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FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-10669
PROSPECTUS
$126,500,000
CYRIX CORPORATION
5 1/2% CONVERTIBLE SUBORDINATED NOTES
DUE JUNE 1, 2001
This Prospectus relates to the offering for resale by the Selling
Securityholders (the "Selling Securityholders") of up to an aggregate of
$126,500,000 of 5 1/2% Convertible Subordinated Notes due June 1, 2001 (the
"Notes") of Cyrix Corporation, a Delaware corporation ("Cyrix" or the
"Company"), and the 3,182,385 shares of Common Stock, par value $.004 per share
(the "Common Stock") that are issuable upon conversion of the Notes at the
initial conversion rate of 25.1572 shares per U.S. $1,000 principal amount of
Notes, subject to adjustment in certain events. The Notes offered hereby were
originally offered by the Company in an underwritten private placement.
The Notes will be convertible at any time on or after August 26, 1996 and
prior to the close of business on the maturity date, unless previously redeemed
or repurchased, at a conversion rate of 25.1572 shares of Common Stock per
$1,000 principal amount of Notes (equivalent to a conversion price of U.S.
$39.75 per share), subject to adjustment under certain circumstances. The
Company's Common Stock is quoted on the Nasdaq National Market. The last
reported sale price of the Common Stock on November 8, 1996 was $19 per share.
Interest on the Notes will be payable semiannually on June 1 and December 1 of
each year, commencing on December 1, 1996.
The Notes are not redeemable prior to June 1, 1999. Thereafter, the Notes
are redeemable at the option of the Company, in whole or in part, at the
redemption prices set forth herein, plus accrued interest. Upon a Change in
Control (as defined herein), holders of Notes will have the right, subject to
certain restrictions and conditions, to require the Company to purchase all or
any portion of their Notes at the principal amount thereof plus accrued and
unpaid interest.
The Notes will be subordinate in right of payment to the extent set forth in
the Indenture (as defined herein) to the prior payment of all Senior
Indebtedness (as defined herein) of the Company. The principal amount of
outstanding Senior Indebtedness was approximately $19.3 million at September 30,
1996.
The Notes may be sold from time to time pursuant to this Prospectus by the
Selling Securityholders. The Notes may be sold by the Selling Securityholders in
ordinary brokerage transactions, in transactions in which brokers solicit
purchases, in negotiated transactions, or in a combination of such methods of
sale, at market prices prevailing at the time of sale, at prices relating to
such prevailing market prices or at negotiated prices. See "Plan of
Distribution." The distribution of the Notes is not subject to any underwriting
agreement. The Company will receive no part of the proceeds of sales from the
offering by the Selling Securityholders. All expenses of registration incurred
in connection with this offering are being borne by the Company, but all selling
and other expenses incurred by the Selling Securityholders will be borne by such
Selling Securityholders. None of the securities offered pursuant to this
Prospectus have been registered prior to the filing of the Registration
Statement of which this Prospectus is a part.
SEE "RISK FACTORS" ON PAGE 3 FOR CERTAIN FACTORS RELEVANT TO AN INVESTMENT
IN THE NOTES.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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November 14, 1996
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, NW, Washington, D.C. 20549, and at the Commission's Regional
Offices at Seven World Trade Center, 13th Floor, New York, New York 10048 and
CitiCorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can be obtained by mail from the Public
Reference Section of the Commission at 450 West Fifth Street, NW, Washington,
D.C. 20549, at prescribed rates. The reports, proxy statements and other
information may also be obtained from the Web site that the Commission maintains
at http:/www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the securities offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which were omitted in accordance with the rules and regulations
of the Commission. For further information, reference is hereby made to the
Registration Statement. Any statements contained herein concerning the
provisions of any document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission are not necessarily complete, and in each
instance reference is made to the copy of such document so filed. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(i) Annual Report on Form 10-K for the fiscal year ended December 31,
1995, as amended by the Annual Report on Form 10-K/A for the fiscal
year ended December 31, 1995, filed May 20, 1996;
(ii) Quarterly Report on Form 10-Q for the quarter ended March 31, 1996;
(iii) The description of the Company's Common Stock contained in Item 1
of the Registration Statement on Form 8-A dated June 10, 1993, as
amended by Form 8-A/A dated July 12, 1993 and Form 8-A/A dated July
14, 1993;
(iv) Current Report on Form 8-K filed May 23, 1996;
(v) Current Report on Form 8-K filed June 27, 1996;
(vi) Quarterly Report on Form 10-Q for the quarter ended June 30, 1996;
and
(vii) Quarterly Report on Form 10-Q for the quarter ended September 30,
1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the securities offered hereby shall be deemed
to be incorporated by reference into this Prospectus and to be a part hereof
from the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all of the documents which are incorporated by reference herein,
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Requests should be directed to
Russell N. Fairbanks, Jr., Vice President, General Counsel and Secretary, at the
Company's principal executive offices.
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RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING AN
INVESTMENT IN THE NOTES OFFERED HEREBY AND THE SHARES OF COMMON STOCK ISSUABLE
UPON CONVERSION THEREOF. THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"),
WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER
SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS.
FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO,
THOSE DISCUSSED IN THIS SECTION.
MANUFACTURING RISKS
Currently, all of the Company's microprocessors are manufactured by
International Business Machine Corporation's Microelectronics Division ("IBM").
Any disruption in the supply of microprocessors from IBM would have a material
adverse effect on the Company's business and results of operations. There are
several material risks to which the Company is exposed by its reliance on IBM as
its sole source of supply for its only product family. Among these risks are the
possible unavailability of or delays in obtaining access to certain process
technologies, the absence of controllable product delivery schedules, potential
inability to achieve acceptable manufacturing yields and production costs and
the possible breakdown in the parties' relationship. While IBM has committed to
manufacture and sell to Cyrix specified volumes of wafers of Cyrix-designed
microprocessor products through December 31, 1999 (the "IBM Product Agreement")
and to manufacture and sell to Cyrix through December 1997 supplemental volumes
of wafers of Cyrix-designed microprocessors (the "IBM Foundry Agreement"), there
is no assurance that delivered or contract volumes will be sufficient to allow
the Company to penetrate larger original equipment manufacturer ("OEM")
accounts, which require demonstrated capacity to deliver significant volumes.
The IBM Product Agreement obligates the Company to pay for certain minimum
quantities of microprocessor products regardless of whether the Company places
orders for microprocessors in such quantities, and the IBM Foundry Agreement
requires that the Company make rolling six-month forward purchase commitments
for microprocessors to be manufactured and sold to the Company thereunder. These
provisions could have a material adverse effect on the Company's business and
results of operations if the Company found itself for any period of time without
a microprocessor product that is competitive with the leading microprocessors
offered by the Company's competitors.
Manufacture of the Company's current generation 6x86-TM- microprocessors
requires more advanced manufacturing processes than those required for the
Company's previous products. SGS Microelectronics ("SGS"), the other party with
which the Company has a manufacturing relationship, is not currently
manufacturing the Company's 6x86 products. Therefore, all of the Company's
microprocessors are currently obtained from IBM. Additionally, each time the
Company introduces a new product that is manufactured using a new process
technology there is a risk that problems will be encountered in manufacturing
the product. There can be no assurance that third party manufacturers will
consistently produce acceptable yields of products in 1996 and beyond.
The Company currently uses 0.5 micron, five-layer metal complementary
metal-oxide semiconductor ("CMOS") processes for its 6x86 products. In the
fourth quarter of fiscal 1996, the Company is scheduled to move from 0.5 micron,
five-layer metal CMOS processes to 0.35 micron, five-layer metal CMOS for
certain of its products. The Company believes that its primary competitors,
Intel Corporation ("Intel") and Advanced Micro Devices, Inc. ("AMD"), have used
advanced 0.35 micron process technologies to manufacture microprocessors during
1996. Thus, Intel and AMD are employing more advanced manufacturing processes
than were available to the Company during the first nine months of fiscal 1996
from IBM and SGS, thereby potentially affording them improved product
performance and decreased manufacturing costs as compared to the Company. See
"-- Product Transitions; Dependence on Product Development" and "-- Market
Dominance by Intel."
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The Company frequently engages in discussions with third parties concerning
access to additional manufacturing capacity and advanced process technology, but
there can be no assurance that it will be able to secure access to such
additional capacity or process technology or to do so on terms the Company
considers desirable. Reliance on any new third party manufacturer would entail
the same risks as are described above relating to the Company's reliance on IBM
and SGS.
PRODUCT TRANSITIONS; DEPENDENCE ON PRODUCT DEVELOPMENT
The microprocessor business is characterized by short product cycles,
intense price competition and rapid advances in product design and process
technology resulting in rapidly occurring product obsolescence. Next generation
microprocessor products are being introduced by the Company's competitors in
increasingly compressed time frames, thereby decreasing the product life cycles
of earlier generation microprocessors and placing additional pressure on
microprocessor companies to design and commence manufacturing next generation
products in a timely manner. The ability of the Company and its competitors to
introduce new products embodying improved performance characteristics and
competitive features and the emergence of new industry standards has rendered
and will continue to render existing products obsolete and unmarketable. As a
result, the Company must successfully develop and introduce on a timely basis
price-competitive microprocessor products that embody new features, meet
evolving industry standards and achieve levels of performance that are
acceptable to the market in order to be competitive. The only microprocessor
product the Company is currently producing for sale is its 6x86 microprocessor.
If the Company is unable to develop and successfully market in a timely manner
successor products with competitive performance, features and pricing, the
Company's business and operating results will be materially and adversely
affected.
The industry's short product cycles also increase the risk that the Company
will from time to time find itself with excessive amounts of inventory of
products for which there is rapidly declining demand and significantly reduced
average selling prices. For example, in the fourth quarter of 1995, average
selling prices of 486DX2 microprocessors fell below the Company's cost to
purchase such products, the demand for these products declined substantially
compared to prior quarters and the Company wrote off substantially all of its
486 inventory, which exceeded $10 million. The requirement that the Company make
rolling six-month forward purchase commitments for products purchased from IBM
pursuant to the IBM Foundry Agreement heightens this risk. See "-- Manufacturing
Risks."
PRODUCT DELAYS
The Company has in the past experienced delays in introducing certain of its
products. During 1995, the Company was not able to introduce and ramp production
of products with performance competitive with the leading performance processors
designed and manufactured by Intel. As a result, the Company's revenues and
profits declined significantly compared to prior periods. There can be no
assurance that the Company can successfully supply 6x86 products in adequate
commercial volumes with performance and cost characteristics comparable to
competitive products. There can be no assurance that the Company will not
encounter design, manufacturing process, manufacturing capacity or other
problems that could delay introduction of new products in the future. In
addition, the development of new products by the Company may require designing
around new or existing patents, resulting in lengthy delays or project
cancellations. If the Company is unable, for these or other reasons, to develop
and successfully market competitive products, in particular next generation
microprocessor products, in a timely manner, the Company's business and
operating results will be materially and adversely affected.
MARKET DOMINANCE BY INTEL
Intel currently has a dominant microprocessor market share, dictates the
performance standards required to compete in the microprocessor market and
influences product life cycles through frequent product introductions, product
enhancements and price competition. In addition to its dominant microprocessor
market share, Intel is also beginning to dominate the entire personal computer
platform. For example, Intel has obtained a dominant market share in sales of
64-bit or Pentium-class core logic chip sets and has emerged as one of the
world's largest motherboard manufacturers. In
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fiscal 1995, Intel purchased an equity interest in Phoenix Technologies Ltd.,
one of the leading suppliers of BIOS (basic input/output system) software, which
translates signals from the personal computer's operating system software to
interface with the computer's hardware devices. Further, Intel manufactures
personal computers, incorporating Intel microprocessors, chip sets, motherboards
and other Intel-designed components, for resale by OEMs under such OEMs' names.
Intel's developments in semiconductor design and manufacturing processes
have allowed Intel to produce microprocessors that are smaller, faster and less
expensive to manufacture. These microprocessor cost and performance advantages,
coupled with Intel's financial strength, have enabled Intel to reduce prices on
its microprocessors within a short period of time following their introduction.
In addition, the Company believes that Intel has a strategy to maintain its
dominant market position through aggressive investments in manufacturing
capacity and research and development. According to reports filed by Intel with
the Commission, Intel spent during 1995 an estimated $1.3 billion on research
and development and $3.6 billion on property, plant and equipment, including
manufacturing facilities. In addition, the Company believes that Intel is
attempting to consolidate its dominant market position through an intensive
advertising campaign designed to strengthen brand loyalty to Intel by the
personal computer end-user. The Company does not have the financial resources to
compete with Intel on such a large scale. As long as Intel remains in this
dominant position, its product introduction schedule and pricing strategy may
have a material adverse effect on the Company's business, operating results and
financial condition.
COMPETITION AND MARKET ACCEPTANCE
The markets for the Company's products are increasingly competitive. In
order to compete effectively in the market for high performance IBM compatible
microprocessors, the Company must develop and introduce on a timely basis
competitive products that embody new technology, meet evolving industry
standards and achieve levels of performance and price acceptable to the market.
See "-- Product Transitions; Dependence on Product Development" and "-- Product
Delays." In the recent past, Intel and other competitors have increased the
frequency of product introductions and enhancements and have used price
decreases to protect or improve their market share. The Company expects that
Intel and other competitors will continue to improve the performance of their
microprocessor products and use price decreases to protect or improve their
market share. There can be no assurance that the Company will be able to
successfully improve the performance of its microprocessors and its
manufacturing costs at the rates required to remain competitive with the leading
performance processors in the market or compete against price decreases, since
Intel and several of the Company's other competitors have substantially greater
financial, technical, manufacturing and marketing resources than the Company. In
order to be competitive, the Company must have sufficiently low costs so that it
can meet such price decreases and introduce products subject to less price
competition; however, there can be no assurance that the Company can accomplish
these goals and be price competitive.
To compete with Intel at higher levels of integration as required by many
personal computer OEMs and dealers, Cyrix is dependent upon the infrastructure
of third-party designers and manufacturers of core logic chip sets,
motherboards, BIOS software, and other components of personal computers. As
Intel has become the dominant competitor in these segments of the personal
computer industry (see "-- Market Dominance by Intel"), third-party designers
and manufacturers of core logic chip sets, motherboards, BIOS software and other
components to support microprocessors have lost market share to Intel, which
owns the microprocessor designs and enjoys significantly greater financial,
technical, manufacturing and marketing resources than such parties. Further, as
Intel expanded its role in designing and setting standards for personal computer
systems, many personal computer OEMs reduced their system development
expenditures and now require processor technologies to be provided at various
levels of integration. In order to compete with Intel and deliver the higher
levels of integration required by many OEMs and dealers in 1996 and beyond, the
Company intends to form closer relationships with third-party designers and
manufacturers of core logic chip sets,
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motherboards, BIOS software and other components, expand its chip set and system
design capabilities, and sell a portion of the Company's processors at higher
levels of integration incorporated into modules, boards and systems, but there
can be no assurance that the infrastructure which supports non-Intel personal
computer platforms will be competitive with Intel or continue to support the
Company's products.
Other competitors in the IBM compatible microprocessor market include AMD,
IBM, SGS and Texas Instruments Incorporated ("TI"). Under a technology exchange
agreement and patent cross-license agreement between AMD and Intel, AMD has
historically competed in the microprocessor market with products which use
intellectual property developed by Intel. AMD recently acquired Nexgen, Inc.,
which has designed microprocessors which Nexgen claims were competitive with the
leading performance processors in the market. In recent years, IBM, SGS and TI
have entered the market using Cyrix's microprocessor designs. In addition, each
of these companies is in the process of designing IBM compatible
microprocessors. The Company may also face competition from manufacturers of
processors that are not currently IBM compatible, such as manufacturers of
IBM's, Motorola's and Apple's Power PC system processors. The Company believes
that other semiconductor manufacturers may enter the market, resulting in even
greater competition. Further, the rapid pace of technological change in the
industry means that companies other than Cyrix could develop a design or process
that radically advances microprocessor standards using a proprietary or
patent-protected design or process.
OEMs generally select processors for inclusion in their personal computer
products based on the processors' price/performance characteristics and mix of
features. In addition, OEMs consider the ability of microprocessor vendors to
have access to advanced process technologies, introduce microprocessors
competitive with the leading processors in the market in a timely manner, supply
adequate volumes of processors which meet such vendors' performance requirements
in a timely and reliable manner, and be price competitive. Even after a Cyrix
product has been designed into an OEM's personal computer, a "design win," the
Company still faces competition to keep its products in the OEM's design.
Generally, an OEM can qualify a second source for any of the Company's products
because SGS and IBM each have licenses to manufacture certain Cyrix-designed
products. As the Company does not have exclusive rights to the products it
designs, revenue and gross margin for such products could be reduced.
To date, the Company has been unable to sell significant quantities of its
microprocessors to most large OEMs such as Compaq, Hewlett Packard, Gateway
2000, Dell and Toshiba. During 1995 and the first nine months of fiscal 1996,
AST Research Inc. accounted for approximately 11% and less than 1%,
respectively, of Cyrix's sales. As the Company is currently transitioning its
product offerings to higher performance 6x86 processors, the Company must obtain
design wins for its 6x86 processors with current or new OEM customers. There can
be no assurance that the Company will retain its current OEM customers during
this product transition or thereafter. The loss of such customers, if not
replaced by other OEM customers with similar sales volumes, could have a
material adverse effect on the Company's results of operations.
In order to obtain manufacturing capacity, the Company has had to grant
limited product rights to others, thereby creating additional competition, and
may need to do so again in order to obtain new manufacturing relationships or
expand its relationship with IBM or SGS.
INTELLECTUAL PROPERTY
There are many patents held by Intel and other companies which relate to the
design and manufacture of semiconductor components, including microprocessors,
and computer systems. The Company has been engaged in litigation with Intel
regarding alleged infringement by the Company of Intel's patents (see "--
Litigation"), and from time to time has been notified that it may infringe the
intellectual property rights of others. Currently, the Company is a licensee of
a limited number of specified patents under an agreement with Intel and is not a
licensee under any patent license agreement with any other party. If the Company
is alleged to infringe one or more patents, it may seek
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a license to the patent. However, there can be no assurance that a license will
be available or available on reasonable terms. In such event, the Company may be
forced to litigate the matter. If litigation were to commence, a license is not
available on reasonable terms or if any other third party is found to have a
valid claim against the Company, it could have a material adverse effect on the
Company.
LITIGATION
GENERAL; MICROPROCESSOR LITIGATION
The processor industry is characterized by litigation involving patent and
infringement claims. Since March 1992, the Company and Intel have been engaged
in litigation related to certain of the Company's microprocessor products. For a
more complete discussion of the litigation with Intel, see Note 6 of the Notes
to Consolidated Financial Statements in the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996, which is incorporated herein by
reference. Intel elected not to appeal the Federal Circuit Court of Appeals
March 6, 1996 opinion and thereby under its settlement agreement with the
Company paid the Company $2 million in August 1996. While the Company has
received favorable judgments and rulings in connection with such litigation, the
Company believes that Intel has a strategy of protecting its market share by
filing intellectual property lawsuits against its competitors, and that Intel
may assert additional patent infringement claims against the Company even though
the Company has prevailed in all of the remaining litigation with Intel
referenced above. Potential additional Intel litigation would likely involve
different patents with new combination or system claims. In addition, new patent
applications are continually being filed, and pending United States patent
applications are confidential until patents are issued. Thus, it is impossible
to ascertain all potential patent infringement claims. The damages and legal and
other expenses of any such litigation could materially and adversely affect the
Company's future operating results. There could be no assurance as to the
outcome of any such litigation, and an adverse decision could render the Company
insolvent or severely impair the Company's future business prospects.
STOCKHOLDERS CLASS ACTION
In December 1994, eleven class actions were filed in the United States
District Court for the Northern District of Texas, purportedly on behalf of
purchasers of the Company's Common Stock, alleging that the Company and various
of its officers and directors violated sections of the Exchange Act and Rule
10b-5 promulgated thereunder, by issuing false and misleading statements
concerning the introduction and production of the Company's Cx486DX2 40/80 MHZ
microprocessors. The complaints also allege that the conduct of the Company and
certain of its officers and directors constituted fraud and negligent
misrepresentation and that certain of such officers and directors sold shares of
Common Stock while in possession of material undisclosed information.
In June 1995, all of the actions were consolidated into one complaint in the
federal district court in Dallas, Texas. The Company moved to dismiss the
consolidated amended class action complaint in July 1995. On August 20, 1996,
the United States District Court for the Northern District of Texas, Dallas
Division, entered an order dismissing plaintiffs' complaint for failure to
properly plead a cause of action. The Court, however, dismissed plaintiffs'
complaint "without prejudice", and permitted plaintiffs leave to amend their
complaint by September 10, 1996 to cure its deficiencies. No such amendment was
filed and on September 26, 1996, the U.S. District Court in Dallas entered a
judgement dismissing the securities class action lawsuit against the Company and
various of its officers. However, there can be no assurance that lawsuits of
this nature will not be filed in the future against the Company. A decision
adverse to the Company in any matter of this nature could have a material
adverse effect on the Company, its financial condition, its results of
operations and its future prospects.
GATEWAY TRADEMARK LITIGATION
By letter dated May 17, 1996, Gateway 2000, Inc. ("Gateway") alleged that
Cyrix "is infringing valuable trademark and trade dress rights of Gateway 2000"
in advertisements promoting Cyrix's 6x86-TM- personal computer systems. Gateway
asserts that Cyrix's "reproduction, copy and colorable imitation of Gateway's
registered trademark and trade dress in connection with advertising Cyrix's
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goods is likely to cause confusion, mistake or deceive the public within the
meaning of the Lanham Act." The letter threatens Cyrix with actions for
trademark infringement, false advertising and trade disparagement, and unfair
competition. Finally, the letter suggests that Gateway might assert its rights
in other nations if the advertisements have been distributed on the
international market.
On May 24, 1996, Cyrix filed in the United States District Court for the
Northern District of Texas, Dallas Division, CYRIX CORPORATION V. GATEWAY 2000,
INC., seeking a declaratory judgment: (i) that none of Cyrix's actions or
omissions relating to its advertisements of the Cyrix 6x86 computers have
violated any provisions of the Lanham Act; (ii) that none of Cyrix's actions or
omissions relating to its advertisements of the Cyrix 6x86 computers have
violated the common law of the State of Texas or any provisions of the Texas
Trademark Act, Texas Business & Commerce Code Section 16.01 et seq., including
but not limited to those provisions relating to trademark infringement, trade
dress infringement and dilution; (iii) that Cyrix has not engaged in any false
or unlawful advertising; (iv) that Cyrix has not engaged in any unfair
competition or trade disparagement; (v) that Cyrix's conduct relating to its
advertisements of the Cyrix 6x86 computers is speech protected by the U.S.
Constitution and the Texas Constitution of 1876; (vi) that none of Cyrix's
actions or omissions relating to its advertisements of the Cyrix 6x86 computers
has violated any state or federal laws; (vii) that Cyrix's acts are privileged
and/or excused by: (a) the defense of fair use; (b) the defense of opinion and
parody; and (c) the defense of truth and (viii) that Cyrix is free to use images
of Holstein cows to signify Gateway (even in an unflattering fashion) in
advertising of personal computers that is not factually false, deceptive or
misleading. Gateway has filed motions to dismiss this case based on lack of
personal jurisdiction and lack of proper service of process.
Subsequently, in late June and early July Gateway filed actions in state
court in New York, New Jersey, Connecticut, Massachusetts and California. The
state court cases are essentially the same and allege that Cyrix has violated
anti-dilution laws, deceptive trade practices laws, trademark infringement laws,
and unfair competition laws. Cyrix believes that Gateway has also made claims
under the Federal Trademark Act and certain state law claims preempted by the
Federal Copyright law. Gateway has requested, among other relief, preliminary
and permanent injunctions, as well as actual and punitive damages. In each of
the five cases, Gateway is seeking actual damages (typically asserting such
amount is at least one million dollars) and punitive damages.
The trial of the New York State Supreme Court case is tentatively set for
sometime in December 1996.
Cyrix believes that it has meritorious defenses to Gateway's claims and
intends to pursue the litigation vigorously. This litigation is now commencing
the discovery phase and the ultimate outcome of this dispute cannot presently be
determined. A decision adverse to the Company in this matter, if not covered by
the Company's insurance policies, could have a material adverse effect on the
Company, its financial condition, its results of operations and its future
prospects.
INTERNATIONAL OPERATIONS
International sales represent a significant portion of the Company's net
product sales. Further, many of the motherboards, chip sets and other components
required to manufacture personal computers are manufactured outside of the
United States. If the Company's overseas suppliers or customers were disrupted,
or shortages in the various essential materials were to occur due to foreign
political or economic factors, there could be a material adverse effect on the
Company's operations.
THE SEMICONDUCTOR AND PERSONAL COMPUTER INDUSTRIES
The semiconductor industry has historically been characterized by wide
fluctuations in product supply and demand. A reduced rate of growth in the
demand for microprocessors could adversely affect the market for the Company's
products. From time to time, the personal computer and semiconductor industries
have also experienced significant downturns, often in connection with, or in
anticipation of, declines in general economic conditions. These downturns have
been characterized by
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diminished product demand, production overcapacity and subsequent accelerated
erosion of average selling prices. The Company's business could be materially
and adversely affected by industry-wide fluctuations in the future.
More recently, the personal computer industry has been consolidating as the
larger, more established manufacturers have become more price aggressive and
have been gaining market share at the expense of other domestic and
international manufacturers. The majority of Cyrix's customer base consists of
smaller personal computer manufacturers. The continued market share gains of the
larger manufacturers could have the effect of reducing demand for the Company's
products and may adversely affect its operating results.
DEPENDENCE ON KEY EMPLOYEES
The Company's development, management of its growth and other activities
depend on the efforts of key management and technical employees, as well as its
directors. Competition to attract and retain such persons is intense. To attract
and retain well-qualified employees, the Company uses incentives such as
competitive compensation, stock options, an employee stock purchase plan and a
profit sharing plan. The Company's future success is also dependent upon its
ability to effectively attract, retain, train, motivate and manage its
employees, including its key management and technical personnel. The Company is
currently experiencing difficulty in retaining key management personnel and
meeting its internal hiring targets with respect to technical personnel, and
there can be no assurance that the Company will be able to attract and retain
key management and technical personnel in the future. Failure to do so could
have a material adverse effect on the Company's business and operating results.
The Company's future success is also dependent upon its ability to effectively
attract, retain and motivate qualified persons to serve as directors, and there
can be no assurance that the Company will be able to do so.
ABSENCE OF TRADING MARKET; TRANSFER RESTRICTIONS
There is no existing trading market for the Notes and there can be no
assurance as to the liquidity of any such market that may develop, the ability
of the holders of Notes to sell such securities, the price at which the holders
of Notes would be able to sell such securities or whether a trading market, if
it develops, will continue. If such a market were to exist, the Notes could
trade at prices higher or lower than their principal amount, depending on many
factors, including prevailing interest rates, the market for similar securities
and the operating results of the Company. Each purchaser of Notes offered hereby
in making its purchase will be deemed to have made certain acknowledgments,
representations and agreements. Transfers of Notes and Common Stock issuable
upon conversion of the Notes are subject to certain restrictions.
QUARTERLY FLUCTUATIONS; STOCK PRICE VOLATILITY
The Company anticipates that its quarterly operating results will fluctuate
as a result of the number and timing of new product introductions, product
shipments, product returns, marketing expenditures, research and development
expenditures and promotional programs. The trading price of the Common Stock has
been and may continue to be subject to wide fluctuations in response to
quarter-to-quarter variations in operating results, changes in earnings
estimates by analysts, announcements concerning new products, strategic
relationships or technological innovations by the Company or its competitors,
general conditions in the computer industry and other events or facts. In recent
years the stock market in general, and the shares of technology companies in
particular, have experienced extreme price fluctuations. This volatility has had
a substantial effect on the market prices of securities issued by many companies
for reasons unrelated to their operating performance. These broad market
fluctuations may adversely affect the market price of the Common Stock.
FACTORS INHIBITING TAKEOVER
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law, which imposes certain restrictions on the ability of a
third party to effect an unsolicited change in control of the Company. In
addition, the Company's Restated Certificate of Incorporation, as amended, does
not provide for cumulative voting in the election of directors and includes
provisions
9
<PAGE>
which authorize the Board of Directors to establish the designations,
preferences, rights and powers of series of preferred stock without any vote by
the stockholders. The establishment of any such series and issuance of shares of
such series may have the effect of delaying or preventing changes in control or
management of the Company. These restrictions could adversely affect the market
price of the Company's Common Stock.
RECENT DEVELOPMENTS
In the first quarter of fiscal 1996, the Company began to receive volume
production of its 6x86 microprocessors which provide system-level performance
competitive with Intel's Pentium microprocessors. Competitive pressures resulted
in lower than anticipated unit sales and significant declines in average selling
prices of the Company's 6x86 microprocessors during the second quarter of fiscal
1996. The Company reported revenues of $27.1 million and a net loss of $16.4
million for the quarter ended June 30, 1996, compared with revenues of $50.2
million and net income of $7.5 million for the second quarter of fiscal 1995.
For the third quarter of fiscal 1996, the Company reported revenues of $33.1
million and a net loss of $6.9 million compared with revenues of $53.6 million
and a net income of $.6 million for the same period of fiscal 1995. Also during
the third quarter of fiscal 1996 the Company cancelled the product purchases it
had committed to during the fourth quarter of fiscal 1996 under the IBM foundry
agreement with no penalties, therefore, the Company has no further commitments
under the IBM Foundry Agreement at the date of this filing. The Company began
selling computer systems during the second quarter of 1996; revenue from the
sale of computer systems accounted for less than 10% of the Company's net
product sales for the nine months ended September 30, 1996. For additional
information regarding operating results, financial condition and factors
affecting the results of future periods, see the information incorporated by
reference herein and the risk factors included in this document.
10
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth the name of each Selling Securityholder and
relationship, if any, with the Company and (i) the amount of Notes owned by each
Selling Securityholder as of August 21, 1996 (assuming no Notes have been sold
under this Prospectus as of such date), (ii) the maximum amount of Notes which
may be offered for the account of such Selling Securityholder under the
Prospectus, (iii) the amount of Common Stock owned by each Selling
Securityholder as of August 21, 1996 and (iv) the maximum amount of Common Stock
which may be offered for the account of such Selling Securityholder under the
Prospectus.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT COMMON STOCK COMMON STOCK
PRINCIPAL AMOUNT OF NOTES OFFERED OWNED PRIOR TO OFFERED HEREBY
NAME OF SELLING SECURITYHOLDER OF NOTES OWNED HEREBY OFFERING (1) (2)
- -------------------------------------- ----------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Convertible Holdings, Inc............. $ 2,000,000 $ 2,000,000 50,314 50,314
Donaldson, Lufkin & Jenrette
Securities Corporation............... 1,490,000 1,490,000 37,484 37,484
Winchester Convertible Plus Ltd. ..... 1,000,000 1,000,000 25,157 25,157
Republic New York Securities.......... 876,000 876,000 22,037 22,037
Wagner Stott Clearing Corp............ 435,000 435,000 10,943 10,943
Wagner Stott Clearing Corp............ 289,000 289,000 7,270 7,270
----------------- ---------------- ---------------- -----------------
SUBTOTAL.............................. 6,090,000 6,090,000 153,205 153,205
----------------- ---------------- ---------------- -----------------
Unnamed holders of Notes or any future
transferees, pledgees, donees or
successors of or from any such
unnamed holder (3)................... 120,410,000 120,410,000 3,029,180(4) 3,029,180
----------------- ---------------- ---------------- -----------------
TOTAL............................. $ 126,500,000 $ 126,500,000 3,182,385 3,182,385
----------------- ---------------- ---------------- -----------------
----------------- ---------------- ---------------- -----------------
</TABLE>
- ------------------------
(1) Comprises the shares of Common Stock into which the Notes held by such
Selling Securityholder are convertible at the initial conversion rate. The
Conversion Rate (as defined herein) and the number of shares of Common Stock
issuable upon conversion of the Notes are subject to adjustment under
certain circumstances. See "Description of Notes -- Conversion Rights."
Accordingly, the number of shares of Common Stock issuable upon conversion
of the Notes may increase or decrease from time to time.
(2) Assumes conversion into Common Stock of the full amount of Notes held by the
Selling Securityholder at the initial conversion rate and the offering of
such shares by such Selling Securityholder pursuant to the Registration
Statement of which this Prospectus forms a part. The Conversion Rate and the
number of shares of Common Stock issuable upon conversion of the Notes is
subject to adjustment under certain circumstances. See "Description of Notes
-- Conversion Rights." Accordingly, the number of shares of Common Stock
issuable upon conversion of the Notes may increase or decrease from time to
time. Fractional shares will not be issued upon conversion of the Notes;
rather, cash will be paid in lieu of fractional shares, if any.
(3) No such holder may offer Notes pursuant to the Registration Statement of
which this Prospectus forms a part until such holder is included as a
Selling Securityholder in a supplement to this Prospectus in accordance with
the Registration Rights Agreement.
(4) Assumes that the unnamed holders of Notes or any future transferees,
pledgees, donees or successors of or from any such unnamed holder do not
beneficially own any Common Stock other than the Common Stock issuable upon
conversion of the Notes at the initial conversion rate.
Because the Selling Securityholders may, pursuant to this Prospectus, offer
all or some portion of the Notes they presently hold, no estimate can be given
as to the amount of the Notes that will be held
11
<PAGE>
by the Selling Securityholders upon termination of any such sales. In addition,
the Selling Securityholders identified above 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. See "Plan of Distribution."
Only Selling Securityholders identified above who beneficially own the Notes
set forth opposite each such Selling Securityholder's name in the foregoing
table on the effective date of the Registration Statement of which this
Prospectus forms a part may sell such Notes pursuant to the Registration
Statement. The Company may from time to time, in accordance with the
Registration Rights Agreement, include additional Selling Securityholders in
supplements to this Prospectus.
The Company will pay the expenses of registering the Notes being sold
hereunder.
12
<PAGE>
DESCRIPTION OF NOTES
The Notes are issued under an Indenture, dated as of May 28, 1996 (the
"Indenture"), between the Company and Bank of Montreal Trust Company, as Trustee
(the "Trustee"), copies of which will be available for inspection at the
Corporate Trust Office of the Trustee in the Borough of Manhattan, The City of
New York. Wherever particular defined terms of the Indenture (including the
Notes and the various forms thereof) are referred to, such defined terms are
incorporated herein by reference (the Notes and various terms relating to the
Notes being referred to in the Indenture as "Securities"). References in this
section to the "Company" are solely to Cyrix Corporation and not its
subsidiaries. The following summaries of certain provisions of the Indenture do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, the detailed provisions of the Notes and the
Indenture, including the definitions therein of certain terms. Section
references below are to Sections of the Indenture.
GENERAL
The Notes are unsecured subordinated obligations of the Company, are limited
to U.S.$110,000,000 aggregate principal amount (plus an additional U.S.
$16,500,000 aggregate principal amount to cover over-allotments) and will mature
on June 1, 2001 and be payable at a price of 100% of the principal amount
thereof. The Notes will bear interest at the rate per annum shown on the front
cover of this Prospectus from May 28, 1996, payable semiannually on June 1 and
December 1 of each year, commencing on December 1, 1996. Interest payable per
$1,000 principal amount of Notes for the period from May 28, 1996 to December 1,
1996 will be U.S.$27.9583. (Section 3.1 and 3.7)
The Notes will be convertible into Common Stock initially at the conversion
rate stated on the cover page hereof, subject to adjustment upon the occurrence
of certain events described under "-- Conversion Rights," at any time on or
after the 90th day following the last original issue date of the Notes and prior
to the close of business on the maturity date, unless previously redeemed or
repurchased. (Section 12.1)
The Notes are redeemable at the option of the Company, on or after June 1,
1999, in whole or in part, at the redemption prices set forth below under "--
Redemption," plus accrued interest to the redemption date. (Section 2.2)
FORM AND DENOMINATION
Regulation S Notes will initially be represented by one or more global Notes
in fully registered form (collectively, the "Regulation S Global Note") without
interest coupons registered in the name of a nominee of The Depository Trust
Company ("DTC") and deposited with the Trustee, for the accounts of Cedel Bank,
Societe Anonyme ("CEDEL") and for Morgan Guaranty Trust Company of New York,
Brussels Office, as operator of Euroclear, on the date of payment for and
delivery of such Notes (the "Settlement Date"), which occurred on May 28, 1996.
Upon deposit of the Regulation S Global Note, CEDEL or Euroclear, as
appropriate, credited each subscriber with a principal amount of Notes equal to
the principal amount thereof for which it had subscribed and paid. Until the
40th day (such date, the "Exchange Date") after the later of the commencement of
the offering of the Notes and the last original issue date of the Notes (such
period, the "Restricted Period"), beneficial interests in the Regulation S
Global Note were held only through Euroclear or CEDEL, unless delivery was made
through the Restricted Global Note (as defined) in accordance with the
certification requirements described below.
Rule 144A Notes initially were represented by one or more global Notes in
fully registered form without interest coupons (collectively, the "Restricted
Global Note" and, together with the Regulation S Global Note, the "Registered
Global Notes"). Rule 144A Notes are issued in minimum denominations of $1,000
and integral multiples thereof. The Restricted Global Note was deposited with
the Trustee as custodian for DTC and registered in the name of a nominee of DTC.
Beneficial interests in the Restricted Global Note may not be exchanged for
beneficial interests in the Regulation S Global
13
<PAGE>
Note at any time except in the limited circumstances described below. See "--
Transfer, Exchange and Withdrawal Exchanges between the Regulation S Global Note
and the Restricted Global Note." (Articles Two and Three)
Owners of beneficial interests in any Registered Global Note will hold such
interests pursuant to the procedures and practices of DTC and must exercise any
rights in respect of their interests (including any right to convert, exchange
or require repurchase of their interests) in accordance with those procedures
and practices. Such beneficial owners will not be Holders, and will not be
entitled to any rights under any Note or the Indenture, with respect to any
Registered Global Note, and the Company and the Trustee, and any of their
respective agents, may treat DTC as the Holder and owner of any Registered
Global Note. See "-- Depository Procedures with Respect to Registered Global
Notes."
Except as set forth below, the Registered Global Notes may be transferred,
in whole and not in part, only to another nominee of DTC or to a successor of
DTC or its nominee. Beneficial interests in the Registered Global Notes may not
be exchanged for Notes in certificated form except in the limited circumstances
described below. See "-- Transfer, Exchange and Withdrawal -- Exchange of
Interests in Registered Global Notes for Registered Certificated Notes." The
Notes are not issuable in bearer form.
Rule 144A Notes (including beneficial interests in the Restricted Global
Note) will be subject to certain restrictions on transfer and bear a restrictive
legend. The Regulation S Global Note will be subject to restrictions on resale
and bears a legend regarding those restrictions, as provided in the Indenture.
In addition, transfer of beneficial interests in the Registered Global Notes
will be subject to the applicable rules and procedures of DTC and its
Participants or Indirect Participants (including, if applicable, those of
Euroclear and CEDEL), which may change from time to time.
For a description of the depository procedures with respect to the
Registered Global Notes, see "-- Depository Procedures with Respect to
Registered Global Notes."
CONVERSION RIGHTS
The Holder of any Note will have the right, at the Holder's option, to
convert any portion of the principal amount of any Note that is an integral
multiple of $1,000 into shares of Common Stock at any time on or after the 90th
day following the last original issue date of the Notes and prior to the close
of business on the maturity date, unless previously redeemed or repurchased, at
a conversion rate of 25.1572 shares of Common Stock per $1,000 principal amount
of Notes (the "Conversion Rate") (equivalent to a conversion price of $39.75 per
share of Common Stock), subject to adjustment as described below. The right to
convert a Note called for redemption or delivered for repurchase will terminate
at the close of business on the Redemption Date for such Note or the Repurchase
Date, as the case may be. (Section 12.1)
The right of conversion attaching to any Note may be exercised by the Holder
by delivering the Note at the Corporate Trust Office of the Trustee in the
Borough of Manhattan, The City of New York, accompanied by a duly signed and
completed notice of conversion. Such notice of conversion can be obtained at the
office of the Trustee at its Corporate Trust Offices in New York City. The
conversion date will be the date on which the Note and the duly signed and
completed notice of conversion are so delivered. 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; such certificate will be sent by the Trustee to the Conversion Agent for
delivery to the Holder. Such shares of Common Stock issuable upon conversion of
the Notes, in accordance with the provisions of the Indenture, will be fully
paid and nonassessable and will rank PARI PASSU with the other shares of Common
Stock of the Company outstanding from time to time. 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 (or portions thereof) called for redemption on a Redemption Date
or repurchaseable on a Repurchase Date occurring, in either case, within such
period) must be
14
<PAGE>
accompanied by payment of an amount equal to the interest payable on such
Interest Payment Date on the principal amount of Notes being surrendered for
conversion. The interest payable on such Interest Payment Date with respect to
any Note (or portion thereof, if applicable) which has been called for
redemption on a Redemption Date, or is repurchaseable on a Repurchase Date,
occurring, in either case, during the period referred to in the parenthetical in
the immediately preceding sentence, which Note (or portion thereof, if
applicable) is surrendered for conversion during such period, shall be paid to
the Holder of such Note being converted in an amount equal to the interest that
would have been payable on such Note if such Note had been converted as of the
close of business on such Interest Payment Date. The interest payable on such
Interest Payment Date in respect of any Note (or portion thereof, as the case
may be) which has not been called for redemption on a Redemption Date, or is not
eligible for repurchase on a Repurchase Date, occurring, in either case, during
such period, which Note (or portion thereof, as the case may be) is surrendered
for conversion during such period, shall be paid to the Holder of such Note as
of such Regular Record Date. Interest payable in respect of any Note surrendered
for conversion on or after an Interest Payment Date shall be paid to the Holder
of such Note as of the next preceding Regular Record Date, notwithstanding the
exercise of the right of conversion. As a result of the foregoing provisions,
except as provided above, Holders that surrender Notes for conversion on a date
that is not an Interest Payment Date will not receive any interest for the
period from the Interest Payment Date next preceding the date of conversion to
the date of conversion or for any later period, even if the Notes are
surrendered after a notice of redemption (except for the payment of interest on
Notes called for redemption on a Redemption Date or repurchaseable on a
Repurchase Date between a Regular Record Date and the Interest Payment Date to
which it relates, as provided above). No other payment or adjustment for
interest, 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 or date before the close of business on the conversion date. No fractional
shares will be issued upon conversion but, in lieu thereof, an appropriate
amount will be paid in cash by the Company based on the market bid price of
Common Stock at the close of business on the day of conversion. (Section 2.2,
3.7, 12.2 and 12.3)
A Holder delivering a Note for conversion will not be required to pay any
taxes or duties in respect of the issue or delivery of Common Stock on
conversion but will be required to pay any tax or duty which may be payable in
respect of any transfer involved in the issue or delivery of the Common Stock in
a name other than that of the Holder of the Note. Certificates representing
shares of Common Stock will not be issued or delivered unless all taxes and
duties, if any, payable by the Holder have been paid. (Section 2.8)
The Conversion Rate is subject to adjustment in certain events, including,
without duplication: (a) dividends (and other distributions) payable in Common
Stock, (b) the issuance to all holders of Common Stock of rights, options or
warrants entitling them to subscribe for or purchase Common Stock at less than
the then Current Market Price of such Common Stock (determined as provided in
the Indenture) as of the record date for shareholders entitled to receive such
rights, options or warrants, (c) subdivisions, combinations and
reclassifications of Common Stock, (d) distributions to all holders of Common
Stock of evidences of indebtedness of the Company, shares of capital stock, cash
or assets (including securities, but excluding those dividends, rights, options,
warrants and distributions referred to above, dividends and distributions paid
exclusively in cash and in mergers and consolidations to which the next
succeeding paragraph applies), (e) distributions consisting exclusively of cash
(excluding any cash portion of distributions referred to in (d) above, or cash
distributed upon a merger or consolidation to which the next succeeding
paragraph applies) to all holders of Common Stock in an aggregate amount that,
combined together with (i) other such all-cash distributions made within the
preceding 12 months in respect of which no adjustment has been made and (ii) any
cash and the fair market value of other consideration payable in respect of any
tender offer (including the type described in (f) below) by the Company or any
of its subsidiaries for Common Stock concluded within the preceding 12 months in
respect of which no adjustment has been made, exceeds 10% of the Company's
market capitalization (being the product of the Current Market Price per share
15
<PAGE>
of the Common Stock on the record date for such distribution times the number of
shares of Common Stock outstanding) on such date, and (f) the successful
completion of a tender offer made by the Company or any of its subsidiaries for
Common Stock which involves an aggregate consideration that, together with (i)
any cash and other consideration payable in a tender offer by the Company or any
of its subsidiaries for Common Stock expiring within the 12 months preceding the
expiration of such tender offer in respect of which no adjustment has been made
and (ii) the aggregate amount of any such all-cash distributions referred to in
(e) above to all holders of Common Stock within the 12 months preceding the
expiration of such tender offer in respect of which no adjustments have been
made, exceeds 10% of the Company's market capitalization on the expiration of
such tender offer. The Company reserves the right to make such reductions in the
Conversion Rate in addition to those required in the foregoing provisions as it
considers to be advisable in order that any event treated for United States
federal income tax purposes as a dividend of stock or stock rights will not be
taxable to the recipients. No adjustment of the Conversion Rate will be required
to be made until the cumulative adjustments amount to 1.0% or more of the
Conversion Rate. (Section 12.4) The Company will compute any adjustments to the
Conversion Rate pursuant to this paragraph and will give notice by mail to
Holders of the Registered Notes of any adjustments. (Section 12.5)
In case of any consolidation or merger of the Company with or into another
Person or any merger of another Person into the Company (other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of the Common Stock), or in case of any sale or transfer of all or
substantially all of the assets of the Company, each Note then outstanding will,
without the consent of the Holder of any Note, become convertible only into the
kind and amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares of
Common Stock into which such Note was convertible immediately prior thereto
(assuming such holder of Common Stock failed to exercise any rights of election
and that such Note was then convertible). (Section 12.11)
If at any time the Company makes a distribution of property to its
stockholders which would be taxable to such stockholders as a dividend for
United States federal income tax purposes (E.G., distributions of evidences of
indebtedness or assets of the Company, but generally not stock dividends on
Common Stock or rights to subscribe for Common Stock) and, pursuant to the
anti-dilution provisions of the Indenture, the number of shares into which Notes
are convertible is increased, such increase may be deemed for federal income tax
purposes to be the payment of a taxable dividend to Holders of Notes.
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the Notes
(including any Liquidated Damages (as defined) and any amounts payable upon the
redemption or the repurchase of the Notes permitted by the Indenture) will be
subordinated in right of payment to the extent set forth in the Indenture to the
prior payment in full of the principal of, premium, if any, interest and other
amounts in respect of all Senior Indebtedness of the Company. The principal
amount of outstanding Senior Indebtedness was approximately $15.8 million at
June 30, 1996. A substantial portion of the Company's Senior Indebtedness is
secured by a lien on substantially all the Company's assets, including a lien on
all or a portion of the outstanding shares of capital stock of certain of the
Company's subsidiaries.
"Senior Indebtedness" is defined in the Indenture to mean: the principal of
(and premium, if any) and interest (including all interest accruing subsequent
to the commencement of any bankruptcy or similar proceeding, whether or not a
claim for post-petition interest is allowable as a claim in any such proceeding)
on, and all fees and other amounts payable in connection with, the following,
whether absolute or contingent, secured or unsecured, due or to become due,
outstanding on the date of the Indenture or thereafter created, incurred or
assumed: (a) indebtedness of the Company evidenced by credit or loan agreements,
notes, bonds, debentures, or other written obligations, (b) all obligations of
the Company for money borrowed, (c) all obligations of the Company evidenced by
a note or similar instrument given in connection with the acquisition of any
businesses, properties or assets of any
16
<PAGE>
kind, (d) obligations of the Company as lessee under leases required to be
capitalized on the balance sheet of the lessee under generally accepted
accounting principles and leases for capital equipment, whether or not
capitalized, including, without limitation, obligations of the Company under the
Master Lease Finance Agreement, dated March 31, 1992, between the Company and
BancBoston Leasing, Inc., (e) obligations of the Company under interest rate and
currency swaps, caps, floors, collars, hedge agreements, forward contracts, or
similar agreements or arrangements intended to protect the Company against
fluctuations in interest or currency exchange rates or commodity prices, (f) all
reimbursement obligations of the Company with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of the
Company, (g) all obligations of the Company issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business), (h) all
obligations of the type referred to in clauses (a) through (g) above of another
Person and all dividends of another Person, the payment of which, in either
case, the Company has assumed or guaranteed, or for which the Company is
responsible or liable, directly or indirectly, jointly or severally, as obligor,
guarantor or otherwise, or which is secured by a lien on property of the
Company, and (i) renewals, extensions, modifications, replacements, restatements
and refundings of, or any indebtedness or obligation issued in exchange for, any
such indebtedness or obligation described in clauses (a) through (h) of this
paragraph; provided, however, that Senior Indebtedness shall not include the
Securities or any such indebtedness or obligation if the terms of such
indebtedness or obligation (or the terms of the instrument under which, or
pursuant to which it is issued) provides that such indebtedness or obligation is
not superior in right of payment to the Securities.
No payment on account of principal of, premium, if any, or interest on the
Notes (including any Liquidated Damages (as defined) and any amounts payable
upon the redemption or the repurchase of the Notes permitted by the Indenture)
may be made by the Company if there is a default in the payment of principal,
premium, if any, or interest (including a default under any repurchase or
redemption obligation) or other amounts with respect to any Senior Indebtedness
or if any other event of default with respect to any Senior Indebtedness,
permitting the holders thereof to accelerate the maturity thereof, shall have
occurred and shall not have been cured or waived or shall not have ceased to
exist after written notice to the Company and the Trustee by any holder of
Senior Indebtedness. Upon any acceleration of the principal due on the Notes or
payment or distribution of assets of the Company to creditors upon any
dissolution, winding up, liquidation or reorganization, whether voluntary or
involuntary, marshaling of assets, assignment for the benefit of creditors, or
in bankruptcy, insolvency, receivership or other similar proceedings of the
Company, all principal, premium, if any, and interest or other amounts due on
all Senior Indebtedness must be paid in full before the Holders of the Notes are
entitled to receive any payment. By reason of such subordination, in the event
of insolvency, creditors of the Company who are holders of Senior Indebtedness
may recover more, ratably, than the Holders of the Notes, and such subordination
may result in a reduction or elimination of payments to the Holders of the
Notes. (Section 13.3)
In addition, the Notes will be structurally subordinated to all indebtedness
and other liabilities (including trade payables and lease obligations) of the
Company's subsidiaries, as any right of the Company to receive any assets of its
subsidiaries upon their liquidation or reorganization (and the consequent right
of the Holders of the Notes to participate in those assets) will be effectively
subordinated to the claims of that subsidiary's creditors (including trade
creditors), except to the extent that the Company itself is recognized as a
creditor of such subsidiary, in which case the claims of the Company would still
be subordinate to any security interest in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held by the Company. As of June
30, 1996, there was outstanding approximately $1.4 million of indebtedness of
subsidiaries of the Company (excluding intercompany indebtedness); this amount
has been guaranteed by the Company and is included in the principal amount of
the Company's outstanding Senior Indebtedness at June 30, 1996, as set forth
above.
17
<PAGE>
The Indenture does not limit the Company's or its subsidiaries' ability to
incur Senior Indebtedness or any other indebtedness.
REDEMPTION
The Notes may not be redeemed at the option of the Company prior to June 1,
1999. On and after June 1, 1999, the Notes may be redeemed, in whole or in part,
at the option of the Company, at the redemption prices specified below, upon not
less than 30 nor more than 60 days' prior notice as provided under "-- Notices"
below.
The redemption price (expressed as a percentage of principal amount) is as
follows for the 12-month periods beginning on June 1 of the following years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ------------------------------------------------------------- -----------
<S> <C>
1999......................................................... 102.200
2000......................................................... 101.100
</TABLE>
and thereafter is equal to 100% of the principal amount, in each case together
with accrued interest to the date of redemption. (Section 2.2, 11.1, 11.5, 11.7)
No sinking fund is provided for the Notes.
PAYMENT AND CONVERSION
The principal of Notes will be payable in U.S. dollars, against surrender
thereof at the Corporate Trust Office of the Trustee in the Borough of
Manhattan, The City of New York, by dollar check drawn on, or by transfer to a
dollar account (such transfer to be made only to Holders of an aggregate
principal amount of Notes in excess of U.S. $2,000,000) maintained by the Holder
with, a bank in New York City. Payment of any installment of interest on Notes
will be made to the Person in whose name such Notes (or any predecessor Note) is
registered at the close of business on the May 15 or the November 15 (whether or
not a Business Day) immediately preceding the relevant Interest Payment Date (a
"Regular Record Date"). Payments of such interest will be made by a dollar check
drawn on a bank in New York City mailed to the Holder at such Holder's
registered address or, upon application by the Holder thereof to the Trustee not
later than the applicable Regular Record Date, by transfer to a dollar account
(such transfer to be made only to Holders of an aggregate principal amount of
Notes in excess of U.S $2,000,000) maintained by the Holder with a bank in New
York City. No transfer to a dollar account will be made unless the Trustee has
received written wire instructions not less than 15 days prior to the relevant
payment date. (Section 2.2)
Payments in respect of the principal of (and premium, if any) and interest
on any Registered Global Note registered in the name of DTC or its nominee will
be payable by the Trustee to DTC or its nominee in its capacity as the
registered Holder under the Indenture. Under the terms of the Indenture, the
Company and the Trustee will treat the Persons in whose names the Notes,
including the Registered Global Notes, are registered as the owners thereof for
the purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither the Company, the Trustee nor any agent of the
Company or the Trustee has or will have any responsibility or liability for (i)
any aspect of DTC's records or any Participant's or Indirect Participant's
records relating to or payments made on account of beneficial ownership
interests in the Registered Global Notes, or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect Participant's
records relating to the beneficial ownership interests in the Registered Global
Notes, or (ii) any other matter relating to the actions and practices of DTC or
any of its Participants or Indirect Participants.
Any payment on the Notes due on any day which is not a Business Day need not
be made on such day, but may be made on the next succeeding Business Day with
the same force and effect as if made on such due date, and no interest shall
accrue on such payment for the period from and after such date. "Business Day,"
when used with respect to any place of payment, place of conversion or any other
place, as the case may be, means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not
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a day on which banking institutions in such place of payment, place of
conversion or other place, as the case may be, are authorized or obligated by
law or executive order to close; provided, however, that a day on which banking
institutions in New York, New York or London, England are authorized or
obligated by law or executive order to close shall not be a Business Day for
certain purposes. (Section 1.1 and 2.2)
Notes may be surrendered for conversion at the Corporate Trust Office of the
Trustee in the Borough of Manhattan, The City of New York. Notes surrendered for
conversion must be accompanied by appropriate notices and any payments in
respect of interest or taxes, as applicable, as described above under "--
Conversion Rights." (Section 2.2 and 12.2)
The Company has initially appointed the Trustee as Paying Agent and
Conversion Agent. The Company may at any time terminate the appointment of any
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, and interest 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 Borough of Manhattan, The City of New York
for surrender of Notes for conversion. Notice of any such termination or
appointment and of any change in the office through which any Paying Agent or
Conversion Agent will act will be given in accordance with "-- Notices" below.
(Section 10.2)
All moneys deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of principal of, premium, if any, or
interest on any Notes which remain unclaimed at the end of two years after such
payment has become due and payable will be repaid to the Company, and the Holder
of such Note will thereafter look only to the Company for payment thereof.
(Section 10.3)
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE IN CONTROL
If a Change in Control (as defined) occurs, each Holder of Notes shall have
the right, at the Holder's option, to require the Company to repurchase all of
such Holder's Notes not theretofore called for redemption, or any portion of the
principal amount thereof, that is $5,000 or an integral multiple of $1,000 in
excess thereof, on the date (the "Repurchase Date") that is 45 days after the
date of the Company Notice (as defined), at a price equal to 100% of the
principal amount of the Notes to be repurchased, together with interest accrued
to the Repurchase Date (the "Repurchase Price"). (Section 14.1)
The Company may, at its option, in lieu of paying the Repurchase Price in
cash, pay the Repurchase Price in Common Stock valued at 95% of the average of
the closing bid prices of the Common Stock for the five trading days immediately
preceding the second day prior to the Repurchase Date; provided that payment may
not be made in Common Stock unless the Company satisfies certain conditions with
respect to such payment prior to the Repurchase Date as provided in the
Indenture. (Section 14.1 and 14.2)
Within 30 days after the occurrence of a Change in Control, the Company is
obligated to give to all Holders of the Notes notice, as provided in the
Indenture (the "Company Notice"), of the occurrence of such Change in Control
and of the repurchase right arising as a result thereof. The Company must also
deliver a copy of the Company Notice to the Trustee. To exercise the repurchase
right, a Holder of Notes must deliver on or before the 30th day after the date
of the Company Notice irrevocable written notice to the Trustee of the Holder's
exercise of such right, together with the Notes with respect to which the right
is being exercised. (Section 14.3)
A "Change in Control" shall be deemed to have occurred at such time after
the original issuance of the Notes as there shall occur:
(i) the acquisition by any Person (including any syndicate or group
deemed to be a "person" under Section 13(d)(3) of the Exchange Act) of
beneficial ownership, directly or indirectly, through a purchase, merger or
other acquisition transaction or series of transactions, of shares of
capital stock of the Company entitling such Person to exercise 50% or more
of the total voting
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power of all shares of capital stock of the Company entitled to vote
generally in elections of directors, other than any such acquisition by the
Company, any subsidiary of the Company or any employee benefit plan of the
Company; or
(ii) any consolidation or merger of the Company with or into, any other
Person, any merger of another Person into the Company, or any conveyance,
sale, transfer or lease of all or substantially all of the assets of the
Company to another Person (other than (a) any such transaction (x) which
does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of capital stock of the Company and (y)
pursuant to which the holders of the Common Stock immediately prior to such
transaction have the entitlement to exercise, directly or indirectly, 50% or
more of the total voting power of all shares of capital stock entitled to
vote generally in the election of directors of the continuing or surviving
corporation immediately after such transaction and (b) any merger which is
effected solely to change the jurisdiction of incorporation of the Company
and results in a reclassification, conversion or exchange of outstanding
shares of Common Stock into solely shares of common stock);
provided, however, that a Change in Control shall not be deemed to have occurred
if the closing bid price per share of the Common Stock for any five trading days
within the period of 10 consecutive trading days ending immediately after the
later of the Change in Control or the public announcement of the Change in
Control (in the case of a Change in Control under clause (i) above) or the
period of 10 consecutive trading days ending immediately before the Change in
Control (in the case of a Change in Control under clause (ii) above) shall equal
or exceed 105% of the Conversion Price of the Notes in effect on each such
trading day. The "Conversion Price" is equal to $1,000 divided by the Conversion
Rate. "Beneficial Owner" shall be determined in accordance with Rule 13d-3
promulgated by the Commission under the Exchange Act, as in effect on the date
of execution of the Indenture. "Person" includes any syndicate or group which
would be deemed to be a "person" under section 13(d)(3) of the Exchange Act.
(Section 14.4)
Rule 13e-4 under the Exchange Act requires the dissemination of certain
information to security holders in the event of an issuer tender offer and may
apply in the event that the repurchase option becomes available to Holders of
the Notes. The Company will comply with this rule to the extent applicable at
that time.
The Company may, to the extent permitted by applicable law, at any time
purchase Notes in the open market or by tender at any price or by private
agreement. Any Note so purchased by the Company may, to the extent permitted by
applicable law and subject to restrictions contained in the Underwriting
Agreement, be re-issued or resold or may, at the Company's option, be
surrendered to the Trustee for cancellation. Any Notes surrendered as aforesaid
may not be re-issued or resold and will be canceled promptly.
The foregoing provisions would not necessarily afford Holders of the Notes
protection in the event of highly leveraged or other transactions involving the
Company that may adversely affect Holders.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate with or merge into any other Person or
convey, transfer, sell or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer, sell or lease
such Person's properties and assets substantially as an entirety to the Company
unless (a) the Person formed by such consolidation or into or with which the
Company is merged or the Person to which the properties and assets of the
Company are so conveyed, transferred, sold or leased shall be a corporation,
limited liability company, partnership or trust organized and existing under the
laws of the United States, any State thereof or the District of Columbia and, if
other than the Company, shall expressly assume the payment of the principal of,
premium, if any, and interest on the Notes and the
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performance of the other covenants of the Company under the Indenture, and (b)
immediately after giving effect to such transaction, no Event of Default, and no
event that, after notice or lapse of time or both, would become an Event of
Default, shall have occurred and be continuing. (Section 7.1)
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure to
pay principal of or premium, if any, on any Note when due, whether or not such
payment is prohibited by the subordination provisions of the Notes and the
Indenture; (b) failure to pay any interest (including any Liquidated Damages) on
any Note when due, continuing for 30 days, whether or not such payment is
prohibited by the subordination provisions of the Notes and the Indenture; (c)
failure to provide a Company Notice in the event of a Change in Control, whether
or not such notice is prohibited by the subordination provisions of the Notes
and the Indenture; (d) failure to perform any other covenant of the Company in
the Indenture, continuing for 60 days (plus an additional 60 days in the case of
defaults subject to cure, provided the Company commences such cure within the
initial 60 days and is diligently pursuing such cure) after written notice as
provided in the Indenture; (e) default in respect of any indebtedness for money
borrowed by the Company that results in acceleration of the maturity of an
amount in excess of $10,000,000 of indebtedness if such indebtedness is not
discharged, or such acceleration is not annulled, within 30 days after written
notice as provided in the Indenture; and (f) certain events of bankruptcy,
insolvency or reorganization. (Section 5.1) Subject to the provisions of the
Indenture relating to the duties of the Trustee in case an Event of Default
shall occur and be continuing, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any of the Holders, unless such Holders shall have offered to the
Trustee reasonable indemnity. (Section 6.3) Subject to such provisions for the
indemnification of the Trustee, the Holders of a majority in aggregate principal
amount of the Outstanding Notes will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee. (Section 5.12)
If an Event of Default shall occur and be continuing, either the Trustee or
the Holders of at least 25% in principal amount of the Outstanding Notes may,
subject to the subordination provisions of the Indenture, accelerate the
maturity of all Notes; provided, however, that after such acceleration, but
before a judgment or decree based on acceleration, the Holders of a majority in
aggregate principal amount of Outstanding Notes may, under certain
circumstances, rescind and annul such acceleration if all Events of Default,
other than the non-payment of principal of the Notes which have become due
solely by such declaration of acceleration, have been cured or waived as
provided in the Indenture. (Section 5.2) For information as to waiver of
defaults, see "-- Meetings, Modification and Waiver."
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and the Holders of at least 25% in aggregate principal amount of the
Outstanding Notes shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as trustee, and the
Trustee shall not have received from the Holders of a majority in aggregate
principal amount of the Outstanding Notes a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
(Section 5.7) However, such limitations do not apply to a suit instituted by a
Holder of a Note for the enforcement of payment of the principal of, premium, if
any, or interest on such Note on or after the respective due dates expressed in
such Note or of the right to convert such Note in accordance with the Indenture.
(Section 5.8)
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (Section 10.9)
MEETINGS, MODIFICATION AND WAIVER
The Indenture contains provision for convening meetings of the Holders of
Notes to consider matters affecting their interests. (Article Nine)
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Certain limited modifications of the Indenture may be made without the
necessity of obtaining the consent of the Holders of the Notes. Other
modifications and amendments of the Indenture may be made, and certain past
defaults by the Company may be waived, either (i) with the written consent of
the Holders of not less than a majority in aggregate principal amount of the
Notes at the time Outstanding or (ii) by the adoption of a resolution, at a
meeting of Holders of the Notes at which a quorum is present, by the Holders of
at least 66 2/3% in aggregate principal amount of the Notes represented at such
meeting. However, no such modification or amendment may, without the consent of
the Holder of each Outstanding Note affected thereby, (a) change the Stated
Maturity of the principal of, or any installment of interest on, any Note, (b)
reduce the principal amount of, or the premium, if any, or interest on, any
Note, (c) reduce the amount payable upon a redemption or mandatory repurchase,
(d) modify the provisions with respect to the repurchase right of the Holders in
a manner adverse to the Holders, (e) change the place or currency of payment of
principal of, premium, if any, or interest on, any Note (including any payment
of Liquidated Damages or of the Repurchase Price in respect of such Note), (f)
impair the right to institute suit for the enforcement of any payment on or with
respect to any Note, (g) modify the obligation of the Company to maintain an
office or agency in New York City, (h) except as otherwise permitted or
contemplated by provisions concerning consolidation, merger, conveyance,
transfer, sale or lease of all or substantially all of the property and assets
of the Company, adversely affect the right of Holders to convert any of the
Notes or to require the Company to repurchase any Note other than as provided in
the Indenture, (i) modify the subordination provisions in a manner adverse to
the Holders of the Notes, (j) reduce the above-stated percentage of Outstanding
Notes necessary to modify or amend the Indenture, (k) reduce the percentage of
aggregate principal amount of Outstanding Notes necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults, (l) reduce the percentage in aggregate principal amount of Outstanding
Notes required for the adoption of a resolution or the quorum required at any
meeting of Holders of Notes at which a resolution is adopted, or (m) modify the
obligation of the Company to deliver information required under Rule 144A to
permit resales of Notes and Common Stock issuable upon conversion thereof in the
event the Company ceases to be subject to certain reporting requirements under
the United States securities laws (Section 8.2 and 5.13). The quorum at any
meeting called to adopt a resolution will be persons holding or representing a
majority in aggregate principal amount of the Notes at the time Outstanding and,
at any reconvened meeting adjourned for lack of a quorum, 25% of such aggregate
principal amount. (Section 9.4)
The Holders of a majority in aggregate principal amount of the Outstanding
Notes may waive compliance by the Company with certain restrictive provisions of
the Indenture by written consent or by the adoption of a resolution at a
meeting. (Section 10.13) The Holders of a majority in aggregate principal amount
of the Outstanding Notes also may waive any past default under the Indenture,
except a default in the payment of principal, premium, if any, or interest, by
written consent. (Section 5.13)
TRANSFER, EXCHANGE AND WITHDRAWAL
At the option of the Holder upon request confirmed in writing, and subject
to the terms of the Indenture, any Registered Note will be exchangeable at any
time into an equal aggregate principal amount of Registered Notes of different
authorized denominations provided that any applicable transfer restrictions are
satisfied. (Section 3.5)
Registered Notes may be presented for registration of transfer (with the
form of transfer endorsed thereon duly executed) or exchange, at the office of
any transfer agent or at the office of the security registrar, without service
charge but, in the case of a transfer, upon payment of any taxes and other
governmental charges as described in the Indenture. Any registration of transfer
or exchange will be effected upon the transfer agent or the security registrar,
as the case may be, being satisfied with the documents of title and identity of
the person making the request, and subject to such reasonable regulations as the
Company may from time to time agree upon with the transfer agents and the
security registrar, all as described in the Indenture. Subject to the applicable
transfer restrictions, Registered Notes may be transferred in whole or in part
in authorized denominations. (Section 3.5)
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The Company has initially appointed the Trustee as security registrar and
transfer agent, acting through its Corporate Trust Office in New York City. The
Company reserves the right to vary or terminate the appointment of the security
registrar or of any transfer agent or to appoint additional or other transfer
agents or to approve any change in the office through which any security
registrar or any transfer agent acts. (Section 3.5 and 10.2)
In the event of a redemption of the Notes for any of the reasons set forth
below under "-- Redemption," the Company will not be required (a) to register
the transfer or exchange of Notes for a period of 15 days immediately preceding
the date notice is given identifying the serial numbers of the Notes called for
such redemption or (b) to register the transfer of or exchange any Registered
Note, or portion thereof, called for redemption. (Section 2.2)
EXCHANGE OF INTERESTS IN REGISTERED GLOBAL NOTES FOR REGISTERED CERTIFICATED
NOTES. As long as DTC, or its nominee, is the registered Holder of a Registered
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner and Holder of the Notes represented by such Registered Global Note
for all purposes under the Indenture and the Notes. Unless DTC notifies the
Company that it is unwilling or unable to continue as depository for a
Registered Global Note, or ceases to be a "Clearing Agency" registered under the
Exchange Act, or announces an intention permanently to cease business or does in
fact do so, or an Event of Default has occurred and is continuing with respect
to a Registered Global Note, owners of beneficial interests in a Registered
Global Note will not be entitled to have any portions of such Registered 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
owners or Holders of the Registered Global Note (or any Notes represented
thereby) under the Indenture or the Notes. In addition, no beneficial owner of
an interest in a Registered Global Note will be able to transfer that interest
except in accordance with DTC's applicable procedures (in addition to those
under the Indenture referred to herein). In the event that owners of beneficial
interests in a Registered Global Note become entitled to receive Registered
Notes in certificated form, such Notes will be issued only as Registered Notes
in certificated form in denominations of U.S.$1,000 and integral multiples
thereof.
EXCHANGE OF REGISTERED CERTIFICATED NOTES FOR INTERESTS IN REGISTERED GLOBAL
NOTES. Regulation D Notes, which initially were issued in certificated (i.e.,
non-global) form, may not be exchanged for beneficial interests in any
Registered Global Note unless such exchange occurs in connection with or
following a transfer of such Regulation D Notes and, in the case of initial
purchasers thereof, the transferor first delivers to the Trustee a written
certificate (in the form provided in the Indenture) to the effect that such
transfer will comply with the appropriate transfer restrictions applicable to
such Notes as set forth in Appendix III to this Prospectus. In the case of any
such exchange of a Regulation D Note initially issued in certificated form for
(a) an interest in the Regulation S Global Note, such transfer must occur
pursuant to Regulation S or Rule 144 (if available) or (b) an interest in the
Restricted Global Note, such transfer must occur pursuant to Rule 144A.
EXCHANGES BETWEEN THE REGULATION S GLOBAL NOTE AND THE RESTRICTED GLOBAL
NOTE. Prior to the expiration of the Restricted Period, beneficial interests in
the Regulation S Global Note may be exchanged for beneficial interests in the
Restricted Global Note only if such exchange occurs in connection with a
transfer of the Notes pursuant to Rule 144A and the transferor first delivers to
the Trustee a written certificate (in the form provided in the Indenture) to the
effect that the Notes are being transferred to a person who the transferor
reasonably believes is a qualified institutional buyer within the meaning of
Rule 144A under the Securities Act, purchasing for its own account or the
account of a qualified institutional buyer in a transaction meeting the
requirements of Rule 144A and in accordance with all applicable securities laws
of the states of the United States and other jurisdictions.
Beneficial interests in the Restricted Global Note may be transferred to a
person who acquires the same in the form of a beneficial interest in the
Regulation S Global Note, whether before or after the expiration of the
Restricted Period, only if the transferor first delivers to the Trustee a
written
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certificate (in the form provided in the Indenture) to the effect that such
transfer is being made in accordance with Rule 904 of Regulation S or Rule 144
(if available) and that, if such transfer occurs prior to the expiration of the
Restricted Period, the interest transferred will be held immediately thereafter
through Euroclear or CEDEL.
Any beneficial interest in one of the Registered Global Notes that is
transferred to a person who takes delivery in the form of an interest in the
other Registered Global Note will, upon transfer, cease to be an interest in
such Registered Global Note and will become an interest in the other Registered
Global Note and, accordingly, will thereafter be subject to all transfer
restrictions and other procedures applicable to beneficial interests in such
other Registered Global Note for so long as it remains such an interest.
Transfers involving an exchange of a beneficial interest in the Regulation S
Global Note for a beneficial interest in the Restricted Global Note or vice
versa will be effected in DTC by means of an instruction originated by the
Trustee through the DTC/Deposit Withdraw at Custodian (DWAC) system.
Accordingly, appropriate adjustments will be made to reflect a decrease in the
principal amount of the Regulation S Global Note and a corresponding increase in
the principal amount of the Restricted Global Note or vice versa, as applicable.
TITLE
The Company, the Trustee, any Paying Agent and any Conversion Agent may
treat the registered owner (as reflected in the Security Register) of any Note
as the absolute owner thereof (whether or not such Note shall be overdue) for
the purpose of making payment and for all other purposes. (Section 2.2)
NOTICES
Notice to Holders of the Notes will be given by mail to the addresses of
such Holders as they appear in the Security Register. Such notices will be
deemed to have been given on the date of such mailing. (Section 1.1 and 1.6)
Notice of a redemption of Notes will be given at least once not less than 30
nor more than 60 days prior to the redemption date (which notice shall be
irrevocable) and will specify the redemption date.
REPLACEMENT OF NOTES
Notes that become mutilated, destroyed, stolen or lost will be replaced by
the Company at the expense of the Holder upon delivery to the Trustee of the
mutilated Notes or evidence of the loss, theft or destruction thereof
satisfactory to the Company and the Trustee. In the case of a lost, stolen or
destroyed Note, indemnity satisfactory to the Trustee and the Company may be
required at the expense of the Holder of such Note before a replacement Note
will be issued. (Section 3.6)
PAYMENT OF STAMP AND OTHER TAXES
The Company will pay all stamp and other duties, if any, which may be
imposed by the United States or the United Kingdom or any political subdivision
thereof or taxing authority thereof or therein with respect to the issuance of
the Notes. The Company will not be required to make any payment with respect to
any other tax, assessment or governmental charge imposed by any government or
any political subdivision thereof or taxing authority thereof or therein.
DEPOSITORY PROCEDURES WITH RESPECT TO REGISTERED GLOBAL NOTES
With respect to the Registered Global Notes, DTC has advised the Company as
follows: DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code, 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 participating
organizations (collectively, the "Participants") and to facilitate the clearance
and settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks,
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brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership interest
of each actual purchaser of each security held by or on behalf of DTC are
recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Company that pursuant to procedures established by
it, (i) upon deposit of the Registered Global Notes, DTC will credit the
accounts of Participants designated by the Purchasers with portions of the
principal amount of the Registered Global Notes and (ii) ownership of such
interests in the Registered Global Notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by DTC (with
respect to the Participants) or by the Participants and the Indirect
Participants (with respect to other owners of beneficial interest in the
Registered Global Notes).
Investors in the Restricted Global Note may hold their interests therein
directly through DTC, if they are Participants in such system, or indirectly
through organizations (including Euroclear and CEDEL) which are Participants in
such system. Investors in the Regulation S Global Note, which will be issued
only after the expiration of the Restricted Period (but not earlier), may hold
interests therein through Euroclear or CEDEL or organizations other than
Euroclear and CEDEL that are Participants in the DTC system. Euroclear and CEDEL
will hold interests in the Regulation S Global Note on behalf of their
Participants through customers' securities accounts in their respective names on
the books of their respective depositaries, which are Morgan Guaranty Trust
Company of New York, Brussels office, as operator of Euroclear, and Citibank,
N.A., as operator of CEDEL. The depositaries, in turn, will hold such interests
in the Regulation S Global Note in customers' securities accounts in the
depositaries' names on the books of DTC. All interests in a Registered Global
Note, including those held through Euroclear or CEDEL, may be subject to the
procedures and requirements of DTC. Those interests held through Euroclear or
CEDEL may also be subject to the procedures and requirements of such system.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Registered Global Note to such persons may be
limited to that extent. Because DTC can act only on behalf of its Participants,
which in turn act on behalf of Indirect Participants and certain banks, the
ability of a person having beneficial interests in a Registered Global Note to
pledge such interests to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests.
EXCEPT AS DESCRIBED ABOVE UNDER "-- TRANSFER, EXCHANGE AND WITHDRAWAL,"
OWNERS OF INTERESTS IN THE REGISTERED GLOBAL NOTES WILL NOT HAVE NOTES
REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF NOTES IN
CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS
THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
DTC has advised the Company that its current practice, upon receipt of any
payment in respect of interests in securities such as the Registered Global
Notes (including principal and interest) held by it or its nominee, is to credit
the accounts of the relevant Participants with the payment on the payment date,
in amounts proportionate to their respective holdings in principal amount of
beneficial interests in the relevant security such as the Registered Global
Notes as shown on the records of DTC unless DTC has reason to believe it will
not receive payment on such payment date. Payments by the Participants and the
Indirect Participants to the beneficial owners of Notes will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers registered in "street name." Such
payments will be the responsibility of the Participants or the Indirect
Participants and will not be the responsibility of DTC, the Trustee or the
Company. Neither the Company nor the Trustee will be liable for any delay by DTC
or any of its Participants in
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identifying the beneficial owners of the Notes, and the Company and the Trustee
may conclusively rely on and will be protected in relying on instructions from
DTC or its nominee as the registered owner of the Registered Global Notes for
all purposes.
Transfers of beneficial interests in the Restricted Global Note between
Participants in DTC will be effected in accordance with DTC's procedures, and
such beneficial interests will trade in DTC's Same-Day Funds Settlement System;
and consequently, secondary market trading activity in such interests will
settle in immediately available funds. Transfers of beneficial interests in the
Regulation S Global Note between participants in Euroclear and CEDEL will be
effected in the ordinary way in accordance with their respective rules and
operating procedures, whereas cross-market transfers of such interests
(including, by DTC Participants other than Euroclear and CEDEL) will be subject
to considerations described below.
Subject to compliance with the transfer restrictions applicable to the Notes
described herein, cross-market transfers with respect to the Registered Global
Notes between the Participants in DTC, on the one hand, and Euroclear or CEDEL
participants, on the other hand, will be effected through DTC in accordance with
DTC's rules on behalf of Euroclear or CEDEL, as the case may be, by its
respective depository; however, such cross-market transactions will require
delivery of instructions to Euroclear or CEDEL, as the case may be, by the
counterparts in such system in accordance with the rules and procedures and
within the established deadlines (Brussels time) of such system. Euroclear or
CEDEL, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depositary to take action
to effect final settlement on its behalf by delivering or receiving interests in
the relevant Registered Global Note in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Euroclear participants and CEDEL participants may not deliver instructions
directly to the depositories for Euroclear or CEDEL.
Because of time zone differences, the securities account of a Euroclear or
CEDEL participant purchasing an interest in a Registered Global Note from a
Participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or CEDEL participant, during the securities settlement
processing day (which must be a business day for Euroclear and CEDEL)
immediately following the settlement date of DTC. Cash received in Euroclear or
CEDEL as a result of sales of interests in a Registered Global Note by or
through a Euroclear or CEDEL participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or CEDEL cash account only as of the business day for
Euroclear or CEDEL following DTC's settlement date.
DTC has advised the Company 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 account with DTC interests in the Registered Global Notes are credited and
only in respect of such portion of the aggregate principal amount of the Notes
as to which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Notes, DTC reserves the right
to exchange the Registered Global Notes for legended Notes in certificated form,
and to distribute such Notes to its Participants.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of beneficial ownership interests in the Registered Global Notes among
Participants of DTC, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. None of
the Company, the Trustee nor any of their respective agents will have any
responsibility for the performance by DTC, its Participants or Indirect
Participants of their respective 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 Registered Global Notes.
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<PAGE>
GOVERNING LAW
The Indenture and the Notes will be governed by and construed in accordance
with the laws of the State of New York, United States of America. (Section 1.11)
THE TRUSTEE
In case an Event of Default shall occur (and shall not be cured), the
Trustee will be required to use the degree of care of a prudent person in the
conduct of his own affairs in the exercise of its powers. Subject to such
provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any of the Holders of
Notes, unless they shall have offered to the Trustee reasonable security or
indemnity. (Section 6.1 and 6.3)
PLAN OF DISTRIBUTION
The Notes were issued to the Selling Securityholders in connection with an
underwritten private placement. The Notes may be sold from time to time by the
Selling Securityholders. The Selling Securityholders may from time to time sell
all or a portion of the Notes in transactions on the Nasdaq National Market, in
the over-the-counter market, in negotiated transactions, or a combination of
such methods of sale, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The Notes may
be sold directly or through broker-dealers. If shares of Common Stock are sold
through broker-dealers, the Selling Securityholders may pay brokerage
commissions and charges. The methods by which the Notes may be sold include (a)
a block trade (which may involve crosses) in which the broker or dealer so
engaged will attempt to sell the securities as agent but may position and resell
a portion of the block as principal to facilitate the transaction; (b) purchases
by a broker or dealer as principal and resale by such broker or dealer for its
own account pursuant to this Prospectus; (c) exchange distributions and/or
secondary distributions in accordance with the rules of the Nasdaq National
Market; (d) ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and (e) privately negotiated transactions.
Pursuant to the provisions of the Registration Rights Agreement entered into
by and between the Company and Goldman, Sachs & Co., the Company will pay the
costs and expenses incident to its registration and qualification of the Notes
offered hereby, including registration and filing fees. In addition, the Company
has agreed to indemnify the Selling Securityholders against certain liabilities,
including liabilities arising under the Securities Act.
The Selling Securityholders and any broker-dealer participating in the
distribution of the Notes may be deemed to be "underwriters" within the meaning
of the Securities Act, and any profit and any commissions paid or any discounts
or concessions allowed to any such broker-dealer may be deemed to be
underwriting discounts and commissions under the Securities Act. The Selling
Securityholders may indemnify any broker-dealer that participates in
transactions involving the sale of Notes against certain liabilities, including
liabilities under the Securities Act.
There can be no assurances that the Selling Securityholders will sell any or
all of the Notes offered by them hereunder.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon by Vinson
& Elkins L.L.P., Dallas, Texas.
EXPERTS
The consolidated financial statements of Cyrix Corporation appearing in
Cyrix Corporation's Annual Report (Form 10-K) for the year ended December 31,
1995, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
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<PAGE>
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, BY ANY SELLING SECURITYHOLDER OR UNDERWRITER. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information.......................... 2
Incorporation of Certain Information by
Reference..................................... 2
Risk Factors................................... 3
Recent Developments............................ 10
Selling Securityholders........................ 11
Description of Notes........................... 13
Plan of Distribution........................... 27
Legal Matters.................................. 27
Experts........................................ 27
</TABLE>
$126,500,000
CYRIX CORPORATION
5 1/2% CONVERTIBLE SUBORDINATED NOTES
DUE JUNE 1, 2001
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PROSPECTUS
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NOVEMBER 14, 1996
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