates. Our lack of experience in hedging
transactions may adversely affect our ability successfully to implement a
hedging program, should we decide to do so.
SHORTAGES OR PRICE INCREASES OF COMPONENTS SPECIFIED BY OUR CUSTOMERS WOULD
DELAY SHIPMENTS AND ADVERSELY AFFECT OUR PROFITABILITY.
Substantially all of our sales are derived from electronics manufacturing
services in which we purchase components specified by our customers. In the
past, supply shortages have substantially curtailed production of all assemblies
using a particular component. In addition, industry-wide shortages of electronic
components, particularly of memory and logic devices, have occurred. If
shortages of these components occur or if components received are defective, we
may be forced to delay shipments, which could have an adverse effect on our
profit margins. Because of the continued increase in demand for surface mount
components, we anticipate component shortages and longer lead times for certain
components to occur from time to time. Also, we typically bear the risk of
component price increases that occur between periodic repricings during the term
of a customer contract. Accordingly, certain component price increases could
adversely affect our gross profit margins.
OUR SUCCESS WILL CONTINUE TO DEPEND TO A SIGNIFICANT EXTENT ON OUR EXECUTIVES.
We depend significantly on certain key executives, including, but not
limited to, Donald E. Nigbor, Steven A. Barton and Cary T. Fu. The unexpected
loss of the services of any one of these executive officers would have an
adverse effect on us. We do not have employment agreements or non-competition
agreements with these executive officers, and we do not maintain key-man
insurance on our executive officers. The success of the AVEX acquisition also
depends in part upon our ability to retain key AVEX officers. Consistent with
our practice, we did not have the former AVEX officers enter into employment
agreements or non-competition agreements.
WE MUST MAINTAIN OUR TECHNOLOGICAL AND MANUFACTURING PROCESS EXPERTISE.
The market for our manufacturing services is characterized by rapidly
changing technology and continuing process development. We are continually
evaluating the advantages and feasibility of new manufacturing processes. We
believe that our future success will depend upon our ability to develop and
provide manufacturing services which meet our customers' changing needs. This
requires that we maintain technological leadership and successfully anticipate
or respond to technological changes in manufacturing processes on a
cost-effective and timely basis. We cannot assure you that our process
development efforts will be successful.
WE ARE SUBJECT TO A VARIETY OF ENVIRONMENTAL LAWS.
We are subject to a variety of federal, state, local and foreign
environmental regulations relating to the handling, storage, discharge and
disposal of hazardous chemicals used during our manufacturing process. If we
fail to comply with any present and future regulations, or if AVEX or companies
we acquire in the future have failed to comply with such regulations or are
otherwise liable for environmental contamination, we could be subject to
liabilities, fines or the suspension of production. In
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addition, such regulations could restrict our ability to expand our facilities
or could require us to acquire costly equipment, or to incur other significant
compliance expenses.
WE MAY EXPERIENCE YEAR 2000 PROBLEMS.
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in century. If not corrected, many computer
applications could fail or create erroneous results by or at the Year 2000. We
are actively taking steps to ensure that our information technology
infrastructure and business system applications, manufacturing equipment and
systems will be Year 2000 compliant, and we are seeking assurances of Year 2000
compliance from our suppliers, customers and other third parties with whom we
conduct business. However, we cannot be certain that our efforts will be
appropriate, adequate or complete.
THE NOTES ARE SUBORDINATED TO OUR SENIOR DEBT AND ALL THE OBLIGATIONS OF OUR
SUBSIDIARIES.
The Notes are unsecured and subordinated in right of payment in full to
all existing and future Senior Debt (as defined) of Benchmark. As a result of
such subordination, in the event of bankruptcy, liquidation or reorganization of
Benchmark or upon acceleration of the Notes due to an Event of Default (as
defined) under the Indenture and in certain other events, the assets of
Benchmark will be available to pay obligations on the Notes only after all
Senior Debt has been paid in full in cash or other payment satisfactory to the
holders of the Senior Debt, and there may not be sufficient assets remaining to
pay amounts due on any or all of the Notes then outstanding. The Notes also are
effectively subordinated to the liabilities, including trade payables, of any
subsidiary of Benchmark. In addition, the Notes are structurally subordinated to
our bank credit facility with Chase Bank of Texas, National Association, which
is secured by a first priority security interest in our inventory, our accounts
receivable, the capital stock of our subsidiaries and substantially all of our
other assets. The Indenture does not prohibit or limit the incurrence of Senior
Debt or the incurrence of other indebtedness and other liabilities by Benchmark
or any subsidiary of Benchmark. The incurrence of additional indebtedness and
other liabilities by us or our subsidiaries could adversely affect our ability
to pay our obligations on the Notes. As of June 30, 1999, Benchmark, after
giving effect to the AVEX acquisition and the refinancing of certain
indebtedness, had $176.8 million of debt that constituted Senior Debt and our
subsidiaries had $171.5 million of debt and other liabilities. In addition, we
have additional borrowing capacity under our bank credit facility, which when
utilized will constitute Senior Debt. See "Description of Notes--Subordination
of Notes."
THE AVEX ACQUISITION AND THE SALE OF THE NOTES SIGNIFICANTLY INCREASED OUR
LEVERAGE.
As a direct result of the AVEX acquisition and the sale of the Notes used
to partially finance it, we incurred $226,200,000 of indebtedness ($80,200,000
from the sale of the Notes and $146,000,000 of bank indebtedness). The Notes and
the bank debt have significantly increased our leverage ratio and decreased our
interest coverage ratio. Most of our indebtedness other than the Notes is senior
debt incurred to complete the AVEX acquisition. We may incur substantial
additional indebtedness in the future. The level of our indebtedness, among
other things, could:
o make it difficult for us to make payments on the Notes;
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o make it difficult for us to obtain any necessary financing in the
future for other acquisitions, working capital, capital
expenditures, debt service requirements or other purposes;
o limit our flexibility in planning for, or reacting to changes in,
our business; and
o make us more vulnerable in the event of a downturn in our
business.
There can be no assurance that we will be able to meet our debt service
obligations, including our obligations under the Notes.
OUR ABILITY TO REPURCHASE NOTES IF A DESIGNATED EVENT OCCURS IS LIMITED.
Our ability to repurchase Notes upon the occurrence of a Designated Event
(defined as a change of control or a termination of trading) is subject to
limitations. If a Designated Event were to occur, we may not have sufficient
financial resources, or we may be unable to arrange financing to pay the
repurchase price for all Notes tendered. Our subsidiaries may be parties in the
future to credit agreements and other agreements relating to indebtedness which
contain restrictions on transferring funds sufficient to permit us to effect a
Designated Event Payment. In addition, our bank credit facility does, and future
credit agreements or other agreements relating to our indebtedness (including
additional Senior Debt) may contain, prohibitions or restrictions on our ability
to effect a Designated Event Payment. In the event a Designated Event occurs at
a time when such prohibitions or restrictions are in effect, we could seek the
consent of our lenders and lenders to our subsidiaries to enable us to purchase
Notes or could attempt to refinance the borrowings that contain such
prohibitions or restrictions. If we do not obtain such consents or repay such
borrowings, we will be effectively prohibited from purchasing Notes. In such
case, our failure to purchase tendered Notes would constitute an Event of
Default under the Indenture whether or not such repurchase is permitted by the
subordination provisions of the Indenture. Any such default may, in turn, cause
a default under our Senior Debt. Moreover, the occurrence of a Designated Event
may cause an event of default under our bank credit facility or other Designated
Senior Debt (as defined). As a result, in such a case, any repurchase of the
Notes would, absent a waiver, be prohibited under the subordination provisions
of the Indenture until the Senior Debt is paid in full.
PRIOR TO THE INITIAL OFFERING, THERE WAS NO TRADING MARKET FOR THE NOTES.
Prior to the initial offering, there was no trading market for the Notes.
Although the initial purchasers advised us that they intended to make a market
in the Notes, they are not obligated to do so and may discontinue such market
making at any time without notice. In addition, such market making activity will
be subject to the limits imposed by the Securities Act and the Exchange Act.
Accordingly, there can be no assurances that any market for the Notes will
develop or, if one does develop, that it will be maintained. If an active market
for the Notes fails to develop or be sustained, the trading price of such Notes
could be materially adversely affected. The Notes are currently eligible for
trading on the Portal Market; however, we do not intend to apply for listing of
the Notes on any securities exchange.
PROVISIONS IN OUR CHARTER DOCUMENTS AND STATE LAW MAY MAKE IT HARDER FOR OTHERS
TO OBTAIN CONTROL OF BENCHMARK EVEN THOUGH SOME SHAREHOLDERS MIGHT CONSIDER SUCH
A DEVELOPMENT TO BE FAVORABLE.
Our shareholder rights plan, provisions of our amended and restated
articles of incorporation and the Texas Business Corporation Act may delay,
inhibit or prevent someone from gaining control of Benchmark through a tender
offer, business combination, proxy contest or some other method. See
"Description of Capital Stock." These provisions include:
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o A "poison pill" shareholder rights plan;
o A statutory restriction on the ability of shareholders to take
action by less than unanimous written consent; and
o A statutory restriction on business combinations with some types
of interested shareholders.
WE MAY EXPERIENCE FLUCTUATIONS IN QUARTERLY RESULTS.
Our quarterly results may vary significantly depending on various factors,
many of which are beyond our control. These factors include:
o The volume of customer orders relative to our capacity;
o Customer introduction and market acceptance of new products;
o Changes in demand for customer products;
o The timing of our expenditures in anticipation of future orders;
o Our effectiveness in managing manufacturing processes;
o Changes in cost and availability of labor and components;
o Changes in our product mix;
o Changes in economic conditions;
o Local factors and events that may affect our production volume
(such as local holidays); and
o Seasonality in customer product requirements.
Additionally, as is the case with many high technology companies, a significant
portion of our shipments typically occurs in the last few weeks of a quarter. As
a result, our sales may shift from one quarter to the next, having a significant
effect on reported results.
OUR STOCK PRICE IS VOLATILE.
Our Common Stock has experienced significant price volatility, and such
volatility may continue in the future. The price of our Common Stock could
fluctuate widely in response to a range of factors, including variations in our
reported financial results and changing conditions in the economy in general or
in our industry in particular. In addition, stock markets generally experience
significant price and volume volatility from time to time which may affect the
market price of our Common Stock for reasons unrelated to our performance.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the Notes or the common
stock issuable upon conversion thereof by the selling securityholders.
SELLING SECURITYHOLDERS
The Notes were issued and sold in August, 1999 to Qualified Institutional
Buyers (as defined under Rule 144A under the Securities Act of 1933, as
amended), to Institutional Accredited Investors (as
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defined under Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and
outside the United States in accordance with Regulation S under the Securities
Act. At an initial exercise price of $40.20, the Notes are convertible into
1,995,025 shares of Common Stock of the Company. Under the terms of a
Registration Agreement, we agreed to register the resale of the shares of Common
Stock received by the selling securityholders upon conversion of the Notes. In
the past three years, none of the selling securityholders have had a material
relationship with us.
The following table sets forth information as of October 18, 1999 with
respect to the selling securityholders and the respective principal amounts of
Notes beneficially owned by each selling securityholder that may be offered
pursuant to this prospectus. Because the selling securityholders may offer all
or some portion of the Notes or the Common Stock issuable upon conversion
thereof pursuant to this prospectus, no estimate can be given as to the amount
of the Notes or the Common Stock issuable upon conversion thereof that will be
held by the selling securityholders upon termination of any such sales. In
addition, the selling securityholders identified below may have sold,
transferred, or otherwise disposed of all or a portion of their Notes since the
date on which they provided the information regarding their Notes in
transactions exempt from the registration requirements of the Securities Act.
PRINCIPAL
AMOUNT OF NOTES NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED BENEFICIALLY OFFERED
SELLING SECURITYHOLDERS AND OFFERED HEREBY OWNED (1)(2) HEREBY (2)
Alpine Associates $4,200,000 104,478 104,478
c/o V.E.Z. Systems
120 Broadway,
9th FL. RM 913
New York, NY 10271
Alpine Partners, L.P. $550,000 13,682 13,682
120 Broadway,
9th Floor-RM 913
New York, NY 10271
Argent Classic Convertible $3,200,000 79,602 79,602
Arbitrage Fund L.P.
181 Harbor Drive
Stamford, CT 06902
Argent Convertible $1,000,000 24,876 24,876
Arbitrage Fund Ltd.
73 Front Street
Hamilton, HM 12 P.O. Box
HM 3013
HM MX Bermuda
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Argent Classic Convertible $3,050,000 75,871 75,871
Arbitrage Fund(Bermuda)L.P.
73 Front Street
Hamilton, HM 12 P.O. Box
HM 3013
HM MX Bermuda
BNP Arbitrage SNC $1,000,000 24,876 24,876
555 Croton Road
Fourth Floor
King of Prussia, PA 19406
Deutsche Bank Securities $11,500,000 286,070 286,070
1251 Avenue of Americas
New York, NY 10019
Fist Franklin Convertible $4,500,000 111,941 111,941
Securities Fund
777 Mariners Island Blvd.
San Mateo, CA 94404
JMG Convertible
Investments, L.P. $2,000,000 49,751 49,751
1999 Avenue of the Stars
Suite 2530
Los Angelas, CA 90067
LDG Limited $250,000 6,219 6,219
181 Harbor Drive
1st Floor
Samford, CT 06902
The Northwestern Mutual $11,500,000 (3) 286,070 286,070
Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
Peoples Benefit Life $1,000,000 24,876 24,876
Company
c/o Camden Asset
Management, LP
2049 Century Park East,
Ste.330
Los Angeles, CA 90067
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Peoples Benefit Life $2,750,000 68,408 68,408
Insurance Company Teamsters
Separate Acct.
c/o Camden Asset
Management, LP
2049 Century Park East,
Ste.330
Los Angeles, CA 90067
Putnam Convertible Income- $4,680,000 116,418 116,418
Growth Trust
c/o Putnam Investment
Management, Inc.
7 Shattuck Road, C-8-A
Andover, MA 01810
Putnam Balanced Retirement $260,000 6,468 6,468
Fund
c/o Putnam Investment
Management, Inc.
7 Shattuck Road, C-8-A
Andover, MA 01810
Putnam High Income $1,500,000 37,314 37,314
Convertible and Bond
Fund
c/o Putnam Investment
Management, Inc.
7 Shattuck Road, C-8-A
Andover, MA 01810
Putnam Convertible $260,000 6,468 6,468
Opportunities and
Income Trust
c/o Putnam Investment
Management, Inc.
7 Shattuck Road, C-8-A
Andover, MA 01810
Museum of Fine Arts, $90,000 2,239 2,239
Boston
c/o The Putnam Advisory
Company, Inc.
7 Shattuck Road, C-8-A
Andover, MA 01810
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ProMutual $340,000 8,458 8,458
c/o The Putnam Advisory
Company, Inc.
7 Shattuck Road, C-8-A
Andover, MA 01810
University of Rochester $90,000 2,239 2,239
c/o The Putnam Advisory
Company, Inc.
7 Shattuck Road, C-8-A
Andover, MA 01810
Rhone-Poulenc Rorer $120,000 2,985 2,985
Pension Plan
c/o The Putnam Advisory
Company, Inc.
7 Shattuck Road, C-8-A
Andover, MA 01810
Parker-Hannifin $110,000 2,737 2,737
Corporation
c/o The Putnam Advisory
Company, Inc.
7 Shattuck Road, C-8-A
Andover, MA 01810
New Hampshire Retirement $550,000 13,682 13,682
System
c/o The Putnam Advisory
Company, Inc.
7 Shattuck Road, C-8-A
Andover, MA 01810
Nomura Securities 2,000,000 49,751 49,751
International, Inc.
2 World Financial Center
Building B
New York, NY 10281
Robertson Stephens $10,000,000 248,757 248,757
555 California Street
Suite 2400
San Francisco, CA 94104
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SoundShore Opportunity $1,500,000 37,314 37,314
Holding Fund Ltd.
c/o AIG Legal
1281 East Main Street
Stamford, CT 06902
TQA Master Fund, Ltd. $2,450,000 60,946 60,946
181 Harbor Drive
1st Floor
Samford, CT 06902
TQA Master Plus Fund, Ltd. $800,000 19,901 19,901
181 Harbor Drive
1st Floor
Samford, CT 06902
Triton Capital Investments,
Ltd. $2,000,000 49,751 49,751
1999 Avenue of the Stars
Suite 2530
Los Angelas, CA 90067
- - ------------------------------
(1) Includes shares of Common Stock issuable upon conversion of the Notes.
(2) Assumes a conversion price of $40.20 per share and a cash payment in
lieu of any fractional share interest.
(3) Includes $500,000 in principal amount held in The Northwestern Mutual Life
Insurance Company Group Annuity Separate Account.
Information concerning the selling securityholders may change from time to
time and any such changed information will be set forth in supplements to this
Prospectus if and when necessary. In addition, the per share conversion price,
and therefore the number of shares of Common Stock issuable upon conversion of
the Notes, is subject to adjustment under certain circumstances. Accordingly,
the aggregate principal amount of Notes and the number of shares of Common Stock
issuable upon conversion thereof offered hereby may increase or decrease.
PLAN OF DISTRIBUTION
We are registering the Notes and the Common Stock issuable upon conversion
thereof (collectively, the Transfer Restricted Securities) on behalf of the
selling securityholders. We will bear all costs, expenses and fees in connection
with the registration of the Transfer Restricted Securities. The selling
securityholders will bear their respective brokerage commissions and similar
selling expenses, if any, attributable to the sale of their Transfer Restricted
Securities. All or part of the Transfer Restricted Securities may be sold from
time to time by the selling securityholders:
o to or through underwriters, brokers or dealers;
o directly to one or more other purchasers;
o through agents on a best-efforts basis or otherwise; or
o through a combination of any such methods of sale.
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Such Transfer Restricted Securities may be sold from time to time in one or more
transactions at a fixed price or prices, which may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at varying prices determined at the time of sale, or at negotiated
prices. Such sales may be effected in transactions (which may involve crosses or
block transactions):
o on any national securities exchange or quotation service on which
the Transfer Restricted Securities may be listed or quoted at the
time of sale;
o in the over-the-counter market;
o in transactions otherwise than on such exchanges or services or
in the over-the-counter market; or
o through the writing of options.
In connection with sales of the Transfer Restricted Securities or otherwise, the
selling securityholders may enter into hedging transactions with brokers-dealers
or others, which may in turn engage in short sales of the Transfer Restricted
Securities in the course of hedging the positions they assume. The selling
securityholders may also sell Transfer Restricted Securities short and deliver
Transfer Restricted Securities to close out such short positions, or loan or
pledge Transfer Restricted Securities to brokers- dealers or others that in turn
may sell such securities. The selling securityholders may pledge or grant a
security interest in some or all of the Transfer Restricted Securities owned by
it and, if it defaults in the performance of its secured obligations, the
pledgees or secured parties may offer and sell the Transfer Restricted
Securities from time to time pursuant to the Prospectus. The selling
securityholders also may transfer and donate shares in other circumstances in
which case the transferees, donees, pledgees or other successors in interest
will be the selling shareholder for purposes of the Prospectus. The selling
securityholders may sell short the Common Stock and may deliver the Prospectus
in connection with such short sales and use the shares covered by the Prospectus
to cover such short sales.
DESCRIPTION OF NOTES
GENERAL
The Notes were issued pursuant to an Indenture dated as of August 13, 1999
(the Indenture), between the Company and Harris Trust Company of New York, as
trustee (the Trustee). A copy of the Indenture and the Registration Agreement is
available as set forth under "Additional Information" below. The following
summary of certain provisions of the Indenture and the Registration Agreement
does not purport to be complete and is qualified in its entirety by reference to
the Indenture and the Registration Agreement, including the definitions in the
Indenture of certain terms used in the following summary. The definitions of
certain terms used in the following summary are set forth below under "Certain
Definitions." For purposes of this section of the prospectus, references to the
Company are solely to Benchmark Electronics, Inc., a Texas corporation, and not
to any of its subsidiaries.
The Notes are general unsecured obligations of the Company and are
subordinated in right of payment to all existing and future Senior Debt of the
Company to the extent set forth in the Indenture. The Indenture does not limit
the amount of other Indebtedness or securities that may be issued by the Company
or any of its Subsidiaries. The Company currently conducts its operations
directly and through its subsidiaries. Accordingly, the Company may in the
future be dependent upon the cash flow of its subsidiaries to meet some or all
of its obligations, including its obligations under the Notes. As a result,
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the Notes will be effectively subordinated to all existing and future
indebtedness and other liabilities and commitments of such subsidiaries. See
"Risk Factors - The Notes are subordinated to our Senior Debt and all the
obligations of our subsidiaries."
The Notes are currently eligible for trading in The Portal Market.
PRINCIPAL, MATURITY AND INTEREST
The aggregate principal amount of the Notes is $80,200,000, they bear
interest at the rate of 6.00% per annum, and they will mature on August 15,
2006.
Interest on the Notes will be payable semiannually on February 15 and
August 15 of each year (each an Interest Payment Date), commencing on February
15, 2000, to holders of record at the close of business on February 1 or August
1 (each a Regular Record Date) immediately preceding such Interest Payment Date.
Interest will be computed on the basis of a 360-day year consisting of twelve
30-day months. Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from August 13,
1999.
If the Company does not comply with certain deadlines set forth in the
Registration Agreement with respect to the registration of the Notes or the
Common Stock issuable upon conversion thereof for resale under a shelf
registration statement, holders of the Notes and/or the Common Stock issued upon
conversion thereof will be entitled to Liquidated Damages (as defined below).
See "- Registration Rights" below.
Principal of, premium, if any, interest and Liquidated Damages, if any, on
the Notes represented by the Global Note registered in the name of and held by
DTC or its nominee will be made to DTC or its nominee, as the case may be, as
the registered owner and holder of the Global Note. Payment of, premium, if any,
interest and Liquidated Damages, if any, on Definitive Notes will be payable at
the office or agency of the Company maintained for such purpose within The City
of New York or, subject to applicable laws and regulations, at the office of any
Paying Agent, or, at option of the Company, payment of interest may be made by
check mailed to the holders of the Definitive Notes at their respective
addresses set forth in the register of holders of Notes. Until otherwise
designated by the Company, the Company's office or agency in The City of New
York will be the office of the Trustee maintained for such purpose. The Notes
will be issued in registered form, without coupons, and in denominations of
$1,000 and integral multiples thereof.
If a payment date is not a Business Day at the place of payment, payment
may be made at that place on the next succeeding Business Day, and no interest
shall accrue for the intervening period.
The Company appointed the Trustee at its corporate trust office in The
City of New York as the Paying Agent and Conversion Agent. The Company at any
time may terminate the appointment of the Paying Agent or Conversion Agent and
appoint additional or other Paying Agents and Conversion Agents, provided that
until the Notes have been delivered to the Trustee for cancellation, or moneys
sufficient to pay the principal of, premium, if any, interest and Liquidating
Damages, if any, on the Notes have been made available for payment and either
paid or returned to the Company as provided in the Indenture, it will maintain
an office or agency in The City of New York for payments with respect to the
Notes and for the surrender of Notes for conversion. Notice of any such
termination or appointment and of any change in the office through which the
Paying Agent or Conversion Agent will act will be given in accordance with
"-Notices" below.
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PROVISIONAL REDEMPTION BY THE COMPANY
After February 15, 2001 and prior to August 19, 2002, the Notes may be
redeemed at the option of the Company, in whole or in part (in any integral
multiple of $1,000), at any time or from time to time, upon not less than 30 nor
more than 60 days' prior notice by mail, at a redemption price equal to 104.286%
of the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the Provisional Redemption Date (subject to the right of
holders of record on the relevant record date to receive any such amounts due on
the relevant payment date) if the closing price of the Common Stock shall have
equaled or exceeded 150% of the Conversion Price then in effect for at least 20
out of 30 consecutive days on which the New York Stock Exchange is open for the
transaction of business prior to the Notice Date.
Upon any Provisional Redemption, the Company will be obligated to make an
additional payment in an amount equal to the present value of the aggregate
value of the interest payments that would thereafter have been payable on the
Notes from the Provisional Redemption Date to but excluding August 19, 2002. The
present value will be calculated using the bond equivalent yield on U.S.
Treasury notes or bills having a term nearest in length to that of the
additional period as of the day immediately preceding the date on which a notice
of provisional redemption is mailed.
OPTIONAL REDEMPTION
On and after August 19, 2002, the Notes may be redeemed at the option of
the Company, in whole or in part (in any integral multiple of $1,000) at any
time or from time to time, at the following redemption prices (expressed as
percentages of the principal amount), in each case plus accrued and unpaid
interest and Liquidating Damages, if any, to the redemption date, subject to the
right of holders of record on the relevant record date to receive any such
amounts due on a relevant payment date. If redeemed during the 12-month period
beginning August 15 of the years indicated (August 19, in the case of 2002) such
redemption price shall be as indicated:
REDEMPTION REDEMPTION
YEAR PRICE YEAR PRICE
---- ---------- ---- ----------
2002 103.429% 2004 101.714%
2003 102.571% 2005 100.857%
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate, provided
that no Notes of $1,000 in principal amount or less shall be redeemed in part.
Notice of redemption shall be mailed at least 30 but not more than 60 days
before the redemption date to each holder of Notes to be redeemed at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. If any Definitive Note is to be redeemed in part
only, a new Note in principal amount equal to the unredeemed portion thereof
will be issued in the name of the holder thereof upon cancellation of the
original Note. On and after the redemption date, interest and Liquidated
Damages, if any, will cease to accrue on Notes or portions
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thereof called for redemption unless the Company defaults in the payment of the
redemption price for such Notes on the applicable redemption date.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS UPON DESIGNATED EVENT
Upon the occurrence of a Designated Event, each holder of Notes will have
the right to require the Company to repurchase all or any part (in an integral
multiple of $1,000) of such holder's Notes pursuant to the offer described below
(the Designated Event Offer) at a purchase price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the Designated Event Payment Date (the Designated Event Payment),
subject to the right of holders of record on the relevant record date to receive
any such amounts due on the relevant payment date. Within 30 days following any
Designated Event, the Company shall mail a notice to each holder stating: (i)
that the Designated Event Offer is being made pursuant to the covenant described
in this paragraph and that all Notes tendered will be accepted for payment; (ii)
the purchase price and the purchase date, which shall be no earlier than 30 days
nor later than 40 days from the date such notice is mailed (the Designated Event
Payment Date); (iii) that any Notes not tendered will continue to accrue
interest and Liquidated Damages, if applicable; (iv) that, unless the Company
defaults in the payment of the Designated Event Payment, all Notes accepted for
payment pursuant to the Designated Event Offer will cease to accrue interest and
Liquidated Damages, if applicable, after the Designated Event Payment Date; and
(v) the procedures that the holders of Notes must follow in order to tender
their Notes (or portions thereof) for payment, and the procedures that holders
of Notes must follow in order to withdraw an election to tender Notes (or
portions thereof) for payment.
The Company will comply with the requirements of Rules 13e-4 and 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of the Notes in connection with a Designated Event.
On the Designated Event Payment Date, the Company will, to the extent
lawful, (i) accept for payment Notes or portions thereof duly tendered pursuant
to the Designated Event Offer, (ii) deposit with the Trustee or a Paying Agent
in immediately available funds an amount equal to the Designated Event Payment
in respect of all Notes or portions thereof so tendered and (iii) deliver or
cause to be delivered to the Trustee the Notes so accepted together with an
Officers' Certificate identifying the Notes or portions thereof tendered to the
Company. The Paying Agent shall promptly mail or deliver to each holder of Notes
so accepted payment in an amount equal to the purchase price for such Notes, and
the Trustee shall promptly authenticate and mail or deliver to each holder a new
certificate representing a Note equal in principal amount to any unpurchased
portion of the Notes surrendered, if any; provided that each such new
certificate representing a Note shall be in a principal amount of $1,000 or an
integral multiple thereof. The Company will publicly announce the results of the
Designated Event Offer on or as soon as practicable after the Designated Event
Payment Date.
Except as described above with respect to a Designated Event, the
Indenture does not contain any other provisions that permit the holders of the
Notes to require that the Company repurchase or redeem the Notes in the event of
a takeover, recapitalization or similar restructuring.
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The Designated Event purchase feature of the Notes may in certain
circumstances make more difficult or discourage a takeover of the Company, and,
thus, the removal of incumbent management. The Designated Event purchase
feature, however, is not the result of management's knowledge of any specific
effort to accumulate the Company's Capital Stock or 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. Instead,
the Designated Event purchase feature is a result of negotiations between the
Company and the Initial Purchasers. Management has no current intention to
engage in a transaction involving a Designated Event, although it is possible
that the Company could decide to do so in the future. Subject to the limitations
on mergers, consolidations and sales of assets described herein, the Company
could, in the future, enter into certain transactions, including acquisitions,
refinancings or other recapitalizations, that would not constitute a Designated
Event under the Indenture, but that could increase the amount of indebtedness
(including Senior Debt) outstanding at such time or otherwise affect the
Company's capital structure or credit ratings. The payment of the Designated
Event Payment is subordinated to the prior payment of Senior Debt as described
under "Subordination of Notes" below.
The Company's ability to repurchase Notes upon the occurrence of a
Designated Event is subject to limitations. If a Designated Event were to occur,
there can be no assurance that the Company would have sufficient financial
resources, or would be able to arrange financing, to pay the repurchase price
for all Notes tendered by holders thereof. Subsidiaries of the Company, if any,
may be parties in the future to credit agreements and other agreements relating
to indebtedness which contain restrictions on transferring funds sufficient to
permit the Company to effect a Designated Event Payment. In addition, future
credit agreements or other agreements relating to indebtedness of the Company
(including additional Senior Debt) may, contain prohibitions or restrictions on
the Company's ability to effect a Designated Event Payment. In the event a
Designated Event occurs at a time when such prohibitions or restrictions are in
effect, the Company could seek the consent of its lenders and lenders to its
subsidiaries to enable the Company to purchase Notes or could attempt to
refinance the borrowings that contain such prohibitions or restrictions. If the
Company does not obtain such consents or repay such borrowings, the Company will
be effectively prohibited from purchasing Notes. In such case, the Company's
failure to purchase tendered Notes would constitute an Event of Default under
the Indenture whether or not such repurchase is permitted by the subordination
provisions of the Indenture. Any such default may, in turn, cause a default
under Senior Debt of the Company. Moreover, the occurrence of a Change in
Control may cause an event of default under the Facility or other Designated
Senior Debt of the Company. As a result, in such a case, any repurchase of the
Notes would, absent a waiver, be prohibited under the subordination provisions
of the Indenture until the Senior Debt is paid in full. See "- Subordination of
Notes" below and "Risk Factors - The Notes are subordinated to our Senior Debt
and all the obligations of our subsidiaries."
A "Designated Event" will be deemed to have occurred upon a Change of
Control or a Termination of Trading.
A "Change of Control" will be deemed to have occurred when: (i) any
"person" or "group" (as such terms are used in Section 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act) of shares representing more than 50% of the
combined voting power of the then outstanding securities entitled to vote
generally in elections of directors of the Company (the Voting Stock); (ii) the
Company consolidates with or merges into any other corporation, or any other
corporation merges into the Company, and, in the case of any such transaction,
the outstanding Common Stock of the Company is reclassified into or exchanged
for any other property or security, unless the stockholders of the Company
immediately before such transaction own, directly or indirectly immediately
following such transaction, at least a majority of the
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combined voting power of the then outstanding voting securities entitled to vote
generally in elections of directors of the corporation resulting from such
transaction in substantially the same respective proportions as their ownership
of the Voting Stock immediately before such transaction; (iii) the Company or
the Company and its Subsidiaries, taken as a whole, sells, assigns, conveys,
transfers or leases all or substantially all of the assets of the Company or of
the Company and its Subsidiaries, taken as a whole, as applicable (other than to
one or more wholly-owned Subsidiaries of the Company); or (iv) any time the
Continuing Directors do not constitute a majority of the board of directors of
the Company (of, if applicable, a successor corporation to the Company).
The definition of Change of Control includes a phrase relating to the
sale, assignment conveyance, transfer or lease of "all or substantially all" of
the assets of the Company. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of Notes to require the Company to repurchase such Notes as a result of a
sale, assignment, conveyance, transfer or lease of less than all of the assets
of the Company or the Company and its Subsidiaries, taken as a whole, may be
uncertain.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election.
A "Termination of Trading" will be deemed to have occurred if the Common
Stock (or other common stock into which the Notes are then convertible) is
neither listed for trading on the New York Stock Exchange or another United
States national securities exchange nor approved for trading on the Nasdaq
National Market or other established automated over-the-counter trading market
in the United States.
REGISTRATION RIGHTS
Pursuant to a registration agreement (the Registration Agreement), the
Company agreed for the benefit of the holders of the Notes and Common Stock
issued upon conversion thereof that (i) it will, at its cost, within 90 days
after the first date on which any Notes are issued (the Closing Date or the
Issuance Date), file a shelf registration statement (the Shelf Registration
Statement) with the Commission with respect to resales of the Notes and the
Common Stock issuable upon conversion thereof, (ii) the Company will use its
best efforts to cause such Shelf Registration Statement to be declared effective
under the Securities Act within 150 days after the Closing Date and (iii) the
Company will keep the Shelf Registration Statement continuously effective under
the Securities Act until the earliest of (a) the second anniversary of the
Closing Date, (b) the date on which the Notes or the Common Stock issuable upon
conversion thereof may be sold by non-affiliates of the Company pursuant to
paragraph (k) of Rule 144 (or any successor provision) promulgated by the
Commission under the Securities Act and (c) the date as of which all the Notes
or the Common Stock issuable upon conversion thereof have been sold pursuant to
the Shelf Registration Statement.
If the Shelf Registration Statement (i) is not filed with the Commission
on or prior to 90 days, or has not been declared effective by the Commission
within 150 days, after the Closing Date, or (ii) is filed and declared effective
but shall thereafter cease to be effective (without being succeeded immediately
by a replacement shelf registration statement filed and declared effective) or
usable for the offer and sale of
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Transfer Restricted Securities (as defined below) for a period of time
(including any Suspension Period as defined below) which shall exceed 60 days in
the aggregate in any 12-month period during the period beginning on the Closing
Date and ending on or prior to the second anniversary of the Closing Date (each
such event referred to in clauses (i) and (ii) being referred to herein as a
Registration Default), the Company will pay liquidated damages (Liquidated
Damages) to each Holder of Transfer Restricted Securities which has complied
with its obligations under the Registration Agreement. The amount of Liquidated
Damages payable during any period in which a Registration Default shall have
occurred and be continuing is that amount which is equal to one-quarter of one
percent (25 basis points) per annum per $1,000 principal amount of Notes or
$2.50 per annum per 24.875622 shares of Common Stock (subject to adjustment in
the event of a stock split, stock recombination, stock dividend and the like)
constituting Transfer Restricted Securities for the first 90 days during which a
Registration Default has occurred and is continuing and 50 basis points per
annum per $1,000 principal amount of Notes or $5.00 per annum per 24.875622
shares of Common Stock (subject to adjustment as set forth above) constituting
Transfer Restricted Securities for any additional days during which such
Registration Default has occurred and is continuing. The Company has agreed to
pay all accrued Liquidated Damages by wire transfer of immediately available
funds or by federal funds check on each Damages Payment Date (as defined in the
Registration Agreement). Following the cure of a Registration Default,
Liquidated Damages will cease to accrue with respect to such Registration
Default.
"Transfer Restricted Securities" means each Note and any share of Common
Stock issued on conversion thereof until the date on which such Note or share,
as the case may be, (i) has been transferred pursuant to the Shelf Registration
Statement or another registration statement covering such Note or share which
has been filed with the Commission pursuant to the Securities Act, in either
case after such registration statement has become effective under the Securities
Act, (ii) has been transferred pursuant to Rule 144 under the Securities Act (or
any similar provision then in force), or (iii) may be sold or transferred
pursuant to paragraph (k) of Rule 144 under the Securities Act (or any successor
provision promulgated by the Commission).
The Company will provide or cause to be provided to each holder of the
Notes, or the Common Stock issuable upon conversion of the Notes, copies of the
prospectus, which will be a part of the Shelf Registration Statement, notify or
cause to be notified to each such holder when the Shelf Registration Statement
for the Notes or the Common Stock issuable upon conversion of the Notes has
become effective and take certain other actions as are required to permit
unrestricted resales of the Notes or the Common Stock issuable upon conversions
of the Notes. A holder of Notes or the Common Stock issuable upon conversion of
the Notes that sells such securities pursuant to a Shelf Registration Statement
will be required to be named as a selling security holder in the related
prospectus and to deliver a prospectus to purchasers, will be subject to certain
of the civil liability provisions under the Securities Act in connection with
such sales and will be bound by the provisions of the Registration Agreement
that are applicable to such holder (including certain indemnification and
contribution rights or obligations). The Company presently intends to distribute
a questionnaire to each beneficial holder of Notes as of a specified date to
obtain certain information regarding such selling security holders for inclusion
in the prospectus.
The Company will be permitted to suspend the use of the prospectus which
is a part of the Shelf Registration Statement for a period not to exceed 30 days
in any three-month period or for three periods not to exceed an aggregate of 90
days in any twelve-month period (any such period being referred to as a
Suspension Period) under certain circumstances relating to pending corporate
developments, public filings with the Commission and similar events. The Company
will pay all expenses of the Shelf
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Registration Statement; provided however, that each holder shall bear the
expense of any broker's commission, agency fee or underwriter's discount or
commission.
CONVERSION
The holder of any Note will have the right, exercisable at any time after
90 days following the Issuance Date and prior to the close of business on the
Business Day immediately preceding the maturity date of the Notes, to convert
the principal amount thereof (or any portion thereof that is an integral
multiple of $1,000) into shares of Common Stock at the conversion price set
forth on the cover page of this Prospectus, subject to adjustment as described
below (the Conversion Price), except that if a Note is called for redemption,
the conversion right will terminate at the close of business on the Business Day
immediately preceding the redemption date. Except as described below, no payment
or adjustment will be made on conversion of any Notes for accrued and unpaid
interest or Liquidated Damages, if any, accrued thereon or for dividends or
distributions on, or Liquidated Damages, if any, attributable to, any Common
Stock issued upon conversion of Notes. If Notes not called for redemption or not
required to be repurchased are converted after a Regular Record Date for the
payment of interest and prior to the next succeeding Interest Payment Date, such
Notes must be accompanied by funds equal to the interest and Liquidated Damages,
if any, payable on such succeeding Interest Payment date on the principal amount
so converted. No fractional shares will be issued upon conversion, but a cash
adjustment will be made for any fractional interest.
Beneficial owners of interest in a Note may exercise their right of
conversion by delivering to DTC the appropriate instruction form for conversion
pursuant to DTC's conversion program and, in the case of conversions through
Euroclear or Cedel Bank, in accordance with Euroclear's or Cedel Bank's normal
operating procedures when application has been made to make the underlying
Common Stock eligible for trading on Cedel Bank or Euroclear. To convert a Note
held in certificated form into share of Common Stock, a holder must (i) complete
and manually sign the conversion notice on the back of the Note (or complete and
manually sign a facsimile thereof) and deliver such notice to the Trustee in New
York, New York, (ii) surrender the Note to the Trustee in New York, New York, as
the case may be, (iii) if required, furnish appropriate endorsements and
transfer documents, (iv) if required, pay all transfer or similar taxes, and (v)
if required, pay funds equal to interest and Liquidated Damages, if any, payable
on the next Interest Payment Date. Pursuant to the Indenture, the date on which
all of the foregoing requirements have been satisfied is the date of surrender
for conversion. Such notice of conversion can be obtained from the Trustee at
its corporate trust office or the office of the Conversion Agent. As promptly as
practicable on or after the conversion date, the Company will issue and deliver
to the Trustee a certificate or certificates for the number of full shares of
Common Stock issuable upon conversion, together with payment in lieu of any
fraction of a share in an amount determined as set forth below. Such certificate
or certificates will be sent by the Trustee to the Conversion Agent for delivery
to the holder. Such Common Stock issuable upon conversion of the Notes will be
fully paid and nonassessable. Any Note surrendered for conversion during the
period from the close of business on any Regular Record Date to the opening of
business on the next succeeding Interest Payment Date (except Notes called for
redemption on a redemption date or to be repurchased on a Designated Event
Payment Date or Special Redemption Date during such period) must be accompanied
by payment of an amount equal to the interest and Liquidated Damages, if any,
payable on such Interest Payment Date on the principal amount of Notes being
surrendered for conversion. In the case of any Note which has been converted
after any Regular Record Date, but on or before the next Interest Payment Date,
interest and Liquidated Damages, if any, on such Note shall be payable on such
Interest Payment Date notwithstanding such conversion. Such interest and
Liquidated Damages, if any, shall be paid to the holder of such Note on such
Regular Record Date. As a result, a holder that surrenders Notes for
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conversion on a date that is not an Interest Payment Date will not receive any
interest or Liquidated Damages, if applicable, for the period from the Interest
Payment Date next preceding the date of conversion to the date of conversion, or
any interest or Liquidated Damages, if applicable, on Notes called for
redemption which are surrendered for conversion after a notice of redemption
(except for the payment of interest and Liquidated Damages, if any, on Notes
called for redemption on a redemption date or to be repurchased on a Designated
Event Payment Date or Special Redemption Date between a Regular Record Date and
the Interest Payment Date to which it relates.) No other payment or adjustment
for interest or Liquidated Damages, or for any dividends in respect of Common
Stock, will be made upon conversion. Holders of Common Stock issued upon
conversion will not be entitled to receive any dividends payable to holders of
Common Stock as of any record time before the close of business on the
conversion date.
The Company will have the option to convert all of the Notes into shares
of Common Stock at the Conversion Price if, on or after August 19, 2002, the
closing price of the Company's Common Stock has equaled or exceeded 150% of the
Conversion Price for at least 20 out of 30 consecutive days on which the New
York Stock Exchange is open for the transaction of business.
The Conversion Price is subject to adjustment upon the occurrence of
certain events, including: (i) the issuance of shares of Common Stock as a
dividend or distribution on the Common Stock or any event treated as such for
U.S. Federal income tax purposes; (ii) the subdivision, combination or
reclassification of Common Stock; (iii) the issuance to all holders of Common
Stock of rights or warrants to subscribe for or purchase Common Stock (or
securities convertible into Common Stock) at a price per share less than the
then Current Market Price per share (determined as set forth below); (iv) the
distribution of shares of Capital Stock of the Company (other than Common
Stock), evidences of indebtedness or other assets (excluding dividends in cash,
except as described in clause (v) below) to all holders of Common Stock; (v) the
distribution, by dividend or otherwise, of cash to all holders of Common Stock
in an aggregate amount that, together with the aggregate of (A) any other
distributions of cash that did not trigger a Conversion Price adjustment to all
holders of Common Stock within the 12 months preceding the date fixed for
determining the stockholders entitled to such distribution and (B) all Excess
Payments in respect of each tender offer or other negotiated transaction by the
Company or any of its Subsidiaries for Common Stock concluded within the
preceding 12 months not triggering a Conversion Price adjustment, exceeds 12
1/2% of the product of the Current Market Price per share (determined as set
forth below) on the date fixed for the determination of stockholders entitled to
receive such distribution times the number of shares of Common Stock outstanding
on such date: (vi) payment of an Excess Payment in respect of a tender offer or
other negotiated transaction by the Company or any of its Subsidiaries for
Common Stock, if the aggregate amount of such Excess Payment, together with the
aggregate amount of (A) cash distributions made within the preceding 12 months
not triggering a Conversion Price adjustment and (B) all Excess Payments in
respect of each tender offer or other negotiated transaction by the Company or
any of its Subsidiaries for Common Stock concluded within the preceding 12
months not triggering a Conversion Price adjustment, exceeds 12 1/2% of the
product of the Current Market Price per share (determined as set forth below) on
the expiration of such tender offer or the date of payment of such negotiated
transaction consideration times the number of shares of Common Stock outstanding
on such date; and (vii) the distribution to all holders of Common Stock of
rights or warrants to subscribe for securities (other than those securities
referred to in clause (iii) above). In the event of a distribution to all or
substantially all holders of Common Stock of rights to subscribe for additional
shares of the Company's Capital Stock (other than those securities referred to
in clause (iii) above), the Company may, instead of making any adjustment in the
Conversion Price, make proper provision so that each holder of a Note who
converts such Note after the record date for such distribution and prior to the
expiration or redemption of such rights shall be entitled to receive upon such
conversion,
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in addition to shares of Common Stock, an appropriate number of such rights. No
adjustment of the Conversion Price will be made until cumulative adjustments
amount to one percent or more of the Conversion Price as last adjusted.
If the Company reclassifies or changes its outstanding Common Stock or
consolidates with or merges into any person, continues in a new jurisdiction or
transfers or leases all or substantially all its assets, or is a party to a
merger that reclassifies or changes its outstanding Common Stock, the Notes will
become convertible into the kind and amount of securities, cash or other assets
which the holders of the Notes would have owned immediately after any such
transaction if the holders had converted the Notes immediately before the
effective date of such transaction.
The Indenture also provides that if rights, warrants or options expire
unexercised, the Conversion Price shall be readjusted to take into account the
actual number of such warrants, rights or options which were exercised.
In the Indenture, the "Current Market Price" per share of Common Stock on
any date shall be deemed to be the average of the Daily Market Prices for the
shorter of (i) 30 consecutive Business Days ending on the last full trading day
on the exchange or market referred to in determining such Daily Market Prices
prior to the time of determination (as defined in the Indenture) or (ii) the
period commencing on the date next succeeding the first public announcement of
the issuance of such rights or warrants or such other distribution or such
negotiated transaction through such last full trading day prior to the time of
determination.
"Excess Payment" means the excess of (A) the aggregate of the cash and
fair market value of other consideration paid by the Company or any of its
Subsidiaries with respect to the shares acquired in the tender offer or other
negotiated transaction over (B) the Daily Market Price on the trading day
immediately following the completion of the tender offer or other negotiated
transaction multiplied by the number of acquired shares.
SUBORDINATION OF NOTES
The Notes will be general unsecured obligations of the Company, will be
subordinated in right of payment to all existing and future Senior Debt of the
Company and will rank PARI PASSU in right of payment with all other existing and
future debt and other liabilities of the Company that are not subordinated by
their express terms to the Notes. In addition, the Notes will be effectively
subordinated to all debt and other liabilities of the Company's subsidiaries,
including AVEX and its subsidiaries. As of June 30, 1999, the Company had $30.1
million of debt that would have constituted Senior Debt, consisting solely of
capital leases and a senior note payable. As of June 30, 1999, the Company,
after giving effect to the AVEX acquisition and the refinancing of certain
indebtedness, would have had $176.8 million of debt that would have constituted
Senior Debt (and an additional $48 million of additional borrowing capacity
under the Revolving Credit Facility). As of the same date, the Company's
subsidiaries had $9.7 million of debt and other balance sheet liabilities
outstanding, and after giving effect to the AVEX acquisition, would have had
$171.5 million of debt and other balance sheet liabilities outstanding. The
Indenture does not restrict the amount of Senior Debt or other indebtedness that
may be incurred by the Company or any subsidiary of the Company. In addition,
the Notes will be structurally subordinated to the Facility, which will be
secured by a first prior security interest in the Company's inventory, its
accounts receivable, 100% of the capital stock of its domestic subsidiaries and
65% of its foreign subsidiaries and substantially all of the Company's other
assets. See "Risk Factors - The Notes are subordinated to our Senior Debt and
all the obligations of our subsidiaries."
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The payment of the principal of, interest (including Liquidated Damages,
if any) on or any other amounts due on the Notes will be subordinated in right
of payment to the prior payment in full of all Senior Debt of the Company. No
payment on account of principal of, redemption of, interest (including
Liquidated Damages, if any) on or any other amounts due on the Notes, including,
without limitation, any payments on the Designated Event Offer, and no
redemption, purchased or other acquisition of the Notes may be made unless (i)
full payment of amounts then due on all Senior Debt has been made or duly
provided for pursuant to the terms of the instrument governing such Senior Debt,
and (ii) at the time for, or immediately after giving effect to, any such
payment, redemption, purchase or other acquisition, there shall not exist under
any Senior Debt or any agreement pursuant to which any Senior Debt has been
issued any default which shall not have been cured or waived and which shall
have resulted in the full amount of such Senior Debt being declared due and
payable. In addition, the Indenture will provide that if any of the holders of
any issue of Designated Senior Debt notify (the Payment Blockage Notice) the
Company and the Trustee that a default has occurred giving the holders of such
Designated Senior Debt the right to accelerate the maturity thereof, no payment
on account of principal, redemption, interest, Liquidated Damages, if any, or
any other amounts due on the Notes and no purchase, redemption or other
acquisition of the Notes will be made for the period (the Payment Blockage
Period) commencing on the date the Payment Blockage Notice is received and
ending on the earlier of (A) the date on which such event of default shall have
been cured or waived or (B) 180 days from the date the Payment Blockage Notice
is received. Notwithstanding the foregoing (but subject to the provisions
contained in the first and second sentences of this paragraph), unless the
holders of such Designated Senior Debt or the Representative of such holder
shall have accelerated the maturity of such Designated Senior Debt, the Company
may resume payments on the Notes after the end of such Payment Blockage Period.
Not more than one Payment Blockage Notice may be given in any consecutive
365-day period, irrespective of the number of defaults with respect to Senior
Debt during such period.
Upon any distribution of its assets in connection with any dissolution,
winding-up, liquidation or reorganization of the Company, all Senior Debt must
be paid in full before the holders of the Notes are entitled to any payments
whatsoever (other than payments of Junior Securities).
If payment of the Notes is accelerated because of an Event of Default, the
Company shall give prompt written notice to the holders of Senior Debt or to the
trustee(s) for such Senior Debt of the acceleration. The Company may not pay the
Notes until five business days after such holders or trustee(s) of Senior Debt
receive notice of such acceleration and, thereafter, may pay the Notes only if
the subordination provisions of the Indenture otherwise permit payment at that
time. As a result of these subordination provisions, in the event of the
Company's insolvency, holders of the Notes may recover ratably less than general
creditors of the Company.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with
or into any Person (whether or not the Company is the surviving corporation),
continue in a new jurisdiction, or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets unless
(i)(a) the Company is the surviving or continuing corporation or (b) the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or the Person which acquires by sale, assignment, transfer, lease,
conveyance or other disposition the properties and assets of the Company is a
corporation organized or existing under the laws of the United States, any state
thereof or the District of Columbia; (ii) the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company) or the
Person to which such sale, assignment, transfer, lease, conveyance or other
disposition will have been made assumes all the obligations of the Company,
pursuant to a supplemental
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indenture in a form reasonably satisfactory to the Trustee, under the Notes and
the Indenture; (iii) the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that the holders of Notes will not recognize gain or
loss for U.S. Federal income tax purposes as a result of the transaction and
will be subject to U.S. Federal income tax on the same amounts, in the same
manner and at the same time as would have been the case if such transaction had
not occurred; (iv) such sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the Company's properties or assets
shall be an entirety or virtually as an entirety to one Person and such Person
shall have assumed all the obligations of the Company, pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee, under
the Notes and the Indenture; (v) immediately after such transaction, no Default
or Event of Default exists; and (vi) the Company or such Person shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such transaction and the supplemental indenture comply with
the Indenture and that all conditions precedent in the Indenture relating to
such transaction have been satisfied.
REPORTS
Whether or not required by the rules and regulations of the Commission, so
long as any Notes are outstanding, the Company will file with the Commission and
furnish to the Trustee and the holders of Notes all quarterly and annual
financial information (without exhibits) required to be contained in a filing
with the Commission on Forms 10-Q and 10-K, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual consolidated financial statements only, a report thereon by the
Company's independent auditors. The Company shall not be required to file any
report or other information with the Commission if the Commission does not
permit such filing.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on or
Liquidated Damages with respect to the Notes; (ii) default in payment when due
of principal on the Notes; (iii) failure by the Company to comply with the
provisions described under " - Repurchase at the Option of Holders Upon
Designated Event;" (iv) failure by the Company for 60 days after the receipt of
written notice to comply with other covenants and agreements contained in the
Indenture or the Notes; (v) default under any credit agreement, mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Subsidiaries), whether such Indebtedness or guarantee now exists or is
created after the date on which the Notes are first authenticated and issued,
which default (a) is caused by a failure to pay when due principal or interest
on such Indebtedness within the grace period provided in such Indebtedness
(which failure continues beyond any applicable grace period) (a Payment Default)
or (b) results in the acceleration of such Indebtedness prior to its express
maturity (without such acceleration being rescinded or annulled) and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $15 million
or more; (vi) failure by the Company or any Subsidiary of the Company to pay
final non-appealable judgments (other than any judgment as to which a reputable
insurance company has accepted full liability) aggregating in excess of $15
million, which judgments are not stayed, bonded or discharged within 60 days
after their entry; and (vii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Material Subsidiaries.
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If any Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to the Company, all outstanding Notes will
become due and payable without further action or notice. Holders of the Notes
may not enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, holders of a majority in principal amount of the
then outstanding Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal, premium, if any, interest or Liquidated
Damages, if applicable, including a Designated Event Payment or Special
Redemption Payment) if it determines that withholding notice is in their
interest.
By notice to the Trustee, the holders of a majority in aggregate principal
amount of the Notes then outstanding may, on behalf of the holders of all of the
Notes, waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
the Designated Event Payment, Special Redemption Payment or interest (including
Liquidated Damages, if applicable) on, or the principal of or premium on, the
Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
GLOBAL NOTE; BOOK-ENTRY SYSTEM
The Notes are evidenced by one or more global notes in definitive, fully
registered form without interest coupons, and were deposited with the Trustee as
custodian for DTC and registered in the name of Cede & Co. ("Cede"), as nominee
of DTC. Except as set forth below, record ownership of the global note may be
transferred, in whole or in part, only to another nominee of DTC or to a
successor of DTC or its nominee.
Holders who are participants in DTC may hold interests in the global note
directly through DTC or indirectly through organizations that are participants.
Holders who are not participants in DTC may beneficially own interests in the
global note held by DTC only through participants in DTC or various banks,
brokers, dealers, trust companies and other parties that clear through or
maintain a custodial relationship with a participant. Transfers between
participants will be effected in the ordinary way in accordance with DTC's rules
and will be settled in same-day funds. The laws of some states require that
certain persons take physical delivery of securities in definitive form.
Consequently, the ability to transfer beneficial interests in the global note to
such persons may be limited.
The Company will pay interest on and principal of and the redemption or
repurchase price of the global note, as well as any payment of liquidated
damages, as described below, to Cede, the nominee for DTC, as the registered
owner of the global note, by wire transfer of immediately available funds on
each relevant payment date. Neither we nor the Trustee has any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the global note, including for any delay by
DTC or any participant or indirect participant in identifying the beneficial
ownership interests, and the Company and the Trustee may conclusively rely on,
and shall be protected in relying on, instructions from DTC as the registered
holder of the global note for all purposes.
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DTC has informed us that its practice is to credit participants' accounts
on the payment date with payments in amounts proportionate to their respective
beneficial interests in the global note, unless DTC has reason to believe that
it will not receive payment. Only the participants are responsible for payments
to owners of beneficial interests held through them.
Redemption notices shall be sent to Cede. If less than all the Notes are
being redeemed, DTC's practice is to determine by lot the amount of the holdings
of each participant in such issue to be redeemed.
Neither DTC nor Cede will consent or vote with respect to the Notes. Under
its usual procedures, DTC mails an omnibus proxy to the issuer as soon as
possible after the record date. The omnibus proxy assigns Cede's consenting or
voting rights to those participants to whose accounts the Notes are credited on
the record date identified in a listing attached to the omnibus proxy.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants, a person or entity having a beneficial interest
in the global note may be unable to pledge its interest to persons or entities
that do not participate in the DTC book-entry system, and other actions related
to their interest may be affected, due to the lack of a physical certificate
evidencing their interest.
DTC has advised us that it will take any action permitted to be taken by a
holder of Notes only at the direction of one or more participants to whose
accounts with DTC interests in the global note are credited. DTC will only take
action in respect of the portion of the principal amount of the Notes
represented by the global note as to which the participant or participants has
or have given direction.
DTC has advised us that it is a limited purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve System,
a "clearing corporation" within the meaning of the New York Uniform Commercial
Code, as amended, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may include
certain other organizations. Various participants or their representatives,
together with other entities, own DTC. Indirect access to the DTC system is
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of beneficial ownership interests in the global note among
participants, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be reliable, but we take no
responsibility for the accuracy of this information. Neither we, the Trustee nor
any of our or their respective agents are responsible for the performance by DTC
or its participants or indirect participants of their obligations under the
rules and procedures governing their operations, including maintaining,
supervising or reviewing the records relating to, or payments made on account
of, beneficial ownership interests in the global note.
So long as DTC, or its nominee, is the registered owner of the global
note, DTC or its nominee, as the case may be, will be considered the sole legal
owner or holder of the Notes represented by the
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global note. Except as set forth below, owners of beneficial interests in a
global note will not be entitled to have Notes represented by the global note
registered in their names, will not receive or be entitled to receive physical
delivery of Notes in definitive form and will not be considered the legal owners
or holder of the Notes under the Indenture. Accordingly, each person owning a
beneficial interest in the global note must rely on the procedures of DTC and,
if such person is not a participant, those of the participant through which that
person owns its interests, in order to exercise any rights of a holder under the
Indenture or the holder's Note.
A global note is exchangeable for definitive Notes in registered
certificated form if:
o DTC notifies the Company that it is unwilling or unable to continue
as depositary for the Company's global note or has ceased to be a
clearing agency registered under the Exchange Act;
o the Company notifies the Trustee in writing that it elects to
cause the issuance of the Notes in certificated form; or
o there shall have occurred and be continuing a default or an event
of default with respect to the Notes.
In all cases, certificated Notes delivered in exchange for any global note
will be registered in the names, and issued in any approved denominations,
required by or on behalf of the depositary.
TRANSFER AND EXCHANGE
The Company has initially appointed the Trustee as Registrar in New York,
New York. The Company reserves the right to vary or terminate the appointment of
the Registrar or to appoint additional or other Registrars or to approve any
change in the office through which the Registrar acts.
A holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar may require a holder, among other things, to furnish appropriate
endorsements and transfer documents and pay any taxes and fees required by law
or permitted by the Indenture. The Company is not required to exchange or
register the transfer of any Note selected for redemption. Also, the Company is
not required to exchange or register the transfer of any Note for a period of 15
days before the mailing of a notice of redemption of Notes to be redeemed.
The registered holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraph, the Indenture or the
Notes may be amended or supplemented with the consent of the holders of at least
a majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes), and any
existing default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the holders of a majority in principal amount
of the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for Notes).
Without the consent of each holder affected, an amendment, supplement or
waiver may not (with respect to any Notes held by a nonconsenting holder of
Notes) (i) reduce the amount of Notes whose holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal of or change the
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fixed maturity of any Note or alter the provisions with respect to the
redemption of the Notes, (iii) reduce the rate of or change the time for payment
of interest on any Note, (iv) waive a default in the payment of a Designated
Event Payment, or principal of, or interest, Liquidated Damages, if any, or
premium, if any, on, any Notes (except a rescission of acceleration of the Notes
by the holders of at least a majority in aggregate principal amount of the Notes
and a waiver of the payment default that resulted from such acceleration, (v)
make any Note payable in money other than that stated in the Notes, (vi) make
any change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of holders of Notes to receive payments of principal of,
or interest, Liquidated Damages, if any, or premium, if any, on, the Notes,
(vii) waive a redemption or repurchase payment with respect to any Note, (viii)
impair the right to convert the Notes into Common Stock, (ix) modify the
conversion or subordination provisions of the Indenture in a manner adverse to
the holders of the Notes (x) at any time after a Designated Event has occurred,
change the time at which the related repurchase or redemption offer must be made
or at which the Securities must be repurchased or redeemed pursuant to such
offer or (xi) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of Definitive Notes, to provide for the
succession of another Person to the Company and the assumption by such successor
to the Company's covenants and obligations under the Indenture, to evidence and
provide for the acceptance of the appointment under the Indenture of a Successor
Trustee, to make any change that would provide any additional rights or benefits
to the holders of the Notes or that does not adversely affect the legal rights
under the Indenture of any such holder, to make provisions with respect to the
conversion rights of holders of Notes in the event of a consolidation, merger,
continuation or sale of assets as required by the Indenture, or to comply with
requirements of the Commission in order to qualify, or maintain the
qualifications of, the Indenture under the Trust Indenture Act.
NOTICES
Notices to holders of the Notes will be given by mail to the addresses of
such holders as they appear in the Register (as defined). Such notices will be
deemed to have been given on the date of such mailing or on the date of the
first such publication, as the case may be.
GOVERNING LAW
The Indenture, the Notes and the Registration Agreement are governed by
and construed in accordance with the laws of the State of New York, United
States of America.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The holders of a majority in principal amount of the then outstanding
Notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that, in case an Event of Default
shall
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occur (which shall not be cured), the Trustee will be required, in the exercise
of its power, to use the degree of care of a prudent person in the conduct of
such person's own affairs. Subject to such provisions, the Trustee will be under
no obligation to exercise any of its rights or powers under the Indenture at the
request of any holder of Notes, unless such holder shall have offered to the
Trustee security and indemnity reasonably satisfactory to it against any loss,
liability or expense.
The Trustee is also the transfer agent and registrar for the Company's
Common Stock.
ADDITIONAL INFORMATION
Anyone who purchases Notes pursuant to this prospectus may obtain a copy
of the Indenture and the Registration Agreement without charge by writing to
Benchmark Electronics, Inc., 3000 Technology Drive, Angleton, Texas 77515,
Attention: Corporate Secretary.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"BUSINESS DAY" means any day that is not a Legal Holiday.
"CAPITAL STOCK" means any and all shares, interests, participations,
rights or other equivalents (however designated) of equity interests in any
entity, including, without limitation, corporate stock and partnership
interests.
"DEFAULT" means any event that is or, with the passage of time or the
giving of notice or both, would be an Event of Default.
"DESIGNATED SENIOR DEBT" means (i) any Senior Debt which, as of the date
of the Indenture, has an aggregate principal amount outstanding of at least $15
million and (ii) any Senior Debt which, at the date of determination, has an
aggregate principal amount outstanding of, or commitments to lend up to, at
least $15 million and is specifically designated by the Company in the
instrument evidencing or governing such Senior Debt as "Designated Senior Debt"
for purposes of the Indenture.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect from time to time.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"INDEBTEDNESS" means, with respect to any Person, all Obligations, whether
or not contingent, of such Person (i)(a) for borrowed money (including, but not
limited to, any indebtedness secured by a security interest, mortgage or other
lien on the assets of such person which is (1) given to secure all or
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part of the purchase price of property subject thereto, whether given to the
vendor of such property or to another, or (2) existing on property at the time
of acquisition thereof), (b) evidenced by a note, debenture, bond or other
written instrument, (c) under a lease required to be capitalized on the balance
sheet of the lessee under GAAP or under any lease or related document (including
a purchase agreement) which provides that such Person is contractually obligated
to purchase or to cause a third party to purchase such leased property, (d) in
respect of letters of credit, bank guarantees or bankers' acceptances (including
reimbursement obligations with respect to any of the foregoing), (e) with
respect to Indebtedness secured by a mortgage, pledge, lien, encumbrance, charge
or adverse claim affecting title or resulting in an encumbrance to which the
property or assets of such Person are subject, whether or not the obligation
secured thereby shall have been assumed or Guaranteed by or shall otherwise be
such Person's legal liability, (f) in respect of the balance of the deferred and
unpaid purchase price of any property or assets and (g) under interest rate or
currency swap agreements, cap, floor and collar agreements, spot and forward
contracts and similar agreements and arrangements; (ii) with respect to any
obligation of others of the type described in the preceding clause (i) or under
clause (iii) below assumed by or Guaranteed in any manner by such Person or in
effect Guaranteed by such Person through an agreement to purchase (including,
without limitation, "take or pay" and similar arrangements), contingent or
otherwise (and the Obligations of such Person under any such assumptions,
Guarantees or other such arrangements); and (iii) any and all deferrals,
renewals, extensions, refinancings and refundings of, or amendments,
modifications or supplements to, any of the foregoing.
"JUNIOR SECURITIES" means securities of the Company as reorganized or
readjusted or any other corporation provided for by a plan or reorganization or
readjustment the payment of which is subordinate, at least to the extent
provided for in the Indenture with respect to the Notes, to the payment in full
without diminution or modification by such plan of all Senior Debt.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions in the State of New York are not required to be open. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period. If any other operative date for purposes of
the Indenture shall occur on a Legal Holiday then for all purposes the next
succeeding day that is not a Legal Holiday shall be such operative date.
"MATERIAL SUBSIDIARY" means any Subsidiary of the Company which at the
date of determination is a "significant subsidiary" as defined in Rule 1-02(w)
of Regulation S-X under the Securities Act and the Exchange Act (as such
Regulation is in effect on the date hereof).
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages, and other liabilities payable under
the documentation governing any Indebtedness.
"PERSON" means an individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, limited
liability company or government or any agency or political subdivision thereof.
"REPRESENTATIVE" means the trustee, agent or representative (if any)
for an issue of Senior Debt.
"SENIOR DEBT" means the principal of, premium, if any, interest on and
other amounts due on Indebtedness of the Company, whether outstanding on the
date of the Indenture or thereafter created (including the Facility), incurred,
assumed or guaranteed by the Company (including all deferrals, renewals,
extensions, refinancings and refundings of, or amendments, modifications or
supplements to,
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any of the foregoing), unless, in the instrument creating or evidencing such
indebtedness of pursuant to which such Indebtedness is outstanding, it is
expressly provided that such Indebtedness is not senior in right of payment to
the Notes. Senior Debt includes, with respect to the obligations described
above, interest accruing, pursuant to the terms of such Senior Debt, on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company, whether or not post-filing interest is allowed in such proceeding, at
the rate specified in the instrument governing the relevant obligation.
Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not
include: (i) Indebtedness of or amounts owed by the Company for compensation to
employees, or for goods, services or materials purchased in the ordinary course
of business; (ii) Indebtedness of the Company to a Subsidiary of the Company
other than such Indebtedness that would be subject to a prior claim by the
lenders under the Company's existing credit facilities or the Facility; or (iii)
any liability for federal, state, local or other taxes owed or owing by the
Company.
"SUBSIDIARY" of a Person means any corporation, association or other
business entity of which more than 50% of the total voting power of shares of
Capital Stock entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more of
the Subsidiaries of that Person or a combination thereof.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
DESCRIPTION OF CAPITAL STOCK
The following description of the material features of our capital stock is
intended as a summary only and is qualified in its entirety by reference to our
amended and restated articles of incorporation, a copy of which has been filed
as an exhibit to our report on Form 10-K for the year ended December 31, 1998,
which is incorporated herein by reference. See "Risk Factors -- Provisions in
our charter documents and state law may make it harder for others to obtain
control of Benchmark even though some shareholders might consider such a
development to be favorable."
COMMON STOCK
Our amended and restated articles of incorporation authorize us to issue
30,000,000 shares of Common Stock. As of September 30, 1999, 16,218,353 shares
of Common Stock were outstanding. In addition, as of September 30, 1999 we had
issued options to purchase 2,703,905 shares of Common Stock, of which options to
purchase 721,307 shares are currently exercisable.
Each share of Common Stock has an equal and ratable right to receive
dividends to be paid from our assets legally available therefor when, as and if
declared by the Board of Directors. We have never paid, and do not anticipate
that we will pay in the foreseeable future, cash dividends on the Common Stock.
In addition, the agreement relating to our credit facility with Chase Bank of
Texas, National Association restricts the amount of cash dividends that we may
pay on Common Stock. The holders of Common Stock have no preemptive or other
rights to subscribe for additional shares of Common Stock or any other
securities of Benchmark. Each share of Common Stock entitles the holder thereof
to one vote in
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the election of directors and on all other matters submitted to a vote of our
shareholders. The holders of Common Stock have no right to cumulate their votes
in the election of directors. In the event of our dissolution or liquidation,
the holders of Common Stock will be entitled to share equally and ratably in our
assets available for distribution after payments are made to our creditors and
the holders of any outstanding shares of preferred stock. The outstanding shares
of Common Stock are, and the shares of Common Stock offered hereby, when issued,
will be fully paid and non-assessable.
The Common Stock is traded on the New York Stock Exchange under the symbol
"BHE." The transfer agent and registrar for the Common Stock is Harris Trust and
Savings Bank, 88 Pine Street, New York, New York 10005.
PREFERRED STOCK
Our amended and restated articles of incorporation authorize us to issue
5,000,000 shares of preferred stock, par value $0.10 per share. We have
established and designated a series of our preferred stock known as Series A
Cumulative Junior Participating Preferred Stock, par value $0.10 per share,
consisting of an aggregate of 30,000 shares. None of this preferred series has
been issued.
In addition, the Board of Directors has the authority, without shareholder
approval, to cause the issuance of other preferred stock in one or more series,
with such designations, preferences, limitations and rights as the Board of
Directors may determine. We have not issued, and have no plans to issue, any
shares of preferred stock. If we were to do so, however, the provisions of the
preferred stock may include, among others, extraordinary voting, dividend,
redemption, conversion or exchange rights.
SHAREHOLDER RIGHTS PLAN
On December 11, 1998, the Board of Directors adopted a shareholder rights
plan. Under this plan, a dividend of one preferred share purchase right (Right)
was declared for each outstanding share of Common Stock, payable December 21,
1998 to shareholders of record on that date. Each Right entitles shareholders to
buy one one-thousandth of a share of newly created Series A Cumulative Junior
Participating Preferred Stock at an exercise price of $155, subject to
adjustment in the event a person acquires, or makes a tender or exchange offer
for, 15% or more of the outstanding Common Stock. In such event, each Right
entitles the holder (other than the person acquiring 15% or more of the
outstanding Common Stock) to purchase shares of Common Stock with a market value
of twice the Right's exercise price. In addition, if a company acquires us in a
merger or other business combination, or if we sell more than 50% of our
consolidated assets or earning power, these rights will entitle our shareholders
(other than the acquirer) to purchase, for the exercise price, shares of the
Common Stock of the acquiring company or its parent having a market value of two
times the exercise price. At any time prior to such event, the Board of
Directors may redeem the Rights at one cent per Right. The Rights can be
transferred only with Common Stock and expire ten years after the date the
shareholder rights plan was adopted. The existence of the Rights may, under
certain circumstances, render more difficult or discourage attempts to acquire
us.
NOTES
We have $80.2 million in aggregate principal amount of our 6.00%
Convertible Subordinated Notes due 2006 (Notes) outstanding. The Notes are
convertible stock at an initial conversion price of $40.20. If all of the Notes
were converted into shares of Common Stock at the initial conversion price,
1,995,025 shares of Common Stock would be issued. The Notes were issued pursuant
to an Indenture
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dated August 13, 1999. The Notes are unsecured obligations and are subordinated
in right of payment to all our existing and future senior debt to the extent set
forth in the Indenture. The Notes are eligible for quotation in The Portal
Market. See-"Description of Notes."
STATUTORY BUSINESS COMBINATION PROVISIONS
Our company is subject to Article 13 of the Texas Business Corporation Act
(Article 13) which, with certain exceptions, prohibits a Texas corporation from
engaging in a "business combination" (as defined in Article 13) with any
shareholder who is a beneficial owner of 20% or more of the corporation's
outstanding stock for a period of three years after such shareholder acquires
the 20% ownership position, unless: (1) the board of directors of the
corporation approves the transaction or the shareholder's acquisition of shares
prior to the acquisition or (2) two-thirds of the unaffiliated shareholders of
the corporation approve the transaction at a shareholders' meeting. Shares that
are issuable, but have not yet been issued, pursuant to options, conversion or
exchange rights or other agreements are not considered outstanding for purposes
of Article 13.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain U.S. Federal income tax
considerations to holders of the Notes. This discussion is based upon the
Internal Revenue Code of 1986, as amended (the Code), U.S. Treasury Regulations,
Internal Revenue Service (IRS) rulings, and judicial decisions currently in
effect, all of which are subject to change (possibly with retroactive effect) or
different interpretations. The Company has not obtained, nor does it intend to
obtain, a ruling from the IRS with respect to the U.S. Federal income tax
consequences of acquiring or holding Notes or Common Stock, and there can be no
assurance that the IRS will not challenge one or more of the tax consequences
described herein.
This discussion does not deal with all aspects of U.S. Federal income
taxation that may be relevant to holders of the Notes or Common Stock and does
not deal with tax consequences arising under the laws of any foreign, state or
local jurisdiction or with any estate or gift tax considerations. This
discussion is for general information purposes only, and does not purport to
address all of the tax consequences that may be relevant to particular holders
in light of their personal circumstances (for example, persons subject to the
alternative minimum tax or persons who hold the Notes or Common Stock as part of
a hedging or conversion transaction or as part of a straddle or persons deemed
to sell Notes or Common Stock under the constructive sale provisions of the
Code), or to certain types of holders (such as certain financial institutions,
insurance companies, tax-exempt entities or dealers in securities) that may be
subject to special rules. This discussion only applies to holders that purchased
Notes in the initial offering and that hold the Notes and any Common Stock
received upon conversion thereof as capital assets under Section 1221 of the
Code, and this discussion assumes that the Notes are properly characterized as
debt instruments for U.S. Federal income tax purposes.
For the purpose of this discussion, a "U.S. Holder" refers to any holder
that is (i) a citizen or resident of the United States, (ii) a corporation or
other entity treated as a corporation for U.S. Federal income tax purposes
created or organized in the Untied States or any state thereof or the District
of Columbia, (iii) an estate of income of which is includible in income for U.S.
Federal income tax purposes regardless of its source or (iv) a trust subject to
primary supervision by a court in the United States and control by one or more
U.S. persons. In the case of a partnership that holds Notes or Common Stock, any
partner described in (i) through (iv), above, generally is also a U.S.
Holder. A "Non-U.S. Holder" is a
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holder, generally including any partner in a partnership that holds Notes or
Common Stock, that is not a U.S. Holder.
PROSPECTIVE HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING
THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THEIR OWNERSHIP AND
DISPOSITION OF THE NOTES, INCLUDING CONVERSION OF THE NOTES, AND THE EFFECT THAT
THEIR PARTICULAR CIRCUMSTANCES MAY HAVE ON SUCH TAX CONSEQUENCES.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS
INTEREST ON NOTES
Stated interest on the Notes generally will be taxable to a U.S. Holder as
ordinary income at the time that such interest is accrued or received in
accordance with the holder's regular method of accounting for tax purposes.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The registration of the Notes pursuant to the Company's obligations under
"Description of Notes -- Registration Rights" will not constitute a taxable
event for U.S. Federal income tax purposes, will not affect a U.S. Holder's tax
basis in the Notes, and a U.S. Holder's holding period for the registered Notes
will include the holding period such U.S. Holder had in the Notes before such
Notes were registered.
The Company intends to take the position that the possibility that holders
of Notes will be paid Liquidated Damages due to the occurrence of a Registration
Default is a remote or incidental contingency as of the issue date of the Notes,
within the meaning of Treasury Regulations Sections 1.1275-2(h) and
1.1275-4(a)(5). The Company's determination that the payment of Liquidated
Damages is a remote or incidental contingency is binding upon all holders of the
Notes, unless a holder properly discloses to the IRS that it is taking a
contrary position. Although the matter is not free from doubt, any Liquidated
Damages should be taxable to a U.S. Holder as ordinary interest at the time it
accrues or is received in accordance with such holder's regular method of tax
accounting. It is possible, however, that the IRS might take a different
position, in which case U.S. Holders might be required to include such
Liquidated Damages in income as it accrues or becomes fixed (regardless of their
regular method of accounting). Prospective holders are urged to consult their
own tax advisors regarding the foregoing.
ADJUSTMENTS TO CONVERSION PRICE
The conversion price of the Notes is subject to adjustment under certain
circumstances, as described under "Description of Notes -- Conversion." Section
305 of the Code and the Treasury Regulations issued thereunder may treat the
holders of the Notes as having received a constructive distribution, resulting
in dividend treatment (as described below) to the extent of the Company's
current and/or accumulated earnings and profits, if, and to the extent that,
certain adjustments in the conversion price (or certain other corporate
transactions) increase the proportionate interest of a holder of Notes in the
fully diluted Common Stock (particularly an adjustment to reflect a taxable
dividend to holders of Common Stock), whether or not such holder ever exercises
its conversion privilege. Moreover, if there is not a full adjustment to the
conversion ratio of the Notes to reflect a stock dividend or other event
increasing the proportionate interest of the holders of outstanding Common Stock
in the assets or earnings and profits of the Company, then such increase in the
proportionate interest of the holders of the
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Common Stock generally will be treated as a distribution to such holders,
taxable as a dividend (as described below) to the extent of the Company's
current and/or accumulated earnings and profits.
SALE, EXCHANGE, REDEMPTION OR RETIREMENT OF NOTES
In general, a U.S. Holder of Notes will recognize gain or loss upon the
sale, exchange, redemption, retirement or other disposition of the Notes (other
than a conversion into common stock) measured by the difference between (i) the
amount realized (except to the extent attributable to accrued but unpaid
interest) and (ii) the U.S. Holder's adjusted tax basis in the Notes. A holder's
tax basis in the Notes generally will equal the cost of the Notes to the holder,
increased by the amount of any market discount (as discussed below) previously
taken into income by the holder or decreased by any bond premium amortized by
the holder with respect to the Notes. Any such gain or loss recognized on the
sale, exchange, redemption, retirement or other disposition of a Note should be
capital gain or loss, and generally will be long-term capital gain or loss if
the Note has been held for more than one year at the time of the sale or
exchange.
CONVERSIONS OF NOTES INTO COMMON STOCK
In general, a holder of Notes will not recognize gain or loss on the
conversion of the Notes into shares of Common Stock, except upon the receipt of
cash in lieu of a fractional share. The holder's tax basis in the shares of
Common Stock received upon conversion of the Notes will equal the holder's
aggregate basis in the Notes exchanged therefor (less any portion thereof
allocable to a fractional share). The holding period of the shares of Common
Stock received by the holder upon conversion of Notes generally will include the
period during which the holder held the Notes prior to conversion. Cash received
in lieu of a fractional share of Common Stock should be treated as a payment in
exchange for such fractional share (rather than a dividend). Gain or loss
recognized on the receipt of cash paid in lieu of a fractional share generally
will equal the difference between the amount of cash received and the tax basis
allocable to the fractional share. Any such gain or loss should be capital gain
or loss, and generally will be long-term capital gain or loss if the Notes were
held for more than one year at the time of conversion.
MARKET DISCOUNT
The tax treatment of U.S. Holders with respect to the Notes may be altered
if the Notes are purchased at a "market discount". Market discount on a Note
will generally equal the amount, if any, by which the principal amount of the
Note exceeds the holder's initial tax basis in the Note (generally the Note's
acquisition price). Subject to a de minimis exception, a U.S. Holder of a Note
acquired at a market discount is generally required to treat as ordinary income
any gain recognized on the disposition of such Note to the extent of the
"accrued market discount" at the time of disposition. Market discount on a Note
will be treated as accruing on a straight-line basis over the term of such Note
or, at the election of the holder, under a constant-yield method. A U.S. Holder
of a Note acquired at a market discount may be required to defer the deduction
of a portion of the interest on any indebtedness incurred or maintained to
purchase or carry the Note until the Note is disposed of in a taxable
transaction, unless the holder elects to include market discount in income as it
accrues. If a Note with accrued market discount is converted into Common Stock,
the amount of such accrued market discount at the time of conversion generally
will be taxable to the U.S. Holder as ordinary income upon disposition of the
Common Stock.
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<PAGE>
AMORTIZABLE PREMIUM
A U.S. Holder that purchases a Note at a premium over its stated principal
amount generally may elect to amortize such premium (Section 171 premium) from
the purchase date to the Note's maturity date under a constant-yield method that
reflects semiannual compounding based on the Note's payment period. Section 171
premium, however, will not include any premium attributable to a Note's
conversion feature. The premium attributable to the conversion feature is the
excess, if any, of the Note's purchase price over what the Note's fair market
value would be if there were no conversion feature. Amortized Section 171
premium is treated as an offset to interest income on a Note and not as a
separate deduction. In general, a U.S. Holder's tax basis in the Notes will be
reduced by the amount of any bond premium as it is amortized or used to offset
interest income. Such amortization will cease upon conversion of the Notes into
Common Stock.
THE COMMON STOCK
Distributions, if any, paid or deemed paid on the Common Stock after a
conversion (or deemed distributions on the Notes as described above under "--
Adjustments to Conversion Price"), to the extent made from current and/or
accumulated earnings and profits of the Company, as determined for U.S. Federal
income tax purposes, will be included in a U.S. Holder's income as ordinary
income (subject to a possible dividends received deduction in the case of
corporate U.S. Holders) as they are paid. To the extent any distributions or
deemed distributions exceed the Company's current and accumulated earnings and
profits, such distributions will be treated as a nontaxable return of capital,
reducing the holder's basis in the Common Stock (or Notes). Any such
distribution in excess of the U.S. Holder's basis in the Common Stock (or Notes)
will be treated as capital gain.
Gain or loss realized on the sale or exchange of Common Stock will equal
the difference between (i) the amount realized on such sale or exchange and (ii)
the holders' adjusted tax basis in such Common Stock. Subject to the market
discount rules discussed above, such gain or loss will generally be long-term
capital gain or loss if the holder has held or is deemed to have held (E.G., by
reason of ownership of the Notes) the Common Stock for more than one year.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE TO NON-U.S. HOLDERS
INTEREST ON NOTES
Generally, stated interest (including any Liquidated Damages) paid on the
Notes to a Non-U.S. Holder will not be subject to U.S. Federal income tax if:
(i) such interest is not effectively connected with the conduct of a trade or
business within the United States by such Non-U.S. Holder, (ii) the Non-U.S.
Holder does not actually or constructively own 10% or more of the total voting
power of all classes of stock of the Company entitled to vote, (iii) the
Non-U.S. Holder is not a "controlled foreign corporation" with respect to which
the Company is a "related person" within the meaning of the Code, (iv) the
beneficial owner of the Notes is not a bank whose receipt of interest on a Note
is described in Section 881(c)(3)(A) of the Code, and (v) the beneficial owner
of the Note, under penalty of perjury, certifies to the payor that the owner is
not a U.S. person and such certificate provides the owner's name and address. If
certain requirements are satisfied, the certification described above may be
provided by a securities clearing organization, a bank, or other financial
institution that holds customers' securities in the ordinary course of its trade
or business. For purposes of the 10% ownership test in (ii), above, a Non-U.S.
Holder of Notes is deemed to own constructively the Common Stock into which such
Notes are convertible.
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<PAGE>
A Non-U.S. Holder that is not exempt from tax under these rules generally
will be subject to U.S. Federal income tax withholding at a rate of 30% unless
(i) the interest is effectively connected with the conduct of a U.S. trade or
business, in which case the interest will be subject to U.S. Federal income tax
on a net income basis as applicable to U.S. Holders generally (unless an
applicable tax treaty provides otherwise), or (ii) an applicable income tax
treaty provides for a lower rate of, or exemption from, withholding tax. In the
case of a Non-U.S. Holder that is a corporation and that receives interest that
is effectively connected with a U.S. trade or business, such income may also be
subject to the branch profits tax (which is generally imposed on a foreign
corporation on the actual or deemed repatriation from the United States of
earnings and profits attributable to a U.S. trade or business) at a 30% rate.
The branch profits tax may not apply (or may apply at a reduced rate) if a
recipient is a qualified resident of a country with which the United States has
an income tax treaty.
To claim the benefit of a tax treaty or to claim exemption from
withholding because interest received is effectively connected with a U.S. trade
or business, the Non-U.S. Holder must provide the appropriate, properly executed
IRS form (generally a Form 1001, Form 4224 or Form W-8) prior to the payment of
interest. These forms must be periodically updated. Also, under recently
finalized U.S. Treasury regulations, a Non-U.S. Holder who is claiming the
benefits of a treaty may be required to obtain a U.S. taxpayer identification
number and to provide certain documentary evidence issued by foreign
governmental authorities to prove residence in the foreign country. Certain
special procedures are provided in the new regulations for payments through
qualified intermediaries.
SALE, EXCHANGE OR REDEMPTION OF NOTES OR SHARES OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to U.S. Federal income tax
on gain recognized upon the sale or other disposition of Notes or shares of
Common Stock received in exchange therefor unless (i) the gain is effectively
connected with the conduct of a trade or business within the United States by
the Non-U.S. Holder (unless an applicable tax treaty provides otherwise) or (ii)
in the case of a Non-U.S. Holder who is a nonresident alien individual, such
Non-U.S. Holder is present in the United States for 183 or more days in the
taxable year. However, if the Company were to become a "United States real
property holding corporation" as defined in the Code, a Non-U.S. Holder may be
subject to U.S. Federal income tax with respect to gain realized on the
disposition of Notes or shares of Common Stock as if such gain were effectively
connected with a U.S. trade or business of the holder, subject to certain
significant exceptions. The Company is not now a "United States real property
holding corporation" and does not anticipate that it will become one.
CONVERSION OF NOTES
A Non-U.S. Holder generally will not be subject to U.S. Federal income tax
on the conversion of a Note into shares of Common Stock. However, to the extent
a Non-U.S. Holder receives cash in lieu of a fractional share upon conversion,
any gain upon the receipt of cash would be subject to the rules described above
regarding the sale or exchange of Common Shares.
DIVIDENDS ON SHARES OF COMMON STOCK
Generally, any distribution paid, or deemed paid, on shares of Common
Stock (including a deemed distribution on the Notes described above under
"Certain Federal Income Tax Consequences Applicable to U.S. Holders --
Adjustments to Conversion Price") to a Non-U.S. Holder will be subject to U.S.
Federal income tax withholding at a rate of 30% unless (i) the dividend is
effectively connected with the conduct of a trade or business within the United
States by the Non-U.S. Holder, in which case the
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<PAGE>
dividend will be subject to the U.S. Federal income tax on net income basis that
applies to U.S. Holders generally (as described above) and, with respect to
corporate Non-U.S. Holders under certain circumstances, the branch profits tax,
or (ii) an applicable income tax treaty provides for a lower rate of withholding
tax. A Non-U.S. Holder may be required to satisfy certain certification
requirements in order to claim a reduction of or exemption from withholding
under the foregoing rules.
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. HOLDERS
Information reporting and backup withholding may apply to payments of
principal, interest, premium or dividends on or the proceeds from the sale or
other disposition of the Notes or Common Stock with respect to certain
noncorporate U.S. Holders. Such U.S. Holders generally will be subject to backup
withholding at a rate of 31% unless the U.S. Holder provides its correct
taxpayer identification number and certain other information, certified under
penalties of perjury, to the payor, or otherwise establishes an exemption from
backup withholding. Any amount withheld under backup withholding is allowable as
a credit against the U.S. Holder's Federal income tax liability, provided the
proper information is provided to the IRS.
NON-U.S. HOLDERS
Generally, information reporting will apply to payments of interest and/or
premium (if any) on the Notes or dividends on the Common Stock, and backup
withholding at a rate of 31% may apply unless the payee certifies that it is not
a U.S. person or otherwise establishes an exemption. In addition, information
reporting and backup withholding will apply to payments of principal on the
Notes unless the payee certifies that it is not a U.S. person or otherwise
establishes an exemption.
The payment of the proceeds of the disposition of Notes or Common Stock to
or through the U.S. office of a U.S. or foreign broker will be subject to
information reporting and possible backup withholding unless the Non-U.S. Holder
certifies as to its Non-U.S. Holder status or otherwise establishes an
exemption, provided that the broker does not have actual knowledge that the
holder is a U.S. person or that the conditions of any other exemption are not,
in fact, satisfied. The proceeds of the disposition by a Non-U.S. Holder of
Notes or Common Stock to or through a foreign office of a broker generally will
not be subject to information reporting or backup withholding. However, if the
broker is a U.S. person, a controlled foreign corporation for U.S. tax purposes,
or a foreign person, 50% or more of whose gross income from all sources for
certain periods is from activities that are effectively connected with a U.S.
trade or business, information reporting generally will apply unless the broker
has documentary evidence in its files as to the Non-U.S. Holder's foreign status
and has no actual knowledge to the contrary.
NEW WITHHOLDING REGULATIONS
The recently finalized withholding regulations referred to above (the New
Regulations) make certain modifications to the withholding and information
reporting rules described above. The New Regulations attempt to unify
certification requirements and modify reliance standards. The New Regulations
will generally be effective for payments made after December 31, 2000, subject
to certain transition rules. Prospective holders are urged to consult their own
tax advisors regarding the New Regulations.
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THE PRECEDING DISCUSSION OF CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY,
EACH PROSPECTIVE HOLDER SHOULD CONSULT ITS OWN TAX ADVISER AS TO THE PARTICULAR
TAX CONSEQUENCES TO IT OF PURCHASING, HOLDING AND DISPOSING OF OR CONVERTING THE
NOTES AND THE COMMON STOCK OF THE COMPANY, INCLUDING THE APPLICABILITY AND
EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN
APPLICABLE LAWS.
LEGAL MATTERS
The validity of the Notes and the shares of Common Stock issuable upon the
conversion thereof are being passed upon for us by Bracewell & Patterson,
L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of Benchmark Electronics, Inc. and
subsidiaries as of December 31, 1998 and 1997 and for each of the years in the
three-year period ended December 31, 1998, have been incorporated by reference
in the registration statement in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing. The
combined financial statements of AVEX Electronics, Inc., its subsidiaries, and
certain related companies as of December 31, 1998 and 1997 and for each of the
years in the three-year period ended December 31, 1998, have been incorporated
by reference in the registration statement in reliance upon the report of KPMG
LLP, independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be incurred by Benchmark
Electronics, Inc. in connection with the issuance and distribution of the common
stock being registered. All amounts except the registration fee are estimated.
Registration Fee.................................. $ 22,965
Legal Fees and Expenses........................... $ 15,000
Accounting Fees................................... $ 5,000
Printing Fees..................................... $ 10,000
Miscellaneous..................................... $ 5,000
--------
$ 57,965
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
TEXAS BUSINESS CORPORATION ACT
Article 2.02-1.B of the Texas Business Corporation Act, as amended (the
"TBCA"), grants to a corporation the power to indemnify a person who was, is or
is threatened to be made a named defendant or respondent in a proceeding because
the person is or was a director of the corporation against judgments, penalties
(including excise and similar taxes), fines, settlements and reasonable expenses
actually incurred in connection therewith, only if it is determined that the
person (1) conducted himself in good faith; (2) reasonably believed that (a) in
the case of conduct in his official capacity as a director of the corporation,
his conduct was in the corporation's best interests, and (b) in all other cases,
his conduct was at least not opposed to the corporation's best interests; and
(3) in the case of any criminal proceeding, he had no reasonable cause to
believe that his conduct was unlawful. Article 2.02-1.C limits the allowable
indemnification by providing that, except to the extent permitted by Article
2.02-1.E, a director may not be indemnified in respect of a proceeding in which
the person was found liable (1) on the basis that he improperly received a
personal benefit, whether or not the benefit resulted from an action taken in
his official capacity, or (2) to the corporation. Article 2.02-1.E provides that
if a director is found liable to the corporation or is found liable on the basis
that he received a personal benefit, the permissible indemnification (1) is
limited to reasonable expenses actually incurred by the person in connection
with the proceeding, and (2) shall not be made in respect of any proceeding in
which the person shall have been found liable for willful or intentional
misconduct in the performance of his duty to the corporation. Finally, Article
2.02-1.H provides that a corporation shall indemnify a director against
reasonable expenses incurred by him in connection with a proceeding in which he
is a named defendant or respondent because he is or was a director if he has
been wholly successful, on the merits or otherwise, in defense of the
proceeding.
With respect to the officers of a corporation, Article 2.02-1.O of the
TBCA provides that a corporation may indemnify and advance expenses to an
officer of the corporation to the same extent that
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it may indemnify and advance expenses to directors under Article 2.02-1.
Further, Article 2.02-1.O provides that an officer of a corporation shall be
indemnified as, and to the same extent, provided by Article 2.02-1.H for a
director.
AMENDED AND RESTATED BYLAWS
The Amended and Restated Bylaws of the Company make mandatory the
indemnification of and advancement of expenses to its directors who become
involved in indemnifiable legal proceedings, subject to their compliance with
certain requirements imposed by Texas law.
INDEMNITY AGREEMENTS
The Company has entered into Indemnity Agreements with its directors and
officers pursuant to which the Company generally is obligated to indemnify its
directors and officers to the full extent permitted by Texas law.
REGISTRATION RIGHTS AGREEMENT
The Registration Agreement pursuant to which the Notes have been included
in this registration statement provides for the indemnification of the officers
and directors of the Company by the holders of the Notes under certain
circumstances.
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- - ------- ----------------------
2(1) Amended and Restated Stock Purchase Agreement dated as of August
12, 1999 by and between Benchmark Electronics, Inc. and J.M. Huber
Corporation.
4.1(2) Restated Articles of Incorporation of the Company.
4.2(3) Amended and Restated Bylaws of the Company.
4.3(4) Amendment to Amended and Restated Articles of Incorporation of the
Company adopted by the shareholders of the Company on May 20, 1997.
4.4(5) Statement of Resolution Establishing Series A Cumulative Junior
Participating Preferred Stock of Benchmark Electronics, Inc.
4.5(6) Indenture dated as of August 13, 1999 by and between Benchmark
Electronics, Inc. and Harris Trust Company of New York, as trustee.
5(7) Opinion of Bracewell & Patterson, L.L.P. as to the legality of
the securities being offered.
23.1(7) Consent of Bracewell & Patterson, L.L.P. (included in its opinion
filed as Exhibit 5 hereto).
23.2(7) Consent of KPMG LLP.
24(8) Powers of Attorney
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<PAGE>
- - ------------------
(1) Incorporated by reference from Exhibit 2 to Benchmark Electronics, Inc.'s
Form 8-K dated August 24, 1999 (File No. 001-10560).
(2) Incorporated herein by reference to Exhibit 3.1 to Benchmark Electronics,
Inc.'s Registration Statement on Form S-1 (Registration No. 33-46316).
(3) Incorporated herein by reference to Exhibit 3.2 of Benchmark Electronics,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998
(File No. 001-10560).
(4) Incorporated herein by reference to Exhibit 3.3 of Benchmark Electronics,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998
(File No. 001-10560).
(5) Incorporated by reference to Exhibit B of the Rights Agreement dated
December 11, 1998 between the Company and Harris Trust Savings Bank, as
Rights Agent, included as Exhibit 1 to Benchmark Electronics Inc.'s Form
8A12B filed December 11, 1998.
(6) Incorporated by reference to Exhibit 99.3 to Benchmark Electronics, Inc.'s
Form 8-K dated August 24, 1999 (File No. 001-10560).
(7) Filed herewith.
(8) Included on the signature page of this Registration Statement.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement or amendment to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Angleton, State of Texas,
on November 10, 1999.
BENCHMARK ELECTRONICS, INC.
By: /S/ DONALD E. NIGBOR
Donald E. Nigbor
President
Each person whose signature appears below on this Registration Statement
hereby constitutes and appoints Donald E. Nigbor and Cary T. Fu, each with full
power to act without the other, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities (until revoked in writing) to sign
any and all amendments (including post-effective amendments and amendments
thereto) to this Registration Statement and any subsequent registration
statement filed by the Registrant pursuant to Rule 462 of the Securities Act of
1933, and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing he might do or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement or amendment has been signed by the following
persons in the capacities and on the dates
indicated.
NAME POSITION DATE
---- -------- ----
/S/ JOHN C. CUSTER Chairman of the November 10, 1999
John C. Custer Board of Directors
/S/ DONALD E. NIGBOR Director and President November 10, 1999
Donald E. Nigbor (principal executive
officer)
/S/ STEVEN A. BARTON Director and Executive November 10, 1999
Steven A. Barton Vice President
/S/ CARY T. FU Director and Executive November 10, 1999
Cary T. Fu Vice President (principal
financial and accounting
officer)
/S/ PETER G. DORFLINGER Director November 10, 1999
Peter G. Dorflinger
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/S/ GERALD W. BODZY Director November 10, 1999
Gerald W. Bodzy
/S/ DAVID H. ARNOLD Director November 10, 1999
David H. Arnold
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
2(1) Amended and Restated Stock Purchase Agreement dated
as of August 12, 1999 by and between Benchmark
Electronics, Inc. and J.M. Huber Corporation.
4.1(2) Restated Articles of Incorporation of the Company.
4.2(3) Amended and Restated Bylaws of the Company.
4.3(4) Amendment to Amended and Restated Articles of
Incorporation of the Company adopted by the shareholders
of the Company on May 20, 1997.
4.4(5) Statement of Resolution Establishing Series A
Cumulative Junior Participating Preferred Stock of
Benchmark Electronics, Inc.
4.5(6) Indenture dated as of August 13, 1999 by and between
Benchmark Electronics, Inc. and Harris Trust Company of
New York.
5(7) Opinion of Bracewell & Patterson, L.L.P. as to the
legality of the securities being offered.
23.1(7) Consent of Bracewell & Patterson, L.L.P. (included in
its opinion filed as Exhibit 5 hereto).
23.2(7) Consent of KPMG LLP.
24(8) Powers of Attorney
- - ------------------
(1) Incorporated by reference from Exhibit 2 to Benchmark Electronics,
Inc.'s Form 8-K dated August 24, 1999 (File No. 001-10560).
(2) Incorporated herein by reference to Exhibit 3.1 to Benchmark
Electronics, Inc.'s Registration Statement on Form S-1 (Registration
No. 33-46316).
(3) Incorporated herein by reference to Exhibit 3.2 of Benchmark
Electronics, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1998 (File No. 001-10560).
(4) Incorporated herein by reference to Exhibit 3.3 of Benchmark
Electronics, Inc.'s Annual Report on Form 10- K for the year ended
December 31, 1998 (File No. 001-10560).
(5) Incorporated by reference to Exhibit B of the Rights Agreement dated
December 11, 1998 between the Company and Harris Trust Savings Bank, as
Rights Agent, included as Exhibit 1 to Benchmark Electronics, Inc.'s
Form 8A12B filed December 11, 1998.
(6) Incorporated by reference to Exhibit 99.3 to Benchmark Electronics,
Inc.'s Form 8-K dated as of August 24, 1999 (File No. 001-10560).
(7) Filed herewith.
(8) Included on the signature page of this Registration Statement.
II-6
EXHIBIT 5
November 10, 1999
Benchmark Electronics, Inc.
3000 Technology Drive
Angleton, Texas 77515
Ladies and Gentlemen:
We have acted as counsel for Benchmark Electronics, Inc., a Texas corporation
("Company"), in connection with the Registration Statement on Form S-3 filed on
November 10, 1999 by the Company under the Securities Act of 1933, as amended
("Registration Statement"), with respect to $80,200,000 aggregate principal
amount of the Company's 6% Convertible Subordinated Notes due 2006 (the
"Notes"). The Notes were issued under an indenture dated as of August 13, 1999
(the "Indenture") between the Company and Harris Trust Company of New York, as
Trustee (the "Trustee"), and are convertible into shares of the Company's common
stock, par value $.10 per share (the "Common Stock"), as provided in the
Indenture.
In such capacity, we are familiar with the Amended and Restated Articles of
Incorporation, as amended, and the Restated Bylaws of the Company, the
Registration Statement and the Indenture and have examined such statutes,
records, instruments and documents as we have deemed necessary for the purposes
hereof. In addition, we have relied on certificates of officers of the Company
and of public officials and others as to certain matters of fact relating to
this opinion and have made such investigations of law as we have deemed
necessary and relevant as a basis hereof. We have assumed the genuineness of all
signatures, the authenticity of all documents and records submitted to us as
originals, the conformity to original documents and records of all documents and
records submitted to us as copies and the truthfulness of all statements of fact
contained therein. We have assumed the due authorization, execution and delivery
of the Indenture by the Trustee.
Based on the foregoing and subject to the limitations and assumptions set forth
herein, and having due regard for such legal considerations as we deem relevant,
we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Texas.
<PAGE>
Benchmark Electronics, Inc.
November 10, 1999
Page 2
2. The Indenture is a valid and legally binding agreement of the Company
and the Notes are legally issued and binding obligations of the Company entitled
to the benefits of the Indenture.
3. The 1,995,025 shares of Common Stock initially issuable upon conversion
of the Notes have been duly authorized by all necessary corporate action on the
part of the Company, have been duly reserved for issuance upon conversion and,
when issued upon conversion in accordance with the terms of the Indenture, will
be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion with the Securities and Exchange
Commission as an exhibit to the Registration Statement and to the reference to
us in the Registration Statement under the caption "Legal Matters." However, in
giving such consent we do not admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission.
Very truly yours,
/s/ BRACEWELL & PATTERSON, L.L.P.
Bracewell & Patterson, L.L.P.
EXHIBIT 23.2
The Board of Directors
Benchmark Electronics, Inc.
We consent to the use of our reports incorporated herein by reference
and to the references to our firm under the heading "Experts" in the prospectus.
KPMG LLP
Houston, Texas
November 10, 1999
