<PAGE> 1
*SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report under Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1998
[ ] Transition Report pursuant to section 13 or 15(d) of the Securities
Exchange Act.
For the transition period from _______________ to ______________
Commission file number 0-25678
------------------------------
MRV Communications, Inc.
(Exact name of registrant as specified in its charter)
Delaware 06-1340090
(State of other jurisdiction (IRS Employer
of incorporation or organization) identification no.)
8943 Fullbright Ave., Chatsworth, CA 91311
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (818) 773-9044
- --------------------------------------------------------------
Check whether the issuer:(1)has filed all reports required to be filed by
section 13 or 15(d) of the Securities Exchange Act during the preceding 12
months ( or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes [X] No [ ]
As of June 30, 1998, there were 26,519,721 shares of Common Stock, $.0034 par
value per share, outstanding.
<PAGE> 2
MRV COMMUNICATIONS, INC.
Form 10-Q June 30, 1998
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
PART I FINANCIAL INFORMATION
<S> <C> <C>
Item 1: Financial Statements:
Condensed Consolidated Balance Sheets as of June 30, 1998
(unaudited) and December 31, 1997 (audited) 3
Condensed Consolidated Statements of Income (unaudited)
for the Six Months and Three Months ended June 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows (unaudited)
for the Six Months ended June 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II OTHER INFORMATION 11
Item 2: Changes in Securities. 11
Item 6: Exhibits and Reports on Form 8-K 12
SIGNATURE 14
</TABLE>
As used in this Report, "MRV" or the "Company" refers to MRV Communications,
Inc. and its consolidated subsidiaries.
2
<PAGE> 3
<TABLE>
<CAPTION>
MRV COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
June 30, December 31,
1998 1997
(unaudited) (audited)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash & cash equivalents $ 116,971 $ 19,428
Short-term investments 21,651 36,413
Accounts receivable, net of
reserves of $6,337 in 1998 and $4,252 in 1997 60,636 47,258
Inventories 45,389 41,689
Deferred income taxes 8,567 2,280
Other current assets 7,570 7,248
- ------------------------------------------------------------------------------------------------------------------------------
Total current assets 260,784 154,316
PROPERTY AND EQUIPMENT - At cost,
net of depreciation and amortization 19,470 8,183
OTHER ASSETS:
Goodwill 21,533 5,077
Investments 16,971 62,382
Deferred income taxes 6,112 6,231
Loan acquisition costs and other 4,409 47
- ------------------------------------------------------------------------------------------------------------------------------
$ 329,279 $ 236,236
- ------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of financing lease obligations $ 141 $ 111
Accounts payable 27,406 30,439
Accrued liabilities 11,700 8,429
Accrued restructuring costs 8,713 -
Deferred revenue 4,876 293
Income taxes payable 4,723 3,485
- ------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 57,559 42,757
LONG-TERM LIABILITIES
Convertible debentures 100,000 --
Capital lease obligations, net of current portion 882 788
Deferred income taxes 425 --
Other long-term liabilities 1,579 2,065
- ------------------------------------------------------------------------------------------------------------------------------
Total long term liabilities 102,886 2,853
MINORITY INTERESTS 2,633 657
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value:
1,000 shares authorized no shares outstanding -- --
Common stock, $0.0034 par value:
40,000,000 shares authorized and
26,520 shares outstanding in 1998
and 26,360 shares outstanding in 1997 90 88
Additional paid-in capital 183,324 175,874
Retained earnings (deficit) (16,651) 14,635
Cumulative translation adjustments (562) (628)
- ------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 166,201 189,969
- ------------------------------------------------------------------------------------------------------------------------------
$ 329,279 $ 236,236
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
3
<PAGE> 4
MRV COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
--------------------------------------------- ---------------------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
- ----------------------------------------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
REVENUES, net $ 126,568 $ 75,092 $ 65,742 $ 39,528
- ----------------------------------------------------------------------------------------- ---------------------------------------
COSTS AND EXPENSES:
Cost of goods sold 70,754 43,061 36,749 22,885
Research and development
expenses 10,525 5,789 5,282 3,041
Selling, general and
administrative expenses 23,581 12,007 12,119 6,232
Purchased technology
in progress 30,571 -- -- --
Restructuring costs 23,194 -- -- --
- ----------------------------------------------------------------------------------------- ---------------------------------------
Operating (loss) income (32,057) 14,235 11,592 7,370
Interest expense related to
convertible debentures
and acquisition -- 427 -- 19
Other income (expense), net 1,374 119 690 285
Provision for income taxes 363 4,305 3,531 2,367
Minority interests 240 70 16 60
- ----------------------------------------------------------------------------------------- ---------------------------------------
NET INCOME (LOSS) $ (31,286) $ 9,552 $ 8,735 $ 5,209
- ----------------------------------------------------------------------------------------- ---------------------------------------
NET INCOME (LOSS) PER SHARE
Basic $ (1.18) $ 0.42 $ 0.33 $ 0.23
Diluted $ (1.18) $ 0.38 $ 0.31 $ 0.21
- ----------------------------------------------------------------------------------------- ---------------------------------------
SHARES USED IN PER - SHARE CALCULATION
Basic 26,440 22,501 26,492 22,812
Diluted 26,440 24,892 28,536 25,206
- ----------------------------------------------------------------------------------------- ---------------------------------------
</TABLE>
See accompanying notes
4
<PAGE> 5
MRV COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------------------------------
1998 1997
---------------------- -----------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) (31,286) 9,552
Adjustments to reconcile net income
(loss) to net cash used in operating activities:
Depreciation and amortization 2,556 735
Interest related to convertible debentures and acquisition -- 427
Purchased technology in progress 30,571 --
Minority interests' share of income 240 70
Decrease (increase) in:
Accounts receivable 6,779 (8,484)
Inventories 5,339 (3,026)
Deferred income taxes (5,636) 20
Other assets 891 369
Increase (decrease) in:
Accounts payable (20,670) 4,921
Accrued liabilities (10,559) (1,864)
Accrued restructuring 8,713 (1,062)
Income taxes payable (818) 755
Deferred revenue 938 (1,026)
Accrued severance pay (611) 131
---------------------- -----------------------
Net cash (used in) provided by operating activities (13,553) 1,518
---------------------- -----------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (4,117) (373)
Purchases of investments (4,058) (31,178)
Proceeds from sale of investments 64,231 23,856
Cash used in acquisitions, net of cash received (41,936) --
---------------------- -----------------------
Net cash provided by (used in) investing activities 14,120 (7,695)
---------------------- -----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 451 3,114
Repurchase of common stock -- (4,230)
Proceeds from issuance of convertible debentures,
net of loan acquisition costs 96,423 --
Principal payments on capital lease obligations 30 (172)
---------------------- -----------------------
Net cash provided by (used in) financing activities 96,904 (1,288)
---------------------- -----------------------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS 72 (320)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 97,543 (7,785)
CASH AND CASH EQUIVALENTS,
beginning of period 19,428 14,641
---------------------- -----------------------
CASH AND CASH EQUIVALENTS,
end of period 116,971 6,856
---------------------- -----------------------
</TABLE>
See accompanying notes
5
<PAGE> 6
MRV COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
Basis of Presentation - The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with the requirements of
Form 10-Q and, therefore, do not include all information and footnotes which
would be presented if such financial statements were prepared in accordance with
generally accepted accounting principles. These statements should be read in
conjunction with the audited financial statements presented in the Company's
Annual Report or Form 10-K for the year ended December 31, 1997.
In the opinion of management, these interim financial statements reflect all
normal and recurring adjustments necessary for a fair presentation of the
financial position and results of operations for each of the periods presented.
The results of operations and cash flows for such periods are not necessarily
indicative of results to be expected for the full year.
2. NET EARNINGS (LOSS) PER SHARE
The following schedule summarizes the information used to compute net income per
common share for the six months and three months ended June 30, 1998 and 1997
(in thousands):
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
-------------------------------- ----------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
Weighted number of common shares used to compute 26,440 22,501 26,492 22,812
basic earnings (loss) per share
Weighted common share equivalents -- 2,391 2,044 2,394
------ ------ ------ ------
Weighted number of common shares used to compute
diluted earnings (loss) per share 26,440 24,892 28,536 25,206
====== ====== ====== ======
</TABLE>
3. COMPREHENSIVE INCOME
On January 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income." For year-end financial statements, SFAS 130 requires the display of
comprehensive income, which is the total of net income and all other non-owner
changes in equity, in a financial statement with the same prominence as other
consolidated financial statements. In addition, the standard encourages
companies to display the components of other comprehensive income below the
total for net income. The following schedule summarizes comprehensive income for
the six months and three months ended June 30, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
------------------------------- -------------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net (loss) income $(31,286) $ 9,552 $ 8,735 $ 5,209
Translation adjustment 66 (230) 146 (14)
-------- -------- -------- --------
Comprehensive (loss) income $(31,220) $ 9,232 $ 8,881 5,195
======== ======== ======== ========
</TABLE>
The cumulative translation adjustment at June 30, 1998 was $(562,000).
4. PRO FORMA FINANCIAL DATA
On January 30, 1998, MRV completed an acquisition from Whittaker Corporation
("Whittaker") of all of the outstanding capital stock of Whittaker Xyplex, Inc.
a Delaware corporation (the "Xyplex Acquisition"). Whittaker Xyplex, Inc.,
(whose name the Company has since changed to NBase Xyplex, Inc.) is a holding
corporation owning all of the outstanding capital stock of Xyplex, Inc., a
Massachusetts corporation ("Xyplex"). Xyplex is a leading provider of access
solutions between enterprise networks and wide area network and/or Internet
service providers ("ISPs"). The purchase price paid to Whittaker consisted of
$35,000,000 in cash and three-year warrants to purchase up to shares
of Common Stock of the Company at an exercise price of $35 per share.
6
<PAGE> 7
As a result of the acquisition, the Company adopted a restructuring plan in
March 1998. The plan calls for reduction of workforce, closing of certain
facilities, elimination of particular product lines, settlement of distribution
agreements and other costs. The Company provided $23,194,000 for the costs of
the restructuring.
The following unaudited pro forma summary sets forth results of operations of
excluding the non-recurring charges for purchased technology in progress and
restructuring resulting from the Xyplex Acquisition as if the acquisition took
place at the beginning of each period presented (in thousands, expect per share
information):
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
-------------------------------------------- ------------------------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
-------------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C>
OPERATING INCOME $ 21,708 $ 14,235 $ 11,592 $ 7,370
NET INCOME $ 16,213 $ 9,552 $ 8,735 $ 4,801
- --------------------------------------------------------------------------- ------------------------------------------
NET INCOME PER SHARE
Basic $ 0.61 $ 0.42 $ 0.33 $ 0.21
Diluted $ 0.57 $ 0.38 $ 0.31 $ 0.19
- --------------------------------------------------------------------------- ------------------------------------------
SHARES USED IN PER SHARE CALCULATION
Basic 26,440 22,501 26,492 22,812
Diluted 28,493 24,892 28,536 25,206
- --------------------------------------------------------------------------- ------------------------------------------
</TABLE>
7
<PAGE> 8
ITEM 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated statements of
operations data of the Company expressed as a percentage of revenues.
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
------------------------------------------ --------------------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
- --------------------------------------------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C>
REVENUES, net 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 55.9 57.3 55.9 57.9
Research and develop-
ment expenses 8.3 7.7 8.0 7.7
Selling, general and
administrative expenses 18.6 16.0 18.4 15.8
Purchased technology
in progress 24.2 -- -- --
Restructuring costs 18.3 -- -- --
- --------------------------------------------------------------------------------- --------------------------------------
Operating (loss) income (25.3) 19.0 17.6 18.6
Interest expense related to
convertible debentures
and acquisition -- 0.6 -- 0.0
Other income (expense), net 1.1 0.2 1.0 0.7
Provision for income taxes 0.3 5.7 5.4 6.0
Minority interests 0.2 0.1 0.0 0.2
- --------------------------------------------------------------------------------- --------------------------------------
NET INCOME (LOSS) (24.7)% 12.7% 13.3% 13.2%
- --------------------------------------------------------------------------------- --------------------------------------
</TABLE>
Revenues
Revenues for the three and six months ended June 30, 1998 were $65,742,000 and
$126,568,000, respectively, as compared to revenues for the three and six months
ended June 30, 1997 of $39,528,000 and $75,092,000, respectively. The changes
represented increases of $26,214,000 or 66.3% for the quarter ended June 30,
1998 over the quarter ended June 30, 1997 and $51,476,000 or 68.6% for the six
months ended June 30, 1998 over the six months ended June 30, 1997. Revenues
increased as a result of a larger sales force, greater marketing efforts and
greater market acceptance of the Company's products, both domestically and
internationally. International sales accounted for approximately 60% and 62% of
revenues for the quarter and six months ended June 30, 1998, respectively, as
compared to 58% and 57% of revenues for the quarter and six months ended June
30, 1997, respectively. International sales, as a percentage of total revenues,
increased mainly because of increased sales, marketing and support resources in
place in Europe. Sales of networking products represented approximately 82%
of total sales for both the quarter and six months ended June 30, 1998
compared to approximately 75% of total sales during each of the quarter and six
months ended June 30, 1997.
8
<PAGE> 9
Gross Profit
Gross profit for the quarter and six months ended June 30, 1998 were $28,993,000
and $55,814,000, respectively, compared to a gross profit of $16,643,000 and
$32,031,000 for the quarter and six months ended June 30, 1997, respectively.
The changes represented increases of $12,350,000 and $23,783,000 for the quarter
and six months ended June 30, 1998, respectively, or 74.2% for both the quarter
and six months ended June 30, 1998 over the quarter and six months ended June
30, 1997. Gross Profit as a percentage of revenues increased from 42.1% and
42.7% during the quarter and six months ended June 30, 1997, respectively, to
44.1% during each of the quarter and six months ended June 30, 1998 as a result
of increased sales of higher margin products.
Research and Development
Research and development ("R&D") expenses were $5,282,000 and $10,525,000, and
represented 8.0% and 8.3% of revenues, for the quarter and six months ended June
30, 1998, respectively. R&D expenses were $3,041,000 and $5,789,000 for the
three months and six months ended June 30, 1997, respectively, and represented
7.7% of revenues for both periods. The increases of 73.7% and 81.8% in R&D
spending during the quarter and six months ended June 30, 1998 over the
comparable periods in 1997 were attributable to the continued development of, as
well as for new projects involving, the Company's networking and fiber optic
products. The Company intends to continue to invest in the research and
development of new products. Management believes that the ability of the Company
to develop and commercialize new products is an important competitive factor.
Selling, General and Administrative
Selling, general and administrative ("SG&A") expenses increased to $12,119,000
and $23,581,000 for the quarter ended and six months ended June 30, 1998 from
$6,232,000 and $12,007,000 for the quarter ended June 30, 1997. As a percentage
of revenues, SG&A increased from 15.8% and 16.0% for the quarter and six months
ended June 30, 1997, respectively, to 18.4% and 18.6% for the quarter and six
months ended June 30, 1998, respectively. The increases in SG&A expense, both in
dollar amounts and as a percentage of sales, are due primarily to substantially
increased marketing efforts as well as increased personnel and overhead costs in
expanded locations.
Purchased Technology in Progress and Restructuring Costs; Interest Expense
Purchased technology in progress for the six months ended June 30, 1998 of
$30,571,000 was related to R&D projects of Xyplex in progress at the time of the
Xyplex Acquisition on January 30, 1998. Restructuring costs during the six
months ended June 30, 1998 were $23,194,000. The restructuring costs in the
first six months of 1998 were associated with a plan adopted by the Company in
March, 1998 calling for the reduction of workforce, closing of certain
facilities, elimination of particular product lines, settlement of distribution
agreements and other costs. The Company did not incur these charges in the
quarter ended June 30, 1998 or quarter and six months ended June 30, 1997. The
Company did, however, incur charges of $19,000 and $427,000 during the quarter
and six months ended June 30, 1997, respectively, as additional interest expense
related to the issuance in 1996 of convertible subordinated debentures (the
"Debentures"), proceeds from which were used to finance the Company's
acquisition of the Fibronics business in 1996. The Company did not report
charges relating to the issuance of the Debentures for periods after June 30,
1997 as the outstanding principal and accrued interest were paid in full at
April 4, 1997 through conversion into Common Stock.
Net Income (Loss)
The Company reported net income (loss) of $8,735,000 and ($31,286,000) during
the three and six months ended June 30, 1998, respectively, compared to net
income of $5,209,000 and $9,552,000 during the three and six months ended June
30, 1997. Net income increased by $3,526,000 or 67.7% for the three months ended
June 30, 1998 over the three months ended June 30, 1997. Net income for the six
months ended June 30, 1998 would have been $16,213,000, excluding $53,765,000 of
charges, associated with the Xyplex Acquisition, as compared to net
9
<PAGE> 10
income of $9,979,000, excluding non-recurring charges of $427,000 relating to
interest expenses attributable to financing the acquisition of the Fibronics
business. Excluding these non-recurring, net income increased by $6,234,000 or
63% for the six months ended June 30, 1998 over the six months ended June 30,
1997.
LIQUIDITY AND CAPITAL RESOURCES
In September 1997, the Company completed a follow-on public offering of
2,785,000 shares of Common Stock raising net proceeds of approximately
$93,320,000. In June 1998, the Company sold an aggregate $100,000,000 principal
amount of 5% convertible subordinated notes due 2003 (the "Notes") in a private
placement raising net proceeds of $96,423,000 (the "1998 Private Placement").
The Notes are convertible into Common Stock of the Company at a conversion price
of $27.0475 per share (equivalent to a conversion rate of approximately 36.97
shares per $1,000 principal amount of notes), representing an initial conversion
premium of 24 percent, for a total of approximately 3.7 million shares of common
stock of the Company. The Notes have a five-year term and are not callable for
the first three years. Interest on the Notes, at 5 percent per annum, is payable
semi-annually on June 15 and December 15, commencing on December 15, 1998.
Cash and cash equivalents and short-term investments totaled approximately
$138,622,000 at June 30, 1998. Such cash and cash equivalents and short-term
investments, as well as cash flow from operations, are the Company's principal
sources of liquidity.
Net cash used in operating activities for the six months ended June 30, 1998 was
$13,553,000. The funds were used primarily to purchase technology in progress
and for restructuring costs in connection with the Xyplex Acquisition. Net cash
provided by investing activities for the six months ended June 30, 1998 was
$14,120,000. Cash provided by the sale of investments to finance the Xyplex
acquisition accounted for most of the cash provided by investing activities
for the six months ended June 30, 1998 and cash used in the Xyplex acquisition
accounted for most of the cash used in investing activities for the same period.
The sale of the Notes in the 1998 Private Placement accounted for substantially
all of the $96,904,000 of cash provided by financing activities during the six
months ended June 30, 1998.
Accounts receivable were $60,636,000 at June 30, 1998 as compared to $47,258,000
at December 31, 1997. The increase in accounts receivable was primarily
attributable to the increase in overall sales in Europe where terms of sale are
traditionally longer than in the U.S.
Inventories were $45,389,000 at June 30, 1998 as compared to $41,689,000 at
December 31, 1997. The increase in inventories was primarily attributable to the
Company's decision to add larger inventories to shorten lead times for customers
and the Xyplex Acquisition. Management believes that MRV's inventory levels at
various points in time may not necessarily be comparable to those of many other
companies in its industry. This is because MRV conducts significant in-house
manufacturing of various components used in its products and thus carries
substantial raw materials and work-in-progress in addition to finished products
in its inventories. In contrast, many competitors outsource to turnkey contract
manufacturers substantial portions of their production requirements and thus do
not include material amounts of raw materials or work in progress in inventories
and may in some circumstances not even include finished products in inventory if
the contract manufacturer ships directly to the competitors' customers.
EFFECTS OF INFLATION AND CURRENCY EXCHANGE RATES
The Company believes that the relatively moderate rate of inflation in the
United States over the past few years has not had a significant impact on the
Company's sales or operating results or on the prices of raw materials. However,
in view of the Company's recent expansion of operations in Israel which has
experienced substantial inflation, there can be no assurance that inflation in
Israel will not have a materially adverse effect on the Company's operating
results in the future.
The Company's sales are currently denominated in U.S. dollars and to date its
business has not been significantly affected by currency fluctuations or
inflation. However, the Company conducts business in several different countries
and thus fluctuations in currency exchange rates could cause the Company's
products to become relatively more expensive in particular countries, leading to
a reduction in sales in that country. In addition, inflation in such countries
could increase the Company's expenses. To date, the Company has not hedged
against currency exchange risks. In the future, the Company may engage in
foreign currency
10
<PAGE> 11
denominated sales or pay material amounts of expenses in foreign currencies and,
in such event, may experience gains and losses due to currency fluctuations. The
Company's operating results could be adversely affected by such fluctuations or
as a result of inflation in particular countries where material expenses are
incurred.
YEAR 2000
Many existing computer programs, including some programs used by the Company,
use only two digits to identify a year in the date field. These programs were
designed without considering the impact of the upcoming change in the century.
If not corrected, these computer applications and systems could fail or create
erroneous results by, at, or after the year 2000. Based on the Company's
investigation to date, management does not anticipate that the Company will
incur material operating expenses or be required to incur material costs to be
year 2000 compliant. To the extent the Company's systems are not fully year 2000
compliant, there can be no assurance that potential systems interruptions or the
cost necessary to update software would not have a material adverse effect on
the Company's business, financial condition, results or operations and business
prospects.
PART II - OTHER INFORMATION
Item 2. Change in Securities
(a) Not applicable
(b) Not applicable
(c) On June 26, 1998, the Company sold $100,000,000 principal amount of
5 percent convertible subordinated notes due 2003 (the "Notes") in a 144A
private placement to qualified institutional investors (the "Initial
Purchasers") at 100% of their principal amount, less a selling discount to the
Initial Purchasers of 3 percent of the principal amount.
Exemption from registration requirements is claimed under the
Securities Act of 1933 (the "Securities Act") in reliance on Section 4(2) of the
Securities Act or Rule 506 of Regulation D promulgated thereunder. The Initial
Purchasers had adequate access to information about the Company and represented
to the Company that they were qualified institutional investors within the
meaning of Rule 144A under the Securities Act and that they offered the Notes,
and will offer and sell the Notes, only: (i) inside the United
11
<PAGE> 12
States to persons whom they reasonably believe are "qualified institutional
buyers" in accordance with Rule 144A or (ii) to non-U.S. persons pursuant to
offers and sales that occur outside the United States in accordance with
Regulation S under the Securities Act. Appropriate legends were affixed to the
certificates evidencing the Notes in such transaction.
The notes have a five-year term and are not callable for the first
three years. At any time prior to maturity or redemption, the Notes are
convertible into common stock of the Company at a conversion price of $27.0475
per share (equivalent to a conversion rate of approximately 36.97 shares per
$1,000 principal amount of Notes), representing an initial conversion premium of
24 percent, for a total of approximately 3.7 million shares of common stock of
the Company.
Item 6. Exhibits and Reports of Form 8-K.
(a) The following exhibits are filed as part of this Report:
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
4.1 Purchase Agreement, dated June 23, 1998, between the Company and
Prudential Securities Incorporated and Bear, Stearns & Co. Inc. relating
to the Notes.
4.2 Indenture, dated as of June 26, 1998, between the Company and American
Stock Transfer & Trust Company, as Trustee, relating to the Notes.
4.3 Specimen of Restricted Global Security
4.4 Registration Rights Agreement dated June 26, 1998 between the Company
and Prudential Securities Incorporated and Bear, Stearns & Co. Inc.
relating to the shares of Common Stock issuable upon conversion of the
Notes.
27 Financial Data Schedule
</TABLE>
(b) The following Reports on Form 8-K were filed during the quarter for
which this report was filed:
o Form 8-K/A dated April 17, 1998 supplementing and completing
registrant's Form 8-K filed February 13, 1998 by filing the
following financial statements of Xyplex, Inc. and pro forma
financial per Item 7 of Form 8-K:
FINANCIAL STATEMENTS
Audited Financial Statements At October 31, 1997 And 1996
And For The Year Ended October 31, 1997 And The Period April 10, 1996 To October
31, 1996
Report of Independent Auditors (Ernst & Young LLP
Balance Sheets at October 31, 1997 and 1996
Statements of Operations for the year ended October 31, 1997
and the period April 10, 1996 to October 31, 1996
Statements of Changes in Stockholders Equity for the year
ended October 31, 1997 and the period April 10, 1996 to October 31, 1996
Statements of Cash Flows for the year ended October 31, 1997
and the period April 10, 1996 to October 31, 1996
Notes to Financial Statements
Audited Financial Statements At April 9, 1996 And For The
Period January 1, 1996 To April 9, 1996
Report of Independent Auditors (Coopers & Lybrand L.L.P)
Balance Sheet at April 9, 1996
Statement of Loss for the period January 1, 1996 to April 9,
1996
Statement of Parent Company Investment
12
<PAGE> 13
Statement of Cash Flows for the period January 1, 1996 to
April 9, 1996
Notes to Financial Statements
PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Consolidated Financial Statements
Unaudited Pro Forma Consolidated Balance Sheet as of
December 31, 1997
Unaudited Pro Forma Statement of Operations for the year
ended December 31, 1997
Notes and Assumptions to Unaudited Pro Forma Consolidated
Financial Statements
o Form 8-K dated June 29, 1998 reporting information under Item 5.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant certifies that it has duly
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized on August 14, 1998.
MRV COMMUNICATIONS, INC.
By: /s/ EDMUND GLAZER
----------------------------------------------
Edmund Glazer
Vice President of Finance and Administration
and Chief Financial Officer
14
<PAGE> 1
EXHIBIT 4.1
$100,000,000(1)
MRV COMMUNICATIONS, INC.
5% Convertible Subordinated Notes Due 2003
PURCHASE AGREEMENT
June 23, 1998
PRUDENTIAL SECURITIES INCORPORATED
BEAR, STEARNS & CO. INC.
c/o Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Dear Sirs:
MRV Communications, Inc., a Delaware corporation (the "Company"),
confirms its agreement with the several initial purchasers named in Schedule I
hereto (collectively, the "Initial Purchasers"), with respect to the issue and
sale by the Company and the purchase by the Initial Purchasers, subject to the
terms and conditions contained in this Agreement, of an aggregate of
$100,000,000 principal amount of 5% Convertible Subordinated Notes Due 2003 (the
"Notes"), convertible into common stock, par value $.0034 per share ("Common
Stock"), of the Company (the "Firm Securities") and, if requested by the Initial
Purchasers, up to an aggregate of $15,000,000 additional principal amount of
Notes (the "Option Securities"). The Firm Securities and the Option Securities
are herein collectively referred to as the "Securities."
1. Securities.
The Securities will be offered and sold without being registered under
the Securities Act of 1933, as amended (the "Securities Act"), in reliance on
exemptions therefrom. The Company understands that the Initial Purchasers will
resell a portion of the Securities (the "Rule 144A Securities") inside the
United States to qualified institutional buyers ("QIBs") in reliance on Rule
144A ("Rule 144A") under the Securities Act and the remaining Securities, if any
(the "Regulation S Securities"), outside the United States to persons other than
U.S. persons in reliance on Regulation S under the Securities Act ("Regulation
S"). The Rule 144A Securities will initially be issued in the form of a single,
permanent global certificate (the "Rule 144A Global Security"). The Regulation
S
- --------
(1) Plus an option to purchase from the Company up to an aggregate of
$15,000,000 additional aggregate principal amount to cover over-allotments.
<PAGE> 2
Securities, if any, will initially be issued in the form of a single,
permanent global certificate (the "Regulation S Global Security," and together
with the Rule 144A Global Securities, the "Global Securities"). It is also
understood and acknowledged that holders (including subsequent transferees) of
the Securities and, if such Securities are subsequently converted into shares of
Common Stock that are restricted for purposes of Rule 144 under the Securities
Act ("Restricted Securities"), the holders of Restricted Securities will have
the registration rights set forth in the Registration Agreement to be dated the
date hereof, reflecting the terms set forth in the Offering Memorandum (as
hereinafter defined) and other customary matters (the "Registration Agreement"),
for so long as the Securities or any Restricted Securities constitute "Transfer
Restricted Securities" (as defined in the Registration Agreement). Pursuant to
the Registration Agreement, the Company will agree, subject to the terms and
conditions set forth therein, (i) to file with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 or Form S-3
under the Securities Act relating to the resale of the Securities and the
Transfer Restricted Securities by certain holders thereof from time to time in
accordance with the methods of distribution set forth in such registration
statement and Rule 415 under the Securities Act (the "Shelf Registration
Statement") and (ii) to use its best efforts to cause such Shelf Registration
Statement to be declared and to remain effective.
2. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with, the Initial
Purchasers that:
(a) A preliminary offering memorandum dated June 4, 1998 and an
offering memorandum dated June 23, 1998 have been prepared by the Company in
connection with the offering of the Securities (the preliminary offering
memorandum being hereinafter referred to as the "Preliminary Offering
Memorandum" and the offering memorandum being hereinafter referred to as the
"Offering Memorandum"; any reference to the Preliminary Offering Memorandum or
the Offering Memorandum shall be deemed to refer to and include the Additional
Company Information (as defined in Section 5(c)), if any). The Preliminary
Offering Memorandum and the Offering Memorandum and any amendments or
supplements thereto did not and will not, as of their respective dates, contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The foregoing provisions of this
paragraph (a) do not apply to statements or omissions made in the Preliminary
Offering Memorandum or the Offering Memorandum in reliance upon and in
conformity with written information furnished to the Company by any Initial
Purchaser specifically for use therein or, in the case of the Preliminary
Offering Memorandum, information omitted therefrom with respect to the offering
price, the amount of proceeds, conversion and interest rates of the Securities
and other items dependent on the offering price, and with respect to the
delivery date and terms of the Securities dependent upon the offering date.
(b) When the Securities are issued and delivered pursuant to this
Agreement, (i) such Securities will not be of the same class (within the meaning
of Rule 144A) as securities of the Company which are listed on a national
securities exchange registered under Section 6 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or quoted in a U.S. automated
2
<PAGE> 3
inter-dealer quotation system; (ii) the Company will be subject to Section 13 or
15(d) of the Exchange Act; (iii) the Company is not an investment company or a
company "controlled" by an investment company within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company Act"); (iv)
neither the Company nor any affiliate (as defined in Rule 501(b) under the
Securities Act) of the Company has, directly or through any agent, sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Securities Act) which is or will be integrated with
the sale of the Securities in a manner that would require the registration of
the Securities or the Common Stock issuable upon conversion of the Securities
(the "Conversion Securities") under the Securities Act; and (v) neither the
Company nor any person acting on its behalf (other than the Initial Purchasers)
has engaged or will engage, in connection with the offering of the Securities,
in any form of general solicitation or general advertising within the meaning of
Rule 502(c) under the Securities Act or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act, or, with
respect to Securities sold in reliance on Rule 903 ("Rule 903") under the
Securities Act, in any directed selling efforts within the meaning of Rule 903
with respect to the Securities and each of them has complied and will comply
with the offering restrictions requirement of Regulation S.
(c) Based on the Initial Purchasers' representations and
warranties in Section 4 and compliance by the Initial Purchasers with their
covenants in Section 4, it is not necessary in connection with (i) the offer,
sale and delivery of the Securities in the manner contemplated by the Offering
Memorandum and this Agreement or (ii) the issuance and delivery of the Common
Stock, to register the Securities or any Conversion Securities under the
Securities Act. The Indenture, dated as of June 26, 1998 (the "Indenture"),
between the Company and America Stock Transfer & Trust Company (the "Trustee")
meets the requirements for an indenture to be qualified under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act").
(d) The Company is a corporation duly organized and validly
existing as a corporation in good standing under the laws of the State of
Delaware. Each of the Company's subsidiaries has been duly organized and is
validly existing as a corporation in good standing under the laws of their
respective jurisdictions. The Company and each of its subsidiaries are duly
qualified to transact business as foreign corporations and are in good standing
under the laws of all other jurisdictions where the ownership or leasing of
their respective properties or the conduct of their respective businesses
requires such qualification, except where the failure to be so qualified does
not amount to a material liability or disability to the Company and its
subsidiaries, taken as a whole. The Company's only significant subsidiaries,
within the meaning of Rule 405 under the Securities Act, are NBase
Communications, Ltd., an Israeli corporation ("NBase Israel"), and Xyplex Inc.,
a Massachusetts corporation ("Xyplex").
(e) The Company and each of its subsidiaries have full power
(corporate and other) to own or lease their respective properties and conduct
their respective businesses as described in the Offering Memorandum; and the
Company has full power (corporate and other) to execute and deliver this
Agreement and the Registration Agreement and the Indenture (the "Other Company
3
<PAGE> 4
Agreements") and to carry out all the terms and provisions hereof and thereof to
be carried out by it.
(f) The issued shares of capital stock of each of the Company's
subsidiaries have been duly authorized and validly issued, are fully paid and
nonassessable and (except for minority positions in the shares of capital stock
of EDSLAN SRL (EDS), RDS, Technonet) are owned of record and beneficially by the
Company, directly or indirectly through one or more of the subsidiaries, free
and clear of any security interests, liens, encumbrances, equities or claims;
except as described in the Offering Memorandum there are not any outstanding
rights, warrants or options to acquire any shares of capital stock of the
Company or any subsidiary, other than employee stock options granted since March
31, 1998 in accordance with ordinary Company practice; and none of the shares of
the Company or any subsidiary was issued in violation of the rights or other
rights to subscribe for or purchase securities, including preemptive rights or
other rights to subscribe for or purchase securities, of any stockholders of the
Company or any subsidiary.
(g) The Company has an authorized, issued and outstanding
capitalization as set forth in the Offering Memorandum under the caption
"Capitalization." The outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable; the issuance
of all outstanding shares of Common Stock is not and may not be void or
voidable, including being voidable by virtue of any statutory right of
preemption or other rights to subscribe for or purchase securities; the holders
of the outstanding shares of Common Stock are not entitled to preemptive or
other rights to acquire any Securities or Conversion Securities or other
securities as a result of the transactions contemplated hereunder (which shall
include the issuance and sale of the Securities and the Conversion Securities);
the Conversion Securities are freely issuable by the Company upon conversion of
the Securities and, other than as described in the Offering Memorandum, there
are no restrictions on the ownership or subsequent transfers of the Conversion
Securities. Conversion Securities have been duly authorized and reserved for
issuance upon such conversion of the Securities and, when they are issued and
delivered upon conversion of the Securities in accordance with the terms thereof
and the Indenture, will be validly issued, fully paid and not subject to calls
for additional payments of any kind; and the Common Stock conforms to the
description thereof contained in the Offering Memorandum.
(h) The Indenture has been duly authorized by the Company and,
when executed and delivered by the Company, the Indenture will constitute the
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforcement thereof may be limited by the
effect of any applicable bankruptcy, insolvency, reorganization, receivership,
moratorium or other similar laws affecting the rights and remedies of creditors
generally and to general principles of equity (regardless of whether enforcement
is considered in a proceeding in equity or at law).
(i) The execution and delivery of this Agreement and the
Registration Agreement have been duly authorized by the Company; this Agreement
has been duly executed and delivered by the Company, and this Agreement is, and
upon execution and delivery of the Registration Agreement
4
<PAGE> 5
such agreement will be, the valid and binding agreements of the Company,
enforceable against the Company in accordance with their terms, except as
enforcement thereof may be limited by the effect of any applicable bankruptcy,
insolvency, reorganization, receivership, moratorium or other similar laws
affecting the rights and remedies of creditors generally and to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and except that rights to indemnity and
contribution may be limited by federal and state securities laws and public
policy considerations.
(j) The Securities have been duly authorized by the Company and
when duly executed by the Company and authenticated by the Trustee and issued
and delivered by the Company in accordance with the Indenture, will have been
duly and validly executed, authenticated, issued and delivered and will
constitute valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms except as enforcement thereof may be
limited by the effect of any applicable bankruptcy, insolvency, reorganization,
receivership, moratorium or other similar laws affecting the rights and remedies
of creditors generally and to general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law); and the
Securities are entitled to the benefits provided by the Indenture.
(k) The consolidated financial statements of the Company and its
consolidated subsidiaries included in the Offering Memorandum fairly present the
financial position of the Company and its consolidated subsidiaries and the
results of operations and changes in financial condition as of the dates and for
the periods therein specified. Such financial statements have been prepared in
accordance with United States generally accepted accounting principles
consistently applied throughout the periods involved (except as otherwise noted
therein). The selected financial data set forth under the caption "Selected
Consolidated Financial and Operating Data" in the Offering Memorandum fairly
present, on the basis stated in the Offering Memorandum, the information
included therein.
(l) Each of Arthur Andersen LLP, Ernst & Young LLP and Coopers &
Lybrand L.L.P., who have certified certain financial statements and delivered
their respective reports with respect to the audited financial statements
included in the Offering Memorandum, are independent public accountants within
the meaning of the Securities Act, the Exchange Act and the applicable rules and
regulations thereunder.
(m) No legal or governmental proceedings are pending to which the
Company or any of its subsidiaries is a party or to which the property of the
Company or any of its subsidiaries is subject that (i) would affect the
offering, issuance sale or marketability of the Securities or the Conversion
Securities or in any manner draw into question the validity of this Agreement or
any of the Other Company Agreements or any of the transactions contemplated
herein or therein, or (ii) is of a character that would be required to be
disclosed in a registration statement on Form S-1 or the related prospectus
relating to the offer and sale of the Securities and which is not described in
the Offering Memorandum, and no such proceedings have been threatened against
the Company or any of its subsidiaries or with respect to any of their
respective properties.
5
<PAGE> 6
(n) There are no contracts or other documents of a character that
would be required to be described in a registration statement on Form S-1 or the
related prospectus relating to the offer and sale of the Securities which are
not described in the Offering Memorandum; except as otherwise described in the
Offering Memorandum, all contracts and other documents described in the Offering
Memorandum are in full force and effect; there are no statutes that would be
required to be described in a registration statement on Form S-1 or the related
prospectus relating to the offer and sale of the Securities that are not
described as would be so required; and no relationship, direct or indirect,
exists between the Company or any affiliate of the Company, on the one hand, and
any director, officer, stockholder, customer or supplier of any of them, on the
other hand, which would be required by the Securities Act, the Trust Indenture
Act or the rules and regulations of the Commission under the Securities Act or
the Trust Indenture Act to be described in a registration statement on Form S-1
or the related prospectus relating to the offer and sale of the Securities which
is not adequately described in the Offering Memorandum.
(o) The offering, sale, issuance and delivery of the Securities
to the Initial Purchasers by the Company pursuant to this Agreement, compliance
by the Company with the provisions of this Agreement and the Other Company
Agreements, and the consummation of the transactions herein and therein
contemplated (including the issuance and delivery of the Conversion Securities)
do not (i) require any authorization, approval, consent, order of, license of,
registration, filing or qualification of or with any governmental authority of
the United States, except (w) such as have been obtained, (x) such as may be
required under state securities or blue sky laws (y) such as may be required in
connection with the Shelf Registration Statement and (z) such as may be required
to list the Conversion Securities, or (ii) conflict with or result in a breach
or violation of any of the terms and provisions of, or constitute a default
under, (w) any indenture, mortgage, deed of trust, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any of their respective
properties are bound, or (y) the charter documents or bylaws of the Company or
any of its subsidiaries, or (z) any statute or other provision of law or any
judgment, decree, order, rule or regulation of any court or other governmental
authority or any arbitrator applicable to the Company or any of its
subsidiaries.
(p) The Company has not, directly or indirectly, (i) taken any
action designed to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company or to facilitate the sale or resale of the
Securities or the Common Stock or (ii) since the date of the Preliminary
Offering Memorandum (A) sold, bid for, purchased, or paid anyone any
compensation for soliciting purchases of, the Securities or the Common Stock, or
(B) paid or agreed to pay to any person any compensation for soliciting another
to purchase any other securities of the Company.
(q) Subsequent to the date as of which information is given in
the Offering Memorandum, (i) neither the Company nor any of its subsidiaries has
incurred any material liability or obligation, direct or contingent, or entered
into any material transaction not in the ordinary course of business; (ii) the
Company has not purchased any of its outstanding capital stock, nor declared,
paid or otherwise made any dividend or distribution of any kind on its capital
stock; and (iii) there has
6
<PAGE> 7
not been any material change in the capital stock, short-term debt or long-term
debt of the Company and its consolidated subsidiaries, except in each case as
described in or contemplated by the Offering Memorandum.
(r) Each of the Company and each of its subsidiaries has good and
marketable title in fee simple to all items of real property and title to all
personal property described in the Offering Memorandum as being owned by each of
them, in each case free and clear of any security interests, liens,
encumbrances, equities, claims and other defects, except such as do not
materially and adversely affect the value of any such property and do not
interfere with the use made or proposed to be made of such property by the
Company or such subsidiary and any real property and buildings held under lease
by the Company or such subsidiary are held under valid, subsisting and
enforceable leases, with such exceptions as are not material and do not
interfere with the use made or proposed to be made of such property and
buildings by the Company or such subsidiary in each case, other than those
arising pursuant to loan agreements and other obligations described in the
Offering Memorandum.
(s) No labor dispute with the employees of the Company or any of
its subsidiaries exists or, to the knowledge of the Company, is threatened
against any of them that could result in a material adverse change in the
condition (financial or otherwise), business prospects, net worth or results of
operations of the Company and its subsidiaries.
(t) Each of the Company and each of its subsidiaries owns or
possesses adequate patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks,
trade names and other intellectual property (collectively, "Intellectual
Property") necessary to carry on the business it now operates, and, except as
disclosed in the Offering Memorandum, neither the Company nor any of its
subsidiaries has received any notice or is otherwise aware of (i) any claim,
action or demand of any person in the United States or elsewhere or any
proceeding in the United States or elsewhere, pending or threatened, that (A)
challenges the ownership interests of the Company or any of its subsidiaries in
any of the Intellectual Property or (B) alleges that any product or service of
the Company or any of its subsidiaries infringes or misappropriates the
Intellectual Property rights of others, which claim, action, demand or
proceeding (including without limitation infringement, misappropriation and
unfair competition), if the subject of any unfavorable decision, ruling or
finding, or invalidity or inadequacy could reasonably be expected to have, in
the aggregate with all other such claims, actions, demands and proceedings, a
material adverse change in the condition (financial or otherwise), business
prospects, net worth or results of operations of the Company and its
subsidiaries or (ii) any facts or circumstances that would render any
Intellectual Property invalid or inadequate to protect the interest of the
Company or any of its subsidiaries therein.
(u) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which they
are engaged; neither the Company nor any such subsidiary has been refused any
insurance coverage sought or applied for; and neither the Company nor any such
7
<PAGE> 8
subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition
(financial or otherwise), business prospects, net worth, or results of
operations of the Company and its subsidiaries.
(v) No "significant subsidiary," as defined in the regulations
promulgated pursuant to the Securities Act, of the Company is currently
prohibited, directly or indirectly, from paying any dividends to the Company,
from making any other distribution on such subsidiary's capital stock, from
repaying to the Company any loans or advances to such subsidiary from the
Company or from transferring any of such subsidiary's property or assets to the
Company or any other subsidiary of the Company, except for customary lease
assignment provisions and as generally referred to in or contemplated by the
Offering Memorandum.
(w) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses, and
neither the Company nor any such subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a material adverse
change in the condition (financial or otherwise), business prospects, net worth
or results of operations of the Company and its subsidiaries, except as
described in or contemplated by the Offering Memorandum.
(x) The Company has filed all foreign, federal, state and local
tax returns that are required to be filed or has requested extensions thereof
(except in any case in which the failure so to file would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole) and has
paid all taxes required to be paid by it and any other assessment, fine or
penalty levied against it, to the extent that any of the foregoing is due and
payable, except for any such assessment, fine or penalty that is currently being
contested in good faith.
(y) Neither the Company nor any of its subsidiaries is in
violation of any federal, state or foreign law or regulation relating to
occupational safety and health or to the storage, handling or transportation of
hazardous or toxic material and the Company and its subsidiaries have received
all permits, licenses or other approvals required of them under applicable
federal, state and foreign occupational safety and health and environmental laws
and regulations to conduct their respective businesses, and the Company and each
such subsidiary is in compliance with all terms and conditions of any such
permit, license or approval, except any such violation of law or regulation,
failure to receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or approvals
which would not, singly or in the aggregate, result in a material adverse change
in the condition (financial or otherwise), business prospects, net worth or
results of operations of the Company and its subsidiaries, taken as a whole.
8
<PAGE> 9
(z) Each certificate signed by any officer of the Company and
delivered to the Initial Purchasers or counsel for the Initial Purchasers shall
be deemed to be a representation and warranty by the Company to the Initial
Purchasers as to the matters covered thereby.
(aa) Except for the shares of capital stock of each of the
subsidiaries owned by the Company and such subsidiaries or as otherwise
described in the Offering Memorandum, the shares and warrants of New Access
Communications, Inc., a Delaware corporation, if any, the shares of SEICOM, and
except for an immaterial amount of shares, if any, of publicly held companies,
neither the Company nor any such subsidiary owns any shares of stock or any
other equity securities of any corporation or has any equity interest in any
firm, partnership, association or other entity.
(bb) There are no holders of securities of the Company, who, by
reason of the filing of the Shelf Registration Statement contemplated under the
Registration Agreement, will have the right to request the Company to register
under the Securities Act, or to include in the Shelf Registration Statement, any
securities held by them, other than Intel Corporation.
(cc) The Common Stock currently outstanding is included for
quotation in The Nasdaq National Market.
(dd) The Company and each of its subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(ee) Neither the Company nor any of its subsidiaries is in
default, or has any knowledge of any event that has occurred which, with notice
or lapse or time or both, would constitute a default in the due performance and
observance of any term, covenant or condition of any indenture, mortgage, deed
of trust, lease or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any of its subsidiaries
or any of their respective properties is bound or may be affected in any
material adverse effect on the property, business or operations of the Company
and its subsidiaries, taken as a whole.
3. Purchase Sale and Delivery of the Securities.
(a) On the basis of the representations, warranties, agreements
and covenants herein contained and subject to the terms and conditions herein
set forth, the Company agrees to issue and sell to each of the Initial
Purchasers, and each of the Initial Purchasers, severally and not jointly,
agrees to purchase from the Company, at a purchase price of 97% of the principal
amount thereof, plus accrued interest from June 26, 1998, if any, to the Firm
Closing Date (as defined), the number
9
<PAGE> 10
of Firm Securities set forth opposite the name of such Initial Purchaser in
Schedule 1 hereto. The Firm Securities to be delivered shall be delivered by the
Company in the form of one or more Global Securities delivered on behalf of the
Company to the Depositary Trust Company ("DTC"), and registered in the name of
Cede & Co., as DTC's nominee, for the account of the Initial Purchasers, against
payment by wire transfer on the Firm Closing Date to the Company by or on behalf
of the Initial Purchasers of the purchase price therefor in immediately
available funds. Such payment for the Firm Securities shall be made at the
offices of Freshman, Marantz, Orlanski, Cooper & Klein, Eighth Floor, East
Tower, 9100 Wilshire Boulevard, Beverly Hills, California 90212, at 9:30 A.M.,
Los Angeles time, on June 26, 1998, or at such other place, time or date as the
Initial Purchasers and the Company may agree upon or as the Initial Purchasers
may determine pursuant to Section 9 hereof, such time and date of delivery
against payment being herein referred to as the "Firm Closing Date." The Company
will make such certificate or certificates for the Firm Securities available for
checking and packaging by the Initial Purchasers at the offices in New York, New
York of the Trustee at least 24 hours prior to the Firm Closing Date.
(b) For the purpose of covering any over-allotments in connection
with the distribution and sale of the Firm Securities as contemplated by the
Offering Memorandum, the Company hereby grants to the several Initial Purchasers
an option to purchase, up to $15,000,000 aggregate principal amount of Option
Securities. The purchase price to be paid for any Option Securities shall be 97%
of the principal amount thereof, plus accrued interest from June 26, 1998, if
any, to the Option Closing Date (as defined). The option granted hereby may be
exercised as to all or any part of the Option Securities from time to time
within 30 days after the date of the Offering Memorandum (or, if such 30th day
shall be a Saturday or Sunday or a holiday, on the next business day thereafter
when the New York Stock Exchange is open for trading). The Initial Purchasers
shall not be under any obligation to purchase any of the Option Securities prior
to the exercise of such option. The Initial Purchasers may from time to time
exercise the option granted hereby by giving notice in writing or by telephone
(confirmed in writing) to the Company setting forth the aggregate principal
amount of Option Securities as to which the Initial Purchasers is then
exercising the option and the date and time for delivery of and payment for such
Option Securities. Any such date of delivery shall be determined by the Initial
Purchasers, but shall not be earlier than two business days or later than seven
business days after such exercise of the option and, in any event, shall not be
earlier than the Firm Closing Date. The time and date set forth in such notice,
or such other time on such other date as the Initial Purchasers and the Company
may agree upon or as the Initial Purchasers may determine pursuant to Section 9
hereof, is herein called the "Option Closing Date" with respect to such Option
Securities. Upon exercise of the option as provided herein, the Company shall
become obligated to sell to each of the several Initial Purchasers, and, subject
to the terms and conditions herein set forth, the Initial Purchasers shall
become obligated, severally and not jointly, to purchase from the Company, the
same percentage of the total principal amount of the Option Securities as to
which the several Initial Purchasers are then exercising the option as such
Initial Purchaser is obligated to purchase of the aggregate principal amount of
Firm Securities. If the option is exercised as to all or any portion of the
Option Securities, one or more Global Securities representing such Option
Securities shall be delivered by the Company on behalf of the Initial Purchasers
to DTC and registered in the name of Cede & Co., as DTC's nominee, against
payment
10
<PAGE> 11
for such Option Securities, on the related Option Closing Date in the manner,
and upon the terms and conditions set forth in paragraph (a) of this Section 3,
except that reference therein to the Firm Securities and the Firm Closing Date
shall be deemed, for purposes of this paragraph (b), to refer to such Option
Securities and Option Closing Date, respectively.
(c) It is understood and acknowledged that upon original issuance
thereof, and until such time as the same is no longer required under the
applicable requirements of the Securities Act, the Securities (and all
securities in exchange therefor, in substitution thereof or upon conversion
thereof), shall bear a legend to the following effect:
THE SECURITIES EVIDENCED HEREBY AND THE SHARES OF COMMON STOCK ISSUABLE
UPON THEIR CONVERSION HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, EXCEPT (A)(1) TO A PERSON WHOM
THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") ACQUIRING FOR ITS
OWN ACCOUNT OF FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE
TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO AN
INSTITUTION THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501 (A)
(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (IF AVAILABLE)
OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE
UNITED STATES.
CONVERSION OF THIS SECURITY IS SUBJECT TO CERTIFICATION AND OTHER
REQUIREMENTS, AND ANY COMMON STOCK ISSUED ON SUCH CONVERSION WILL BE SUBJECT TO
THE TRANSFER RESTRICTIONS REFERRED TO ABOVE.
4. Offering by the Initial Purchasers.
(a) Each Initial Purchaser, severally and not jointly, represents
and warrants that it is a "qualified institutional buyer" within the meaning of
Rule 144A.
(b) Each Initial Purchaser, severally and not jointly,
acknowledges that the Securities have not been registered under the Securities
Act and may not be offered or sold within the United States or to, or for the
benefit of, United States persons except pursuant to an exemption from, or a
transaction not subject to, the registration requirements of the Securities Act
or pursuant to an effective registration statement under the Securities Act.
Each Initial Purchaser, severally and
11
<PAGE> 12
not jointly, represents, warrants and agrees that it has offered the Securities,
and will offer and sell the Securities, only: (i) inside the United States to
persons whom it reasonably believes are "qualified institutional buyers" in
accordance with Rule 144A or (ii) to non-U.S. persons pursuant to offers and
sales that occur outside the United States in accordance with Regulation S under
the Securities Act. Each Initial Purchaser, severally and not jointly,
represents, warrants and agrees that, with respect to Securities offered or sold
in reliance on Regulation S, (i) neither it nor its affiliates nor any person
acting on its behalf has engaged or will engage in any directed selling efforts
in the United States within the meaning of Regulation S with respect to the
Securities, (ii) such Initial Purchasers, its affiliates and all persons acting
on its or their behalf have complied and will comply with the offering
restrictions requirements of Regulation S in connection with the offering of the
Securities outside of the United States and (iii) with respect to resales by
such Initial Purchaser made in reliance on Regulation S, to deliver either with
the confirmation of such resale by such Initial Purchaser or otherwise prior to
settlement of such resale a notice substantially to the following effect: "The
Securities covered hereby have not been registered under the U.S. Securities Act
of 1933, as amended (the "Securities Act") and may not be offered and sold
within the United States or to, or for the account or benefit of, U.S. persons
(i) as part of the distribution thereof at any time or (ii) otherwise until one
year after the later of the date of the commencement of the offering and the
latest closing date, except in either case in accordance with Regulation S under
the Securities Act. Terms used above have the meaning given them by Regulation
S."
(c) Each Initial Purchaser, severally and not jointly, represents
and agrees that (i) it has not offered or sold and, prior to the date six months
after the latest Closing Date, will not offer or sell, directly or indirectly,
any Securities in the United Kingdom by means of any document other than to
persons whose ordinary business it is to buy or sell shares or notes, whether as
principal or agent, for the purposes of their business or otherwise in
circumstances which have not resulted in or will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Securities in, from or otherwise
involving the United Kingdom, including any stabilization activities as referred
to in the Offering Memorandum, and (iii) it has only issued or passed on and
will only issue or pass on in the United Kingdom any document received by it in
connection with the issue of the Securities to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or to a person to whom the document may
otherwise lawfully be issued or passed on.
(d) Each Initial Purchaser, severally and not jointly, agrees
that it will not offer or sell the Securities purchased from the Company
hereunder by means of any form of general solicitation or general advertising.
(It is understood, however, that such limitation shall not preclude the Initial
Purchasers from placing any tombstone announcement with respect to the resale by
the Initial Purchasers of the Securities outside the United States, provided
that such announcement does not constitute directed selling efforts within the
meaning of Regulation S, or, following one year after the later of the
commencement of the offering and the latest Closing Date, inside the United
States.) Each Initial Purchaser, severally and not jointly, agrees, with respect
to resales made in reliance on
12
<PAGE> 13
Rule 144A, other than through the National Association of Securities Dealers,
Inc. Private Offerings, Resales and Trading through Automated Linkages
("PORTAL") Market, of any of the Securities purchased from the Company
hereunder, to deliver either with the confirmation of such resale or otherwise
prior to settlement of such resale a notice to the effect that the resale of
such Securities has been made in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A.
(e) Each Initial Purchaser, severally and not jointly, agrees
that, during the one year "distribution compliance period" (within the meaning
of Regulation S), it will hold the Regulation S Global Security as provided in
the Offering Memorandum and, in connection therewith, it will not (i) effect
transfers of interests in the Regulation S Global Security unless such transfers
are made to QIBs or (ii) effect transfers of interests in the Regulation S
Global Security (x) by any "dealer" or person "receiving a selling concession,
fee or other remuneration" (within the meaning of Regulation S) (y) within the
United States (within the meaning of Regulation S) or (z) to a U.S. person or
for the account or benefit of a U.S. person (within the meaning of Rule 902(o)
under the Securities Act).
(f) Each Initial Purchaser, severally and not jointly,
understands that the Securities have not been and will not be registered under
the Securities and Exchange Law of Japan, and represents that it has not offered
or sold, and agrees not to offer or sell, directly or indirectly, any Securities
in Japan or for the account of any resident thereof except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
of Japan and otherwise in compliance with applicable provisions of Japanese law.
5. Covenants of the Company.
The Company covenants and agrees with the Initial Purchasers that:
(a) If, at any time prior to the completion of the sale of the
Securities by the Initial Purchasers to purchasers, any event occurs as a result
of which the Offering Memorandum as then amended or supplemented would include
an untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
at such time to amend or supplement the Offering Memorandum to comply with any
applicable law, the Company will promptly prepare an amendment or supplement
which will correct such statement or omission or effect such compliance (except
that in case the Initial Purchasers is required to deliver an offering
memorandum under applicable law in connection with the offer or sale of
Securities at any time more than nine months after the Firm Closing Date, the
cost of such preparation and furnishing of such amended or supplemented offering
memorandum shall be borne by the Initial Purchasers), and the Company will not
effect any amendment or supplement to the Offering Memorandum of which the
Initial Purchaser shall not have previously been advised or to which it shall
have previously objected without the consent of the Initial Purchasers, which
consent will not be unreasonably withheld. Neither your
13
<PAGE> 14
consent to, nor the delivery by the Initial Purchasers of, any such amendment or
supplement shall constitute a waiver of any of the conditions set forth in
Section 7.
(b) The Company will arrange for the qualification of the
Securities and the Conversion Securities for offering and sale under the
securities or blue sky laws of such jurisdictions as the Initial Purchasers may
designate and will continue such qualifications in effect for as long as may be
necessary to complete the distribution of the Securities, provided, however,
that in connection therewith the Company shall not be required to qualify to
conduct business as a foreign corporation or to execute a general consent to
service of process in any jurisdiction. The Company will promptly advise the
Initial Purchasers of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose.
(c) The Company will, without charge, provide to the Initial
Purchasers as many copies of each Preliminary Offering Memorandum or the
Offering Memorandum or any amendment or supplement thereto as the Initial
Purchasers and its counsel may reasonably request; without limiting the
application of this sentence, the Company, not later than (1) 6:00 PM, New York
City time, on the date of determination of the offering price, if such
determination occurred at or prior to 10:00 AM, New York City time, on such date
or (2) 2:00 PM, New York City time, on the business day following the date of
determination of the offering price, if such determination occurred after 10:00
AM, New York City time, on such date, will deliver to the Initial Purchasers,
without charge, as many copies of the Offering Memorandum and any amendment or
supplement thereto as the Initial Purchasers may reasonably request for purposes
of confirming orders that are expected to settle on the Firm Closing Date. In
addition, the Company will furnish to the Initial Purchasers, on the date
hereof, five copies of the independent auditors' reports included in the
Offering Memorandum signed by the auditors rendering such report. If, at any
time prior to three years after the later of the Firm Closing Date and the
Option Closing Date and at a time when any of the Securities, the Global
Securities or the Conversion Securities are "restricted securities" within the
meaning of Rule 144(a)(3) under the Securities Act, the Company is not subject
to Section 13 or 15(d) of the Exchange Act and is not exempt from reporting
pursuant to Rule 12g3-2(b) thereunder, the Company will furnish, as soon as
available, to the Initial Purchasers or to any holder of the Securities, or the
Conversion Securities, copies of the information required to be delivered to
holders and prospective purchasers of the Securities, the Global Securities or
the Conversion Securities pursuant to Rule 144A(d)(4) to permit compliance with
Rule 144A in connection with resales of the Securities, the Global Securities or
the Conversion Securities (the "Additional Company Information").
(d) During the period of three years after the later of the Firm
Closing Date and the Option Closing Date or until the effectiveness of the Shelf
Registration Statement to be filed by the Company with the Commission pursuant
to the Registration Agreement, the Company will, upon request, furnish to the
Initial Purchasers and any holder of Securities or Conversion Securities a copy
of the restrictions on transfer applicable to such Securities or Conversion
Securities.
14
<PAGE> 15
(e) The Company will not, and will not permit any of its
subsidiaries to, resell any Securities or Conversion Securities which have been
acquired by any of them during the period of three years after the later of the
Firm Closing Date and the Option Closing Date and which constitute "restricted
securities" under Rule 144, otherwise than pursuant to an effective registration
statement under the Securities Act.
(f) The Company will apply the net proceeds from the sale of the
Securities substantially as set forth under "Use of Proceeds" in the Offering
Memorandum.
(g) The Company will not, directly or indirectly, without the
prior written consent of Prudential Securities Incorporated, on behalf of the
Initial Purchasers, offer, sell, offer to sell, contract to sell, pledge, grant
any option to purchase or otherwise sell or dispose (or announce any offer,
sale, offer of sale, contract of sale, pledge, grant of any option to purchase
or other sale or disposition) of any shares of Common Stock or any securities
convertible into, or exchangeable or exercisable for, shares of Common Stock,
for a period until 90 days after the date hereof (the "Lock-Up Period"), except
(i) pursuant to this Agreement, (ii) upon the conversion of the Securities,
(iii) grants of employee stock options in accordance with ordinary Company
practice and issuances pursuant to the exercise of employee stock options
outstanding on the date hereof, (iv) upon the proper exercise of any options or
warrants outstanding as of March 31, 1998 or (v) warrants to purchase up to
300,000 shares of Common Stock at a price of $35.00 per share, which warrants
may be issued in connection with an acquisition of another company, or its
assets. The Company will obtain the agreements described in Section 7(i) hereof
prior to the Firm Closing Date.
(h) Except following the effectiveness of the Shelf Registration
Statement, neither the Company nor any subsidiary of the Company will solicit
any offer to buy or offer or sell the Securities by means of any form of general
solicitation or general advertising (within the meaning of Rule 502(c) under the
Securities Act) in a manner which would result in the proposed sale of the
Securities in accordance with this Agreement and the Offering Memorandum failing
to be exempt from the registration requirements of the Securities Act or take
any other action that would have required the registration of the resale by the
Initial Purchasers of the Securities under the Securities Act.
(i) The Company will not, and will not permit any of its
affiliates (as defined in Rule 501(b) under the Securities Act) to, sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Securities Act) the offering of which security could
be integrated with sale of the Securities or Conversion Securities in a manner
which would require the registration of the Securities or Conversion Securities
under the Securities Act.
(j) The Company shall use its best efforts in cooperation with
the Initial Purchasers to permit the Securities to be eligible for clearance and
settlement through DTC, Cedel and Euroclear.
15
<PAGE> 16
(k) So long as any of the Securities are outstanding, the Company
will furnish to the Initial Purchasers, as soon as practicable after the end of
the fiscal year, a copy of its annual report to stockholders for such year; and
the Company will furnish to the Initial Purchasers (i) as soon as available, a
copy of each report or definitive proxy statement of the Company filed with the
Commission under the Exchange Act or mailed to stockholders and (ii) from time
to time, such other information concerning the Company as the Initial Purchasers
may reasonably request.
(l) The Company will at all times reserve and keep available,
free of preemptive rights, shares of Common Stock for the purpose of enabling
the Company to satisfy any obligations to issue shares of its Common Stock upon
conversion of the Securities.
(m) The Company will use its best efforts to include for
quotation, subject to notice of issuance, Conversion Securities on The Nasdaq
National Market on or prior to the effective date of the Shelf Registration
Statement.
6. Expenses.
The Company will pay all costs and expenses incident to the performance
of its obligations under this Agreement, whether or not the transactions
contemplated herein are consummated or this Agreement is terminated pursuant to
Section 10 hereof, including all costs and expenses (i) incident to the
preparation and delivery of the Securities in global and definitive forms, the
preparation and printing of the Preliminary Offering Memorandum and the Offering
Memorandum and all other amendments and supplements thereto and the mailing and
delivering of copies thereof to the Initial Purchasers, but not including the
fees and disbursements of counsel to the Initial Purchasers except with respect
to any Preliminary and Supplemental Blue Sky Memoranda, as provided in (iv)
below; (ii) of the Company's counsel and accountants and listing agents in
connection with the issuing and listing of the Securities, (iii) incurred in
connection with the approval of the Securities for trading in the PORTAL market
and the registration or qualification and determination of eligibility for
investment of the Securities under the laws of such jurisdictions as the Initial
Purchasers may designate (including all counsel fees), (iv) in connection with
the preparation, printing (including word processing and duplication costs) and
delivery of this Agreement, the Other Company Agreements and any Preliminary and
Supplemental Blue Sky Memoranda, including mailing and shipping, (v) the fees
and expenses of the Trustee, any successor Trustee and any agent of any Trustee;
and (vi) any "road show" meetings with prospective investors in the Securities
(other than as shall have been specifically approved by the Initial Purchasers
to be paid for by the Initial Purchasers). If the sale of the Securities
provided for herein is not consummated because this Agreement is terminated
pursuant to Section 11(a)(i) or 11(a)(ii) hereof or because of any failure,
refusal or inability on the part of the Company to perform and satisfy any of
the conditions set forth in Sections 7(a), 7(b), 7(c), 7(d), 7(f), 7(g), 7(h),
7(i), 7(l) or 7(m), other than by reason of a default by the Initial Purchasers,
the Company will reimburse the Initial Purchasers upon demand for all reasonable
out-of-pocket expenses (including reasonable counsel fees and disbursements)
that shall have been incurred by it in connection with the proposed purchase and
sale of the Securities. The Company shall not in any event be liable
16
<PAGE> 17
to the Initial Purchasers for the loss of anticipated profits from the
transactions covered by this Agreement.
7. Conditions of the Obligations of the Initial Purchasers.
The obligations of the several Initial Purchasers to purchase and pay
for the Firm Securities shall be subject, in the sole discretion of the Initial
Purchasers, to the accuracy of the representations and warranties of the Company
contained herein as of the date hereof and as of the Firm Closing Date, as if
made on and as of the Firm Closing Date, to the accuracy of the certifications,
representations and warranties of the Company's officers made pursuant to the
provisions hereof, to the performance by the Company of its respective covenants
and agreements hereunder and to the following additional conditions:
(a) Subsequent to the execution and delivery of this Agreement,
(i) no order or decree preventing the use of the Offering Memorandum or any
amendment or supplement thereto, or any order asserting that the transactions
contemplated by this Agreement are subject to the registration requirements of
the Securities Act, shall have been issued and no proceedings for that purpose
shall have been commenced or shall be pending or, to the knowledge of the
Company, be contemplated and no stop order suspending the sale of the Securities
in any jurisdiction designated by the Initial Purchasers shall have been issued
and no proceedings for that purpose shall have been commenced or shall be
pending or, to the knowledge of the Company, shall be contemplated; (ii) the
Initial Purchasers shall not have discovered or disclosed to the Company that
the Offering Memorandum or any amendment or supplement thereto contains an
untrue statement of fact which, in the Initial Purchasers' opinion, is material
or fails to state a fact which is material or is necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading; or (iii) there shall not have occurred any invalidation of Rule 144A
or Regulation S under the Securities Act by any court or any withdrawal or
proposed withdrawal of any rule or regulation under the Securities Act or the
Exchange Act by the Commission or any amendment or proposed amendment thereof by
the Commission which in the judgment of the Initial Purchasers would materially
impair its ability to purchase, hold or effect resales of the Securities as
contemplated hereby.
(b) The Initial Purchasers shall have received an opinion, dated
the Firm Closing Date, of Freshman, Marantz, Orlanski, Cooper & Klein, counsel
for the Company, to the effect that:
(i) The Company and NBase Xyplex, Inc., a Delaware corporation
("NBase Xyplex"), each is a corporation duly organized and validly
existing as a corporation in good standing under the laws of the State
of Delaware. The Company and NBase Xyplex each is duly qualified to
transact business as a foreign corporation and is in good standing under
the laws of all United States jurisdictions where the ownership or
leasing of its properties or the conduct of its businesses requires such
qualification, except where the failure to be so qualified does not
amount to a material liability or disability to the Company and its
subsidiaries, taken as a whole;
17
<PAGE> 18
(ii) The Company and NBase Xyplex each has all requisite
corporate power, to own or lease its properties and conduct its business
as described in the Offering Memorandum, and the Company has all
requisite corporate power to enter into this Agreement and the other
Company Agreements and to carry out all the terms and provisions hereof
and thereof;
(iii) The authorized, issued and outstanding capital stock of
the Company as of March 31, 1998 is as set forth in the Offering
Memorandum under the caption "Capitalization," the Common Stock conforms
in all material respects to the description thereof contained in the
Offering Memorandum;
(iv) To the knowledge of such counsel, except for the Securities
and as described in the Offering Memorandum, there are no outstanding
rights, warrants or options to acquire any capital stock of the Company
or any subsidiary;
(v) To the knowledge of such counsel, other than rights pursuant
to the Registration Agreement, no holders of securities other than Intel
Corporation of the Company are entitled to have such securities
registered under the Securities Act as a result of the issuance and sale
of the Securities hereunder or as a result of the Company filing the
Shelf Registration Statement pursuant to the terms of the Registration
Agreement;
(vi) The Indenture has been duly authorized, executed and
delivered by the Company; assuming the due authorization, execution and
delivery of the Indenture by the Trustee, the Indenture constitutes a
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms; the Indenture complies as to form
in all material respects with the requirements of the Trust Indenture
Act of 1939, as amended (the "TIA"), and the rules and regulations of
the Commission applicable to an indenture which is qualified thereunder;
and it is not legally required in connection with the offer, sale and
delivery of the Securities to the Initial Purchasers or in connection
with the initial resales of the Securities delivered on the Closing Date
by the Company to the Initial Purchasers, in each case in the manner
contemplated by this Agreement and the Offering Memorandum, to qualify
the Indenture under the TIA;
(vii) The Securities have been duly authorized, executed and
delivered by the Company and, assuming they have been duly authenticated
by the Trustee in accordance with the terms of the Indenture, upon
delivery of the Securities in accordance with the Indenture, the
Securities will constitute legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms;
and the Securities conform in all material respects to the descriptions
thereof contained in the Offering Memorandum and are entitled to the
benefits provided by the Indenture;
(viii)The shares of Common Stock to be issued upon conversion of
the Securities have been duly authorized and reserved for issuance upon
such conversion of the
18
<PAGE> 19
Securities and, when they are issued and delivered upon conversion of
the Securities in accordance with the terms of the Indenture, will be
validly issued, fully paid and nonassessable and not subject to any
preemptive rights;
(ix) The statements under the captions "Description of Notes,"
"Description of Capital Stock," "Management," "Certain Federal Income
Tax Considerations" and "Notice to Investors" in the Offering Memorandum
insofar as such statements constitute a general summary of matters of
United States law or of documents referred to therein have been reviewed
by such counsel and are correct in all material respects;
(x) This Agreement and the Registration Agreement have been duly
authorized, executed and delivered by the Company and each such
agreement constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms;
(xi) To the knowledge of such counsel, no legal or governmental
proceedings are pending to which the Company or any of its subsidiaries
is a party or to which the property of the Company or any of its
subsidiaries is subject, that (i) would affect the subject matter of
this Agreement or any Other Company Agreement or any of the transactions
contemplated herein or therein, or (ii) is of a character that would be
required to be disclosed in a registration statement on Form S-1 or the
related prospectus relating to the offer and sale of the Securities,
and, to the knowledge of such counsel, no such proceedings have been
threatened against the Company or any of its subsidiaries or with
respect to any of their respective properties;
(xii) To the knowledge of such counsel, there are no contracts
or other documents of a character that would be required to be described
in Part I of a registration statement on Form S-1 or the related
prospectus relating to the offer and sale of the Securities which are
not described in the Offering Memorandum;
(xiii) The offering, sale, issuance and delivery of the
Securities to the Initial Purchasers by the Company pursuant to this
Agreement, compliance by the Company with the provisions of this
Agreement and of the Other Company Agreements, and the consummation of
the transactions herein and therein contemplated (including the issuance
and delivery of the Conversion Securities) do not (A) require any
authorization, approval, consent, order of, license of, registration,
filing or qualification of or with any governmental authority of the
United States, except such as may be required under state securities or
blue sky laws (and, in the case of compliance with the Registration
Agreement, the filing of the Shelf Registration Statement (as defined
therein) and the registration thereunder of the Securities and the
Common Stock to be issued upon conversion of the Securities under the
Securities Act), or (B) conflict with or result in a breach or violation
of any of the terms and provisions of, or constitute a default under,
(i) any indenture, mortgage, deed of trust, lease or other agreement or
instrument, known to such counsel, to which the Company or NBase
19
<PAGE> 20
Xyplex is a party or by which the Company or NBase Xyplex or any of
their respective properties are bound, or (ii) the charter documents or
bylaws of any of the Company or NBase Xyplex, or (iii) any statute or
regulation of United States, the State of California or the State of New
York or the General Corporation Law of the State of Delaware or any
judgment, decree or order of any court or other governmental authority
or any arbitrator known to such counsel and applicable to the Company or
any of its subsidiaries, except, with respect to clauses (i) and (iii),
for such conflicts, breaches, violations or defaults that would not,
individually or in the aggregate, have a material adverse effect on the
condition (financial or other), business, properties, net worth or
results of operations of the Company and its subsidiaries, taken as a
whole, and would not adversely affect the ability of the Company to
perform its obligations under this Agreement and the Other Company
Agreements;
(xiv) The Company is not and, after giving effect to the
offering and sale of the securities and the application of the proceeds
thereof as described in the Offering Memorandum, will not be, an
"investment company", within the meaning of the Investment Company Act;
and
(xv) Assuming the accuracy of the representations and warranties
and compliance with the agreements of the Company and the Initial
Purchasers herein and referred to under the captions "Plan of
Distribution" and "Notice to Investors" in the Offering Memorandum, in
connection with (A) the offer, sale and delivery of the Securities on
the Closing Date by the Company to the Initial Purchasers pursuant to
this Agreement, (B) the initial resale of the Securities delivered on
the Closing Date by the Initial Purchasers as contemplated by this
Agreement and the Offering Memorandum, or (C) the issuance and delivery
of the Conversion Securities in the manner contemplated by the
Indenture, it is not legally required to register the Securities or any
Conversion Securities under the Securities Act, it being understood that
no opinion is expressed as to any subsequent resale of any Securities or
Conversion Securities.
Such counsel shall state that they have participated in conferences with
representatives of the Company, representatives of the independent public
accountants for the Company and the Initial Purchasers and their counsel, at
which conferences the contents of the Offering Memorandum, each amendment
thereof (if any) and supplement thereto (if any) and related matters were
discussed, and, although such counsel is not passing upon and assumes no
responsibility for the accuracy, fairness or completeness of the Offering
Memorandum, any amendment thereof or supplement thereto (except as expressly
provided above), nothing has come to the attention of such counsel to cause such
counsel to believe that the Offering Memorandum or any amendment thereof, if
any, or supplement thereto, if any (other than the financial statements and
related notes and schedules and other financial data included therein, as to
which such counsel need express no belief) contains, as of the date thereof and
as of the Firm Closing Date or the Option Closing Date, as the case may be, any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
20
<PAGE> 21
In rendering any such opinion, such counsel may (i) rely, as to matters
of fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials and (ii) assume that the laws of
the State of New York will have the same effect as the laws of the State of
California.
(c) The Initial Purchasers shall have received the opinion, dated
the Firm Closing Date, of Eckhouse, Talmor, Shilo & Dichno, counsel for NBase
Israel, to the effect that:
(i) NBase Israel is a corporation duly organized and validly
existing as a corporation in good standing under the laws of the State
of Israel. NBase Israel is duly qualified to transact business as a
foreign corporation and is in good standing under the laws of all
jurisdictions where the ownership or leasing of its properties or the
conduct of its businesses requires such qualification, except where the
failure to be so qualified does not amount to a material liability or
disability to the Company and its subsidiaries, taken as a whole;
(ii) NBase Israel has full corporate power, to own or lease its
properties and conduct its business as described in the Offering
Memorandum;
(iii) The issued shares of capital stock of NBase Israel have
been duly authorized and validly issued, are fully paid and
nonassessable and are owned of record by the Company. The issued shares
of capital stock of NBase Israel are, to the knowledge of such counsel,
free and clear of any perfected security interests or any other security
interests, liens, encumbrances, equities or claims; and, to the
knowledge of such counsel, there are no outstanding rights, warrants or
options to acquire any capital stock of NBase Israel;
(iv) To the knowledge of such counsel, no legal or governmental
proceedings are pending to which NBase Israel is a party or to which the
property of NBase is subject, that (i) would affect the subject matter
of this Agreement or any Other Company Agreement or any of the
transactions contemplated herein or therein, or (ii) is of a character
that would be required to be disclosed in a registration statement on
Form S-1 or the related prospectus relating to the offer and sale of the
Securities, and no such proceedings have been threatened against NBase
Israel or with respect to any of its properties;
(v) To the knowledge of such counsel, there are no contracts or
other documents of a character of NBase Israel that would be required to
be described in Part I of a registration statement on Form S-1 or the
related prospectus relating to the offer and sale of the Securities
which are not described in the Offering Memorandum;
(vi) The offering, sale, issuance and delivery of the Securities
to the Initial Purchasers by the Company pursuant to this Agreement,
compliance by the Company with the provisions of this Agreement and of
the Other Company Agreements, and the consummation of the transactions
herein and therein contemplated (including the issuance and
21
<PAGE> 22
delivery of the Conversion Securities) do not (A) require any
authorization, approval, consent, order of, license of, registration,
filing or qualification of or with any governmental authority of the
State of Israel, or (B) conflict with or result in a breach or violation
of any of the terms and provisions of, or constitute a default under,
(i) any indenture, mortgage, deed of trust, lease or other agreement or
instrument to which NBase Israel is a party or by which NBase Israel or
any of its properties are bound, or (ii) the charter documents or bylaws
of NBase Israel, or (iii) any statute or regulation of the State of
Israel or any judgment, decree or order of any court or other
governmental authority or any arbitrator known to such counsel and
applicable to NBase Israel, with respect to clauses (i) and (iii), for
such conflicts, breaches, violations or defaults that would not,
individually or in the aggregate, have a material adverse effect on the
condition (financial or other), business, properties, net worth or
results of operations of the Company and its subsidiaries, taken as a
whole, and would not adversely affect the ability of the Company to
perform its obligations under this Agreement and the Other Company
Agreements.
(d) The Initial Purchasers shall have received the opinion, dated
the Firm Closing Date, of Warner & Stackpole LLP, counsel to Xyplex, to the
effect that:
(i) Xyplex is a corporation duly organized and validly existing
as a corporation in good standing under the laws of the Commonwealth of
Massachusetts. Xyplex is duly qualified to transact business as a
foreign corporation and is in good standing under the laws of all
jurisdictions where the ownership or leasing of its properties or the
conduct of its businesses requires such qualification, except where the
failure to be so qualified does not amount to a material liability or
disability to the Company and its subsidiaries, taken as a whole;
(ii) Xyplex has full corporate power, to own or lease its
properties and conduct its business as described in the Offering
Memorandum;
(iii) The issued shares of capital stock of Xyplex have been
duly authorized and validly issued, are fully paid and nonassessable and
are owned of record by the Company. The issued shares of capital stock
of Xyplex are, to the knowledge of such counsel, free and clear of any
perfected security interests or any other security interests, liens,
encumbrances, equities or claims; and, to the knowledge of such counsel,
there are no outstanding rights, warrants or options to acquire any
capital stock of vXyplex.
(e) The Initial Purchasers shall have received an opinion, dated
the Firm Closing Date, of Andrews & Kurth L.L.P., counsel for the Initial
Purchasers, with respect to the issuance and sale of the Firm Securities, the
Offering Memorandum, and such other related matters as the Initial Purchasers
may reasonably require, and the Company shall have furnished to such counsel
such documents as they may reasonably request for the purpose of enabling them
to pass upon such matters.
22
<PAGE> 23
(f) The Initial Purchasers shall have received from Arthur
Andersen, LLP a letter or letters dated, respectively, the date hereof and the
Firm Closing Date, in form and substance satisfactory to the Initial Purchasers,
that:
(i) they are independent accountants with respect to the Company
within the meaning of the Securities Act and the applicable rules and
regulations thereunder;
(ii) in their opinion, the audited financial statements and
schedules and pro forma financial statements of the Company included in
the Offering Memorandum comply in form in all material respects with the
applicable accounting requirements of the Securities Act and the related
published rules and regulations;
(iii) on the basis of their limited review in accordance with
standards established by the American Institute of Certified Public
Accountants of any interim unaudited financial statements of the Company
included or incorporated by reference in the Offering Memorandum,
carrying out certain specified procedures (which do not constitute an
examination made in accordance with generally accepted auditing
standards) that would not necessarily reveal matters of significance
with respect to the comments set forth in this paragraph (iii), a
reading of the minute books of the stockholders, the board of directors
and any committees thereof of the Company, officials of the Company, and
inquiries of certain officials of the Company who have responsibility
for financial and accounting matters, nothing came to their attention
that caused them to believe that:
(A) the unaudited financial statements of the Company
included or incorporated by reference in the Offering Memorandum
do not comply in form in all material respects with the
applicable accounting requirements of the Securities Act and the
related published rules and regulations thereunder or are not in
conformity with generally accepted accounting principles applied
on a basis substantially consistent with that of the audited
financial statements included or incorporated by reference in
the Offering Memorandum; or
(B) at a specific date not more than five business days
prior to the date of such letter, there was any change in long-
term debt of the Company or any decreases in net current assets
or stockholders' equity of the Company, in each case compared
with amounts shown on the March 31, 1998 consolidated balance
sheet included in the Offering Memorandum, or for the period
from March 31, 1998 to such specified date there were any
decreases, as compared with the prior comparable period, in the
net sales, income before income taxes or net income of the
Company, except in all instances for changes, decreases or
increases set forth in such letter;
(iv) they have carried out certain specified procedures (as
requested by the Initial Purchasers), not constituting an audit, with
respect to certain amounts, percentages and financial information that
are derived from the general accounting records of the Company
23
<PAGE> 24
and are included in the Offering Memorandum, and have compared such
amounts, percentages and financial information with such records of the
Company or with information derived from such records and have found
them to be in agreement, excluding any questions of legal
interpretation; and
(v) on the basis of a reading of the unaudited pro forma
consolidated condensed financial statements included in the Registration
Statement and the Prospectus, carrying out certain specified procedures
that would not necessarily reveal matters of significance with respect
to the comments set forth in this paragraph (v), inquiries of certain
officials of the Company and its consolidated subsidiaries who have
responsibility for financial and accounting matters and proving the
arithmetic accuracy of the application of the pro forma adjustments to
the historical amounts in the unaudited pro forma consolidated condensed
financial statements, nothing came to their attention that caused them
to believe that the unaudited pro forma consolidated condensed financial
statements do not comply in form in all material respects with the
applicable accounting requirements of Rule 11-02 of Regulation S-X or
that the pro forma adjustments have not been properly applied to the
historical amounts in the compilation of such statements.
In the event that the letter referred to above set forth any such
changes, decreases or increases, it shall be a further condition to the
obligation of the Initial Purchasers that (A) such letters shall be accompanied
by a written explanation of the Company as to the significance thereof, unless
the Initial Purchasers deems such explanation unnecessary, and (B) such changes,
decreases or increases do not, in the sole judgment of the Initial Purchasers,
make it impractical or inadvisable to proceed with the purchase and delivery of
the Securities as contemplated by the Offering Memorandum, as amended as of the
date hereof.
Reference to the Offering Memorandum in this paragraph (f) with respect
to the letter referred to above shall include any amendment or supplement
thereto at the date of such letter.
(g) The Initial Purchasers shall have received from each of Ernst
& Young LLP and Coopers & Lybrand L.L.P. a letter or letters dated,
respectively, the date hereof and the Firm Closing Date, in form and substance
satisfactory to the Initial Purchasers.
(h) The Initial Purchasers shall have received a certificate,
dated the Firm Closing Date, of the Chief Executive Officer and the Chief
Financial Officer of the Company, on behalf of the Company, to the effect that:
(i) the representations and warranties of the Company in this
Agreement are true and correct as if made on and as of the Firm Closing
Date; the Offering Memorandum, as amended as of the Firm Closing Date,
does not include any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not
24
<PAGE> 25
misleading; and the Company has performed all covenants and agreements
and satisfied all conditions on its part to be performed or satisfied at
or prior to the Firm Closing Date; and
(ii) subsequent to the respective dates as of which information
is given in the Offering Memorandum, neither the Company nor any of its
subsidiaries has sustained any material loss or interference with their
respective businesses or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from
any labor dispute or any legal or governmental proceeding, and there has
not been any material adverse change, or any development involving a
prospective material adverse change, in the condition (financial or
otherwise), management, business prospects, net worth or results of
operations of the Company and its subsidiaries, taken as a whole, except
in each case as described in or contemplated by the Offering Memorandum
(exclusive of any amendment or supplement thereto).
(i) The Initial Purchasers shall have received from each person
who is a director or executive officer of the Company an agreement to the effect
that such person will not, directly or indirectly, without the prior written
consent of Prudential Securities Incorporated, offer, sell, offer to sell,
contract to sell, pledge, grant any option to purchase or otherwise sell or
dispose (or announce any offer, sale, offer of sale, contract of sale, pledge,
grant of any option to purchase or other sale or disposition) of any Common
Stock or any securities convertible into, or exchangeable or exercisable for,
Common Stock for a period of 90 days after the date of this Agreement.
(j) On or before the Firm Closing Date, the Initial Purchasers
and counsel for the Initial Purchasers shall have received such further
certificates, documents or other information as they may have reasonably
requested from the Company.
(k) The Securities shall have been approved by the National
Association of Securities Dealers, Inc. for trading in the PORTAL market,
subject to the issuance of the Securities.
(l) The Indenture shall have been duly executed and delivered by
the Company and the Trustee, and the Securities shall have been executed and
delivered by the Company and duly authenticated by the Trustee.
(m) The Registration Agreement shall have been executed and
delivered by the Company.
All opinions, certificates, letters and documents delivered pursuant to
this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Initial Purchasers and
counsel for the Initial Purchasers. The Company shall furnish to the Initial
Purchasers such conformed copies of such opinions, certificates, letters and
documents in such quantities as the Initial Purchasers and counsel for the
Initial Purchasers shall reasonably request.
25
<PAGE> 26
The obligation of the Initial Purchasers to purchase and pay for any
Option Securities shall be subject, in its discretion, to each of the foregoing
conditions to purchase the Firm Securities, except that all references to the
Firm Securities and the Firm Closing Date shall be deemed to refer to such
Option Securities and the related Option Closing Date, respectively.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Initial Purchaser and each person, if any, who controls any Initial Purchaser
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject under the Securities
Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement made by the
Company in Section 2 of this Agreement,
(ii) any untrue statement or alleged untrue statement of any
material fact contained in (A) the Offering Memorandum or the
Preliminary Offering Memorandum or any amendment or supplement thereto,
(B) any application or other document, or any amendment or supplement
thereto, executed by the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in
order to qualify the Securities under the securities or blue sky laws
thereof or filed with or any securities association or securities
exchange (each an "Application"), or (C) any Additional Company
Information provided by the Company to any holder or prospective
purchaser of Securities pursuant to Section 5(c),
(iii) the omission or alleged omission to state in the Offering
Memorandum or the Preliminary Offering Memorandum or any amendment or
supplement thereto, any Application or any Additional Company
Information provided by the Company to any holder or prospective
purchaser of Securities pursuant to Section 5(c), a material fact
required to be stated therein or necessary to make the statements
therein not misleading or
(iv) any untrue statement or alleged untrue statement of any
material fact contained in any audio or visual materials used in
connection with the marketing of the Securities, including, without
limitation, slides, videos, films and tape recordings,
and will reimburse, as incurred, each Initial Purchaser and each such
controlling person for any legal or other expenses reasonably incurred by such
Initial Purchaser or such controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability or action; provided, however that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made
26
<PAGE> 27
in such Offering Memorandum or Preliminary Offering Memorandum or any
Application in reliance upon and in conformity with written information
furnished to the Company by such Initial Purchaser specifically for use therein;
and provided, further, that the Company will not be liable to any Initial
Purchaser or any person controlling such Initial Purchaser with respect to any
such untrue statement or omission made in any Preliminary Offering Memorandum
that is corrected in the Offering Memorandum (or any amendment or supplement
thereto) if the person asserting any such loss, claim, damage or liability
purchased Securities from such Initial Purchaser but was not sent or given a
copy of the Offering Memorandum (as amended or supplemented) at or prior to the
written confirmation such Securities to such person in any case where such
delivery of the Offering Memorandum (as amended or supplemented) is required by
the Securities Act, unless such failure to deliver the Offering Memorandum (as
amended or supplemented) was a result of noncompliance by the Company with
Section 5(c) of this Agreement. This indemnity agreement will be in addition to
any liability which the Company may otherwise have. The Company will not,
without the prior written consent of the Initial Purchasers, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not any Initial Purchaser or any person who
controls such Initial Purchaser within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act is a party to such claim,
action, suit or proceeding), unless such settlement, compromise or consent
includes an unconditional release of all the Initial Purchasers and such
directors, officers, employees, agents or controlling persons from all liability
arising out of such claim, action, suit or proceeding.
(b) Each Initial Purchaser, severally and not jointly, will
indemnify and hold harmless the Company, each of its directors, officers,
employees and agents and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act against any losses, claims, damages or liabilities to which the Company or
any such director, officer, employee or agent or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of any material fact
contained in the Offering Memorandum or the Preliminary Offering Memorandum or
any amendment or supplement thereto, or any Application or (ii) the omission or
the alleged omission to state therein a material fact required to be stated in
the Offering Memorandum or the Preliminary Offering Memorandum or any amendment
or supplement thereto, or any Application or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such Initial Purchaser specifically for use therein;
and, subject to the limitation set forth immediately preceding this clause, will
reimburse, as incurred, any legal or other expenses reasonably incurred by the
Company or any such director, officer, employee or agent or controlling person
in connection with investigating or defending any such loss, claim, damage,
liability or any action in respect thereof. This indemnity agreement will be in
addition to any liability which such Initial Purchaser may otherwise have.
27
<PAGE> 28
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section 8. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such indemnified
party; provided, however, that if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to it and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnifying party shall not have
the right to direct the defense of such action on behalf of such indemnified
party or parties and such indemnified party or parties shall have the right to
select separate counsel to defend such action on behalf of such indemnified
party or parties. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof and approval by such
indemnified party of counsel appointed to defend such action, the indemnifying
party will not be liable to such indemnified party under this Section 8 for any
legal or other expenses, other than reasonable costs of investigation,
subsequently incurred by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence (it being
understood, however, that in connection with such action the indemnifying party
shall not be liable for the expenses of more than one separate counsel (in
addition to local counsel) in any one action or separate but substantially
similar actions in the same jurisdiction arising out of the same general
allegations or circumstances, designated by the Initial Purchaser in the case of
paragraph (a) of this Section 8, representing the indemnified parties under such
paragraph (a) who are parties to such action or actions) or (ii) the
indemnifying party does not promptly retain counsel satisfactory to the
indemnified party or (iii) the indemnifying party has authorized the employment
of counsel for the indemnified party at the expense of the indemnifying party.
After such notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the consent
of the indemnifying party.
(d) In circumstances in which the indemnity agreement provided
for in the preceding paragraphs of this Section 8 is unavailable or
insufficient, for any reason, to hold harmless an indemnified party in respect
of any losses, claims, damages or liabilities (or actions in respect thereof)
that by the terms of the preceding paragraphs of this Section 8 could otherwise
be the subject of an indemnity claim, each indemnifying party, in order to
provide for just and equitable contribution, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other from the
offering of the Securities or (ii) if the allocation provided by the foregoing
clause (i) is not permitted by applicable law, not only such relative benefits
but also the
28
<PAGE> 29
relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions or
alleged statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) that by the terms of the preceding
paragraphs of this Section 8 could otherwise be the subject of an indemnity
claim, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Initial Purchasers on
the other shall be deemed to be in the same proportion as the total proceeds
from the offering (before deducting expenses) received by the Company bear to
the total discounts and commissions received by the Initial Purchasers. The
relative fault of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Initial Purchasers, the parties' relative
intents, knowledge, access to information and opportunity to correct or prevent
such statement or omission, and any other equitable considerations appropriate
in the circumstances. The Company and the Initial Purchasers agree that it would
not be equitable if the amount of such contribution were determined by pro rata
or per capita allocation or by any other method of allocation that does not take
into account the equitable considerations referred to above in this paragraph
(d). Notwithstanding any other provision of this paragraph (d), no Initial
Purchaser shall be obligated to make contributions hereunder that in the
aggregate exceed the total offering price of the Securities purchased by such
Initial Purchaser under this Agreement, less the aggregate amount of any damages
that such Initial Purchaser has otherwise been required to pay in respect of the
same or any substantially similar claim, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to contribute
hereunder are several in proportion to their respective purchase obligations and
not joint. For purposes of this paragraph (d), each person, if any, who controls
an Initial Purchaser within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act shall have the same rights to contribution as
such Initial Purchaser, and each director of the Company and each person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, shall have the same rights to
contribution as the Company.
9. Default of Initial Purchasers.
If one or more Initial Purchasers default in their obligations to
purchase Firm Securities or Option Securities hereunder and the aggregate number
of such Securities that such defaulting Initial Purchaser or Initial Purchasers
agreed but failed to purchase is ten percent or less of the aggregate number of
Firm Securities or Option Securities to be purchased by all of the Initial
Purchasers at such time hereunder, the other Initial Purchasers may make
arrangements satisfactory to the Representatives for the purchase of such
Securities by other persons (who may include one or more of the non-defaulting
Initial Purchasers), but if no such arrangements are made by the Firm Closing
Date or the related Option Closing Date, as the case may be, the other Initial
Purchasers shall be obligated severally in proportion to their respective
commitments hereunder to purchase the Firm Securities or Option Securities that
such defaulting Initial Purchaser or Initial Purchasers agreed but failed to
purchase. If one or more Initial Purchasers so default with respect to an
aggregate number
29
<PAGE> 30
of Securities that is more than ten percent of the aggregate number of Firm
Securities or Option Securities, as the case may be, to be purchased by all of
the Initial Purchasers at such time hereunder, and if arrangements satisfactory
to the Initial Purchasers are not made within 36 hours after such default for
the purchase by other persons (who may include one or more of the non-defaulting
Initial Purchasers) of the Securities with respect to which such default occurs,
this Agreement will terminate without liability on the part of any
non-defaulting Initial Purchaser or the Company other than as provided in
Section 10 hereof. In the event of any default by one or more Initial Purchasers
as described in this Section 9, the Representatives shall have the right to
postpone the Firm Closing Date or the Option Closing Date, as the case may be,
established as provided in Section 3 hereof for not more than seven business
days in order that any necessary changes may be made in the arrangements or
documents for the purchase and delivery of the Firm Securities or Option
Securities, as the case may be. As used in this Agreement, the term "Initial
Purchaser" includes any person substituted for an Initial Purchaser under this
Section 9. Nothing herein shall relieve any defaulting Initial Purchaser from
liability for its default.
10. Survival.
The respective representations, warranties, agreements, covenants,
indemnities and other statements of the Company, its officers and the several
Initial Purchasers set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement shall remain in full force and effect,
regardless of (i) any investigation made by or on behalf of the Company, any of
its officers or directors, any Initial Purchaser or any controlling person
referred to in Section 8 hereof and (ii) delivery of and payment for the
Securities. The respective agreements, covenants, indemnities and other
statements set forth in Sections 6 and 8 hereof shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement.
11. Termination.
(a) This Agreement may be terminated with respect to the Firm
Securities or any Option Securities in the sole discretion of the Initial
Purchasers by notice to the Company given prior to the Firm Closing Date or the
related Option Closing Date, respectively, in the event that the Company shall
have failed, refused or been unable to perform all obligations and satisfy all
conditions on its part to be performed or satisfied hereunder at or prior
thereto or, if at or prior to the Firm Closing Date or such Option Closing Date,
respectively,
(i) the Company or any of its subsidiaries shall have, in the
sole judgment of the Initial Purchasers, sustained any material loss or
interference with their respective businesses or properties from fire,
flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental
proceeding or there shall have been any material adverse change, or any
development involving a prospective material adverse change (including
without limitation a change in management or control of the Company), in
the condition (financial or otherwise), business prospects, net worth or
results of operations of the Company and its subsidiaries, taken as a
whole, except
30
<PAGE> 31
in each case as described in or contemplated by the Offering Memorandum
(exclusive of any amendment or supplement thereto);
(ii) trading in the Common Stock shall have been suspended by
the Nasdaq National Market;
(iii) securities trading generally on the New York Stock
Exchange or the Nasdaq National Market shall have been suspended or
minimum or maximum prices shall have been established on any such
exchange or market system;
(iv) a banking moratorium shall have been declared by New York
authorities; or
(v) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or (C) any other calamity or crisis or
material adverse change in general economic, political or financial
conditions having an effect on the United States financial markets that,
in the sole judgment of the Initial Purchasers, makes it impractical or
inadvisable to proceed with the offering or the delivery of the
Securities as contemplated by the Offering Memorandum, as amended as of
the date hereof.
(b) Termination of this Agreement pursuant to this Section 11
shall be without liability of any party to any other party except as provided in
Section 10 hereof.
12. Information Supplied by Initial Purchasers.
The statements set forth in the last paragraph on the front cover page
and under the heading "Plan of Distribution" in any Preliminary Offering
Memorandum or the Offering Memorandum (to the extent such statements relate to
the Initial Purchasers) constitute the only information furnished by the Initial
Purchasers to the Company for the purposes of Sections 1(a) and 8 hereof. The
Initial Purchasers confirm that such statements (to such extent) are correct.
13. Notices.
All communications hereunder shall be in writing and, if sent to any of
the Initial Purchasers, shall be delivered or sent by mail, telex or facsimile
transmission and confirmed in writing to Prudential Securities Incorporated, One
New York Plaza, New York, New York 10292, Attention: Equity Transactions Group;
and if sent to the Company, shall be delivered or sent by mail, telex or
facsimile transmission and confirmed in writing to the Company at MRV
Communications, Inc., 8943 Fullbright Avenue, Chatsworth, California 91311,
Attention: Noam Lotan, President (or, in each case, to such other address as may
be hereafter notified by the respective parties hereto in accordance herewith).
31
<PAGE> 32
14. Successors.
This Agreement shall inure to the benefit of and shall be binding upon
the Initial Purchasers, the Company and their respective successors and legal
representatives, and nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any other person any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any provisions
herein contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person except that (i) the indemnities of the
Company contained in Section 8 of this Agreement shall also be for the benefit
of any person or persons who control the Initial Purchasers within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act and (ii)
the indemnities of the Initial Purchasers contained in Section 8 of this
Agreement shall also be for the benefit of the directors of the Company and any
person or persons who control the Company within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act. No purchaser of Securities
from the Initial Purchasers shall be deemed a successor because of such
purchase.
15. Applicable Law.
The validity and interpretation of this Agreement, and the terms and
conditions set forth herein, shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to any provisions
relating to conflicts of laws.
16. Consent to Jurisdiction and Service of Process.
All judicial proceedings arising out of or relating to this Agreement
may be brought in any state or federal court of competent jurisdiction in the
State of New York, and by execution and delivery of this Agreement, the Company
accepts for itself and in connection with its properties, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts and
waives any defense of forum non convenience and irrevocably agrees to be bound
by any judgment rendered thereby in connection with this Agreement. Nothing
herein shall limit the right of the Initial Purchasers to bring proceedings
against the Company in the courts of any other jurisdiction.
17. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
32
<PAGE> 33
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter shall constitute an agreement binding the Company and the Initial
Purchasers.
Very truly yours,
MRV COMMUNICATIONS, INC.
By: /s/ Noam Lotan
-------------------------------
Name: Noam Lotan
Title: President
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
PRUDENTIAL SECURITIES INCORPORATED
BEAR, STEARNS & CO. INC.
By: PRUDENTIAL SECURITIES INCORPORATED
By: /s/ Jean-Claude Canfin
-------------------------------
Name: Jean-Claude Canfin
Title: Managing Director
33
<PAGE> 34
SCHEDULE 1
INITIAL PURCHASERS
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF FIRM SECURITIES TO
INITIAL PURCHASERS BE PURCHASED
---------------------
<S> <C>
Prudential Securities Incorporated................................ $ 70,000,000
Bear, Stearns & Co. Inc........................................... 30,000,000
----------------
Total........................................................... $ 100,000,000
================
</TABLE>
34
<PAGE> 1
EXHIBIT 4.2
================================================================================
MRV COMMUNICATIONS, INC.,
ISSUER
AND
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRUSTEE
---------------
INDENTURE
DATED AS OF JUNE 26, 1998
---------------
$115,000,000
5% CONVERTIBLE SUBORDINATED NOTES DUE 2003
================================================================================
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL
APPLICATION
<TABLE>
<S> <C>
SECTION 1.1 Definitions.................................................................1
SECTION 1.2 Compliance Certificates and Opinions.......................................10
SECTION 1.3 Form of Documents Delivered to the Trustee.................................11
SECTION 1.4 Acts of Holders of Securities..............................................11
SECTION 1.5 Notices, Etc...............................................................13
SECTION 1.6 Notice to Holders of Securities; Waiver....................................14
SECTION 1.7 Effect of Headings and Table of Contents...................................14
SECTION 1.8 Successors and Assigns.....................................................14
SECTION 1.9 Separability Clause........................................................14
SECTION 1.10 Benefits of Indenture......................................................14
SECTION 1.11 Governing Law..............................................................15
SECTION 1.12 Legal Holidays.............................................................15
SECTION 1.13 Conflict with Trust Indenture Act..........................................15
ARTICLE II
SECURITY FORMS
SECTION 2.1 Forms Generally............................................................16
SECTION 2.2 Form of Face of Security...................................................17
SECTION 2.3 Form of Reverse of Security................................................20
SECTION 2.4 Form of Trustee's Certificate of Authentication............................26
ARTICLE III
THE SECURITIES
SECTION 3.1 Title and Terms............................................................27
SECTION 3.2 Denominations..............................................................28
SECTION 3.3 Execution, Authentication, Delivery and Dating.............................28
SECTION 3.4 Temporary Securities.......................................................28
SECTION 3.5 Registration, Registration of Transfer and Exchange; Restrictions on
Transfer...................................................................29
SECTION 3.6 Mutilated, Destroyed, Lost or Stolen Securities............................34
SECTION 3.7 Payment of Interest, Interest Rights Preserved.............................34
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 3.8 Persons Deemed Owners......................................................36
SECTION 3.9 Cancellation...............................................................36
SECTION 3.10 Computation of Interest....................................................36
SECTION 3.11 Cusip Numbers..............................................................37
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction and Discharge of Indenture....................................37
SECTION 4.2 Application of Trust Money.................................................38
ARTICLE V
REMEDIES
SECTION 5.1 Events of Default..........................................................39
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment.........................40
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee............41
SECTION 5.4 Trustee May File Proofs of Claim...........................................42
SECTION 5.5 Trustee May Enforce Claims Without Possession of Securities................43
SECTION 5.6 Application of Money Collected.............................................43
SECTION 5.7 Limitation on Suits........................................................44
SECTION 5.8 Unconditional Right of Holders to Receive Principal and Interest and
to Convert.................................................................44
SECTION 5.9 Restoration of Rights and Remedies.........................................45
SECTION 5.10 Rights and Remedies Cumulative.............................................45
SECTION 5.11 Delay or Omission Not Waiver...............................................45
SECTION 5.12 Control by Holders of Securities...........................................45
SECTION 5.13 Waiver of Past Defaults....................................................46
SECTION 5.14 Undertaking for Costs......................................................46
SECTION 5.15 Waiver of Stay or Extension Laws...........................................46
ARTICLE VI
THE TRUSTEE
SECTION 6.1 Certain Duties and Responsibilities........................................47
SECTION 6.2 Notice of Defaults.........................................................48
SECTION 6.3 Certain Rights of Trustee..................................................48
SECTION 6.4 Not Responsible for Recitals or Issuance of Securities.....................49
SECTION 6.5 May Hold Securities, Act as Trustee under Other Indentures.................49
SECTION 6.6 Money Held in Trust........................................................50
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
SECTION 6.7 Compensation and Indemnification of Trustee and its Prior Claims...........50
SECTION 6.8 Corporate Trustee Required; Eligibility....................................51
SECTION 6.9 Resignation and Removal; Appointment of Successor..........................51
SECTION 6.10 Acceptance of Appointment by Successor.....................................52
SECTION 6.11 Merger, Conversion, Consolidation or Succession to Business................53
SECTION 6.12 Authenticating Agent.......................................................53
SECTION 6.13 Disqualification; Conflicting Interests....................................54
ARTICLE VII
HOLDER'S LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1 Company to Furnish Trustee Names and Addresses of Holders..................55
SECTION 7.2 Preservation of Information; Communications to Holders.....................55
SECTION 7.3 Reports by the Company.....................................................55
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR
LEASE
SECTION 8.1 Company May Consolidate, Etc., Only on Certain Terms.......................56
SECTION 8.2 Successor Substituted......................................................57
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 Supplemental Indentures Without Consent of Holders of Securities...........57
SECTION 9.2 Supplemental Indentures with Consent of Holders of Securities..............58
SECTION 9.3 Execution of Supplemental Indentures.......................................59
SECTION 9.4 Effect of Supplemental Indentures..........................................59
SECTION 9.5 Reference in Securities to Supplemental Indentures.........................59
SECTION 9.6 Notice of Supplemental Indentures..........................................60
</TABLE>
iii
<PAGE> 5
ARTICLE X
MEETINGS OF HOLDERS OF SECURITIES
<TABLE>
<S> <C>
SECTION 10.1 Purposes for Which Meetings May Be Called..................................60
SECTION 10.2 Call, Notice and Place of Meetings.........................................60
SECTION 10.3 Persons Entitled to Vote at Meetings.......................................61
SECTION 10.4 Quorum; Action.............................................................61
SECTION 10.5 Determination of Voting Rights; Conduct and Adjournment of Meetings........62
SECTION 10.6 Counting Votes and Recording Action of Meetings............................62
ARTICLE XI
COVENANTS
SECTION 11.1 Payment of Principal and Interest..........................................63
SECTION 11.2 Maintenance of Offices or Agencies.........................................63
SECTION 11.3 Money for Security Payments to Be Held in Trust............................64
SECTION 11.4 Corporate Existence........................................................65
SECTION 11.5 Maintenance of Properties..................................................65
SECTION 11.6 Compliance with Laws.......................................................65
SECTION 11.7 Payment of Taxes and Other Claims..........................................66
SECTION 11.8 Delivery of Certain Information............................................66
SECTION 11.9 Statement by Officers as to Default........................................66
SECTION 11.10 Waiver of Certain Covenants................................................67
SECTION 11.11 Registration Rights........................................................67
SECTION 11.12 Book-entry System..........................................................68
ARTICLE XII
REDEMPTION OF SECURITIES
SECTION 12.1 Right of Redemption........................................................68
SECTION 12.2 Applicability of Article...................................................68
SECTION 12.3 Election to Redeem; Notice to Trustee......................................69
SECTION 12.4 Selection by Trustee of Securities to Be Redeemed........................69
SECTION 12.5 Notice of Redemption.......................................................69
SECTION 12.6 Deposit of Redemption Price................................................70
SECTION 12.7 Securities Payable on Redemption Date......................................70
</TABLE>
iv
<PAGE> 6
ARTICLE XIII
CONVERSION OF SECURITIES
<TABLE>
<S> <C>
SECTION 13.1 Conversion Privilege and Conversion Rate...................................71
SECTION 13.2 Exercise of Conversion Privilege...........................................72
SECTION 13.3 Fractions of Shares of Common Stock........................................73
SECTION 13.4 Adjustment of Conversion Rate..............................................74
SECTION 13.5 Notice of Adjustments of Conversion Rate...................................78
SECTION 13.6 Notice of Certain Corporate Action.........................................78
SECTION 13.7 Company to Reserve Common Stock............................................79
SECTION 13.8 Taxes on Conversions.......................................................80
SECTION 13.9 Covenant as to Common Stock................................................80
SECTION 13.10 Cancellation of Converted Securities.......................................80
SECTION 13.11 Provision in Case of Consolidation, Merger or Conveyance of Assets.........80
SECTION 13.12 Responsibility of Trustee for Conversion Provisions........................81
ARTICLE XIV
SUBORDINATION
SECTION 14.1 Securities Subordinate to Senior Debt......................................82
SECTION 14.2 Payment over of Proceeds upon Dissolution, Etc.............................82
SECTION 14.3 No Payment When Senior Debt in Default.....................................83
SECTION 14.4 Payment Permitted If No Default............................................84
SECTION 14.5 Subrogation to Rights of Holders of Senior Debt............................84
SECTION 14.6 Provisions Solely to Define Relative Rights................................84
SECTION 14.7 Trustee to Effectuate Subordination........................................85
SECTION 14.8 No Waiver of Subordination Provisions......................................85
SECTION 14.9 Notice to Trustee..........................................................85
SECTION 14.10 Reliance on Judicial Order or Certificate of Liquidating Agent.............86
SECTION 14.11 Trustee Not Fiduciary for Holders of Senior Debt...........................86
SECTION 14.12 Rights of Trustee as Holder of Senior Debt; Preservation of Trustee's
Rights.....................................................................86
SECTION 14.13 Article Applicable to Paying Agents........................................87
SECTION 14.14 Payment....................................................................87
</TABLE>
v
<PAGE> 7
ARTICLE XV
REPURCHASE OF SECURITIES AT THE OPTION OF THE HOLDER
UPON A CHANGE IN CONTROL
<TABLE>
<S> <C>
SECTION 15.1 Right to Require Repurchase................................................88
SECTION 15.2 Notices; Method of Exercising Repurchase Right, Etc........................88
SECTION 15.3 Certain Definitions........................................................90
ANNEX A Form of Conversion Notice...................................................A-1
ANNEX B Form of Transfer Certificate (Restricted Global Security to
Regulation S Global Security)...............................................B-1
ANNEX C Form of Transfer Certificate (Regulation S Global Security to
Restricted Global Security During the Restricted Period)....................C-1
</TABLE>
Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
vi
<PAGE> 8
INDENTURE, dated as of June 26, 1998, between MRV COMMUNICATIONS,
INC., a Delaware corporation (herein called the "Company"), and AMERICAN STOCK
TRANSFER & TRUST COMPANY, a New York corporation, as Trustee hereunder (herein
called the "Trustee").
RECITALS
The Company has duly authorized the creation of an issue of its 5%
Convertible Subordinated Notes due 2003 (herein called the "Securities") of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company in accordance with their and its terms, have been
done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL
APPLICATION
SECTION 1.1 Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) Unless the context otherwise requires, any reference to an
"Article" or a "Section," or to an "Annex," refers to an Article or Section of,
or an Annex attached to, this Indenture, as the case may be;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles in the United States prevailing at the time of any relevant
computation hereunder; and
(4) the words "herein," "hereof" and "hereunder" and other words of
similar import refer
1
<PAGE> 9
to this Indenture as a whole and not to any particular Article, Section or other
subdivision;
provided, however that where such words are used in any form of Security, form
of notice or form of certificate, such words shall refer only to the particular
form of Security, form of notice or form of certificate, as the case may be, in
which such words are contained.
"Act," when used with respect to any Holder of a Security, has the
meaning specified in Section 1.4.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control," when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent Members" has the meaning specified in Section 3.5.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of Euroclear and CEDEL, and of the Depositary for such
Security, in each case to the extent applicable to such transaction and as in
effect from time to time.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.12 to act on behalf of the Trustee to authenticate
Securities.
"Authorized Newspaper" means a newspaper in the English language,
customarily published on each Business Day, whether or not published on
Saturdays, Sundays or holidays, and of general circulation in the place in
connection with which the term is used or in the financial community of such
place. Where successive publications are required to be made in Authorized
Newspapers, the successive publications may be made in the same or in different
newspapers in the same city meeting the foregoing requirements and in each case
on any Business Day.
"Board of Directors" means the board of directors of the Company, or
any committee of the board of directors of the Company, empowered to act for the
Company, as the case may be, with respect to this Indenture.
"Board Resolution" means a resolution duly adopted by the Board of
Directors, a copy of which, certified by the Secretary or an Assistant Secretary
of the Company, as the case may be, to have been duly adopted by the Board of
Directors and to be in full force and effect on the date of such certification,
shall have been delivered to the Trustee.
"Business Day" means, with respect to any particular place of payment,
place of conversion
2
<PAGE> 10
or any other place, as the case may be, each Monday, Tuesday, Wednesday,
Thursday and Friday, other than any such day on which banking institutions in
The City of New York, New York or in such particular place are authorized or
obligated by law or executive order to close. If any day on which any delivery,
request, surrender, payment or other action is required or permitted hereunder
to be taken by or on behalf of a Holder is not a Business Day in any place where
such action is permitted hereunder to be taken, then such actions may be taken
at such or any other permitted place on the next succeeding Business Day at such
place with the same force and effect as if taken at the same time on such day
that is not a business day at such place.
"CEDEL" means Cedel Bank, societe anonyme (or any successor securities
clearing agency).
"Change in Control" has the meaning specified in Section 15.3.
"Closing Price Per Share" means, with respect to the Common Stock of
the Company, for any day, the reported last sales price regular way per share on
such day or, in case no such reported sale takes place on such day, the average
of the reported closing bid and asked prices regular way, in either case (i) on
the principal (as determined by the Company's Board of Directors) national
securities exchange on which the Common Stock is listed or admitted to trading
or (ii) if not listed or admitted to trading on any national securities
exchange, on the Nasdaq National Market or (iii) if the Common Stock is not
listed or admitted to trading on any national securities exchange or quoted on
such National Market, the average of the closing bid and asked prices in the
over-the-counter market as furnished by any New York Stock Exchange member firm
selected from time to time by the Company for that purpose.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Commission" means the U.S. Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act of
1934, or, if at any time after the execution of this instrument such Commission
is not existing and performing the duties now assigned to it under applicable
law, then the body performing such duties at such time.
"Common Stock" means the Common Stock, par value $.0034 per share, of
the Company authorized at the date of this instrument as originally executed.
Subject to the provisions of Section 1311, shares issuable on conversion or
repurchase of Securities shall include only shares of Common Stock or shares of
any class or classes of common stock resulting from any reclassification or
reclassifications thereof; provided, however, that if at any time there shall be
more than one such resulting class, the shares so issuable on conversion of
Securities shall include shares of all such classes, and the shares of each such
class then so issuable shall be substantially in the proportion which the total
number of shares of such class resulting from all such reclassifications bears
to the total number of shares of all such classes resulting from all such
reclassifications.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of
3
<PAGE> 11
this Indenture, and thereafter "Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by any one of its Chairman of the Board, its
Chief Executive Officer, its President, or any Vice President, and by any one of
its Chief Financial Officer, Treasurer, any Assistant Treasurer, its Secretary
or any Assistant Secretary, and delivered to the Trustee.
"Constituent Person" has the meaning specified in Section 13.11.
"Conversion Agent" means any Person authorized by the Company to
convert Securities in accordance with Article XIII. The Company has initially
appointed the Trustee as Conversion Agent.
"Conversion Price" and "Conversion Rate" have the meanings specified
in Section 13.1 hereof, as adjusted in accordance with Section 13.4.
"Conversion Securities" means the securities delivered on conversion
of Securities (or any securities successor thereto), together with any
securities successor thereto to those so delivered on conversions.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time the trust created by this Indenture shall be administered
(which at the date of this Indenture is located at 40 Wall Street, New York, New
York 10005, Attention: Corporate Trust Administration (MRV Communications, Inc.
5% Convertible Subordinated Notes Due 2003)).
"corporation" means a corporation, association, company, joint-stock
company or business trust.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Depositary" means DTC until a successor depositary shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Depositary" shall mean such successor Depositary.
"Dollar" or "$" means a dollar or other equivalent unit in such coin
or currency of the United States as at the time shall be legal tender for the
payment of public and private debts.
"DTC" means The Depository Trust Company, a New York corporation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, including any successor or amendatory statutes.
"Euroclear" means the Euroclear Clearance System (or any successor
securities clearing agency).
4
<PAGE> 12
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Act" means the U.S. Securities Exchange Act of 1934
(including any successor act thereto), as it may be amended from time to time,
and (unless the context otherwise requires) includes the rules and regulations
of the Commission promulgated thereunder.
"Expiration Date" has the meaning specified in Section 1.4(g).
"Global Security" means any of the Restricted Global Security and the
Regulation S Global Security.
"Holder" means a Person in whose name such Security is registered in
the Security Register.
"Indebtedness" means obligations (other than nonrecourse obligations)
of, or guaranteed or assumed by, the Company for borrowed money, including
obligations evidenced by bonds, debentures, notes or other similar instruments
and reimbursement and cash collateralization of letters of credit, bankers'
acceptances, interest rate hedge and currency hedge agreements.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
including, for all purposes of this instrument and any such supplemental
indenture, the Annexes attached to this instrument.
"Initial Purchasers" means Prudential Securities Incorporated and
Bear, Stearns & Co. Inc.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Liquidated Damages" has the meaning specified in Section 11.12.
"Maturity," when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption, exercise of the repurchase right set forth in
Article XV or otherwise.
"Non-Conversion Period" has the meaning specified in Section 2.3.
"Non-Electing Share" has the meaning specified in Section 13.11.
"Notice of Default" has the meaning specified in Section 5.1.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Financial Officer, the Treasurer, the
Controller, an Assistant Treasurer, an Assistant Controller,
5
<PAGE> 13
the Secretary, an Assistant Secretary or any Vice President of the Company.
"Officers' Certificate" means a written certificate signed by any one
of the Chairman of the Board, the Chief Executive Officer, the President, the
Chief Financial Officer or any Vice President of the Company and by any one of
the Treasurer, the Controller, an Assistant Treasurer, an Assistant Controller,
the Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee; provided, however, that, for purposes of Section 11.9, an "Officers'
Certificate" means a written certificate signed by the principal executive,
financial or accounting officer of the Company and any one of the other Officers
referred to above and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company and who shall be reasonably acceptable to the Trustee.
"Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered
to the Trustee for cancellation;
(ii) Securities for the payment or redemption of which money in
the necessary amount has been theretofore deposited with the Trustee
or any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Securities, provided that if
such Securities are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made; and
(iii) Securities which have been paid pursuant to Section 3.6 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by
a bona fide purchaser in whose hands such Securities are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities are present at a meeting of Holders
of Securities for quorum purposes or have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in conclusively relying upon any such determination as to the presence of a
quorum or upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which a Responsible Officer of the Trustee
actually knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon
6
<PAGE> 14
the Securities or any Affiliate of the Company or such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or interest on any Securities on behalf of the Company.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, estate,
unincorporated organization or other legal entity or government or any agency or
political subdivision thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 3.6 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Qualified Institutional Buyer" has the meaning specified in Rule
144A.
"Record Date" means any Regular Record Date or Special Record Date.
"Record Date Period" means the period from the close of business on
any Regular Record Date next preceding any Interest Payment Date to the opening
of business on such Interest Payment Date.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registration Default" has the meaning specified in Section 11.12.
"Registration Rights Agreement" has the meaning specified in Section
11.12.
"Regular Record Date" for interest payable in respect of any Security
on any Interest Payment Date means the June 1 or December 1 (whether or not a
Business Day) next preceding the relevant Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act (including
any successor regulation thereto), as it may be amended from time to time.
"Regulation S Global Security" has the meaning specified in Section
2.1.
"Repurchase Date" has the meaning specified in Section 15.1.
7
<PAGE> 15
"Repurchase Price" has the meaning specified in Section 15.1.
"Responsible Officer," when used with respect to the Trustee, shall
mean any officer of the Trustee within the Corporate Trust Office including any
Senior Vice President, Assistant Vice President, Trust Officer, Secretary,
Assistant Secretary or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of such officer's knowledge and familiarity
with the particular subject.
"Restricted Global Security" has the meaning specified in Section 2.1.
"Restricted Period" has the meaning specified in Section 2.1.
"Restricted Securities" has the meaning specified in Section 2.1.
"Rule 144" means Rule 144 under the Securities Act (including any
successor rule thereto), as the same may be amended from time to time.
"Rule 144A" means Rule 144A under the Securities Act (including any
successor rule thereto), as the same may be amended from time to time.
"Rule 144A Information" has the meaning specified in Section 11.8.
"Securities" has the meaning ascribed to it in the first paragraph
under the caption "Recitals."
"Securities Act" means the Securities Act of 1933 (including any
successor act thereto), as it may be amended from time to time, and (unless the
context otherwise requires) includes the rules and regulations of the Commission
promulgated thereunder.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
"Senior Debt" means 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 direct or
indirect, 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 for money borrowed or evidenced by
credit or loan agreement, bonds, debentures, notes or similar instruments, (b)
all obligations of the Company evidenced by a note or similar instrument or
written agreement given in connection with the acquisition of any businesses,
properties or assets, including securities, (c) obligations of the Company as
lessee under leases capitalized on the balance sheet of the lessee under
generally accepted accounting principles, (d) obligations of the Company under
interest rate and
8
<PAGE> 16
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, (e) all
reimbursement obligations of the Company with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of the
Company, (f) indebtedness of others of the kinds described in the preceding
clauses (a), (b), (c), (d) and (e) that the Company has assumed, guaranteed or
otherwise assured the payment thereof, directly or indirectly, and/or (g)
deferrals, renewals, extensions and refundings of, or bonds, debentures, notes
or other evidences of indebtedness issued in exchange for, or amendments,
modifications or supplements to, or covenants and other obligations of the
Company in connection with, the indebtedness described in the preceding clauses
(a) through (f) whether or not there is any notice to or consent of the Holders
of the Securities; except (i) indebtedness and advances among the Company and
its Subsidiaries; and (ii) any particular indebtedness, deferral, renewal,
extension or refunding, if it is expressly stated in the governing terms or in
the assumption thereof that the indebtedness involved is not Senior Debt.
"Shelf Registration Statement" has the meaning specified in Section
11.12.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity," when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For the purposes of this definition,
"voting stock" means stock or other similar interests which ordinarily
has or have voting power for the election of directors, or persons performing
similar functions, whether at all times or only so long as no senior class of
stock has such voting power by reason of any contingency.
"Trading Days" means (i) if the Common Stock is listed or admitted for
trading on any national securities exchange, days on which such national
securities exchange is open for business or (ii) if the Common Stock is not
listed or admitted for trading on any national securities exchange, days on
which trades may be made on The Nasdaq National Market or any similar system of
automated dissemination of quotations of securities prices on which the Common
Stock is quoted or (iii) if the Common Stock is not listed or admitted to
trading on any national securities exchange or quoted on such National Market or
similar system, days on which the Common Stock is traded regular way in the
over-the-counter market and for which a closing bid and a closing asked price
for the Common Stock is available.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this instrument until a successor Trustee shall have become such pursuant to
the applicable provisions of this
9
<PAGE> 17
Indenture, and thereafter "Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the United States Trust Indenture Act of
1939 (including any successor act thereto), as it may be amended from time to
time, and (unless the context otherwise requires) includes the rules and
regulations of the Commission thereunder.
"United States person" means a citizen or resident of the United
States, a domestic partnership, a domestic corporation or any estate or trust
the income of which is subject to United States federal income taxation
regardless of its source.
"Unrestricted Securities" has the meaning specified in Section 2.1.
"Vice President," when used with respect to the Company, means any
Vice President, whether or not designated by a number or a word or words added
before or after the title "Vice President."
SECTION 1.2 Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
10
<PAGE> 18
SECTION 1.3 Form of Documents Delivered to the Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4 Acts of Holders of Securities.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Indenture to be
given or taken by Holders of Securities may be embodied in and evidenced by (1)
one or more instruments of substantially similar tenor signed by such Holders in
person or by agent or proxy duly appointed in writing, (2) the record of Holders
of Securities voting in favor thereof, either in person or by proxies duly
appointed in writing, at any meeting of Holders of Securities duly called and
held in accordance with the provisions of Article X or (3) a combination of such
instruments and any such record. Except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments or record
or both are delivered to the Trustee and, where it is hereby expressly required,
to the Company. Such instrument or instruments and record (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Holders of Securities signing such instrument or instruments and so
voting at such meeting. Proof of execution of any such instrument or of a
writing appointing any such agent or proxy, or of the holding by any Person of a
Security, shall be sufficient for any purpose of this Indenture and (subject to
Section 6.1) conclusive in favor of the Trustee and the Company if made in the
manner provided in this Section. The record of any meeting of Holders of
Securities shall be proved in the manner provided in Section 10.6.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority.
(c) The ownership of Securities shall be proven by the Security
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder
11
<PAGE> 19
of every Security issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof in respect of anything done, omitted or
suffered to be done by the Trustee or the Company in reliance thereon, whether
or not notation of such action is made upon such Security.
(e) The Company may set any day as a record date for the purpose
of determining the Holders of Outstanding Securities entitled to give, make or
take any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by this Indenture to be given, made or taken
by Holders of Securities, provided that the Company may not set a record date
for, and the provisions of this paragraph shall not apply with respect to, the
giving or making of any notice, declaration, request or direction referred to in
the next paragraph. If any record date is set pursuant to this paragraph, the
Holders of Outstanding Securities on such record date, and no other Holders,
shall be entitled to take the relevant action, whether or not such Holders
remain Holders after such record date; provided that no such action shall be
effective hereunder unless taken on or prior to the applicable Expiration Date
by Holders of the requisite principal amount of Outstanding Securities on such
record date. Nothing in this paragraph shall be construed to prevent the Company
from setting a new record date for any action for which a record date has
previously been set pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any Person be canceled
and of no effect), and nothing in this paragraph shall be construed to render
ineffective any action taken by Holders of the requisite principal amount of
Outstanding Securities on the date such action is taken. Promptly after any
record date is set pursuant to this paragraph, the Company, at its own expense,
shall cause notice of such record date, the proposed action by Holders and the
applicable Expiration Date to be given to the Trustee in writing and to each
Holder of Securities in the manner set forth in Section 1.6.
(f) The Trustee may set any day as a record date for the purpose
of determining the Holders of Outstanding Securities entitled to join in the
giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 5.2, (iii) any request to institute
proceedings referred to in Section 5.7(2) or (iv) any direction referred to in
Section 5.12. If any record date is set pursuant to this paragraph, the Holders
of Outstanding Securities on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities on such record date. Nothing in this paragraph shall be construed to
prevent the Trustee from setting a new record date for any action (whereupon the
record date previously set shall automatically and without any action by any
Person be canceled and of no effect), nor shall anything in this paragraph be
construed to render ineffective any action taken by Holders of the requisite
principal amount of Outstanding Securities on the date such action is taken.
Promptly after any record date is set pursuant to this paragraph, the Trustee,
at the Company's expense, shall cause notice of such record date, the proposed
action by Holders and the applicable Expiration Date to be given to the Company
in writing and to each Holder of Securities in the manner set forth in Section
1.6.
(g) With respect to any record date set pursuant to this Section,
the party hereto
12
<PAGE> 20
that sets such record date may designate any day as the "Expiration Date" and
from time to time may change the Expiration Date to any earlier or later day,
provided that no such change shall be effective unless notice of the proposed
new Expiration Date is given to the other party hereto in writing, and to each
Holder of Securities in the manner set forth in Section 1.6, on or prior to the
existing Expiration Date. If an Expiration Date is not designated with respect
to any record date set pursuant to this Section, the party hereto that set such
record date shall be deemed to have initially designated the 180th day after
such record date as the Expiration Date with respect thereto, subject to its
right to change the Expiration Date as provided in this paragraph.
Notwithstanding the foregoing, no Expiration Date shall be later than the 180th
day after the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to take
any action hereunder with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any part of such principal amount.
SECTION 1.5 Notices, Etc.
Any request, demand, authorization, direction, notice, consent,
election, waiver or other Act of Holders of Securities or other document
provided or permitted by this Indenture to be made upon, given or furnished to,
or filed with,
(1) the Trustee by any Holder of Securities or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with the Trustee and received at its Corporate Trust Office,
Attention: Corporate Trust Administration (MRV Communications, Inc. 5%
Convertible Subordinated Notes Due 2003), or
(2) the Company by the Trustee or by any Holder of Securities shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing, mailed, first-class postage prepaid, or telexed or
telecopied and confirmed by mail, first-class postage prepaid, or delivered by
hand or overnight courier, addressed to the Company at 8943 Fullbright Avenue,
Chatsworth, California 91311, telephone no.: (818) 773-0900, telecopy no.: (818)
773-0261, Attention: Noam Lotan, President, or at any other address previously
furnished in writing to the Trustee by the Company.
Any request, demand, authorization, direction, notice, consent,
election or waiver required or permitted under this Indenture shall be in the
English language, except that any published notice may be in an official
language of the country of publication.
SECTION 1.6 Notice to Holders of Securities; Waiver.
Except as otherwise provided herein, where this Indenture provides for
notice to Holders of any event, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid, to each Holder affected by such event, at his registered
13
<PAGE> 21
address as recorded in the Security Register. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Holder entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 1.7 Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 1.8 Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its respective successors and assigns, whether so expressed or not.
SECTION 1.9 Separability Clause.
In case any provision in this Indenture or the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1.10 Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors and
assigns hereunder, the holders of Senior Debt of the Company and the Holders of
Securities and, solely with respect to this Article I and Sections 11.8, 13.8,
and 13.9, the holders of Conversion Securities, any benefit or legal or
equitable right, remedy or claim under this Indenture.
This Article I and Sections 11.8, 13.8 and 13.9 shall not be amended
or modified, and neither compliance by the Company with, nor any default by it
under, such Article or any such Sections, shall be waived, in any manner that
adversely affects the interest of any holder of a Conversion Security at the
time outstanding without such Holder's consent.
14
<PAGE> 22
SECTION 1.11 Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, THE UNITED STATES OF
AMERICA.
SECTION 1.12 Legal Holidays.
In any case where any Interest Payment Date, Redemption Date,
Repurchase Date or Stated Maturity of any Security or the last day on which a
Holder of a Security has a right to convert his Security shall not be a Business
Day, then (notwithstanding any other provision of this Indenture or of the
Securities) payment of principal of, premium, if any, or interest (including
Liquidated Damages) on, or the payment of the Repurchase Price (whether the same
is payable in cash or in shares of Common Stock) with respect to, or delivery
for conversion of, such Security need not be made on or by such day, but may be
made on or by the next succeeding Business Day with the same force and effect as
if made on the Interest Payment Date, Redemption Date, Repurchase Date, or at
the Stated Maturity or by such last day for conversion, as the case may be;
provided, however, that in the case that payment is made on such succeeding
Business Day, no interest shall accrue on the amount so payable for the period
from and after such Interest Payment Date, Redemption Date, Repurchase Date,
Stated Maturity or last day for conversion, as the case may be.
SECTION 1.13 Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture (or would be required to be a part of and
govern this Indenture if this Indenture were required to be qualified under the
Trust Indenture Act), the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
that may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
ARTICLE II
SECURITY FORMS
SECTION 2.1 Forms Generally.
The Securities shall be in substantially the forms set forth in this
Article, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or Depositary thereof, the Code and regulations thereunder,
or as may, consistently herewith, be determined by the Officers executing such
Securities, as evidenced by their execution thereof. The Company shall
15
<PAGE> 23
approve the form of the Securities and any notation, legend or endorsement on
the Securities.
Any definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Securities
may be listed or quoted, as the case may be, all as determined by the Officers
executing such Securities as evidenced by their execution thereof.
In certain cases described elsewhere herein, the legends set forth in
the first three paragraphs of Section 2.2 may be omitted from Securities issued
hereunder.
Securities offered and sold in their initial distribution in reliance
on Regulation S shall be initially represented by one or more Regulation S
Global Notes (the "Regulation S Global Security") issued in fully registered
form without interest coupons, substantially in the form of Security set forth
in Sections 2.2 and 2.3, with such applicable legends as are provided for in
Section 2.2. Such Regulation S Global Security shall be registered in the name
of the Depositary or its nominee and deposited with the Trustee, as custodian
for the Depositary, duly executed by the Company and authenticated by the
Trustee as hereinafter provided, for credit to the respective accounts at the
Depositary of the depositories for Morgan Guaranty Trust Company of New York,
Brussels office, as operator of Euroclear or CEDEL. Until such time as the
Restricted Period shall have terminated, investors may hold beneficial interests
in such global Notes only through Euroclear and CEDEL, unless delivery of such
beneficial interest shall be made through the Restricted Global Note in
accordance with the certification requirements discussed below in Section
3.5(b)(3). After such time as the Restricted Period shall have terminated, such
certification requirements shall no longer be required for such transfers. As
used herein, the term "Restricted Period" means the period up to (but not
including) the 365th day following the later of (i) the day on which the
Securities are first offered to persons other than distributors (as defined in
Regulation S) in reliance on Regulation S and (ii) the last original issuance
date of the Securities. The Regulation S Global Security following the
Restricted Period and all other Securities that are not Restricted Securities
shall collectively be referred to herein as the "Unrestricted Securities."
Securities offered and sold in their initial distribution in reliance on
Rule 144A shall initially be issued in the form of one or more Global Securities
(collectively, the "Restricted Global Security") in fully registered form
without interest coupons, substantially in the form of Security set forth in
Sections 2.2 and 2.3, with such applicable legends as are provided for in
Section 2.2, except as otherwise permitted herein. Such Restricted Global
Security shall be registered in the name of the Depositary or its nominee and
deposited with the Trustee, as custodian for the Depositary, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the Restricted Global Security may be increased or
decreased from time to time by adjustments made on the records of the Trustee,
as custodian for the Depositary, in connection with a corresponding decrease or
increase in the aggregate principal amount of the Regulation S Global Security,
as hereinafter provided. The Restricted Global Security and all other Securities
evidencing the debt, or any portion of the debt, initially evidenced by such
Global Security, other than Securities transferred or exchanged upon
certification as provided in Section 3.5(b)(2) or (4), shall
16
<PAGE> 24
collectively be referred to herein as the "Restricted Securities."
The Securities will be issued only in registered form. The Securities
will be issued in minimum denominations of $1,000, as provided in Section 3.2.
SECTION 2.2 Form of Face of Security.
[THE SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OR A DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THE SECURITIES EVIDENCED HEREBY AND THE SHARES OF COMMON STOCK
ISSUABLE UPON THEIR CONVERSION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE TRANSFEROR
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") ACQUIRING FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT,
(3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED
BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO AN INSTITUTION THAT IS AN
ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501 (A) (1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT IN A
17
<PAGE> 25
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (IF
AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES OF THE UNITED STATES.
CONVERSION OF THIS SECURITY IS SUBJECT TO CERTIFICATION AND OTHER
REQUIREMENTS, AND ANY COMMON STOCK ISSUED ON SUCH CONVERSION WILL BE SUBJECT TO
THE TRANSFER RESTRICTIONS REFERRED TO ABOVE.
MRV COMMUNICATIONS, INC.
5% CONVERTIBLE SUBORDINATED NOTES DUE 2003
No.___$_________ [Registered Global Security - CUSIP No.553477 AA8
[Registered Regulation S Global Security - CUSIP No.[ ]
MRV COMMUNICATIONS, INC., a Delaware corporation (herein called the
"Company," which term includes any successor Person under the Indenture referred
to on the reverse hereof), for value received, hereby promises to pay to
_______________, or registered assigns, the principal sum of _____________ U.S.
Dollars, [IF THIS SECURITY IS A GLOBAL SECURITY, THEN INSERT -- (which principal
amount may from time to time be increased or decreased to such other principal
amounts (which, taken together with the principal amounts of all other
Outstanding Securities, shall not exceed $115,000,000 in the aggregate at any
time) by adjustments made on the records of the Trustee hereinafter referred to
in accordance with the Indenture)] on June15, 2003, and to pay interest thereon
from June 26, 1998 or from the most recent Interest Payment Date (as defined
below) to which interest has been paid or duly provided for, semi-annually in
arrears on June 15 and December 15 in each year, commencing on December 15,
1998, and at Maturity at the rate of 5% per annum, until the principal hereof is
paid or made available for payment, provided that any amount of such principal
or interest that is overdue shall bear interest at the rate of 5% per annum (to
the extent that payment of such interest shall be legally enforceable), from the
date such amount is due until it is paid or made available for payment, and such
interest on any overdue amount shall be payable on demand. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which shall be the June 1
or December 1 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, provided notice thereof shall have been given to
Holders of Securities not less than 10 days prior to such Special Record Date,
or be paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange
18
<PAGE> 26
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
Payment of the principal of and interest on this Security will be made
in immediately available funds and in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts, at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, The City of New York, provided, however,
that payment of interest may, at the option of the Company, be made by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register. If this Security is a Global Security, then
each such payment will be made in accordance with the procedures of the
Depositary as then in effect.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof or an Authenticating Agent by the
manual signature of one of their respective authorized signatories, this
Security shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Security to be duly
executed under its corporate seal.
MRV COMMUNICATIONS, INC.
[Corporate Seal]
By:
----------------------------------
Name:
Title:
Attest:
- ----------------------------------
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated:
AMERICAN STOCK TRANSFER & TRUST COMPANY
as Trustee
19
<PAGE> 27
By:
-------------------------------
Authorized Signatory
SECTION 2.3 Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Company designated as its "5% Convertible Subordinated Notes due 2003" (herein
called the "Securities"), limited in aggregate principal amount to $115,000,000
issued and to be issued under an Indenture, dated as of June 26, 1998 (herein
called the "Indenture"), between the Company and American Stock Transfer & Trust
Company, as Trustee (herein called the "Trustee," which term includes any
successor trustee under the Indenture), to which the Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee, the Holders of Senior Debt of the Company and the
Holders of the Securities and of the terms upon which the Securities are, and
are to be, authenticated and delivered.
No sinking fund is provided for in the Securities. The Securities may
not be redeemed at the option of the Company prior to June 15, 2001. Thereafter,
the Securities may be redeemed at the option of the Company, in whole or in
part, at the Redemption Prices set forth below: Such Redemption Prices
(expressed as a percentage of principal amount) are as follows for the 12-month
period beginning on June 15 of the following years:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
<S> <C>
2001....................................... 102%
2002....................................... 101
</TABLE>
in each case together with accrued interest to the Redemption Date provided that
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.
Notice of redemption (which notice shall be irrevocable) will be given
by first-class mail to Holders of Securities at their registered addresses as
recorded in the Security Register. Notice will be given not more than 60 nor
less than 30 days prior to the Redemption Date, as provided in the Indenture.
In any case where the due date for the payment of the principal of,
premium, if any, or interest (including Liquidated Damages) on, any Security or
the last day on which a Holder of a Security has a right to convert his Security
shall be at any place of payment or place of conversion, as the case may be, a
day on which banking institutions at such place of payment or place of
conversion are authorized or obligated by law or executive order to close, then
payment of principal of, premium, if any, or interest (including Liquidated
Damages) on, or delivery for conversion of such Security need not be made on or
by such date at such place but may be made on or by the next succeeding day at
such place which is not a day on which banking institutions are authorized or
obligated by law or
20
<PAGE> 28
executive order to close, with the same force and effect as if made on the date
for such payment or the date fixed for redemption or repurchase, or at the
Stated Maturity or by such last day for conversion, and no interest shall accrue
for the period after such date.
Subject to and upon compliance with the provisions of the Indenture,
the Holder of this Security is entitled, at his option, at any time on or after
the 90th day following the last original issue date of the Securities (the
"Non-Conversion Period") and prior to the close of business on June 15, 2003, or
in case this Security is called for redemption or the Holder hereof has
exercised its right to require the Company to repurchase this Security, then in
respect of this Security until and including, but (unless the Company defaults
in making the payment due upon redemption or repurchase, as the case may be) not
after, the close of business on the Redemption Date or the Repurchase Date, as
the case may be, to convert this Security into newly issued fully paid and
nonassessable shares of Common Stock of the Company at an initial Conversion
Rate equal to 36.9720 shares of Common Stock per $1,000 principal amount of
Securities (or at the current adjusted Conversion Rate if an adjustment has been
made as provided in the Indenture) by surrender of this Security, and also a
duly executed conversion notice, substantially in the form provided in Annex A
of the Indenture (including the tax certification contained in such notice), to
the Company, subject to any laws or regulations applicable thereto and subject
to the right of the Company to terminate the appointment of the Conversion Agent
(as defined below), at the office or agency of the Company in The City of New
York or at such other offices or agencies outside the United States that the
Company may designate (each a "Conversion Agent"). Any Security surrendered for
conversion during a Record Date Period (except Securities called for redemption
on a Redemption Date or to be repurchased on a Repurchase Date during, in each
case, such period) must be accompanied by payment of an amount equal to the
interest payable on the Interest Payment Date relating to such Record Date
Period on the principal amount of such Security being surrendered for
conversion, and the interest payable in respect of such Security on such
Interest Payment Date shall be paid to the Holder of such Security as of the
Regular Record Date relating to such Record Date Period. The interest payable on
such Interest Payment Date with respect to any Security which has been called
for redemption on a Redemption Date, or is repurchaseable on a Repurchase Date,
occurring, in either case, during a Record Date Period, which Security is
surrendered for conversion during such Record Date Period, shall be paid to the
Holder of such Security being converted in an amount equal to the interest that
would have been payable on such Security if such Security had been converted as
of the close of business on such Interest Payment Date. Interest payable in
respect of any Security surrendered for conversion on or after an Interest
Payment Date shall be paid to the Holder of such Security as of the next
preceding Regular Record Date, notwithstanding the exercise of the right of
conversion.
The Company shall thereafter deliver to the Holder the fixed number of
shares of Common Stock (together with any cash adjustment, as provided in the
Indenture) into which this Security is convertible and such delivery will be
deemed to satisfy the Company's obligation to pay the principal amount of this
Security. No fractions of shares or scrip representing fractions of shares will
be issued on conversion, but instead of any fractional interest (calculated to
the nearest 1/100th of a share) the Company shall pay a cash adjustment as
provided in the Indenture, or alternatively the Company shall round up the
conversion transaction to the next higher whole share. In addition, the
Indenture
21
<PAGE> 29
provides that in case of certain consolidations or mergers to which the Company
is a party or the sale or transfer of all or substantially all of the assets of
the Company, the Indenture shall be amended, without the consent of any Holders
of Securities, so that this Security, if then Outstanding, will be convertible
thereafter, during the period this Security shall be convertible as specified
above, only into the kind and amount of securities, cash and other property
receivable upon consolidation, merger, sale or transfer by a holder of the
number of shares of Common Stock of the Company into which this Security might
have been converted immediately prior to such consolidation, merger, sale or
transfer (assuming such holder of Common Stock failed to exercise any rights of
election and received per share the kind and amount received per share by at
least a plurality of Non-Electing Shares). Adjustments in the Conversion Rate of
less than one percent of such price will not be required, but any adjustment
that would otherwise be required to be made will be carried forward and taken
into account in the computation of any subsequent adjustment.
Notwithstanding any provision hereof, no securities will be delivered
on conversion of this Security or any portion hereof unless the certification
and other requirements described in the Indenture are satisfied.
Subject to certain limitations in the Indenture, at any time when the
Company is not subject to Section 13 or 15(d) of the United States Securities
Exchange Act of 1934, as amended, upon the request of a Holder of a Restricted
Security or the holder of shares of Common Stock issued upon conversion thereof,
the Company will promptly furnish or cause to he furnished Rule 144A Information
(as defined below) to such Holder of Restricted Securities or such holder of
shares of Common Stock issued upon conversion of Restricted Securities, or to a
prospective purchaser of any such security designated by any such Holder or
holder, as the case may be, to the extent required to permit compliance by any
such holder with Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act"). "Rule 144A Information" shall be such information as is
specified pursuant to Rule 144A(d)(4) under the Securities Act (or any successor
provision thereto).
If this Security is a Registrable Security, then the Holder of this
Security and the Common Stock of the Company issuable upon conversion thereof is
entitled to the benefits of a Registration Rights Agreement (subject to the
provisions thereof), dated as of the date hereof, between the Company and the
Initial Purchasers (the "Registration Rights Agreement"). Pursuant to the
Registration Rights Agreement, the Company has agreed for the benefit of the
Holders from time to time of the Securities and the Common Stock issuable upon
conversion thereof that it will, at its expense, (a) within 90 days after the
first date of original issuance of the Securities, file a shelf registration
statement (the "Shelf Registration Statement") with the Commission with respect
to resales of the Securities and the Common Stock issuable upon conversion
thereof (together, the "Registrable Securities"), (b) use its best efforts to
cause such Shelf Registration Statement to be declared effective by the
Commission as promptly as practicable but no later than 180 days after the first
date of original issuance of the Securities (the "Settlement Date"), and (c) use
its best efforts to maintain such Shelf Registration Statement continuously
effective under the Securities Act, until the second anniversary of the date of
the effectiveness of the Shelf Registration Statement or such earlier date as is
provided in the Registration Rights Agreement.
22
<PAGE> 30
If (i) on or prior to 90 days following the first date of original
issuance of the Securities, a Shelf Registration Statement has not been filed
with the Commission, or (ii) on or prior to 180 days following the Settlement
Date, such Shelf Registration Statement is not declared effective (each, a
"Registration Default"), additional interest ("Liquidated Damages") will accrue
on this Security from and including the day following such Registration Default
to but excluding the day on which such Registration Default has been cured.
Liquidated Damages will be paid semi-annually in arrears, with the first
semi-annual payment due on the first Interest Payment Date in respect of the
Securities following the date on which such Liquidated Damages begin to accrue,
and will accrue at a rate per annum equal to an additional one-quarter of one
percent (0.25%) of the principal amount of the Securities to and including the
90th day following such Registration Default and at a rate per annum equal to
one-half of one percent (0.50%) thereof from and after the 91st day following
such Registration Default. In the event that the Shelf Registration Statement
ceases to be effective prior to the second annual anniversary of the initial
effective date of the Shelf Registration Statement or such earlier date as is
provided in the Registration Rights Agreement for a period in excess of 60 days,
whether or not consecutive, during any 12-month period, then the interest rate
borne by the Securities shall increase by an additional one-half of one percent
(0.50%) per annum from the 61st day of the applicable 12-month period such Shelf
Registration Statement ceases to be effective to but excluding the day on which
the Shelf Registration Statement again becomes effective.
Whenever in this Security there is a reference, in any context, to the
payment of the principal of, premium, if any, or interest on, or in respect of,
any Security such reference shall be deemed to include reference to the payment
of Liquidated Damages payable as described in the preceding paragraph to the
extent that, in such context, Liquidated Damages are, were or would be payable
in respect of such Security and express mention of the payment of Liquidated
Damages (if applicable) in any provisions of this Security shall not be
construed as excluding Liquidated Damages in those provisions of this Security
where such express mention is not made.
The Holder of this Security, by its acceptance thereof, agrees to be
bound by the terms of the Registration Rights Agreement relating to the
Securities and the Common Stock issuable upon conversion thereof.
If a Change in Control occurs, the Holder of this Security shall have
the right, at the Holder's option in accordance with the provisions of the
Indenture, to require the Company to repurchase this Security (or any portion of
the principal amount hereof that is an integral multiple of $1,000) for cash at
a Repurchase Price equal to 100% of the principal amount thereof plus interest
accrued to the Repurchase Date. Whenever in this Security there is a reference,
in any context, to the principal of any Security as of any time, such reference
shall be deemed to include reference to the Repurchase Price payable in respect
of such Security to the extent that such Repurchase Price is, was or would be so
payable at such time, and express mention of the Repurchase Price in any
provision of this Security shall not be construed as excluding the Repurchase
Price in those provisions of this Security when such express mention is not
made.
The indebtedness evidenced by this Security is, to the extent and in
the manner provided in
23
<PAGE> 31
the Indenture, subordinate and subject in right of payment to the prior payment
in full of all amounts then or thereafter to become due on all Senior Debt of
the Company, and this Security is issued subject to such provisions of the
Indenture with respect thereto. Each Holder of this Security, by accepting the
same, (a) agrees to and shall be bound by such provisions, (b) authorizes and
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and (c) appoints the
Trustee its attorney-in-fact for any and all such purposes.
If an Event of Default shall occur and be continuing, the principal of
all the Securities may be declared due and payable to the extent, in the manner
and with the effect provided in the Indenture. Upon payment (i) of the amount of
principal so declared due and payable and (ii) of interest on any overdue
principal and overdue interest, all of the Company's obligations in respect of
the payment of the principal of and interest on the Securities shall terminate.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee either (a) with the written consent of
the Holders of a majority in principal amount of the Securities at the time
outstanding, or (b) by the adoption of a resolution, at a meeting of Holders of
the Outstanding Securities at which a quorum is present by the Holders of 662/3%
in aggregate principal amount of the Outstanding Securities represented at such
meeting. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive compliance
by the Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Security shall be conclusive and binding upon such Holder
and upon all future Holders of this Security and of any Security issued in
exchange herefor or in lieu hereof, whether or not notation of such consent or
waiver is made upon this Security or such other Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default, the Holders of not
less than 25% in aggregate principal amount of the Outstanding Securities shall
have made written request to the Trustee to institute proceedings in respect of
such Event of Default and offered the Trustee indemnity satisfactory to it and
the Trustee shall not have received from the Holders of a majority in principal
amount of the Securities Outstanding a direction inconsistent with such request
and shall have failed to institute any such proceedings for 60 days after
receipt of such notice, request and offer of indemnity. The foregoing shall not
apply to any suit instituted by the Holder of this Security for the enforcement
of any payment of principal hereof or interest hereon (including any Liquidated
Damages) on or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall
24
<PAGE> 32
alter or impair the obligations of the Company, which are absolute and
unconditional, to pay the principal of, premium, if any, and interest (including
Liquidated Damages) on this Security at the times, places and rate, and in the
coin or currency, herein prescribed or to convert this Security as provided in
the Indenture.
As provided in the Indenture and subject to certain limitations and
satisfaction of certain requirements therein set forth, the transfer of this
Security is registrable on the Security Register upon surrender of this Security
for registration of transfer at the office or agency of the Company as may be
designated by it for such purpose in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Security Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees. No
service charge shall be made to a Holder for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to recover
any tax or other governmental charge payable in connection therewith.
Prior to due presentation of this Security for registration of
transfer the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered, as the owner
thereof for all purposes, whether or not such Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, THE UNITED STATES OF AMERICA
WITHOUT REGARD TO PRINCIPLES REGARDING CONFLICTS OF LAWS.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
ELECTION OF HOLDER TO REQUIRE REPURCHASE
1. Pursuant to Section 15.1 of the Indenture, the undersigned hereby
elects to have this Security repurchased by the Company.
2. The undersigned hereby directs the Trustee or the Company to pay it
or ________________________________________________________________ an amount in
cash equal to 100% of the principal amount hereof, plus interest accrued to the
Repurchase Date, as provided in the Indenture.
Dated:____________________________
____________________________
25
<PAGE> 33
Signature
_________________________________
Signature Guaranteed
Principal amount to be repurchased:___________________________________
Remaining principal amount following such repurchase:_________________
NOTICES: The signature to the foregoing Election must correspond to
the Name as written upon the face of this Security in every particular, without
alteration or any change whatsoever.
If payment is to be made to a person other than the signatory above,
the signature must be guaranteed by an "Eligible Institution" (banks, stock
brokers, savings and loan associations and credit unions) with membership in an
approved signature guarantee medallion program pursuant to Commission Rule
17Ad-15.
SECTION 2.4 Form of Trustee's Certificate of Authentication.
This is one of the Securities referred to in the within-mentioned
Indenture.
DATED:
AMERICAN STOCK TRANSFER
& TRUST COMPANY, as Trustee
By:_______________________________
Authorized Signatory
ARTICLE III
THE SECURITIES
SECTION 3.1 Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $115,000,000,
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Sections
3.4, 3.5, 3.6, 9.5, or 13.2.
The Securities shall be known and designated as the "5% Convertible
Subordinated Notes due 2003" of the Company. Their Stated Maturity shall be June
15, 2003 and they shall bear interest at
26
<PAGE> 34
the rate of 5% per annum from June 26, 1998, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, as the case
may be, payable semi-annually in arrears on June 15 and December 15 of each
year, commencing December 15, 1998, and at Maturity, until the principal thereof
is paid or made available for payment, provided that any amount of such
principal or interest that is overdue shall bear interest at the rate of 5% per
annum (to the extent that payment of such interest shall be legally
enforceable), from the date such amount is due until it is paid or made
available for payment, and such interest on any overdue amount shall be payable
on demand.
The principal of, premium, if any and interest on the Securities
(including Liquidated Damages), shall be payable in immediately available funds
and in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts, at the office
of American Stock Transfer & Trust Company (located at 40 Wall Street, New York,
New York 10005) in the Borough of Manhattan, The City of New York or, at the
option of the Holder and subject to any fiscal or other laws and regulations
applicable thereto, at any other office or agency of the Company or any Paying
Agent outside The City of New York; provided, however, that payment of interest
may, at the option of the Company, be made by check mailed to the address of the
Person entitled thereto as such address shall appear in the Security Register.
The Securities shall be redeemable at the Company's option, in whole
or in part, at any time on or after June 15, 2001 as provided in the form of
Securities set forth in Sections 2.2 and 2.3 and Article XII.
The Securities shall be convertible as provided in Article XIII.
The Securities shall be subordinated in right of payment to Senior
Debt of the Company as provided in Article XIV.
The Securities shall be subject to repurchase by the Company at the
option of the Holders as provided in Article XV.
SECTION 3.2 Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple of $1,000
in excess thereof.
SECTION 3.3 Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by any one
of its Chairman of the Board, its Chief Executive Officer, its President, or any
one of its Vice Presidents, under a facsimile of its corporate seal reproduced
thereon attested by its Secretary or one of its Assistant Secretaries. Any such
signature may be manual or facsimile.
Securities bearing the manual or facsimile signature of individuals
who were at any time the
27
<PAGE> 35
proper Officers of the Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Securities or did not hold such offices at
the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with such Company Order shall authenticate and make available for delivery such
Securities as in this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee or the Authenticating Agent by manual signature of an
authorized signatory, and such certificate upon such Security shall be
conclusive evidence, and the only evidence, that such Security has been duly
authenticated and delivered hereunder.
SECTION 3.4 Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and make
available for delivery, temporary Securities which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the Officers executing such Securities may determine, as
evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 11.2, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and make
available for delivery in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
For purposes of this Section 3.4, each Global Security shall be
considered a definitive Security.
28
<PAGE> 36
SECTION 3.5 Registration, Registration of Transfer and Exchange; Restrictions on
Transfer.
(a) The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency designated pursuant to Section 11.2 being herein
sometimes collectively referred to as the "Security Register") in which, subject
to such reasonable regulations as it may prescribe, the Company shall provide
for the registration of Securities and of transfers of Securities. The Trustee
is hereby appointed "Security Registrar" for the purpose of registering
Securities and transfers of Securities as herein provided. Upon surrender for
registration of transfer of any Security at an office or agency of the Company
designated pursuant to Section 11.2 for such purpose, and subject to the other
provisions of this Section 3.5, the Company shall execute, and the Trustee shall
authenticate and make available for delivery, in the name of the designated
transferee or transferees, one or more new Securities of any authorized
denominations and of a like aggregate principal amount.
At the option of the Holder, and subject to the other provisions of
this Section 3.5, Securities may be exchanged for other Securities of any
authorized denominations and of a like aggregate principal amount, upon
surrender of the Securities to be exchanged at such office or agency. Whenever
any Securities are so surrendered for exchange, and subject to the other
provisions of this Section 3.5, the Company shall execute, and the Trustee shall
authenticate and make available for delivery, the Securities which the Holder
making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and subject to the other provisions of this Section 3.5, entitled to the
same benefits under this Indenture, as the Securities surrendered upon such
registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer or exchange of securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 3.4, 13.2 or 15.3(f) not involving any
transfer and subject to Section 13.9.
(b) Notwithstanding any other provisions of this Indenture or the
Securities (but subject to Section 2.1), transfers of a Global Security, in
whole or in part, transfers and exchanges of interests therein of the kinds
described in clauses (2), (3), (4) and (5) below and exchanges of interests in
Global Securities, and transfers or exchanges of other Securities as described
in clause (4) below, shall be made only in accordance with this Section 3.5(b).
Transfers and exchanges subject
29
<PAGE> 37
to this Section 3.5 shall also be subject to the other provisions of this
Indenture that are not inconsistent with this Section 3.5.
(i) Limitation on Transfers of a Global Security. A Global
Security may not be transferred, in whole or in part, to any Person
other than the Depositary or a nominee thereof, and no such transfer
to any such other Person may be registered; provided that this clause
(i) shall not prohibit any transfer of a Security that is issued in
exchange for a Global Security but is not itself a Global Security. No
transfer of a Security to any Person shall be effective under this
Indenture or the Securities unless and until such Security has been
registered in the name of such Person. Nothing in this Section
3.5(b)(i) shall prohibit or render ineffective any transfer of a
beneficial interest in a Global Security effected in accordance with
the other provisions of this Section 3.5(b).
(ii) Restricted Global Security to Regulation S Global Security.
If the holder of a beneficial interest in the Restricted Global
Security wishes at any time to transfer such interest to a Person who
wishes to take delivery thereof in the form of a beneficial interest
in the Regulation S Global Security, such transfer may be effected,
subject to the Applicable Procedures only in accordance with this
Section 3.5(b)(ii) and Section 3.5(b)(v). Upon receipt by the Trustee,
as Security Registrar, of (A) written instructions given in accordance
with the Applicable Procedures from any member of, or participants in,
the Depositary ("Agent Member") directing the Trustee to credit or
cause to be credited to a specified Agent Member's account a
beneficial interest in the Regulation S Global Security in a principal
amount equal to that of the beneficial interest in the Restricted
Global Security to be so transferred, (B) a written order given in
accordance with the Applicable Procedures containing information
regarding the account of the Agent Member (and, if applicable, the
Euroclear or CEDEL account, as the case may be) to be credited with,
and the account of the Agent Member to be debited for, such beneficial
interest and (C) a certificate in substantially the form set forth in
Annex B given by the holder of such beneficial interest, the Trustee,
as Security Registrar, shall instruct the Depositary to reduce the
principal amount of the Restricted Global Security, and to increase
the principal amount of the Regulation S Global Security, by the
principal amount of the beneficial interest in the Restricted Global
Security to be so transferred, and to credit or cause to be credited
to the account of the Person specified in such instructions (which
during the Restricted Period shall be the Agent Member for Euroclear
or CEDEL or both, as the case may be) a beneficial interest in the
Regulation S Global Security having a principal amount equal to the
amount by which the principal amount of the Restricted Global Security
was reduced upon such transfer.
(iii) Regulation S Global Security to Restricted Global Security.
If during the Restricted Period the holder of a beneficial interest in
the Regulation S Global Security wishes to transfer such interest to a
Person who wishes to take delivery thereof in the form of a beneficial
interest in the Restricted Global Security, such transfer may be
effected, subject to the Applicable Procedures, only in accordance
with this Section 3.5(b)(iii). Upon receipt by the Trustee, as
Security Registrar, of (A) written instructions given in accordance
with the
30
<PAGE> 38
Applicable Procedures from an Agent Member directing the Trustee to
credit or cause to be credited to a specified Agent Member's account a
beneficial interest in the Restricted Global Security in a principal
amount equal to that of the beneficial interest in the Regulation S
Global Security to be so transferred, (B) a written order given in
accordance with the Applicable Procedures containing information
regarding the account of the Agent Member to be credited with, and the
account of the Agent Member (and, if applicable, the Euroclear or
CEDEL account, as the case may be) to be debited for, such beneficial
interest and (C) if the transfer is requested prior to the expiration
of the Restricted Period, a certificate in substantially the form set
forth in Annex C given by the holder of such beneficial interest, the
Trustee, as Security Registrar, shall instruct the Depositary to
reduce the principal amount of the Regulation S Global Security and to
increase the principal amount of the Restricted Global Security, by
the principal amount of the beneficial interest in the Regulation S
Global Security to be so transferred, and to credit or cause to be
credited to the account of the Person specified in such instructions a
beneficial interest in the Restricted Global Security having a
principal amount equal to the amount by which the principal amount of
the Regulation S Global Security, as the case may be, was reduced upon
such transfer.
(iv) Exchanges. In the event that a Restricted Global Security or
any portion thereof is exchanged for a Regulation S Global Security or
Securities other than Global Securities, such other Securities may in
turn be exchanged (on transfer or otherwise) for Securities that are
not Global Securities or for beneficial interests in a Global Security
(if any is then outstanding) only in accordance with such procedures,
which shall be substantially consistent with the provisions of clauses
(i) through (iii) above and (v) below (including the certification
requirements intended to insure that transfers and exchanges of
beneficial interests in a Global Security comply with Rule 144A, Rule
144 or Regulation S, as the case may be) and any Applicable
Procedures, as may be from time to time adopted by the Company and the
Trustee.
(v) Interests in Regulation S Global Security to be Held Through
Euroclear or CEDEL. Until the termination of the Restricted Period,
interests in the Regulation S Global Security may be held only through
Agent Members acting for and on behalf of Euroclear and CEDEL,
provided that this Clause (v) shall not prohibit any transfer in
accordance with Section 3.5(b)(iii) hereof.
(c) Each Restricted Security and Global Security issued hereunder
shall, upon issuance, bear the legends required by Section 2.2 to be applied to
such a Security and such required legends shall not be removed from such
Security except as provided in the next sentence or paragraph (d) of this
Section 3.5. The legend required for a Restricted Security may be removed from a
Security if there is delivered to the Company such satisfactory evidence, which
may include an opinion of independent counsel, as may be reasonably required by
the Company that neither such legend nor the restrictions on transfer set forth
therein are required to ensure that transfers of such Security will not violate
the registration requirements of the Securities Act. Upon provision of such
satisfactory evidence, the Trustee, at the written direction of the Company,
shall authenticate and deliver in
31
<PAGE> 39
exchange for such Security another Security or Securities having an equal
aggregate principal amount that does not bear such legend. If such a legend
required for a Restricted Security has been removed from a Security as provided
above, no other Security issued in exchange for all or any part of such Security
shall bear such legend, unless the Company has reasonable cause to believe that
such other Security is a "restricted security" within the meaning of Rule 144
and instructs the Trustee in writing to cause a legend to appear thereon.
(d) The provisions of clauses (i), (ii), (iii) and (iv) below
shall apply only to Global Securities:
(i) Each Global Security authenticated under this Indenture shall
be registered in the name of the Depositary or a nominee thereof and
delivered to such Depositary or a nominee thereof or custodian
therefor, and each such Global Security shall constitute a single
Security for all purposes of this Indenture.
(ii) Notwithstanding any other provision in this Indenture or the
Securities, no Global Security may be exchanged in whole or in part
for Securities registered, and no transfer of a Global Security in
whole or in part may be registered, in the name of any Person other
than the Depositary or a nominee thereof unless (A) the Depositary (1)
has notified the Company that it is unwilling or unable to continue as
Depositary for such Global Security or (2) has ceased to be a clearing
agency registered under the Exchange Act, (B) in the case of a Global
Security held for an account of Euroclear or CEDEL, Euroclear or
CEDEL, as the case may be, (1) is closed for business for a continuous
period of 14 days (other than by reason of statutory or other
holidays) or (2) announces an intention permanently to cease business
or does in fact do so, (C) there shall have occurred and be continuing
an Event of Default with respect to such Global Security or (D) a
request for certificates has been made upon 60 days' prior written
notice given to the Trustee in accordance with the Depositary's
customary procedures and a copy of such notice has been received by
the Company from the Trustee. Any Global Security exchanged pursuant
to clause (A) or (B) above shall be so exchanged in whole and not in
part and any Global Security exchanged pursuant to clause (C) or (D)
above may be exchanged in whole or from time to time in part as
directed by the Depositary. Any Security issued in exchange for a
Global Security or any portion thereof shall be a Global Security,
provided that any such Security so issued that is registered in the
name of a Person other than the Depositary or a nominee thereof shall
not be a Global Security.
(iii) Securities issued in exchange for a Global Security or any
portion thereof pursuant to clause (ii) above shall be issued in
definitive, fully registered form, without interest coupons, shall
have an aggregate principal amount equal to that of such Global
Security or portion thereof to be so exchanged, shall be registered in
such names and be in such authorized denominations as the Depositary
shall designate and shall bear any legends required hereunder. Any
Global Security to
32
<PAGE> 40
be exchanged in whole shall be surrendered by the Depositary to the
Trustee, as Security Registrar. With regard to any Global Security to
be exchanged in part, either such Global Security shall be so
surrendered for exchange or, if the Trustee is acting as custodian for
the Depositary or its nominee with respect to such Global Security,
the principal amount thereof shall be reduced, by an amount equal to
the portion thereof to be so exchanged, by means of an appropriate
adjustment made on the records of the Trustee. Upon any such surrender
or adjustment, the Trustee shall authenticate and make available for
delivery the Security issuable on such exchange to or upon the written
order of the Depositary or an authorized representative thereof.
(iv) In the event of the occurrence of any of the events
specified in clause (ii) above, the Company will promptly make
available to the Trustee a reasonable supply of certificated
Securities in definitive, fully registered form, without interest
coupons.
(v) Neither any Agent Members nor any other Persons on whose
behalf Agent Members may act (including Euroclear and CEDEL and
account holders and participants therein) shall have any rights under
this Indenture with respect to any Global Security, or under any
Global Security, and the Depositary or such nominee, as the case may
be, may be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner and holder of such Global
Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the
Depositary or such nominee, as the case may be, or impair, as between
the Depositary, its Agent Members and any other person on whose behalf
an Agent Member may act, the operation of customary practices of such
Persons governing the exercise of the rights of a holder of any
Security.
SECTION 3.6 Mutilated, Destroyed, Lost or Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and make available for delivery
in exchange therefor a new Security of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and make
available for delivery, in lieu of any such destroyed, lost or stolen Security,
a new Security of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
33
<PAGE> 41
A Holder shall bear the cost to the Company of replacing a mutilated,
destroyed, stolen or lost Security. Upon the issuance of any new Security under
this Section, the Company also may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Trustee)
connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.7 Payment of Interest, Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security and the date of the
proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as in this Clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest which
shall be not more than 15 days and not less than 10 days prior to the date of
the proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify the
Company of such Special Record Date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder of Securities at such Holder's address as it appears in the
Security Register, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such
34
<PAGE> 42
Defaulted Interest and the Special Record Date therefor having been so mailed,
such Defaulted Interest shall be paid to the Persons in whose names the
Securities (or their respective Predecessor Securities) are registered at the
close of business on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this Clause, such manner of payment shall be
deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section and Section 3.5,
each Security delivered under this Indenture upon registration of transfer of or
in exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
Any Security surrendered for conversion during a Record Date Period
(except Securities called for redemption on a Redemption Date or to be
repurchased on a Repurchase Date during, in each case, such period) must be
accompanied by payment of an amount equal to the interest payable on the
Interest Payment Date relating to such Record Date Period on the principal
amount of such Securities being surrendered for conversion, and the interest
payable in respect of such Security on such Interest Payment Date shall be paid
to the Holder of such Security as of the Regular Record Date relating to such
Record Date Period. The interest payable on such Interest Payment Date with
respect to any Security which has been called for redemption on a Redemption
Date, or is repurchaseable on a Repurchase Date, occurring, in either case,
during such Record Date Period, which Security is surrendered for conversion
during such Record Date Period, shall be paid to the Holder of such Security
being converted in an amount equal to the interest that would have been payable
on such Security if such Security had been converted as of the close of business
on such Interest Payment Date. Interest payable in respect of any Security
surrendered for conversion on or after an Interest Payment Date shall be paid to
the Holder of such Security as of the next preceding Regular Record Date,
notwithstanding the exercise of the right of conversion.
SECTION 3.8 Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee shall treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and (subject to
Sections 3.5 and 3.7) interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
35
<PAGE> 43
SECTION 3.9 Cancellation.
All Securities surrendered for payment, redemption, repurchase,
registration of transfer or exchange or conversion shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee. All Securities so
delivered shall be canceled promptly by the Trustee. The Company may at any time
deliver to the Trustee for cancellation any Securities previously authenticated
and delivered hereunder which the Company may have acquired in any manner
whatsoever, and all Securities so delivered shall be promptly canceled by the
Trustee. No Securities shall be authenticated in lieu of or in exchange for any
Securities canceled as provided in this Section 3.9 except as expressly
permitted by this Indenture. All canceled Securities and any certificates in
connection therewith shall be held by the Trustee in accordance with its
customary practices until destroyed by the Trustee; provided, however, that the
Trustee shall not be required to destroy such Securities. The Company may not
issue new Securities to replace Securities it has paid in full or delivered to
the Trustee for cancellation.
SECTION 3.10 Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
SECTION 3.11 Cusip Numbers.
The Company in issuing the Securities may use "CUSIP" and "CINS"
numbers (if then generally in use), and the Trustee shall use CUSIP numbers or
CINS numbers, as the case may be, in notices of redemption, repurchase or
exchange as a convenience to the Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of redemption,
repurchase or exchange and that reliance may be placed only on the other
identification numbers printed on the Securities.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further
effect (except as to any surviving rights of conversion, or replacement of
Securities herein expressly provided for and any right to receive the payment of
principal of, premium, if any, or interest on, such Securities or Liquidated
Damages under the ninth and tenth paragraphs on the reverse of the form of
Securities set forth in Section 2.3), and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(a) either
36
<PAGE> 44
(i) all Securities theretofore authenticated and delivered
(other than (A) Securities which have been destroyed, lost or
stolen and which have been replaced or paid as provided in
Section 3.6 and (B) Securities for whose payment money has
theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 11.3) have
been delivered to the Trustee for cancellation; or
(ii) all such Securities not theretofore delivered to the
Trustee for cancellation (other than Securities referred to in
clauses (A) and (B) of clause (a)(i) above)
(A) have become due and payable, or
(B) will have become due and payable at their Stated
Maturity within one year, or
(C) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name,
and at the expense, of the Company,
and the Company, in the case of clause (A), (B) or (C) above, has deposited or
caused to be deposited with the Trustee as trust funds (immediately available to
the Holders in the case of clause (i)) in trust for the purpose an amount
sufficient to pay and discharge the entire indebtedness on such Securities not
theretofore delivered to the Trustee for cancellation, for principal, premium,
if any, and interest (including any Liquidated Damages), to the date of such
deposit (in the case of Securities which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be;
(b) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with, and that any consents required under any
document evidencing and/or securing Senior Debt have been obtained and are in
full force and effect.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7 and, if money shall
have been deposited with the Trustee pursuant to clause (a)(ii) of this Section
4.1, the obligations of the Trustee under Section 4.2 and the last paragraph of
Section 11.3 shall survive. Funds held in trust pursuant to this Section are not
subject to the provisions of Article XIV.
37
<PAGE> 45
SECTION 4.2 Application of Trust Money.
Subject to the provisions of the last paragraph of Section 11.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and interest for
whose payment such money has been deposited with the Trustee.
All moneys deposited with the Trustee pursuant to Section 4.1 (and
held by it or any Paying Agent) for the payment of Securities subsequently
converted shall be returned to the Company upon Company Request.
38
<PAGE> 46
ARTICLE V
REMEDIES
SECTION 5.1 Events of Default.
"Event of Default," whenever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article XIV or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) failure to pay the principal or Redemption Price of any Security
at its Maturity, whether or not such payment is prohibited pursuant to Article
XIV hereof; or
(2) failure to pay any interest (including any Liquidated Damages)
upon any Security when it becomes due and payable, whether or not such payment
is prohibited pursuant to Article XIV hereof, and continuance of such default
for a period of 30 days; or
(3) failure to provide a Company Notice in the event of a Change in
Control as provided by Section 15.3; or
(4) failure to perform any other covenant or warranty of the Company
in this Indenture (other than a covenant a default in whose performance or whose
breach is elsewhere in this Section specifically dealt with), and continuance of
such default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in aggregate principal amount of
the Outstanding Securities a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(5) Any indebtedness for borrowed money by the Company in an
outstanding principal amount in excess of $5,000,000, whether such Indebtedness
now exists or shall hereafter be created, is not paid at final maturity or the
payment thereof is accelerated and such default in payment or acceleration has
not been cured or rescinded or annulled within a period of 30 days after there
shall have been given, by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Securities a written notice specifying such
default and requiring the Company to cause such indebtedness to be discharged or
cause such acceleration to be rescinded or annulled and stating that such notice
is a "Notice of Default" hereunder; provided, however, that the Trustee shall
have no obligation, either express or implied, to give any notice, make any
demand, make any collection, initiate any judicial proceeding, file any proofs
of claim or take any action as a result of an Event of Default described
39
<PAGE> 47
in this clause (5), unless and until the Trustee has received written notice of
such Event of Default from the Company, a Holder of a Security or a holder of
Indebtedness of the Company;
(6) the entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of the Company in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (ii) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of the Company under any applicable Federal or State law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order for relief or any such other decree or order unstayed
and in effect for a period of 60 consecutive days; or
(7) the commencement by the Company of a voluntary case or proceeding
under the applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of a decree or order
for relief in respect of the Company in an involuntary case or proceeding under
any applicable Federal or State bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under any applicable Federal or State law, or
the consent by it to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any substantial part
of its property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its debts
generally as they become due.
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 5.1(1), (2), (6) and (7)) occurs and is continuing, then and in every
such case the Trustee shall, at the written request of the Holders of not less
than 25% in aggregate principal amount of the Outstanding Securities, or the
Holders of not less than 25% in aggregate principal amount of the Outstanding
Securities shall directly, by notice in writing to the Company, declare the
principal of all the Securities to be due and payable immediately, and upon any
such declaration such principal and any accrued interest and any unpaid
Liquidated Damages thereon shall become immediately due and payable. If an Event
of Default specified in Section 5.1(1) or (2) occurs and is continuing, the
Holder of any Outstanding Security may, by notice in writing to the Company
(with a copy to the Trustee), declare the principal of such Security to be due
and payable immediately, and upon any such declaration such principal and
(subject to Section 3.7) any accrued interest and Liquidated Damages thereon
shall become immediately due and payable. If an Event of Default specified in
Sections 5.1(6) and (7) occurs and is continuing, the principal of, premium, if
any, and any accrued interest (including any Liquidated Damages) on, all of the
Securities then Outstanding shall ipso facto become due and payable immediately
without any declaration or other Act on the part of the Trustee or any Holder.
40
<PAGE> 48
At any time after such declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article V provided, the Holders of a majority
in principal amount of the Outstanding Securities, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(i) all overdue interest (including any Liquidated Damages)
on all Securities,
(ii) the principal of any Securities which have become due
otherwise than by such declaration of acceleration and any
interest thereon at the rate borne by the Securities,
(iii) to the extent that payment of such interest is lawful,
interest upon overdue interest at a rate of 5% per annum, and all
sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(b) all Events of Default, other than the non-payment of the
principal of, premium, if any, and any interest (including Liquidated Damages)
on, Securities which have become due solely by such declaration of acceleration,
have been cured or waived as provided in Section 5.13.
No such rescission or annulment shall affect any subsequent default or
impair any right consequent thereon.
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(a) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default continues
for a period of 30 days,
or,
(b) default is made in the payment of the principal of any
Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and interest and, to the extent that payment of such
interest shall be legally enforceable, interest on any overdue
41
<PAGE> 49
principal and on any overdue interest, at a rate of 5% per annum, and in
addition thereto, such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders of Securities by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any such rights, whether for
the specific enforcement of any covenant or agreement in this Indenture or in
aid of the exercise of any power granted herein, or to enforce any other proper
remedy.
SECTION 5.4 Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or either of
their creditors, the Trustee (irrespective of whether the principal of, and any
interest on, the Securities shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the Trustee shall
have made any demand on the Company for the payment of overdue principal or
interest) shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(a) to file and prove a claim for the whole amount of principal,
premium, if any and interest (including Liquidated Damages) owing and unpaid in
respect of the Securities and take such other actions, including participating
as a member, voting or otherwise, of any official committee of creditors
appointed in such matter, and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements, advances and
other amounts due under Section 6.7 of the Trustee and each predecessor Trustee,
its agents and counsel) and of the Holders of Securities allowed in such
judicial proceeding, and
(b) to collect and receive any moneys or other property payable
or deliverable on any such claim and to distribute the same, and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder of
Securities by his acceptance thereof to make such payments to the Trustee and,
in the event that the Trustee shall consent to the making of such payments
directly to the Holders of Securities, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements
42
<PAGE> 50
and advances of the Trustee, and each predecessor Trustee, its agents and
counsel and any other amounts due the Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a Security
any plan of reorganization, arrangement, adjustment, or composition affecting
the Securities or the rights of any Holder thereof or to authorize the Trustee
to vote in respect of the claim of any Holder of a Security in any such
proceeding; provided, however, that the Trustee may, on behalf of such Holders,
vote for the election of a trustee in bankruptcy or similar official and be a
member of a creditors' or other similar committee.
SECTION 5.5 Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, and each predecessor Trustee, its
agents and counsel, be for the ratable benefit of the Holders of the Securities
in respect of which judgment has been recovered.
SECTION 5.6 Application of Money Collected.
Any money collected by the Trustee pursuant to this Article V shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or interest,
upon presentation of the Securities and the notation thereon of the payment if
only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
6.7;
SECOND: To the payment of the amounts then due and unpaid for
principal of, premium, if any, and interest (including any Liquidated Damages)
on the Securities in respect of which or for the benefit of which such money has
been collected, ratably, without preference or priority of any kind, according
to the amounts due and payable on such Securities for principal, premium, if
any, and interest (including any Liquidated Damages), respectively; and
THIRD: Subject to Article XIV, any remaining amounts shall be repaid
to the Company.
SECTION 5.7 Limitation on Suits.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless:
43
<PAGE> 51
(a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% in aggregate principal
amount of the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee indemnity
satisfactory to it against the costs, expenses and liabilities to be incurred in
compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority in
aggregate principal amount of the Outstanding Securities;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all such
Holders.
In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of the Holders, each representing
less than a majority in aggregate principal amount of the Outstanding
Securities, the Trustee in its sole discretion may determine what action, if
any, shall be taken, notwithstanding any other provisions of this Indenture, and
shall have no liability to any person for such action or inaction.
SECTION 5.8 Unconditional Right of Holders to Receive Principal and Interest and
to Convert.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of, premium, if any, and (subject to Section
3.7) interest (including any Liquidated Damages) on such Security on the
respective Stated Maturities expressed in such Security (or, in the case of
redemption or repurchase, on the Redemption Date or Repurchase Date, as the case
may be), and to convert such Security in accordance with Article XIII, and to
institute suit for the enforcement of any such payment and right to convert, and
such rights shall not be impaired without the consent of such Holder.
44
<PAGE> 52
SECTION 5.9 Restoration of Rights and Remedies.
If the Trustee or any Holder of a Security has instituted any
proceeding to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case, subject to any determination in such proceeding, the Company, the Trustee
and the Holders of Securities shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Trustee and such Holders shall continue as though no such proceeding had been
instituted.
SECTION 5.10 Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 3.6, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders of Securities is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
SECTION 5.11 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
any acquiescence therein. Every right and remedy given by this Article V or by
law to the Trustee or to the Holders of Securities may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the Holders
of Securities, as the case may be.
SECTION 5.12 Control by Holders of Securities.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided that
(a) such direction shall not be in conflict with any rule of law
or with this Indenture, and
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction or this Indenture.
45
<PAGE> 53
SECTION 5.13 Waiver of Past Defaults.
The Holders, either (a) through the written consent of not less than a
majority in principal amount of the Outstanding Securities, or (b) by the
adoption of a resolution, at a meeting of Holders of the Outstanding Securities
at which a quorum is present, by the Holders of at least 66-2/3% in aggregate
principal amount of the Outstanding Securities represented at such meeting, may
on behalf of the Holders of all the Securities waive any past default hereunder
and its consequences, except a default (1) in the payment of the principal of,
premium, if any, or interest (including any Liquidated Damages) on any Security,
or (2) in respect of a covenant or provision hereof which under Article IX
cannot be modified or amended without the consent of the Holders of each
Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 5.14 Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant; but
the provisions of this Section 5.14 shall not apply to any suit instituted by
the Company, to any suit instituted by the Trustee, to any suit instituted by
any Holder, or group of Holders, holding in the aggregate more than 10% in
aggregate principal amount of the Outstanding Securities, or to any suit
instituted by any Holder of any Security for the enforcement of the payment of
the principal of or interest on any Security on or after the respective Stated
Maturity or Maturities expressed in such Security (or, in the case of redemption
or repurchase, on or after the Redemption Date or the Repurchase Date, as the
case may be) or for the enforcement of the right to convert any Security in
accordance with Article XIII.
SECTION 5.15 Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
46
<PAGE> 54
ARTICLE VI
THE TRUSTEE
SECTION 6.1 Certain Duties and Responsibilities.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs.
(b) Except during the continuance of an Event of Default,
(i) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and
no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; but in the case of any such
certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture.
(c) No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act, or its own wilful misconduct, except that
(i) this paragraph (c) shall not be construed to limit the
effect of paragraph (b) of this Section;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it
shall be proved that the Trustee was negligent in ascertaining
the pertinent facts;
(iii) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of a majority in
principal amount of the Outstanding Securities relating to the
time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture; and
(iv) no provision of this Indenture shall require the
Trustee to expend or
47
<PAGE> 55
risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or
indemnity satisfactory to it against such risk or liability is
not assured to it.
(d) Whether or not therein expressly so provided, every provision
of this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
SECTION 6.2 Notice of Defaults.
Within 90 days after the occurrence of any default hereunder, the
Trustee shall give to all Holders of Securities, in the manner provided in
Section 1.5, notice of such default hereunder actually known to a Responsible
Officer of the Trustee, unless such default shall have been cured or waived;
provided, however, that in the case of any default of the character specified in
Section 5.1(4), no such notice to Holders of Securities shall be given until at
least 30 days after the occurrence of such default. For the purpose of this
Section, the term "default" means any event which is, or after notice or lapse
of time or both would become, an Event of Default.
SECTION 6.3 Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(a) the Trustee may conclusively rely and shall be protected in
acting or refraining from acting upon any resolution, Officers' Certificate,
other certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors of the Company shall be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
conclusively rely upon an Officers' Certificate or an Opinion of Counsel;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of
the rights or powers
48
<PAGE> 56
vested in it by this Indenture at the request or direction
of any of the Holders of Securities pursuant to this Indenture, unless such
Holders shall have offered to the Trustee security or indemnity satisfactory to
it against the costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document, but
the Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the Company, personally or by agent
or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents,
attorneys, custodians or nominees and the Trustee shall not be responsible for
any misconduct or negligence on the part of any agent, attorney, custodian or
nominee appointed with due care by it hereunder.
SECTION 6.4 Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities (except the
Trustee's certificates of authentication) shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the use
or application by the Company of Securities or the proceeds thereof.
SECTION 6.5 May Hold Securities, Act as Trustee under Other Indentures.
The Trustee, any Authenticating Agent, any Paying Agent, any
Conversion Agent or any other agent of the Company or the Trustee, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with the Company with the same rights it would have if it
were not Trustee, Authenticating Agent, Paying Agent, Conversion Agent or such
other agent.
The Trustee may become and act as trustee under other indentures under
which other securities, or certificates of interest or participation in other
Securities, of the Company are outstanding in the same manner as if it were not
Trustee hereunder.
SECTION 6.6 Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company in writing.
49
<PAGE> 57
SECTION 6.7 Compensation and Indemnification of Trustee and its Prior Claims.
The Company agrees
(a) to pay to the Trustee from time to time such compensation as
the Company and the Trustee shall from time to time agree in writing for all
services rendered by it hereunder (which compensation shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust);
(b) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision of
this Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith; and
(c) to indemnify the Trustee (and its directors, officers,
employees and agents) for, and to hold it harmless against, any and all loss,
damage, claim, liability or expense, including taxes (other than taxes based on
the income of the Trustee), incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration of
this trust, including the reasonable costs, expenses and reasonable attorneys'
fees of defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
When the Trustee incurs expenses or renders services in connection
with an Event or Default specified in Section 5.1(6) or Section 5.1(7), the
expenses (including the reasonable charges of its counsel) and the compensation
for the services are intended to constitute expenses of the administration under
any applicable Federal or State bankruptcy, insolvency or other similar law.
The Trustee shall have a lien prior to the Securities as to all
property and funds held by it hereunder for any amount owing it or any
predecessor Trustee pursuant to this Section 6.7, except with respect to funds
held in trust for the benefit of the Holders of particular Securities.
The provisions of this Section shall survive the termination of this
Indenture or the earlier resignation or removal of the Trustee.
SECTION 6.8 Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America, any State thereof, or the District of Columbia, authorized under such
laws to exercise corporate trust powers, having (or if the Trustee is a
subsidiary of a bank holding company, its parent company shall have (and such
parent company shall guarantee the obligations of the Trustee hereunder)) a
combined capital and surplus of at least $10,000,000, subject to supervision or
examination by Federal or State authority, in good standing and having an office
or agency in The City of New York. If such corporation publishes reports of
50
<PAGE> 58
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
SECTION 6.9 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.10.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If the instrument of acceptance by a successor Trustee
required by this Section 6.9 shall not have been delivered to the Trustee within
30 days after the giving of such notice of resignation, the resigning Trustee
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(c) The Trustee may be removed at any time by an Act of the
Holders of a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and the Company.
(d) If at any time:
(i) the Trustee shall cease to be eligible under Section 6.8
and shall fail to resign after written request therefor by the
Company or by any Holder of a Security who has been a bona fide
Holder of a Security for at least six months, or
(ii) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the Trustee
or of its property shall be appointed or any public officer shall
take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or
liquidation, then, in any such case (A) the Company by a Board
Resolution may remove the Trustee, or (B) subject to Section
5.14, any Holder of a Security who has been a bona fide Holder of
a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment
of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Trustee for any cause,
the Company, by a Board Resolution, shall promptly appoint a successor Trustee
and shall comply with the applicable requirements of this Section 6.9 and
Section 6.10. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company and the retiring
51
<PAGE> 59
Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment in accordance with the applicable requirements of Section
6.10, become the successor Trustee and supersede the successor Trustee appointed
by the Company. If no successor Trustee shall have been so appointed by the
Company or the Holders of Securities and accepted appointment in the manner
required by this Section 6.9 and Section 6.10, any Holder of a Security who has
been a bona fide Holder of a Security for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders of Securities in the manner provided in Section 1.5. Each notice shall
include the name of the successor Trustee and the address of its Corporate Trust
Office.
Notwithstanding the replacement of the Trustee pursuant to this
Section 6.9, the Company's obligations under Section 6.7 shall continue for the
benefit of the retiring Trustee.
The retiring Trustee shall not be liable for the acts or omissions of
any successor Trustee hereunder.
SECTION 6.10 Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on the request of the Company or the
Successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be eligible under this Article.
SECTION 6.11 Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise eligible under this Article,
without the execution or filing of any paper
52
<PAGE> 60
or any further act on the part of any of the parties hereto. In case any
Securities shall have been authenticated, but not delivered, by the Trustee then
in office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Securities
so authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities.
SECTION 6.12 Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents acceptable
to the Company with respect to the Securities which shall be authorized to act
on behalf of the Trustee to authenticate Securities issued upon exchange or
substitution pursuant to this Indenture. Securities so authenticated shall be
entitled to the benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder, and every reference
in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall at all
times be a corporation organized and doing business under the laws of the United
States of America or any State thereof and authorized under such laws to act as
Authenticating Agent, having (or if such Authenticating Agent is a subsidiary of
a bank holding company, its parent company shall have (and such parent company
shall guarantee the obligations of such Authenticating Agent hereunder)) a
combined capital and surplus of not less than $10,000,000 or its equivalent in
another currency or composite currencies and subject to supervision or
examination by government authority. If such Authenticating Agent publishes
reports of condition at least annually, pursuant to law or to the requirements
of said supervising or examining authority, then for the purposes of this
Section 6.12, the combined capital and surplus of such Authenticating Agent
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time an Authenticating Agent
shall cease to be eligible in accordance with the provisions of this Section
6.12, such Authenticating Agent shall resign immediately in the manner and with
the effect specified in this Section 6.12.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section 6.12, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.12,
53
<PAGE> 61
the Trustee may appoint a successor Authenticating Agent which shall be
acceptable to the Company. Any successor Authenticating Agent upon acceptance of
its appointment hereunder shall become vested with all the rights, powers and
duties of its predecessor hereunder, with like effect as if originally named as
an Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section 6.12.
If an Authenticating Agent is appointed with respect to the Securities
pursuant to this Section 6.12, the Securities may have endorsed thereon, in
addition to or in lieu of the Trustee's certification of authentication, an
alternative certificate of authentication in the following form:
This is one of the Securities referred to in the within-mentioned
Indenture.
DATED:
American Stock Transfer & Trust
Company, as Trustee
By:_________________________________
as Authenticating Agent
By:_________________________________
Authorized Signatory
SECTION 6.13 Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
ARTICLE VII
HOLDER'S LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1 Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after the Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders of Securities as of such Regular Record Date, and
54
<PAGE> 62
(b) at such other times as the Trustee may reasonably request in
writing, within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 7.2 Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in Section 7.1 and the names
and addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it pursuant to Section
7.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act for holders of securities issued under an indenture
qualified pursuant to the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to names and addresses of Holders made pursuant
to the Trust Indenture Act or the Code.
SECTION 7.3 Reports by the Company.
(a) The Company shall file with the Trustee, within 30 days after
the Company is required to file the same with the Commission, copies of the
annual reports and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the Commission may by rules and
regulations prescribe) which the Company is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act. In the event the Company is
not subject to Section 13 or 15(d) of the Exchange Act, it shall file with the
Trustee upon request the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
(b) The Company shall file with the Trustee such additional
information, documents and reports with respect to compliance by the Company
with the conditions and covenants provided for in this Indenture as may be
requested from time to time by the Trustee.
55
<PAGE> 63
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR
LEASE
SECTION 8.1 Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person
or, directly or indirectly, convey, transfer, sell or lease or otherwise dispose
of all or substantially all of its properties and assets to any Person (other
than a wholly owned Subsidiary), and the Company shall not permit any Person
(other than a wholly owned Subsidiary of the Company) to consolidate with or
merge into the Company or convey, transfer, sell or lease all or substantially
all of its properties and assets to the Company, unless:
(a) in case the Company shall consolidate with or merge into
another Person or convey, transfer, sell or lease all or substantially all of
its properties and assets to any Person, the Person formed by such consolidation
or into which the Company is merged or the Person which acquires by conveyance,
transfer or sale, or which leases, all or substantially all of the properties
and assets of the Company shall be a corporation, limited liability company,
partnership or trust, shall be organized and validly existing under the laws of
the United States of America, any State thereof or the District of Columbia and
shall expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, the due and punctual payment of the principal of,
premium, if any, and interest (including Liquidated Damages payable, if any,
pursuant to Section 11.12) on all of the Securities, as applicable, and the
performance or observance of every covenant of this Indenture on the part of the
Company to be performed or observed and shall have provided for conversion
rights in accordance with Article XIII;
(b) immediately after giving effect to such transaction, no Event
of Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have occurred and be continuing; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer, sale or lease and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture comply
with this Article and that all conditions precedent herein provided for relating
to such transaction have been complied with.
SECTION 8.2 Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer, sale or lease of all or the
properties and assets of the Company in accordance with Section 8.1, the
successor Person formed by such consolidation or into which the Company is
merged or to which such conveyance, transfer or lease is made shall succeed to,
and be
56
<PAGE> 64
substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such successor Person had been
named as the Company herein, and thereafter the predecessor Person shall be
relieved of all obligations and covenants under this Indenture and the
Securities.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 Supplemental Indentures Without Consent of Holders of Securities.
Without the consent of any Holders of Securities, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, for any of the
following purposes:
(a) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants and obligations of the
Company herein and in the Securities as permitted by this Indenture; or
(b) to add to the covenants of the Company for the benefit of the
Holders of Securities, or to surrender any right or power herein conferred upon
the Company; or
(c) to secure the Securities; or
(d) to modify the restrictions on, and procedures for, resale and
other transfers of the Securities to the extent required by any change in
applicable law or regulation (or the interpretation thereof) or in practice
relating to the resale or transfer of restricted securities generally; or
(e) to make provision with respect to the conversion rights of
Holders of Securities pursuant to Section 13.12; or
(f) to accommodate the issuance, if any, of Securities in
book-entry or definitive form and matters related thereto which do not adversely
affect the interest of the Holders of Securities; or
(g) to comply with any requirements of the Commission in order to
effect and maintain the qualification of this Indenture under the Trust
Indenture Act; or
(h) to cure any ambiguity, to correct or supplement any provision
herein, which may be inconsistent with any other provision herein or which is
otherwise defective, or to make any other provisions with respect to matters or
questions arising under this Indenture as the Company and the Trustee may deem
necessary or desirable, provided, such action pursuant to this clause (h) shall
57
<PAGE> 65
not adversely affect the interests of the Holders of Securities in any material
respect.
Upon Company Request, accompanied by a Board Resolution authorizing
the execution of any such supplemental indenture, and subject to and upon
receipt by the Trustee of the documents described in Section 9.3 hereof, the
Trustee shall join with the Company in the execution of any supplemental
indenture authorized or permitted by the terms of this Indenture and any further
appropriate agreements and stipulations which may be therein contained.
SECTION 9.2 Supplemental Indentures with Consent of Holders of Securities.
With either (a) the written consent of the Holders of not less than a
majority in aggregate principal amount of the Outstanding Securities, by the Act
of said Holders delivered to the Company and the Trustee, or (b) by the adoption
of a resolution, at a meeting of Holders of the Outstanding Securities at which
a quorum is present, by the Holders of 66-2/3% in aggregate principal amount of
the Outstanding Securities represented at such meeting, the Company, when
authorized by a Board Resolution, and the Trustee may enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or
of modifying in any manner the rights of the Holders of Securities under this
Indenture; provided, however, that no such supplemental indenture shall, without
the consent or affirmative vote of the Holder of each Outstanding Security
affected thereby,
(a) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount thereof
or the rate of interest payable thereon or any premium payable upon redemption
or mandatory repurchase thereof or change the obligation of the Company to pay
Liquidated Damages pursuant to Section 11.12, or change the place or currency in
which any Security or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the Stated
Maturity thereof (or, in the case of redemption or repurchase, on or after the
Redemption Date or Repurchase Date, as the case may be), or
(b) reduce the requirements of Section 10.4 for quorum or voting,
or reduce the percentage in aggregate principal amount of the Outstanding
Securities the consent of whose Holders is required for any such supplemental
indenture or the consent of whose Holders is required for any waiver provided
for in this Indenture, or
(c) modify the obligation of the Company to maintain an office or
agency in The City of New York pursuant to Section 11.2, or
(d) modify any of the provisions of this Section, Section 5.13 or
Section 11.11, except to increase any percentage contained herein or therein or
to provide that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security affected
thereby, or
58
<PAGE> 66
(e) modify any of the provisions of Sections 11.8, 11.10 or
11.12, or
(f) modify any provisions of Article XIII, XIV or XV in a manner
adverse to the Holders.
It shall not be necessary for any Act of Holders of Securities under
this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
SECTION 9.3 Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.1) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture and an Officers' Certificate to the
effect that all conditions precedent have been satisfied. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture which
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
SECTION 9.4 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 9.5 Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Company and the
Trustee, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
SECTION 9.6 Notice of Supplemental Indentures..
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 9.2, the Company
shall give notice to all Holders of Securities, in the manner provided in
Section 1.6, of such fact, setting forth in general terms the substance of such
supplemental indenture. Any failure of the Company to give such notice, or any
defect therein, shall not in any way impair or affect the validity of any such
supplemental indenture.
59
<PAGE> 67
ARTICLE X
MEETINGS OF HOLDERS OF SECURITIES
SECTION 10.1 Purposes for Which Meetings May Be Called.
A meeting of Holders of Securities may be called at any time and from
time to time pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be made, given or taken by Holders of Securities.
SECTION 10.2 Call, Notice and Place of Meetings.
(a) The Trustee may at any time call a meeting of Holders of
Securities for any purpose specified in Section 10.1, to be held at such time
and at such place in The City of New York as the Trustee shall determine. Notice
of every meeting of Holders of Securities, setting forth the time and the place
of such meeting and in general terms the action proposed to be taken at such
meeting, shall be given, in the manner provided in Section 1.6, not less than 21
nor more than 180 days prior to the date fixed for the meeting.
(b) In case at any time the Company, pursuant to a Board
Resolution, or the Holders of at least 10% in aggregate principal amount of the
Outstanding Securities shall have requested the Trustee to call a meeting of the
Holders of Securities for any purpose specified in Section 10.1, by written
request setting forth in reasonable detail the action proposed to be taken at
the meeting, and the Trustee shall not have made the first publication of the
notice of such meeting within 21 days after receipt of such request or shall not
thereafter proceed to cause the meeting to be held as provided herein, then the
Company or the Holders of Securities in the amount specified, as the case may
be, may determine the time and the place in The City of New York for such
meeting and may call such meeting for such purposes by giving notice thereof as
provided in paragraph (a) of this Section.
SECTION 10.3 Persons Entitled to Vote at Meetings.
To be entitled to vote at any meeting of Holders of Securities, a
Person shall be (a) a Holder of one or more Outstanding Securities, or (b) a
Person appointed by an instrument in writing as proxy for a Holder or Holders of
one or more Outstanding Securities by such Holder or Holders. The only Persons
who shall be entitled to be present or to speak at any meeting of Holders shall
be the Persons entitled to vote at such meeting and their counsel, any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.
60
<PAGE> 68
SECTION 10.4 Quorum; Action.
The Persons entitled to vote a majority in principal amount of the
Outstanding Securities shall constitute a quorum. In the absence of a quorum
within 30 minutes of the time appointed for any such meeting, the meeting shall,
if convened at the request of Holders of Securities, be dissolved. In any other
case, the meeting may be adjourned for a period of not less than 10 days as
determined by the chairman of the meeting prior to the adjournment of such
meeting. In the absence of a quorum at any such adjourned meeting, such
adjourned meeting may be further adjourned for a period not less than 10 days as
determined by the chairman of the meeting prior to the adjournment of such
adjourned meeting (subject to repeated applications of this sentence). Notice of
the reconvening of any adjourned meeting shall be given as provided in Section
10.2(a), except that such notice need be given only once not less than five days
prior to the date on which the meeting is scheduled to be reconvened. Notice of
the reconvening of an adjourned meeting shall state expressly the percentage of
the principal amount of the Outstanding Securities which shall constitute a
quorum.
Subject to the foregoing, at the reconvening of any meeting adjourned
for a lack of a quorum, the persons entitled to vote 25% in aggregate principal
amount of the Outstanding Securities at the time shall constitute a quorum for
the taking of any action set forth in the notice of the original meeting.
At a meeting or an adjourned meeting duly reconvened and at which a
quorum is present as aforesaid, any resolution and all matters (except as
limited by the proviso to Section 9.2) shall be effectively passed and decided
if passed or decided by the Persons entitled to vote not less than 66 2/3% in
aggregate principal amount of Outstanding Securities represented and voting at
such meeting.
Any resolution passed or decisions taken at any meeting of Holders of
Securities duly held in accordance with this Section shall be binding on all the
Holders of Securities, whether or not present or represented at the meeting.
SECTION 10.5 Determination of Voting Rights; Conduct and Adjournment of
Meetings.
(a) Notwithstanding any other provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for any
meeting of Holders of Securities in regard to proof of the holding of Securities
and of the appointment of proxies and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall deem appropriate. Except as otherwise
permitted or required by any such regulations, the holding of Securities shall
be proved in the manner specified in Section 1.3 and the appointment of any
proxy shall be proved in the manner specified in Section 1.3. Such regulations
may provide that written instruments appointing proxies, regular on their face,
may be presumed valid and genuine without the proof specified in Section 10.3 or
other proof.
61
<PAGE> 69
(b) The Trustee shall, by an instrument in writing, appoint a
temporary chairman (which may be the Trustee) of the meeting, unless the meeting
shall have been called by the Company or by Holders of Securities as provided in
Section 10.2(b), in which case the Company or the Holders of Securities calling
the meeting, as the case may be, shall in like manner appoint a temporary
chairman. A permanent chairman and a permanent secretary of the meeting shall be
elected by vote of the Persons entitled to vote a majority in principal amount
of the Outstanding Securities represented at the meeting.
(c) At any meeting, each Holder of a Security or proxy shall be
entitled to one vote for each $1,000 principal amount of Securities held or
represented by him; provided, however, that no vote shall be cast or counted at
any meeting in respect of any Security challenged as not Outstanding and ruled
by the chairman of the meeting to be not Outstanding. The chairman of the
meeting shall have no right to vote, except as a Holder of a Security or proxy.
(d) Any meeting of Holders of Securities duly called pursuant to
Section 10.2 at which a quorum is present may be adjourned from time to time by
Persons entitled to vote a majority in principal amount of the Outstanding
Securities represented at the meeting, and the meeting may be held as so
adjourned without further notice.
SECTION 10.6 Counting Votes and Recording Action of Meetings.
The vote upon any resolution submitted to any meeting of Holders of
Securities shall be by written ballots on which shall be subscribed the
signatures of the Holders of Securities or of their representatives by proxy and
the principal amounts and serial numbers of the Outstanding Securities held or
represented by them. The permanent chairman of the meeting shall appoint two
inspectors of votes who shall count all votes cast at the meeting for or against
any resolution and who shall make and file with the secretary of the meeting
their verified written reports in duplicate of all votes cast at the meeting. A
record, at least in duplicate, of the proceedings of each meeting of Holders of
Securities shall be prepared by the secretary of the meeting and there shall be
attached to said record the original reports of the inspectors of votes on any
vote by ballot taken thereat and affidavits by one or more Persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was given as provided in Section 10.2 and, if
applicable, Section 10.4. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one such
copy shall be delivered to the Company and another to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting. Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
62
<PAGE> 70
ARTICLE XI
COVENANTS
SECTION 11.1 Payment of Principal and Interest.
The Company will duly and punctually pay the principal of and interest
on the Securities in accordance with the terms of the Securities and this
Indenture.
SECTION 11.2 Maintenance of Offices or Agencies.
The Company hereby initially appoints the Trustee as its agent in The
City of New York where Securities may be presented or surrendered for payment,
where Securities may be surrendered for registration of transfer or exchange,
where conversion notices, certificates and other items required to be delivered
to effect conversion may be delivered and where notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served.
The Company hereby initially appoints the Trustee as Paying Agent for
the payment of principal of and interest on the Securities and as Conversion
Agent for the Conversion of any of the Securities in accordance with Article
XIII, and appoints the office of the Trustee as transfer agent where Securities
may be surrendered for registration of transfer or exchange.
The Company may at any time and from time to time vary or terminate
the appointment of any such agent or appoint any additional agents with or
without cause for any or all of such purposes; provided, however, that until all
of the
Securities have been delivered to the Trustee for cancellation, or
moneys sufficient to pay the principal of and interest on the Securities have
been made available for payment and either paid or returned to the Company
pursuant to the provisions of Section 11.3, the Company will maintain in the
Borough of Manhattan, The City of New York, an office or agency where Securities
may be presented or surrendered for payment, where Securities may be surrendered
for registration of transfer or exchange, where Securities may be surrendered
for conversion and where notices and demands to or upon the Company, in respect
of the Securities and this Indenture may be served. The Company will give prompt
written notice to the Trustee, and will give notice to Holders of Securities in
the manner specified in Section 1.5, of the appointment or termination of any
such agents and of the location and any change in the location of any such
office or agency.
If at any time the Company shall fail to maintain any such required
office or agency, or shall fail to furnish the Trustee with the address thereof,
presentations and surrenders may be made and notices and demands may be served
on and Securities may be surrendered for conversion to the Corporate Trust
Office of the Trustee, and the Company hereby appoints the same as its agent to
receive such respective presentations, surrenders, notices and demands.
63
<PAGE> 71
SECTION 11.3 Money for Security Payments to Be Held in Trust.
If the Company at any time shall act as its own Paying Agent, it will,
on or before each due date of the principal of or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal or interest so becoming due until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided and the Company will promptly notify the Trustee of its action or
failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to or on each due date of the principal of or interest on any Securities,
deposit with a Paying Agent a sum sufficient to pay the principal, premium, if
any, or interest so becoming due, such sum to be held in trust for the benefit
of the Persons entitled to such principal, premium, if any, or interest, and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of any failure so to act. An installment of principal of, premium if
any, interest or Liquidated Damages with respect to the Securities shall be
considered paid on the date it is due if the Trustee or a Paying Agent holds
such amount for the benefit of Holders on or before 10:00 a.m., New York City
time, on such date.
The Company will cause each Paying Agent other than the Trustee or
affiliate of the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of
or interest on Securities in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed of
as herein provided;
(b) give the Trustee written notice of any default by the Company
(or any other obligor upon the securities) in the making of any payment of
principal or interest; and
(c) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Subject to the provisions of any applicable escheat law, any money
deposited with the Trustee or any Paying Agent, or then held by the Company, in
trust for the payment of the principal of, premium, if any, or interest
(together with any Liquidated Damages in respect thereof) on any Security and
remaining unclaimed for two years after such principal or interest (together
with any Liquidated Damages in respect thereof) has become due and payable shall
be paid to the Company
64
<PAGE> 72
on Company Request, or (if then held by the Company) shall be discharged from
such trust; and the Holder of such Security shall thereafter, as a general
unsecured creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before making any such
repayment, may at the expense of the Company cause to be published once, in an
Authorized Newspaper in the Borough of Manhattan, The City of New York, notice
that such money remains unclaimed and that, after a date specified therein,
which shall not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 11.4 Corporate Existence.
Subject to Article VIII, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise
if the Board of Directors of the Company shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
that the loss thereof is not disadvantageous in any material respect to the
Holders.
SECTION 11.5 Maintenance of Properties.
The Company will cause all material properties used or useful in the
conduct of its business or the business of any Subsidiary to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 11.5 shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business or the business of any Subsidiary and not disadvantageous in any
material respect to the Holders.
SECTION 11.6 Compliance with Laws.
The Company will comply, and cause each Subsidiary to comply, with the
requirements of all applicable laws, ordinances, rules, regulations, and
requirements of any governmental authority (including, without limitation, ERISA
and the rules and regulations thereunder), except where the necessity of
compliance therewith is contested in good faith by appropriate proceedings or
where the failure to comply would not have a material adverse effect upon the
Company and its Subsidiaries taken as a whole.
65
<PAGE> 73
SECTION 11.7 Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which disputed amounts adequate reserves in accordance with
generally accepted accounting principals have been made.
SECTION 11.8 Delivery of Certain Information.
At any time when the Company is not subject to Section 13 or 15(d) of
the Exchange Act, upon the request of a Holder of a Restricted Security or the
holder of shares of Common Stock issued upon conversion thereof, the Company
will promptly furnish or cause to be furnished Rule 144A Information (as defined
below) to such Holder of Restricted Securities or such holder of Common Stock
issued upon conversion of Restricted Securities, or to a prospective purchaser
of such security designated by any such Holder or holder, as the case may be, to
the extent required to permit compliance by such holder with Rule 144A under the
Securities Act (or any successor provision thereto) in connection with the
resale of such Security by such Holder; provided, however, that the Company
shall not be required to furnish such information in connection with any request
made on or after the date which is two years from the later of (i) the date such
a security (or any predecessor security) was acquired from the Company or (ii)
the date such a security (or any predecessor security) was last acquired from
the Company or an "affiliate" of the Company within the meaning of Rule 144
under the Securities Act (or any successor provision thereto); and provided,
further, that the Company shall not be required to furnish such information at
any time to a prospective purchaser located outside the United States who is not
a "U.S. Person" within the meaning of Regulation S under the Securities Act if
such Security may then be sold to such prospective purchaser in accordance with
Rule 903 or Rule 904 under the Securities Act (or any successor provision
thereto). "Rule 144A Information" shall be such information as is specified
pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision
thereto).
SECTION 11.9 Statement by Officers as to Default.
The Company shall deliver to the Trustee within 120 days after the end
of each fiscal year of the Company an Officers' Certificate stating whether or
not to the best knowledge of the signers thereof the Company is in default in
the performance and observance of any of the terms, provisions and conditions of
this Indenture (without regard to any period of grace or requirement of notice
provided hereunder) and, if the Company shall be in default, specifying all such
defaults and the nature and status thereof of which they may have knowledge.
66
<PAGE> 74
The Company will also deliver to the Trustee, forthwith upon any
Officer becoming aware of any Event of Default, an Officers' Certificate
specifying with particularity such default or Event of Default and further
stating what action the Company has taken, is taking or proposes to take with
respect thereto.
Any notice required to be given under this Section 11.9 shall be
delivered to the Trustee at its Corporate Trust Office and need not comply with
Section 1.2.
SECTION 11.10 Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 11.5 or 11.6 if before the time for
such compliance the Holders of at least a majority in principal amount of the
Outstanding Securities (or such lesser amount as shall have acted at a meeting
pursuant to the provisions of this Indenture) shall either waive such compliance
in such instance or generally waive compliance with such covenant or condition,
but no such waiver shall extend to or affect such covenant or condition except
to the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Company and the duties of the Trustee in
respect of any such covenant or condition shall remain in full force and effect.
SECTION 11.11 Registration Rights.
The holders of the Securities and the Common Stock issuable upon
conversion thereof are entitled to the benefits of a Registration Rights
Agreement, dated as of the date hereof, between the Company and the Initial
Purchasers (the "Registration Rights Agreement"). Pursuant to the Registration
Rights Agreement, the Company has agreed for the benefit of the holders from
time to time of the Securities and the Common Stock issuable upon conversion
thereof that it will, at its expense, (i) within 90 days after the first date of
original issuance of the Securities, file a shelf registration statement (the
"Shelf Registration Statement") with the Commission with respect to resales of
the Securities and the Common Stock issuable upon conversion thereof, (ii) use
its best efforts to cause such Shelf Registration Statement to be declared
effective by the Commission as promptly as practicable but no later than 180
days after the first date of original issuance of the Securities (the
"Settlement Date") and (iii) use its best efforts to maintain such Shelf
Registration Statement continuously effective under the Securities Act until the
second annual anniversary of the date of the effectiveness of the Shelf
Registration Statement or such earlier date as is provided in the
Registration Rights Agreement.
If (i) on or prior to 90 days following the first date of original
issuance of the Securities, a Shelf Registration Statement has not been filed
with the Commission, or (ii) on or prior to the 180 days following the
Settlement Date, such Shelf Registration Statement is not declared effective
(each, a "Registration Default"), additional interest ("Liquidated Damages")
will accrue on the Securities from and including the day following such
Registration Default to but excluding the day on which such Registration Default
has been cured. Liquidated Damages will be paid semi-annually in arrears, with
the first semi-annual payment due on the first Interest Payment Date in respect
of the Securities
67
<PAGE> 75
following the date on which such Liquidated Damages begin to accrue, and will
accrue at a rate per annum equal to an additional one-quarter of one percent
(0.25%) of the principal amount of the Securities to and including the 90th day
following such Registration Default and at a rate per annum equal to one-half of
one percent (0.50%) thereof from and after the 91st day following such
Registration Default. In the event that the Shelf Registration Statement ceases
to be effective prior to the second annual anniversary of the initial effective
date of the Shelf Registration Statement or such earlier date as is provided in
the Registration Rights Agreement for a period in excess of 60 days, whether or
not consecutive, during any 12-month period, then the interest rate borne by the
Securities shall increase by an additional one-half of one percent (0.50%) per
annum on the 61st day of the applicable 12-month period such Shelf Registration
Statement ceases to be effective to but excluding the day on which the Shelf
Registration Statement again becomes effective.
Whenever in this Indenture there is mentioned, in any context, the
payment of the principal of, premium, if any, or interest on, or in respect of,
any Security, such mention shall be deemed to include mention of the payment of
Liquidated Damages provided for in this Section to the extent that, in such
context, Liquidated Damages are, were or would be payable in respect thereof
pursuant to the provisions of this Section and express mention of the payment of
Liquidated Damages (if applicable) in any provisions hereof shall not be
construed as excluding Liquidated Damages in those provisions hereof where such
express mention is not made.
SECTION 11.12 Book-entry System.
If the Securities cease to trade in the Depositary's book-entry
settlement system, the Company covenants and agrees that it shall use reasonable
efforts to make such other book-entry arrangements that it determines are
reasonable for the Securities.
ARTICLE XII
REDEMPTION OF SECURITIES
SECTION 12.1 Right of Redemption.
The Securities shall be redeemable at the Company's option, in whole
or in part, under the circumstances and at the Redemption Prices specified in
the form of Securities set forth in Sections 2.2 and 2.3.
SECTION 12.2 Applicability of Article.
Redemption of Securities at the election of the Company, as permitted
or required by any provision of the Securities or this Indenture, shall be made
in accordance with such provision and this Article XII.
68
<PAGE> 76
SECTION 12.3 Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be
evidenced by a Board Resolution. In the case of any redemption at the election
of the Company of all of the Securities, the Company shall, at least 40 but not
more than 60 days prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee in
writing of such Redemption Date. If the Securities are to be redeemed pursuant
to an election of the Company which is subject to a condition specified in the
forms of Securities set forth in Section 2.2, the Company shall furnish the
Trustee with (a) an Officers' Certificate stating that the Company is entitled
to effect such redemption and setting forth a statement of facts demonstrating
the same, including a statement that there is no default or event of default in
respect of Senior Debt that would prohibit such redemption under Section 14.3,
and (b) an Opinion of Counsel as contemplated by Section 1.2.
SECTION 12.4 Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected by the Trustee within three Business
Days after it receives the notice described in 11.3, from the Outstanding
Securities not previously called for redemption, by such method as the Trustee
may deem fair and appropriate.
If any Registered Security selected for partial redemption is
converted in part before termination of the conversion right with respect to the
portion of the Security so selected, the converted portion of such Security
shall be deemed (so far as may be) to be the portion selected for redemption.
Securities which have been converted during a selection of Securities to be
redeemed may be treated by the Trustee as Outstanding for the purpose of such
selection.
The Trustee shall promptly notify the Company and each Security
Registrar in writing of the securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount and
certificate numbers thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 12.5 Notice of Redemption.
Notice of redemption shall be given in the manner provided in Section
1.5 to the Holders of Securities to be redeemed. Notice shall be given at least
once not less than 30 nor more than 60 days prior to the Redemption Date.
All notices of redemption shall state:
69
<PAGE> 77
(a) the Redemption Date,
(b) the Redemption Price, and the amount of accrued interest, if
any,
(c) if less than all Outstanding Securities are to be redeemed,
the aggregate principal amount of the Securities to be redeemed;
(d) that on the Redemption Date, the Redemption Price, and
accrued interest, if any, will become due and payable upon each Security to be
redeemed, and that interest thereon shall cease to accrue on and after said
date,
(e) the Conversion Rate, the date on which the right to convert
the Securities will terminate and the places where the Securities may be
surrendered for conversion, and
(f) the place or places where the Securities are to be
surrendered for payment of the Redemption Price and accrued interest, if any.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name of and at the expense of the Company, and such notice, when
given to the Holders, shall be irrevocable.
SECTION 12.6 Deposit of Redemption Price.
Not less than one Business Day prior to any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as Paying Agent, segregate and hold in trust as provided in
Section 11.3) an amount of money sufficient to pay the Redemption Price of, and
(except if the Redemption Date shall be an Interest Payment Date) accrued
interest on, all the Securities which are to be redeemed on that date other than
any Securities called for redemption on that date which have been converted
prior to the date of such deposit.
If any Security called for redemption is converted, any money
deposited with the Trustee or with a Paying Agent or so segregated and held in
trust for the redemption of such Security shall (subject to any right of the
Holder of such Security or any Predecessor Security to receive interest as
provided in the last paragraph of Section 3.7) be paid to the Company on Company
Request or, if then held by the Company, shall be discharged from such trust.
SECTION 12.7 Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price herein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, the Holder of such
Security shall be paid the
70
<PAGE> 78
Redemption Price, together with accrued interest to the Redemption Date;
provided, however, that installments of interest whose Stated Maturity is on or
prior to the Redemption Date shall be payable to the Holders of such Securities,
or one or more Predecessor Securities, registered as such at the close of
business on the relevant Record Dates according to their terms and the
provisions of Section 3.7.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal of, premium, if any, and, to the
extent permitted by applicable law, accrued interest on such Security shall,
until paid, bear interest from the Redemption Date at the rate of interest borne
by the Security and such Security shall remain convertible until the principal
of such Security (or portion thereof, as the case may be) shall have been paid
or duly provided for.
ARTICLE XIII
CONVERSION OF SECURITIES
SECTION 13.1 Conversion Privilege and Conversion Rate.
Subject to and upon compliance with the provisions of this Article, at
the option of the Holder thereof, any Security or any portion of the principal
amount thereof which is $1,000 or any integral multiple of $1,000 in excess
thereof, may be converted at any time after the Non-Conversion Period at the
principal amount thereof, or of such portion thereof, into fully paid and
nonassessable Common Stock of the Company (calculated as to each conversion to
the nearest 1/100 of a share) at the Conversion Rate, determined as hereinafter
provided, in effect at the time of conversion. Such conversion right shall
expire at the close of business on June 15, 2003; subject, in the case of
conversion of a Global Security, to any applicable book-entry procedures of the
Depositary for such conversion. In case a Security or portion thereof is called
for redemption at the election of the Company or is delivered for repurchase at
the option of the Holder, such conversion right in respect of the Security or
portion thereof so called shall expire at the close of business on the
Redemption Date or the Repurchase Date, unless the Company defaults in making
the payment due upon redemption or the repurchase, as the case may be (subject
as aforesaid to any applicable book-entry procedures).
The rate at which shares of Common Stock shall be delivered upon
conversion (herein called the "Conversion Rate") shall be initially 36.9720
shares of Common Stock for each $1,000 principal amount of Securities. The
Conversion Rate shall be adjusted in certain instances as provided in this
Article 13. The price at which shares of Common Stock shall be delivered upon
conversion (herein called the "Conversion Price") shall at any time be equal to
$1,000 divided by the then applicable Conversion Rate (and rounded to the
nearest cent).
71
<PAGE> 79
SECTION 13.2 Exercise of Conversion Privilege.
In order to exercise the conversion privilege with respect to any
Security or portion thereof, the Holder of any Security to be converted or any
other person acting on its behalf shall surrender such Security, duly endorsed
or assigned to the Company or in blank at any office or agency of the Company
maintained for that purpose pursuant to Section 11.2, accompanied by a duly
signed conversion notice substantially in the form set forth in Annex A stating
that the Holder elects to convert such Security or, if less than the entire
principal amount thereof is to be converted, the portion thereof to be
converted. Alternatively, if such security is represented by a Global Security,
conversion may be effected by written order given to the Trustee in accordance
with the applicable procedures of the Depositary then in effect. Each Security
surrendered for conversion (in whole or in part) during a Record Date Period
shall (except in the case of any Security or portion thereof which has been
called for redemption on a Redemption Date or repurchase on a Repurchase Date
occurring within such period) be accompanied by payment in New York Clearing
House funds or other funds acceptable to the Company of an amount equal to the
interest payable on the Interest Payment Date relating to such Record Date
Period on the principal amount of such Security being surrendered for
conversion, and the interest payable in respect of such Security on such
Interest Payment Date shall be paid to the Holder of the such Security as of the
Regular Record Date relating to such Record Date Period. The interest payable on
such Interest Payment Date with respect to any Security which has been called
for redemption on a Redemption Date, or is repurchaseable on a Repurchase Date,
occurring, in either case, during a Record Date Period, which Security is
surrendered for conversion during such Record Date Period, shall be paid to the
Holder of such Security being converted in an amount equal to the interest that
would have been payable on such Security if such Security had been converted as
of the close of business on such Interest Payment Date. Interest payable in
respect of any Security surrendered for conversion on or after an Interest
Payment Date shall be paid to the Holder of such Security as of the next
preceding Regular Record Date, notwithstanding the exercise of the right of
conversion.
Holders that surrender Securities 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 Securities are surrendered after
a notice of redemption (except for the payment of interest on Securities called
for redemption on a Redemption Date or to be repurchased on a Repurchase Date
between a Regular Record Date and the Interest Payment Date to which it
relates). No other payment or adjustment for interest, or for any dividends in
respect of Common Stock, will be made upon conversion. Holders of shares of
Common Stock issued upon conversion will not be entitled to receive any
dividends payable to holders of shares of Common Stock as of any record time
before the close of business on the conversion date.
Securities shall be deemed to have been converted immediately prior to
the close of business on the day of surrender of such Securities for conversion
in accordance with the foregoing provisions, and at such time the rights of the
Holders of such Securities as Holders shall cease, and the Person or Persons
entitled to receive the Common Stock issuable upon conversion shall be treated
for all
72
<PAGE> 80
purposes as the record holder or holders of such Common Stock at such
time. As promptly as practicable on or after the conversion date, the Company
shall issue and deliver, out of its authorized but previously unissued shares of
Common Stock, at the office of such Conversion Agent a certificate or
certificates for the number of full shares of newly issued Common Stock issuable
upon conversion, together with payment in lieu of any fraction of a share, as
provided in Section 13.3.
All shares of Common Stock delivered upon such conversion of
Restricted Securities shall bear a restrictive legend substantially in the form
of the legend required to be set forth on the Restricted Securities pursuant to
Section 2.2 and shall be subject to the restrictions on transfer provided in
such legend. Neither the Trustee nor any agent maintained for the purpose of
such conversion shall have any responsibility for the inclusion or content of
any such restrictive legend on such Common Stock; provided, however, that the
Trustee or any agent maintained for the purpose of such conversion shall have
provided, to the Company or to the Company's transfer agent for such Common
Stock, prior to or concurrently with a request to the Company to deliver to such
agent maintained for the purpose of such conversion certificates for such Common
Stock, written notice that the Securities delivered for conversion are
Restricted Securities.
In the case of any Security which is converted in part only, upon such
conversion the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a new Security or
Securities of authorized denominations in an aggregate principal amount equal to
the unconverted portion of the principal amount of such Security. A Security may
be converted in part, but only if the principal amount of such Security to be
converted is any integral multiple of $1,000 and the principal amount of such
security to remain outstanding after such conversion is equal to $1,000 or any
integral multiple of $1,000 in excess thereof.
If shares of Common Stock to be issued upon conversion of a Security,
or Securities to be issued upon conversion of a Security in part only, are to be
registered in a name other than that of the Holder of such Security, the
Security Registrar shall, prior to the conversion of such Security, record in
the Security Register the transfer of that portion of the Security to be so
converted in the name of the person in whose name such Common Stock or
Securities are to be registered.
SECTION 13.3 Fractions of Shares of Common Stock.
No fractional shares of Common Stock or scrip certificates in respect
thereof shall be issued upon conversion of any Security or Securities. If more
than one Security shall be surrendered for conversion at one time by the same
Holder, the number of full shares which shall be issuable upon conversion
thereof shall be computed on the basis of the aggregate principal amount of the
Securities so surrendered. Instead of any fractional shares of Common Stock
which would otherwise be issuable upon conversion of any Security or Securities,
the Company shall pay a cash adjustment in respect of such fraction (calculated
to the nearest 1/100 of a share) in an amount in Dollars equal to the same
fraction of the current market price per Common Share (calculated in accordance
with Section 13.4(8) below) at the close of business on the day of conversion,
or at the Company's option, the Company shall round up the conversion
transaction to the next higher whole share.
73
<PAGE> 81
SECTION 13.4 Adjustment of Conversion Rate.
The Conversion Rate shall be subject to adjustments from time to time
as follows:
(a) In case at any time after the date hereof, the Company shall
pay or make a dividend or other distribution on any class of capital stock of
the Company payable in shares of Common Stock, the Conversion Rate in effect at
the opening of business on the day following the date fixed for the
determination of shareholders entitled to receive such dividend or other
distribution shall be increased by dividing such Conversion Rate by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the total number of
shares constituting such dividend or other distribution, such increase to become
effective immediately after the opening of business on the day following the
date fixed for such determination. If, after any such date fixed for
determination, any dividend or distribution is not in fact paid, the Conversion
Rate shall be immediately readjusted, effective as of the date the Board of
Directors determines not to pay such dividend or distribution, to the Conversion
Rate that would have been in effect if such determination date had not been
fixed. For the purposes of this paragraph (1), the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Company but shall include shares issuable in respect of scrip certificates,
if any, issued in lieu of fractions of shares of Common Stock. The Company will
not pay any dividend or make any distribution on shares of Common Stock held in
the treasury of the Company.
(b) In case at any time after the date hereof, the Company shall
issue rights, warrants or options to all holders of its Common Stock entitling
them to subscribe for or purchase shares of Common Stock at a price per share
less than the current market price per share (determined as provided in
paragraph (8) of this Section 13.4) of the Common Stock on the date fixed for
the determination of shareholders entitled to receive such rights, warrants or
options, the Conversion Rate in effect at the opening of business on the day
following the date fixed for such determination shall be increased by dividing
such Conversion Rate by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination plus the number of shares of Common Stock which the
aggregate of the offering price of the total number of shares of Common Stock so
offered for subscription or purchase would purchase at such current market price
and the denominator shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination plus the number
of shares of Common Stock so offered for subscription or purchase, such increase
to become effective immediately after the opening of business on the day
following the date fixed for such determination. For the purposes of this
paragraph (b), the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Company but will include
shares issuable in respect of scrip certificates, if any, issued in lieu of
fractions of shares of Common Stock. The Company will not issue any rights or
warrants in respect of shares of Common Stock held in the treasury of the
Company.
(c) In case outstanding shares of Common Stock shall be
subdivided into a greater
74
<PAGE> 82
number of shares of Common Stock, the Conversion Rate in effect at the opening
of business on the day following the day upon which such subdivision becomes
effective shall be proportionately increased, and, conversely in case
outstanding shares of Common Stock shall each be combined into a smaller number
of shares of Common Stock, the Conversion Rate in effect at the opening of
business on the day following the day upon which such combination becomes
effective shall be proportionately reduced, such increase or reduction, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
(d) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its indebtedness,
shares of capital stock, or assets (including securities, but excluding any
rights, warrants or options referred to in paragraph (b) of this Section 13.4,
any dividend or distribution paid exclusively in cash, any dividend or
distribution referred to in paragraph (a) of this Section 13.4 and any merger or
consolidation to which Section 13.11 applies), the Conversion Rate shall be
adjusted so that the same shall equal the rate determined by dividing the
Conversion Rate in effect immediately prior to the close of business on the date
fixed for the determination of shareholders entitled to receive such
distribution by a fraction of which the numerator shall be the current market
price per share (determined as provided in paragraph (h) of this Section 13.4)
of the Common Stock on the date fixed for such determination less the then fair
market value (as determined by the Board of Directors, whose determination shall
be conclusive and described in a Board Resolution filed with the Trustee) of the
portion of the assets, shares or evidences of indebtedness so distributed
applicable to one share of Common Stock and the denominator shall be such
current market price per share of Common Stock, such adjustment to become
effective immediately prior to the opening of business on the day following the
date fixed for the determination of shareholders entitled to receive such
distribution.
(e) In case the Company shall, by dividend or otherwise, make a
distribution to all holders of its Common Stock consisting exclusively of cash
(excluding any cash that is distributed upon a merger or consolidation or a sale
or transfer of all or substantially all of the assets of the Company to which
Section 13.11 applies or as part of a distribution referred to in paragraph (d)
of this Section 13.4) in an aggregate amount that, combined together with (i)
the aggregate amount of any other distributions to all holders of its Common
Stock made exclusively in cash within the 12 months preceding the date of
payment of such distribution and in respect of which no adjustment pursuant to
this paragraph (e) has been made and (ii) the aggregate of any cash plus the
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution filed with the Trustee)
of consideration payable in respect of any tender offer by the Company or any of
its Subsidiaries for all or any portion of the Common Stock concluded within the
12 months preceding the date of payment of such distribution and in respect of
which no adjustment pursuant to paragraph (f) of this Section 13.4 has been
made, exceeds 10% of the product of the current market price per share of the
Common Stock on the date for the determination of holders of shares of Common
Stock entitled to receive such distribution times the number of shares of Common
Stock outstanding on such date (the "aggregate current market price"), then, and
in each such case, immediately after the close of business on such date for
determination,
75
<PAGE> 83
the Conversion Rate shall be increased so that the same shall equal the rate
determined by dividing the Conversion Rate in effect immediately prior to the
close of business on the date fixed for determination of the shareholders
entitled to receive such distribution by a fraction (i) the numerator of which
shall be equal to the current market price per share (determined as provided in
paragraph (h) of this Section 13.4) of the Common Stock on the date fixed for
such determination less an amount equal to the quotient of (x) the excess of
such combined cash tender amount over such aggregate current market price
divided by (y) the number of shares of Common Stock outstanding on such date for
determination and (ii) the denominator of which shall be equal to the current
market price per share (determined as provided in paragraph (h) of this Section
13.4) of the Common Stock on such date for determination.
(f) In case a tender or exchange offer made by the Company or any
Subsidiary for all or any portion of the Common Stock shall expire and such
tender or exchange offer (as amended upon the expiration thereof) shall require
the payment to shareholders (based on the acceptance (up to any maximum
specified in the terms of the tender offer) of Purchased Shares (as defined
below)) of an aggregate consideration having a fair market value (as determined
by the Board of Directors, whose determination shall be conclusive and described
in a Board Resolution filed with the Trustee) that combined together with (i)
the aggregate of the cash plus the fair market value (as determined by the Board
of Directors, whose determination shall be conclusive and described in a Board
Resolution), as of the expiration of such tender or exchange offer, of
consideration payable in respect of any other tender or exchange offer, by the
Company or any Subsidiary for all or any portion of the Common Stock expiring
within the 12 months preceding the expiration of such tender or exchange offer
and in respect of which no adjustment, pursuant to this paragraph (f) has been
made and (ii) the aggregate amount of any distributions to all holders of the
Company's Common Stock within 12 months preceding the expiration of such tender
or exchange offer and in respect of which no adjustment pursuant to paragraph
(e) of this Section 13.4 has been made (the "combined tender and cash amount")
exceeds 10% of the product of the current market price per share of the Common
Stock (determined as provided in paragraph (h) of this Section 13.4) as of the
last time (the "Expiration Time") tenders or exchanges could have been made
pursuant to such tender or exchange offer (as it may be amended) times the
number of shares of Common Stock outstanding (including any tendered or
exchanged shares) on the Expiration Time, then, and in each such case,
immediately prior to the opening of business on the day after the date of the
Expiration Time, the Conversion Rate shall be adjusted so that the same shall
equal the rate determined by dividing the Conversion Rate immediately prior to
the close of business on the date of the Expiration Time by a fraction (i) the
numerator of which shall be equal to (A) the product of (I) the current market
price per share of Common Stock (determined as provided in paragraph (h) of this
Section 13.4) on the date of the Expiration Time multiplied by (II) the number
of shares of Common Stock outstanding (including any tendered or exchanged
shares) on the date of the Expiration Time less (B) the combined tender and cash
amount, and (ii) the denominator of which shall be equal to the product of (A)
the current market price per share of the Common Stock (determined as provided
in paragraph (8) of this Section 13.4) as of the Expiration Time multiplied by
(B) the number of shares of Common Stock outstanding (including any tendered or
exchanged shares) as of the Expiration Time less the number of all shares
validly tendered or exchanged and not withdrawn as of the Expiration Time (the
shares deemed so
76
<PAGE> 84
accepted up to any such maximum, being referred to as the "Purchased Shares").
(g) The reclassification of Common Stock into securities other
than Common Stock (other than any reclassification upon a consolidation or
merger to which Section 13.11 applies) shall be deemed to involve (i)
distribution of such securities other than Common Stock to all holders of Common
Stock (and the effective date of such reclassification shall be deemed to be
"the date fixed for the determination of shareholders entitled to receive such
distribution" and "the date fixed for such determination" within the meaning of
paragraph (d) of this Section 13.4), and (ii) a subdivision or combination, as
the case may be, of the number of shares of Common Stock outstanding immediately
prior to such reclassification into the number of shares of Common Stock
outstanding immediately thereafter (and the effective date of such
reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective,"
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (c) of this Section 13.4).
(h) For the purpose of any computation under paragraphs (b), (d),
(e) or (f) of this Section 13.4, the current market price per share of Common
Stock on any date shall be deemed to be the average of the daily Closing Prices
Per Share for the five consecutive Trading Days selected by the Company
commencing not more than 10 Trading Days before, and ending not later than, the
earlier of the day in question and the day before the "ex" date with respect to
the issuance or distribution requiring such computation. For purposes of this
paragraph, the term "'ex' date," when used with respect to any issuance or
distribution, means the first date on which the Common Stock trades regular way
on the applicable securities exchange or in the applicable securities market
without the right to receive such issuance or distribution.
(i) No adjustment in the Conversion Rate shall be required unless
such adjustment (plus any adjustments not previously made by reason of this
paragraph (i)) would require an increase or decrease of at least one percent in
such rate; provided, however, that any adjustments which by reason of this
paragraph (i) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Article
shall be made to the nearest cent or to the nearest one-hundredth of a share, as
the case may be.
(j) The Company may make such increases in the Conversion Rate,
for the remaining term of the Securities or any shorter term, in addition to
those required by paragraphs (a), (b), (c), (e), (e) and (f) of this Section
13.4, as it considers to be advisable in order to avoid or diminish any income
tax to any holders of shares of Common Stock resulting from any dividend or
distribution of stock or issuance of rights or warrants to purchase or subscribe
for stock or from any event treated as such for United States federal income tax
purposes or for any other reasons. The Company shall have the power to resolve
any ambiguity or correct any error in this paragraph (j) and its actions in so
doing, absent manifest error, shall be final and conclusive.
(k) To the extent permitted by applicable law, the Company from
time to time may increase the Conversion Rate by any amount for any period of
time if the period is at least twenty (20)
77
<PAGE> 85
days, the increase is irrevocable during such period, and the Board of Directors
shall have made a determination that such increase would be in the best
interests of the Company, which determination shall be conclusive; provided,
however, that no such increase shall be taken into account for purposes of
determining whether the Closing Price Per Share of the Common Stock exceeds the
Conversion Price by 105% in connection with an event which would otherwise be a
Change of Control pursuant to Section 15.3. Whenever the Conversion Rate is
increased pursuant to the preceding sentence, the Company shall give notice of
the increased to the Holders in the manner provided in Section 1.6 at least
fifteen (15) days prior to the date the increased Conversion Rate takes effect,
and such notice shall state the increased Conversion Rate and the period during
which it will be in effect.
SECTION 13.5 Notice of Adjustments of Conversion Rate.
Whenever the Conversion Rate is adjusted as herein provided:
(a) the Company shall compute the adjusted Conversion Rate in
accordance with Section 13.4 and shall prepare a certificate signed by the Chief
Financial Officer of the Company setting forth the adjusted Conversion Rate and
showing in reasonable detail the facts upon which such adjustment is based, and
such certificate shall forthwith promptly be filed with the Trustee and with
each Conversion Agent; and
(b) a notice stating that the Conversion Rate has been adjusted
and setting forth the adjusted Conversion Rate shall forthwith be prepared, and
as soon as practicable after it is prepared, such notice shall be provided by
the Company to all Holders in accordance with Section 1.6.
Neither the Trustee nor any Conversion Agent shall be under any duty
or responsibility with respect to any such certificate or the information and
calculations contained therein, except to exhibit the same to any Holder of
Securities desiring inspection thereof at its office during normal business
hours. Unless and until a Responsible Officer of the Trustee shall have received
such certificate, the Trustee shall not be deemed to have knowledge of any
adjustment of the Conversion Rate and may assume without inquiry that the last
Conversion Rate of which it has knowledge remains in effect.
SECTION 13.6 Notice of Certain Corporate Action.
In case:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable (i) otherwise than exclusively in cash
or (ii) exclusively in cash in an amount that would require an adjustment
pursuant to Section 13.4; or
(b) the Company shall authorize the granting to the holders of
its Common Stock of rights, options or warrants to subscribe for or purchase any
shares of capital stock of any class or of any other rights; or
78
<PAGE> 86
(c) of any reclassification of the Common Stock of the Company,
or of any consolidation, merger or share exchange to which the Company is a
party and for which approval of any shareholders of the Company is required, or
of the conveyance, transfer, sale or lease of all or substantially all of the
assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Securities pursuant to Section 11.2, and shall
cause to be provided to all Holders in accordance with Section 1.6, at least 20
days (or 10 days in any case specified in clause (a) or (b) above) prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, rights, options or warrants, or, if a record is not to be taken,
the effective date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution, rights, options or warrants are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, share exchange, conveyance, transfer, sale, lease, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, share exchange, conveyance,
transfer, sale, lease, dissolution, liquidation or winding up. Neither the
failure to give such notice or the notice referred to in the following paragraph
nor any defect therein shall affect the legality or validity of the proceedings
described in clauses (a) through (d) of this Section 13.6. If at the time the
Trustee shall not be the Conversion Agent, a copy of such notice and any notice
referred to in the following paragraph shall also forthwith be filed by the
Company with the Trustee.
The Company shall cause to be filed at each office or agency
maintained for the purpose of conversion of Securities pursuant to Section 11.2,
and shall cause to be provided to all Holders in accordance with Section 1.6,
notice of any tender offer by the Company or any Subsidiary for all or any
portion of the Common Stock at or about the time that such notice of tender
offer is provided to the public generally.
SECTION 13.7 Company to Reserve Common Stock.
The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but previously unissued Common Stock,
for the purpose of effecting the conversion of Securities, the full number of
shares of Common Stock then issuable upon the conversion of all such Outstanding
Securities.
79
<PAGE> 87
SECTION 13.8 Taxes on Conversions.
Except as provided in the next sentence, the Company will pay any and
all transfer, stamp, documentary and other similar taxes and duties that may be
payable in respect of the issue or delivery of shares of Common Stock on
conversion of Securities pursuant hereto. A Holder delivering a Security for
conversion will be required to pay any tax or duty which may be payable in
respect of any transfer involved in the issue and delivery of shares of Common
Stock in a name other than that of the Holder of the Security or Securities to
be converted, and no such issue or delivery shall be made unless and until the
Person requesting such issue has paid to the Company the amount of any such tax
or duty or has established to the satisfaction of the Company that such tax or
duty has been paid.
SECTION 13.9 Covenant as to Common Stock.
The Company covenants that all shares of Common Stock which may be
delivered upon conversion of Securities will be newly issued shares, upon such
delivery, will have been duly authorized and validly issued and will be fully
paid and nonassessable and, except as provided in Section 13.8, the Company will
pay all taxes, liens and charges with respect to the issue thereof.
SECTION 13.10 Cancellation of Converted Securities.
All Securities delivered for conversion shall be delivered to the
Trustee to be canceled by or at the direction of the Trustee, which shall
dispose of the same as provided in Section 3.9.
SECTION 13.11 Provision in Case of Consolidation, Merger or Conveyance of
Assets.
In case of any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another Person into the Company
(other than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock of the Company)
or any conveyance, sale, transfer or lease of all or substantially all of the
assets of the Company, the Person formed by such consolidation or resulting from
such merger or which acquires such assets, as the case may be, shall execute and
deliver to the Trustee a supplemental indenture executed in accordance with
Article IX providing that the Holder of such Security then Outstanding shall
have the right thereafter, during the period such Security shall be convertible
as specified in Section 13.1, to convert such Security only into the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, sale, transfer or lease by a holder of the number of
shares of Common Stock of the Company into which such Security might have been
converted immediately prior to such consolidation, merger, sale or transfer,
assuming such holder of Common Stock of the Company (i) is not a Person with
which the Company consolidated or merged with or which merged into or with the
Company or to which such conveyance, sale, transfer or lease was made, as the
case may be ("Constituent Person"), or an Affiliate of a Constituent Person and
(ii) failed to exercise his rights of election, if any, as to the kind or amount
of securities, cash and other property receivable upon such consolidation,
merger, conveyance, sale, transfer or lease (provided
80
<PAGE> 88
that if the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, conveyance, sale, transfer or lease is not the
same for each share of Common Stock of the Company held immediately prior to
such consolidation, merger, conveyance, sale, transfer or lease by other than a
Constituent Person or an Affiliate thereof and in respect of which such rights
of election shall not have been exercised ("Non-Electing Share"), then for the
purpose of this Section 13.11 the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer by the
holders of each Non-Electing Share shall be deemed to be the kind and amount so
receivable per share by a plurality of the Non-Electing Shares). Such
supplemental indenture shall provide for adjustments which, for events
subsequent to the effective date of such supplemental indenture, shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Article. The above provisions of this Section 13.11 shall similarly apply to
successive consolidations, mergers, conveyances, sales, transfers or leases.
Notice of the execution of such a supplemental indenture shall be given by the
Company to the Holder of each Security as provided in Section 1.5 promptly upon
such execution.
Neither the Trustee, any Paying Agent nor any Conversion Agent shall
be under any responsibility to determine the correctness of any provisions
contained in any such supplemental indenture relating either to the kind or
amount of shares of stock or other securities or property or cash receivable by
Holders of Securities upon the conversion of their Securities after any such
consolidation, merger, conveyance, sale, transfer or lease or to any such
adjustment, but may accept as conclusive evidence of the correctness of any such
provisions, and shall be protected in relying upon, an Opinion of Counsel with
respect thereto, which the Company shall cause to be furnished to the Trustee
upon request.
SECTION 13.12 Responsibility of Trustee for Conversion Provisions.
The Trustee, subject to the provisions of Section 6.1, and any
Conversion Agent shall not at any time be under any duty or responsibility to
any Holder of Securities to determine whether any facts exist which may require
any adjustment of the Conversion Rate, or with respect to the nature, extent or
amount of any such adjustment when made, or with respect to the method employed,
or herein or in any supplemental indenture provided to be employed, in making
the same, or whether a supplemental indenture need be entered into. Neither the
Trustee, subject to the provisions of Section 6.1, nor any Conversion Agent
shall be accountable with respect to the validity or value (or the kind or
amount) of any shares of Common Stock, or of any other securities or property or
cash, which may at any time be issued or delivered upon the conversion of any
Security; and it or they do not make any representation with respect thereto.
Neither the Trustee, subject to the provisions of Section 6.1, nor any
Conversion Agent shall be responsible for any failure of the Company to make any
cash payment or to issue, transfer or deliver any shares of Common Stock or
share certificates or other securities or property or cash upon the surrender of
any Security for the purpose of conversion; and the Trustee, subject to the
provisions of Section 6.1, and any Conversion Agent shall not be responsible for
any failure of the Company to comply with any of the covenants of the Company
contained in this Article.
81
<PAGE> 89
ARTICLE XIV
SUBORDINATION
SECTION 14.1 Securities Subordinate to Senior Debt.
The Company covenants and agrees, and each Holder of a Security, by
his acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article (subject to the provisions
of Article IV), the indebtedness represented by the Securities, and the payment
of the principal of, interest on and all other amounts, if any, owing with
respect to each and all of the Securities are hereby expressly made subordinate
and subject in right of payment to the prior payment in full in cash or other
immediately available funds of all Senior Debt of the Company.
SECTION 14.2 Payment over of Proceeds upon Dissolution, Etc.
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, or (b) any liquidation, dissolution or other winding
up of the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshaling of assets and liabilities of the Company, then and in any
such event specified in (a), (b) or (c) above (each such event, if any, herein
sometimes referred to as a "Proceeding") the holders of Senior Debt shall be
entitled to receive payment in full of all amounts due or to become due on or in
respect of all Senior Debt, in cash before the Holders of the Securities are
entitled to receive any payment on account of principal of, premium, if any, or
interest (including Liquidated Damages) on the Securities or on account of the
purchase, redemption or other acquisition of Securities by the Company or any
Subsidiary of the Company, and to that end the holders of all Senior Debt shall
be entitled to receive, for application to the payment thereof, any payment or
distribution of any kind or character, whether in cash, property or securities,
which may be payable or deliverable in respect of the Securities in any such
Proceeding.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, securities or other property, before all Senior Debt is paid in
full, and if such fact shall, at or prior to the time of such payment or
distribution, have been made known to a Responsible Officer of the Trustee or,
as the case may be, such Holder, then and in such event such payment or
distribution shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or distribution of assets of the Company for application
to the payment of all Senior Debt, to the extent necessary to pay all Senior
Debt in full, after giving effect to any concurrent payment or distribution to
or for the holders of Senior Debt.
For purposes of this Article only, the words "any payment or
distribution of any kind or
82
<PAGE> 90
character, whether in cash, property or securities" shall not be deemed to
include a payment or distribution of stock or securities of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment which shares of stock
or securities are subordinated in right of payment to all then outstanding
Senior Debt to substantially the same extent as, or to a greater extent then,
the Securities are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the
conveyance, transfer, sale or lease of all or substantially all of its
properties and assets to another Person upon the terms and conditions set forth
in Article VIII shall not be deemed a Proceeding for the purposes of this
Section if the Person formed by such consolidation or into which the Company is
merged or the Person which acquires by conveyance, transfer, sale or lease such
properties and assets, as the case may be, shall, as a part of such
consolidation, merger, conveyance, transfer, sale or lease comply with the
conditions set forth in Article VIII.
SECTION 14.3 No Payment When Senior Debt in Default.
In the event that any Securities are declared or otherwise shall
become due and payable before their Stated Maturity, then and in such event the
holders of the Senior Debt outstanding at the time such Securities so become due
and payable shall be entitled to receive payment in full of all amounts due or
to become due on or in respect of all Senior Debt in cash or other immediately
available funds or otherwise in a manner satisfactory to the holders of such
Senior Debt, before the Holders of the Securities are entitled to receive any
payment by the Company on account of the principal of, premium, if any, or
interest (including Liquidated Damages) on the Securities or on account of the
purchase or other acquisition of the Securities.
In the event and during the continuation of any default in the payment
of any amount owing in respect of any Senior Debt beyond any applicable grace
period with respect thereto, or in the event that any event of default with
respect to any Senior Debt shall have occurred and be continuing permitting the
holders of such Senior Debt (or a trustee or other representative on behalf of
the holders thereof) to declare such Senior Debt due and payable prior to the
date on which it would otherwise have become due and payable, unless and until
such event of default shall have been cured or waived or shall have ceased to
exist and such acceleration shall have been rescinded or annulled, or in the
event any judicial proceeding shall be pending with respect to any such default
in payment or event of default, then no payment shall be made by the Company on
account of principal of, premium, if any, or interest (including Liquidated
Damages) on the Securities, or on account of the purchase, redemption or other
acquisition of the Securities.
In the event that, notwithstanding the foregoing provisions of this
Section, the Company shall make any payment prohibited by the foregoing
provisions of this Section, and if such fact shall, at or prior to the time of
such payment, have been made known to a Responsible Officer of the Trustee or,
as the case may be, such Holder, then and in such event such payment or
distribution shall be paid over and delivered forthwith to the Company, in the
case of the Trustee, or the Trustee, in the case of such Holder.
83
<PAGE> 91
The provisions of this Section shall not apply to any payment with
respect to which Section 14.2 would be applicable.
SECTION 14.4 Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Securities shall prevent (a) the Company, at any time except during
the pendency of any proceeding referred to in Section 14.2 or under the
conditions described in Section 14.3, from making payments at any time of
principal of, premium, if any, or interest (including Liquidated Damages) on the
Securities, or (b) the application by the Trustee of any money deposited with it
hereunder to the payment of or on account of the principal of, premium, if any,
or interest (including Liquidated Damages) on the Securities or the retention of
such payment by the Holders, if, at the time of such application by the Trustee,
it did not have knowledge that such payment would have been prohibited by the
provisions of this Article.
SECTION 14.5 Subrogation to Rights of Holders of Senior Debt.
Subject to the payment in full of all Senior Debt, the Holders of the
Securities shall be subrogated to the extent of the payments or distributions
made to the holders of such Senior Debt pursuant to the provisions of this
Article, to the rights of the holders of such Senior Debt to receive payments
and distributions of cash, property and securities applicable to the Senior Debt
until the principal of, premium, if any, and interest (including Liquidated
Damages) on the Securities shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Senior Debt of
any cash, property or securities to which the Holders of the Securities or the
Trustee would be entitled except for the provisions of this Article, and no
payments over pursuant to the provisions of this Article to the holders of
Senior Debt by Holders of the Securities or the Trustee, shall, as among the
Company, its creditors other than holders of Senior Debt and the Holders of the
Securities, be deemed to be a payment or distribution by the Company to or on
account of the Senior Debt.
SECTION 14.6 Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Debt on the other hand. Nothing contained in
this Article or elsewhere in this Indenture or in the Securities is intended to
or shall (a) impair, as among the Company, the creditors of the Company other
than holders of Senior Debt and the Holders of the Securities, the obligation of
the Company, which is absolute and unconditional to pay to the Holders of the
Securities the principal of, premium, if any, and interest (including Liquidated
Damages) on the Securities as and when the same shall become due and payable in
accordance with their terms; or (b) affect the relative rights against the
Company of the Holders of the Securities and creditors of the Company other than
the holders of Senior Debt; or (c) prevent the Trustee or the Holder of any
Security from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this
84
<PAGE> 92
Article of the holders of Senior Debt to receive cash, property and securities
otherwise payable or deliverable to the Trustee or such Holder.
SECTION 14.7 Trustee to Effectuate Subordination.
Each Holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 14.8 No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance by
the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Securities, without
incurring responsibility to the Holders of the Securities and without impairing
or releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Securities to the holders of Senior Debt, do any
one or more of the following: (i) change the manner, place or terms of payment
or the time of payment of, or renew or alter, Senior Debt, or otherwise amend or
supplement in any manner Senior Debt or any instrument evidencing the same or
any agreement under which Senior Debt is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Debt; (iii) release any Person liable in any manner for the
collection of Senior Debt; and (iv) exercise or refrain from exercising any
rights against the Company and any other Person.
SECTION 14.9 Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities. Notwithstanding the provisions of
this Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Debt or from any trustee therefor or
representative thereof; and, prior to the receipt of any such written notice,
the Trustee shall be entitled in all respects to assume that no such facts
exist; provided, however, that if the Trustee shall not have received the notice
provided for in this Section at least two Business Days prior to the date upon
which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of, the principal of or interest on
any Security), then, anything herein contained to the contrary notwithstanding,
the Trustee shall have full
85
<PAGE> 93
power and authority to receive such money and to apply the same to the purpose
for which such money was received and shall not be affected by any notice to the
contrary which may be received by it within two Business Days prior to such
date.
Subject to the provisions of Section 6.1, the Trustee shall be
entitled to rely on the delivery to it of a written notice, by a Person
representing himself to be a holder of Senior Debt (or a trustee therefor or
representative thereof) to establish that such notice has been given by a holder
of Senior Debt (or a trustee therefor or representative thereof). In the event
that the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of Senior Debt to participate in
any payment or distribution pursuant to this Article, the Trustee may request
such Person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of Senior Debt held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 14.10 Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee, subject to the provisions of Section 6.1, and the
Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such Proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders
of Securities, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior Debt and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article.
SECTION 14.11 Trustee Not Fiduciary for Holders of Senior Debt.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt and shall not be liable to any such holders if it shall
in good faith, mistakenly pay over or distribute to Holders of Securities or to
the Company or to any other Person cash, property or securities to which any
holders of Senior Debt shall be entitled by virtue of this Article or otherwise.
SECTION 14.12 Rights of Trustee as Holder of Senior Debt; Preservation of
Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Debt which may at
any time be held by it, to the same extent as any other holder of Senior Debt,
and nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder.
86
<PAGE> 94
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 6.7.
SECTION 14.13 Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, (i) the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the Trustee and (ii)
any notice given to the Trustee under this Article XIV shall be deemed to have
been given to any such Paying Agent; provided, however, that Section 14.12 shall
not apply to the Company or any Affiliate of the Company if it or such Affiliate
acts as Paying Agent.
SECTION 14.14 Payment.
For the purposes of this Article only, (1) the issuance and delivery
of junior securities upon conversion of Securities in accordance with Article
XIII or upon the repurchase of Securities in accordance with Article XV shall
not be deemed to constitute a payment or distribution on account of the
principal of, premium, if any, or interest on Securities or on account of the
purchase or other acquisition of Securities, and (2) the payment, issuance or
delivery of cash, property or securities (other than junior securities) upon
conversion of a Security shall be deemed to constitute payment on account of the
principal of, premium, if any, or interest on such Security. For the purposes of
this Section, the term "junior securities" means (a) shares of any stock of any
class of the Company and any cash, property or securities into which the
Securities are convertible pursuant to Article XIII and (b) securities of the
Company which are subordinated in right of payment to all Senior Debt which may
be outstanding at the time of issuance or delivery of such securities to
substantially the same extent as, or to a greater extent than, the Securities
are so subordinated as provided in this Article. Nothing contained in this
Article or elsewhere in this Indenture or in the Securities is intended to or
shall impair, as among the Company, its creditors other than holders of Senior
Debt and the Holders of the Securities, the right, which is absolute and
unconditional, of the Holder of any Security to convert such Security in
accordance with Article XIII or to exchange such Security for Common Stock in
accordance with Article XV if the Company elects to satisfy the obligations
under Article XV by the delivery of Common Stock.
ARTICLE XV
REPURCHASE OF SECURITIES AT THE OPTION OF THE HOLDER
UPON A CHANGE IN CONTROL
87
<PAGE> 95
SECTION 15.1 Right to Require Repurchase.
In the event that a Change in Control (as hereinafter defined) shall
occur, then each Holder shall have the right, at the Holder's option, but
subject to the provisions of Section 15.3, to require the Company to repurchase,
and upon the exercise of such right the Company shall repurchase, all of such
Holder's Securities, or any portion of the principal amount thereof that is
equal to $1,000 or any 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 in Section 15.3) at a purchase price equal to 100% of the
principal amount of the Securities to be repurchased plus interest accrued to
the Repurchase Date (the "Repurchase Price"); provided, however, that
installments of interest on Securities whose Stated Maturity is on or prior to
the Repurchase Date shall be payable, in cash, to the Holders of such
Securities, or one or more Predecessor Securities, registered as such on the
relevant Record Date according to their terms and the provisions of Section 3.7.
Such right to require the repurchase of the Securities shall not continue after
a discharge of the Company from its obligations with respect to the Securities
in accordance with Article IV, unless a Change in Control shall have occurred
prior to such discharge. Whenever in this Indenture there is a reference, in any
context, to the principal of any Security as of any time, such reference shall
be deemed to include reference to the Repurchase Price payable in respect of
such Security to the extent that such Repurchase Price is, was or would be so
payable at such time, and express mention of the Repurchase Price in any
provision of this Indenture shall not be construed as excluding the Repurchase
Price in those provisions of this Indenture when such express mention is not
made; provided that for purposes of Article XIV, such reference shall be deemed
to include reference to the Repurchase Price only to the extent the Repurchase
Price is payable in cash.
SECTION 15.2 Notices; Method of Exercising Repurchase Right, Etc.
(a) Unless the Company shall have theretofore called for
redemption all of the Outstanding Securities, on or before the 30th day after
the occurrence of a Change in Control, the Company or, at the request and
expense of the Company on or before the 15th day after such occurrence, the
Trustee, shall give to all Holders of Securities, in the manner provided in
Section 1.6, notice (the "Company Notice") of the occurrence of the Change in
Control and of the repurchase right set forth herein arising as a result
thereof. The Company shall also deliver a copy of such notice of a repurchase
right to the Trustee.
Each notice of a repurchase right shall state:
(i) the Repurchase Date,
(ii) the date by which the repurchase right must be
exercised,
(iii) the Repurchase Price,
(iv) a description of the procedure which a Holder must
follow to exercise
88
<PAGE> 96
a repurchase right, and the place or places where such Securities
are to be surrendered for payment of the Repurchase Price and
accrued interest, if any,
(v) that on the Repurchase Date the Repurchase Price, and
accrued interest, if any, will become due and payable upon each
such Security designated by the Holder to be repurchased, and
that interest thereon shall cease to accrue on and after said
date,
(vi) the Conversion Rate then in effect, the date on which
the right to convert the principal amount of the Securities to be
repurchased will terminate and the place or places where such
Securities may be surrendered for conversion, and
(vii) the place or places that the certificate required by
Section 2.3 shall be delivered, and the form of such certificate.
In addition, at least two Business Days preceding the Repurchase Date,
the Company shall publish in an Authorized Newspaper, in the manner provided in
Section 1.5, notice specifying whether the Repurchase Price will be payable in
cash or shares of Common Stock and shall deliver a copy of such notice to the
Trustee.
No failure of the Company to give the foregoing notices or defect
therein shall limit any Holder's right to exercise a repurchase right or affect
the validity of the proceedings for the repurchase of Securities.
If any of the foregoing provisions or other provisions of this Article
are inconsistent with applicable law, such law shall govern.
(b) To exercise a repurchase right, a Holder shall deliver to the
Trustee or any Paying Agent on or before the 30th day after the date of the
Company Notice (i) written notice of the Holder's exercise of such right, which
notice shall set forth the name of the Holder, the principal amount of the
Securities to be repurchased (and, if any Security is to repurchased in part,
the serial number thereof, the portion of the principal amount thereof to be
repurchased and the name of the Person in which the portion thereof to remain
Outstanding after such repurchase is to be registered) and a statement that an
election to exercise the repurchase right is being made thereby, and, in the
event that the Repurchase Price shall be paid in shares of Common Stock, the
name or names (with addresses) in which the certificate or certificates for
shares of Common Stock shall be issued, and (ii) the Securities with respect to
which the repurchase right is being exercised. Such written notice shall be
irrevocable, except that the right of the Holder to convert the Securities with
respect to which the repurchase right is being exercised shall continue until
the close of business on the Repurchase Date.
(c) In the event a repurchase right shall be exercised in
accordance with the terms hereof, the Company shall pay or cause to be paid to
the Trustee or the Paying Agent the Repurchase Price in cash, as provided above,
for payment to the Holder on the Repurchase Date, together with
89
<PAGE> 97
accrued and unpaid interest to the Repurchase Date payable with respect to the
Securities as to which the purchase right has been exercised; provided, however,
that installments of interest that mature on or prior to the Repurchase Date
shall be payable in cash to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Regular Record Date, in each case according to the terms and provisions
of Article Three.
(d) If any Security (or portion thereof) surrendered for
repurchase shall not be so paid on the Repurchase Date, the principal amount of
such Security (or portion thereof, as the case may be) shall, until paid, bear
interest to the extent permitted by applicable law from the Repurchase Date at
the rate of 5% per annum, and each Security shall remain convertible into shares
of Common Stock until the principal of such Security (or portion thereof, as the
case may be) shall have been paid or duly provided for.
(e) Any Security which is to be repurchased only in part shall be
surrendered to the Trustee (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and make available for delivery to the Holder of such
Security without service charge, a new Security or Securities, containing
identical terms and conditions, each in an authorized denomination in aggregate
principal amount equal to and in exchange for the unrepurchased portion of the
principal of the Security so surrendered.
(f) All Securities delivered for repurchase shall be delivered to
the Trustee, the Paying Agent or any other agents (as shall be set forth in the
Company Notice) to be canceled by or at the direction of the Trustee, which
shall dispose of the same as provided in Section 3.9.
SECTION 15.3 Certain Definitions.
For purposes of this Article XV,
(a) the term "beneficial owner" shall be determined in accordance
with Rule 13d-3, as in effect on the date of the original execution of this
Indenture, promulgated by the Commission pursuant to the Exchange Act;
(b) a "Change in Control" shall be deemed to have occurred at the
time, after the original issuance of the Securities, of:
(i) the acquisition by any Person 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 power of all shares of capital
stock of the Company entitled to vote generally in the elections
of directors (any shares of voting stock of which such person or
group is the beneficial owner that are not then outstanding being
deemed outstanding for
90
<PAGE> 98
purposes of calculating such percentage) 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 of the Company with, or merger of the
Company 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 Common Stock or capital stock of the
Company and (y) pursuant to which the holders of Common Stock
immediately prior to such transaction are entitled 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 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 date of the Change in Control or the date of 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 prior to the date of
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 in effect on such Trading Day; and (c) the term "Person"
shall include any syndicate or group which would be deemed to be
a "person" under Section 13(d)(3) of the Exchange Act, as in
effect on the date of the original execution of this Indenture.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
91
<PAGE> 99
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
MRV COMMUNICATIONS, INC.
[SEAL]
By:/s/ Noam Lotan
---------------------------------
Name: Noam Lotan
Title: President
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By:/s/ Herbert J. Lemmer
---------------------------------
Name: Herbert J. Lemmer
Title: Vice President
92
<PAGE> 100
State of California )
: ss.:
County of Los Angeles )
On the 26th day of June, 1998, before me personally came Noam Lotan,
to me known, who, being by me duly sworn, did depose and say that he is
President and CEO of MRV COMMUNICATIONS, INC., one of the corporations described
in and which executed the foregoing instrument; that he/she knows the seal of
said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation; and that he/she signed his name thereto by like authority.
__________________________________
Notary Public
State of New York )
: ss.:
County of Kings )
On the 26th day of June, 1998, before me personally came Herbert J.
Lemmer, to me known, who, being by me duly sworn, did depose and say that he is
Vice President of AMERICAN STOCK TRANSFER & TRUST COMPANY, a New York
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation; and that he signed his name thereto by like
authority.
__________________________________
Notary Public
93
<PAGE> 101
ANNEX A
FORM OF CONVERSION NOTICE
[Notice pursuant to Section 13.2 of the Indenture]
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Re: MRV COMMUNICATIONS, INC.
5% Convertible Subordinated Notes due 2003 (the "Securities")
Reference is hereby made to the Indenture, dated as of June 26, 1998
(the "Indenture"), between MRV Communications, Inc., as Issuer, and American
Stock Transfer & Trust Company, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
This letter relates to the Securities specified below, which are
registered in the name of the undersigned (the "Holder"). The Holder hereby
irrevocably exercises its right to convert such Securities, or the portion
thereof, if any, specified below, into shares of Common Stock and, except to the
extent specified or required as described below, directs that certificates
representing such Shares of Common Shares, together with any check in payment
for a fractional share and any Security representing any unconverted principal
amount, be issued and delivered through the facilities of the Depositary, for
credit to the account(s) of the Person(s) indicated below.
The Holder acknowledges and agrees that no shares of Common Stock will
be delivered upon conversion of the specified Securities during the
Non-Conversion Period and no shares of Common Stock will be delivered on
conversion until any amount payable by the Holder on account of interest is
paid, any certificates evidencing specified Securities not held in book-entry
form are duly endorsed or assigned to the Company or in blank and surrendered
and any taxes or other charges or documents required in connection with a
transfer on conversion, and any other required items, are delivered to the
Conversion Agent.
The Holder acknowledges and agrees that, notwithstanding this request
for conversion, the Company may require that the shares of Common Stock
delivered on conversion of the specified Securities be delivered in certificated
form subject to a restrictive legend, or that additional certifications be
delivered on behalf of the relevant beneficial owner(s), if it determines that
doing so is necessary to comply with the requirements of the Securities Act or
otherwise, as provided in the Indenture.
Conversion of the specified Securities is subject to the requirements
established by the Company as well as to the procedures of the Depositary, all
as in effect from time to time. The specified Securities will be deemed to have
been converted as of the close of business on the first day
A-1
<PAGE> 102
on which this conversion notice and all other required items have been delivered
to the Conversion Agent as provided above and, upon such conversion, shall cease
to accrue interest or be Outstanding (subject to the Holder's right to receive
the Conversion Securities as provided in the Indenture). Prior to such
conversion, the Holder will have no rights in the Conversion Securities.
Please provide the information requested below, as applicable.
1. Please specify the securities held and the portion thereof to be
converted:
Principal amount held: $
CUSIP number(s):
Depositary (DTC) account where held:
Principal amount being converted (if less than all):$_____
2. Unless and to the extent otherwise specified below, all Securities
(together with any unconverted Securities) will be delivered in book-entry form
to the DTC account specified in Item 1 above.
3. If other arrangements are desired, please specify the type, number
and form of securities to be delivered on conversion and the names(s) of the
account holder(s) or registered owner(s), by checking the appropriate boxes and
providing the information requested:
[ ] Common Shares
[ ] Book-Entry
Number of shares of Common Stock:
DTC Account:
[ ] Certificates
Number of shares of Common Stock:
Registered Owner:
[ ] Unconverted Securities
[ ] Certificates
A-2
<PAGE> 103
Principal Amount: $
Registered Owner:
[ ] Book-Entry
Principal Amount: $
DTC Account:
Please sign and date this notice in the space provided below.
Date:
Name of Holder: _____________________
Signature(s) of Holder:_____________________
Title(s): _____________________
(If the Holder is a corporation, partnership or fiduciary, the title of the
Person signing on behalf of the Holder must be stated.)
* Aggregate principal amount of each certificate must equal $1,000 or any
amount in excess thereof in integral multiples of $1,000.
If shares of Common Stock or unconverted Securities are to be delivered other
than to and in the name of the registered owner, any signature must be
guaranteed by an "Eligible Institution" (banks, stock brokers, savings and loan
associations and credit unions) with membership in an approved signature
guarantee medallion program pursuant to Securities and Exchange Commission Rule
17Ad-15.
__________________________________
Signature Guarantee
A-3
<PAGE> 104
ANNEX B
FORM OF TRANSFER CERTIFICATE
RESTRICTED GLOBAL SECURITY TO
REGULATION S GLOBAL SECURITY
(Transfers pursuant to Section 3.5(b)(2) of the Indenture)
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Re MRV COMMUNICATIONS, INC.
5% Convertible Subordinated Notes
Due 2003 (the "Securities")
Reference is hereby made to the Indenture, dated as of June 26, 1998
(the "Indenture"), between MRV Communications, Inc., as Issuer, and American
Stock Transfer & Trust Company, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
This letter relates to $_____________ aggregate principal amount of
Securities which are evidenced by the Restricted Global Security (CUSIP
No.553477 AA8 R) and held with the Depositary in the name of [insert name of
transferor] (the "Transferor"). The Transferor has requested a transfer of such
beneficial interest in the Securities to a Person who will take delivery thereof
in the form of an equal aggregate principal amount of Securities evidenced by
the Regulation S Global Security, which amount, in the case of transfers during
the Restricted Period, immediately after such transfer, is to be held with the
Depositary through Euroclear or CEDEL or both.
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that such transfer has been effected pursuant to
and in accordance with the transfer restrictions applicable to the Global
Securities and pursuant to and in accordance with Rule 903, Rule 904 or Rule 144
under the United States Securities Act of 1933, as amended (the "Securities
Act"), and accordingly the Transferor does hereby further certify that:
(a) If the transfer has been effected pursuant to Rule 903 or
Rule 904:
(i) the offer of the Securities was not made to a person in
the United States;
(ii) either:
B-1
<PAGE> 105
(A) at the time the buy order was originated, the
transferee was outside the United States or the Transferor and
any person acting on its behalf reasonably believed that the
transferee was outside the United States, or
(B) the transaction was executed in, on or through
the facilities of a designated offshore securities market and
neither the Transferor nor any person acting on its behalf knows
that the transaction was prearranged with a buyer in the United
States;
(iii) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable;
(iv) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act; and
(v) if the transfer is being requested on or prior to
________, 199_, upon completion of the transaction, the
beneficial interest being transferred as described above was held
with the Depositary through Euroclear or CEDEL or both, and
(b) If the transfer has been effected pursuant to Rule 144, the
Securities have been transferred in a transaction permitted by Rule 144 under
the Securities Act.
Upon giving effect to this request to exchange a beneficial interest
in such Restricted Global Security for a beneficial interest in a Regulation S
Global Security, the resulting beneficial interest shall be subject to the
restrictions on transfer applicable to Regulation S Global Securities pursuant
to the Indenture and the Securities.
This certificate and the statements contained herein are made for the
benefit of the Company and the Initial Purchasers. Terms used in this
certificate and not otherwise defined in the Indenture have the meanings set
forth in Regulation S under the Securities Act.
Dated:
[Insert Name of Transferor]
By:_________________________________
Name:
Title:
(If the registered owner
is a corporation,
partnership or fiduciary,
the title of the Person
signing on behalf of such
registered owner must be
stated.)
B-2
<PAGE> 106
ANNEX C
FORM OF TRANSFER CERTIFICATE
REGULATION S GLOBAL SECURITY TO RESTRICTED GLOBAL
SECURITY DURING THE RESTRICTED PERIOD
(Transfers pursuant to Section 3.5(b)(3) of the Indenture)
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Re: MRV COMMUNICATIONS, INC.
5% Convertible Subordinated Notes
Due 2003 (the "Securities")
Reference is hereby made to the Indenture, dated as of June 26, 1998
(the "Indenture"), between MRV Communications, Inc., as Issuer, and American
Stock Transfer & Trust Company, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
This letter relates to $_________________ aggregate principal amount
of Securities which are evidenced by the Regulation S Global Security and held
with the Depositary through Euroclear or CEDEL or both in the name of [insert
name of transferor] (the "Transferor") during the Restricted Period. The
Transferor has requested a transfer of such beneficial interest in the
Securities to a Person that will take delivery thereof in the form of an equal
principal amount of Securities evidenced by the Restricted Global Security
(CUSIP No.553477 AA8 R) to be held with the Depositary.
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that such transfer has been effected pursuant to
and in accordance with Rule 144A under the United States Securities Act of 1933,
as amended, and accordingly the Transferor does hereby further certify that the
Securities are being transferred to a person that the Transferor reasonably
believes is purchasing the Securities for its own account, or for one or more
accounts with respect to which such Person exercises sole investment discretion,
and such Person and each such account is a "qualified institutional buyer"
within the meaning of Rule 144A, in each case in a transaction meeting the
requirements of Rule 144A and such Securities are being transferred in
compliance with any applicable blue sky securities laws of any State of the
United States.
Upon giving effect to this request to exchange a beneficial interest
in Regulation S Global Securities for a beneficial interest in Restricted Global
Security, the resulting beneficial interest shall
be subject to the restrictions on transfer applicable to the Restricted Global
Securities pursuant to the
C-1
<PAGE> 107
Indenture and Securities Act.
This certificate and the statements contained herein are made for the
benefit of the Company and the Initial Purchasers. Terms used in this
Certificate and not otherwise defined in the Indenture have the meanings set
forth in Regulation S under the Securities Act.
Dated:
[Insert Name of Transferor]
By:_________________________________
Name:
Title:
(If the registered owner is a corporation, partnership or fiduciary, the title
of the Person signing on behalf of such registered owner must be stated.)
C-2
<PAGE> 1
EXHIBIT 4.3
SPECIMEN
[THE SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OR A DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THE SECURITIES EVIDENCED HEREBY AND THE SHARES OF COMMON STOCK ISSUABLE
UPON THEIR CONVERSION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE TRANSFEROR REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A") ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT,
(3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED
BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO AN INSTITUTION THAT IS AN
ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501 (A) (1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT IN A TRANSACTION EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (IF AVAILABLE) OR (5) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED
STATES.
<PAGE> 2
CONVERSION OF THIS SECURITY IS SUBJECT TO CERTIFICATION AND OTHER
REQUIREMENTS, AND ANY COMMON STOCK ISSUED ON SUCH CONVERSION WILL BE SUBJECT TO
THE TRANSFER RESTRICTIONS REFERRED TO ABOVE.
MRV COMMUNICATIONS, INC.
5% CONVERTIBLE SUBORDINATED NOTES DUE 2003
No.___$_________ [Registered Global Security - CUSIP No.553477 AA8
[Registered Regulation S Global Security - CUSIP No.[ ]
MRV COMMUNICATIONS, INC., a Delaware corporation (herein called the
"Company," which term includes any successor Person under the Indenture referred
to on the reverse hereof), for value received, hereby promises to pay to
_______________, or registered assigns, the principal sum of _____________ U.S.
Dollars, [IF THIS SECURITY IS A GLOBAL SECURITY, THEN INSERT -- (which principal
amount may from time to time be increased or decreased to such other principal
amounts (which, taken together with the principal amounts of all other
Outstanding Securities, shall not exceed $115,000,000 in the aggregate at any
time) by adjustments made on the records of the Trustee hereinafter referred to
in accordance with the Indenture)] on June 15, 2003, and to pay interest thereon
from June 26, 1998 or from the most recent Interest Payment Date (as defined
below) to which interest has been paid or duly provided for, semi-annually in
arrears on June 15 and December 15 in each year, commencing on December 15,
1998, and at Maturity at the rate of 5% per annum, until the principal hereof is
paid or made available for payment, provided that any amount of such principal
or interest that is overdue shall bear interest at the rate of 5% per annum (to
the extent that payment of such interest shall be legally enforceable), from the
date such amount is due until it is paid or made available for payment, and such
interest on any overdue amount shall be payable on demand. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which shall be the June 1
or December 1 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, provided notice thereof shall have been given to
Holders of Securities not less than 10 days prior to such Special Record Date,
or be paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in said Indenture.
Payment of the principal of and interest on this Security will be made
in immediately
<PAGE> 3
available funds and in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts,
at the office or agency of the Company maintained for that purpose in the
Borough of Manhattan, The City of New York, provided, however, that payment of
interest may, at the option of the Company, be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register. If this Security is a Global Security, then each such payment
will be made in accordance with the procedures of the Depositary as then in
effect.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof or an Authenticating Agent by the
manual signature of one of their respective authorized signatories, this
Security shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Security to be duly
executed under its corporate seal.
MRV COMMUNICATIONS, INC.
[Corporate Seal]
By:
-------------------------------
Name:
Title:
Attest:
- -------------------------------
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated:
AMERICAN STOCK TRANSFER & TRUST COMPANY
as Trustee
By:
-------------------------------
Authorized Signatory
Reverse of Security
<PAGE> 4
This Security is one of a duly authorized issue of securities of the
Company designated as its "5% Convertible Subordinated Notes due 2003" (herein
called the "Securities"), limited in aggregate principal amount to $115,000,000
issued and to be issued under an Indenture, dated as of June 26, 1998 (herein
called the "Indenture"), between the Company and American Stock Transfer & Trust
Company, as Trustee (herein called the "Trustee," which term includes any
successor trustee under the Indenture), to which the Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee, the Holders of Senior Debt of the Company and the
Holders of the Securities and of the terms upon which the Securities are, and
are to be, authenticated and delivered.
No sinking fund is provided for in the Securities. The Securities may
not be redeemed at the option of the Company prior to June 15, 2001. Thereafter,
the Securities may be redeemed at the option of the Company, in whole or in
part, at the Redemption Prices set forth below: Such Redemption Prices
(expressed as a percentage of principal amount) are as follows for the 12-month
period beginning on June 15 of the following years:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---- ----------------
<S> <C>
2001....................................... 102%
2002....................................... 101
</TABLE>
in each case together with accrued interest to the Redemption Date provided that
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.
Notice of redemption (which notice shall be irrevocable) will be given
by first-class mail to Holders of Securities at their registered addresses as
recorded in the Security Register. Notice will be given not more than 60 nor
less than 30 days prior to the Redemption Date, as provided in the Indenture.
In any case where the due date for the payment of the principal of,
premium, if any, or interest (including Liquidated Damages) on, any Security or
the last day on which a Holder of a Security has a right to convert his Security
shall be at any place of payment or place of conversion, as the case may be, a
day on which banking institutions at such place of payment or place of
conversion are authorized or obligated by law or executive order to close, then
payment of principal of, premium, if any, or interest (including Liquidated
Damages) on, or delivery for conversion of such Security need not be made on or
by such date at such place but may be made on or by the next succeeding day at
such place which is not a day on which banking institutions are authorized or
obligated by law or executive order to close, with the same force and effect as
if made on the date for such payment or the date fixed for redemption or
repurchase, or at the Stated Maturity or by such last day for conversion, and no
interest shall accrue for the period after
<PAGE> 5
such date.
Subject to and upon compliance with the provisions of the Indenture, the
Holder of this Security is entitled, at his option, at any time on or after the
90th day following the last original issue date of the Securities (the
"Non-Conversion Period") and prior to the close of business on June 15, 2003, or
in case this Security is called for redemption or the Holder hereof has
exercised its right to require the Company to repurchase this Security, then in
respect of this Security until and including, but (unless the Company defaults
in making the payment due upon redemption or repurchase, as the case may be) not
after, the close of business on the Redemption Date or the Repurchase Date, as
the case may be, to convert this Security into newly issued fully paid and
nonassessable shares of Common Stock of the Company at an initial Conversion
Rate equal to 36.9720 shares of Common Stock per $1,000 principal amount of
Securities (or at the current adjusted Conversion Rate if an adjustment has been
made as provided in the Indenture) by surrender of this Security, and also a
duly executed conversion notice, substantially in the form provided in Annex A
of the Indenture (including the tax certification contained in such notice), to
the Company, subject to any laws or regulations applicable thereto and subject
to the right of the Company to terminate the appointment of the Conversion Agent
(as defined below), at the office or agency of the Company in The City of New
York or at such other offices or agencies outside the United States that the
Company may designate (each a "Conversion Agent"). Any Security surrendered for
conversion during a Record Date Period (except Securities called for redemption
on a Redemption Date or to be repurchased on a Repurchase Date during, in each
case, such period) must be accompanied by payment of an amount equal to the
interest payable on the Interest Payment Date relating to such Record Date
Period on the principal amount of such Security being surrendered for
conversion, and the interest payable in respect of such Security on such
Interest Payment Date shall be paid to the Holder of such Security as of the
Regular Record Date relating to such Record Date Period. The interest payable on
such Interest Payment Date with respect to any Security which has been called
for redemption on a Redemption Date, or is repurchaseable on a Repurchase Date,
occurring, in either case, during a Record Date Period, which Security is
surrendered for conversion during such Record Date Period, shall be paid to the
Holder of such Security being converted in an amount equal to the interest that
would have been payable on such Security if such Security had been converted as
of the close of business on such Interest Payment Date. Interest payable in
respect of any Security surrendered for conversion on or after an Interest
Payment Date shall be paid to the Holder of such Security as of the next
preceding Regular Record Date, notwithstanding the exercise of the right of
conversion.
The Company shall thereafter deliver to the Holder the fixed number of
shares of Common Stock (together with any cash adjustment, as provided in the
Indenture) into which this Security is convertible and such delivery will be
deemed to satisfy the Company's obligation to pay the principal amount of this
Security. No fractions of shares or scrip representing fractions of shares will
be issued on conversion, but instead of any fractional interest (calculated to
the nearest 1/100th of a share) the Company shall pay a cash adjustment as
provided in the Indenture, or alternatively the Company shall round up the
conversion transaction to the next higher whole share. In addition, the
Indenture provides that in case of certain consolidations or mergers to which
the Company is a party or the sale or transfer of all or substantially all of
the assets of the
<PAGE> 6
Company, the Indenture shall be amended, without the consent of any Holders of
Securities, so that this Security, if then Outstanding, will be convertible
thereafter, during the period this Security shall be convertible as specified
above, only into the kind and amount of securities, cash and other property
receivable upon consolidation, merger, sale or transfer by a holder of the
number of shares of Common Stock of the Company into which this Security might
have been converted immediately prior to such consolidation, merger, sale or
transfer (assuming such holder of Common Stock failed to exercise any rights of
election and received per share the kind and amount received per share by at
least a plurality of Non-Electing Shares). Adjustments in the Conversion Rate of
less than one percent of such price will not be required, but any adjustment
that would otherwise be required to be made will be carried forward and taken
into account in the computation of any subsequent adjustment.
Notwithstanding any provision hereof, no securities will be delivered on
conversion of this Security or any portion hereof unless the certification and
other requirements described in the Indenture are satisfied.
Subject to certain limitations in the Indenture, at any time when the
Company is not subject to Section 13 or 15(d) of the United States Securities
Exchange Act of 1934, as amended, upon the request of a Holder of a Restricted
Security or the holder of shares of Common Stock issued upon conversion thereof,
the Company will promptly furnish or cause to he furnished Rule 144A Information
(as defined below) to such Holder of Restricted Securities or such holder of
shares of Common Stock issued upon conversion of Restricted Securities, or to a
prospective purchaser of any such security designated by any such Holder or
holder, as the case may be, to the extent required to permit compliance by any
such holder with Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act"). "Rule 144A Information" shall be such information as is
specified pursuant to Rule 144A(d)(4) under the Securities Act (or any successor
provision thereto).
If this Security is a Registrable Security, then the Holder of this
Security and the Common Stock of the Company issuable upon conversion thereof is
entitled to the benefits of a Registration Rights Agreement (subject to the
provisions thereof), dated as of the date hereof, between the Company and the
Initial Purchasers (the "Registration Rights Agreement"). Pursuant to the
Registration Rights Agreement, the Company has agreed for the benefit of the
Holders from time to time of the Securities and the Common Stock issuable upon
conversion thereof that it will, at its expense, (a) within 90 days after the
first date of original issuance of the Securities, file a shelf registration
statement (the "Shelf Registration Statement") with the Commission with respect
to resales of the Securities and the Common Stock issuable upon conversion
thereof (together, the "Registrable Securities"), (b) use its best efforts to
cause such Shelf Registration Statement to be declared effective by the
Commission as promptly as practicable but no later than 180 days after the first
date of original issuance of the Securities (the "Settlement Date"), and (c) use
its best efforts to maintain such Shelf Registration Statement continuously
effective under the Securities Act, until the second anniversary of the date of
the effectiveness of the Shelf Registration Statement or such earlier date as is
provided in the Registration Rights Agreement.
<PAGE> 7
If (i) on or prior to 90 days following the first date of original
issuance of the Securities, a Shelf Registration Statement has not been filed
with the Commission, or (ii) on or prior to 180 days following the Settlement
Date, such Shelf Registration Statement is not declared effective (each, a
"Registration Default"), additional interest ("Liquidated Damages") will accrue
on this Security from and including the day following such Registration Default
to but excluding the day on which such Registration Default has been cured.
Liquidated Damages will be paid semi-annually in arrears, with the first
semi-annual payment due on the first Interest Payment Date in respect of the
Securities following the date on which such Liquidated Damages begin to accrue,
and will accrue at a rate per annum equal to an additional one-quarter of one
percent (0.25%) of the principal amount of the Securities to and including the
90th day following such Registration Default and at a rate per annum equal to
one-half of one percent (0.50%) thereof from and after the 91st day following
such Registration Default. In the event that the Shelf Registration Statement
ceases to be effective prior to the second annual anniversary of the initial
effective date of the Shelf Registration Statement or such earlier date as is
provided in the Registration Rights Agreement for a period in excess of 60 days,
whether or not consecutive, during any 12-month period, then the interest rate
borne by the Securities shall increase by an additional one-half of one percent
(0.50%) per annum from the 61st day of the applicable 12-month period such Shelf
Registration Statement ceases to be effective to but excluding the day on which
the Shelf Registration Statement again becomes effective.
Whenever in this Security there is a reference, in any context, to the
payment of the principal of, premium, if any, or interest on, or in respect of,
any Security such reference shall be deemed to include reference to the payment
of Liquidated Damages payable as described in the preceding paragraph to the
extent that, in such context, Liquidated Damages are, were or would be payable
in respect of such Security and express mention of the payment of Liquidated
Damages (if applicable) in any provisions of this Security shall not be
construed as excluding Liquidated Damages in those provisions of this Security
where such express mention is not made.
The Holder of this Security, by its acceptance thereof, agrees to be
bound by the terms of the Registration Rights Agreement relating to the
Securities and the Common Stock issuable upon conversion thereof.
If a Change in Control occurs, the Holder of this Security shall have
the right, at the Holder's option in accordance with the provisions of the
Indenture, to require the Company to repurchase this Security (or any portion of
the principal amount hereof that is an integral multiple of $1,000) for cash at
a Repurchase Price equal to 100% of the principal amount thereof plus interest
accrued to the Repurchase Date. Whenever in this Security there is a reference,
in any context, to the principal of any Security as of any time, such reference
shall be deemed to include reference to the Repurchase Price payable in respect
of such Security to the extent that such Repurchase Price is, was or would be so
payable at such time, and express mention of the Repurchase Price in any
provision of this Security shall not be construed as excluding the Repurchase
Price in those provisions of this Security when such express mention is not
made.
The indebtedness evidenced by this Security is, to the extent and in the
manner provided in
<PAGE> 8
the Indenture, subordinate and subject in right of payment to the prior payment
in full of all amounts then or thereafter to become due on all Senior Debt of
the Company, and this Security is issued subject to such provisions of the
Indenture with respect thereto. Each Holder of this Security, by accepting the
same, (a) agrees to and shall be bound by such provisions, (b) authorizes and
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and (c) appoints the
Trustee its attorney-in-fact for any and all such purposes.
If an Event of Default shall occur and be continuing, the principal of
all the Securities may be declared due and payable to the extent, in the manner
and with the effect provided in the Indenture. Upon payment (i) of the amount of
principal so declared due and payable and (ii) of interest on any overdue
principal and overdue interest, all of the Company's obligations in respect of
the payment of the principal of and interest on the Securities shall terminate.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee either (a) with the written consent of
the Holders of a majority in principal amount of the Securities at the time
outstanding, or (b) by the adoption of a resolution, at a meeting of Holders of
the Outstanding Securities at which a quorum is present by the Holders of 662/3%
in aggregate principal amount of the Outstanding Securities represented at such
meeting. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive compliance
by the Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Security shall be conclusive and binding upon such Holder
and upon all future Holders of this Security and of any Security issued in
exchange herefor or in lieu hereof, whether or not notation of such consent or
waiver is made upon this Security or such other Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default, the Holders of not
less than 25% in aggregate principal amount of the Outstanding Securities shall
have made written request to the Trustee to institute proceedings in respect of
such Event of Default and offered the Trustee indemnity satisfactory to it and
the Trustee shall not have received from the Holders of a majority in principal
amount of the Securities Outstanding a direction inconsistent with such request
and shall have failed to institute any such proceedings for 60 days after
receipt of such notice, request and offer of indemnity. The foregoing shall not
apply to any suit instituted by the Holder of this Security for the enforcement
of any payment of principal hereof or interest hereon (including any Liquidated
Damages) on or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligations of the Company, which
are absolute and unconditional, to pay
<PAGE> 9
the principal of, premium, if any, and interest (including Liquidated Damages)
on this Security at the times, places and rate, and in the coin or currency,
herein prescribed or to convert this Security as provided in the Indenture.
As provided in the Indenture and subject to certain limitations and
satisfaction of certain requirements therein set forth, the transfer of this
Security is registrable on the Security Register upon surrender of this Security
for registration of transfer at the office or agency of the Company as may be
designated by it for such purpose in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Security Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees. No
service charge shall be made to a Holder for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to recover
any tax or other governmental charge payable in connection therewith.
Prior to due presentation of this Security for registration of transfer
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered, as the owner thereof for
all purposes, whether or not such Security be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, THE UNITED STATES OF AMERICA
WITHOUT REGARD TO PRINCIPLES REGARDING CONFLICTS OF LAWS.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
ELECTION OF HOLDER TO REQUIRE REPURCHASE
1. Pursuant to Section 15.1 of the Indenture, the undersigned hereby
elects to have this Security repurchased by the Company.
2. The undersigned hereby directs the Trustee or the Company to pay it
or ________________________________________________________________ an amount in
cash equal to 100% of the principal amount hereof, plus interest accrued to the
Repurchase Date, as provided in the Indenture.
Dated:_________________________________________
_________________________________________
Signature
<PAGE> 10
Signature Guaranteed
Principal amount to be repurchased:____________________________________
Remaining principal amount following such repurchase:__________________
NOTICES: The signature to the foregoing Election must correspond to the
Name as written upon the face of this Security in every particular, without
alteration or any change whatsoever.
If payment is to be made to a person other than the signatory above, the
signature must be guaranteed by an "Eligible Institution" (banks, stock brokers,
savings and loan associations and credit unions) with membership in an approved
signature guarantee medallion program pursuant to Commission Rule 17Ad-15.
This is one of the Securities referred to in the within-mentioned
Indenture.
DATED:
AMERICAN STOCK TRANSFER
& TRUST COMPANY, as Trustee
By: _________________________________________
Authorized Signatory
<PAGE> 1
EXHIBIT 4.4
MRV COMMUNICATIONS, INC.
5% Convertible Subordinated Notes Due 2003
REGISTRATION RIGHTS AGREEMENT
June 26, 1998
PRUDENTIAL SECURITIES INCORPORATED
BEAR, STEARNS & CO. INC.
c/o Prudential Securities Incorporated
One New York Plaza, 16th Floor
New York, New York 10292
Ladies and Gentlemen:
MRV Communications, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to the Purchasers (as defined herein), upon the terms
set forth in a purchase agreement dated June 23, 1998 (the "Purchase Agreement")
among the Purchasers and the Company, its 5% Convertible Subordinated Notes Due
2003 (the "Securities"). As an inducement to the Purchasers to enter into the
Purchase Agreement and in satisfaction of a condition to the obligations of the
Purchasers thereunder, the Company agrees with the Purchasers, (i) for the
benefit of the Purchasers and (ii) for the benefit of the holders (as defined
herein) from time to time of the Securities and the Common Stock, par value
$.0034 per share (the "Common Stock"), of the Company issuable upon conversion
of the Securities (collectively, the "Registrable Securities"), including the
Purchasers, as follows:
SECTION 1. Definitions.
(a) Capitalized terms used herein without definition shall have
their respective meanings set forth in or pursuant to the Purchase Agreement or
the Offering Circular, dated June 23, 1998, in respect of the Securities. As
used in this Agreement, the following capitalized defined terms shall have the
following meanings:
"Act" or "Securities Act" means the United States Securities Act of
1933, as amended.
"Affiliate" of any specified person means any other person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with such specified person. For purposes of this definition, control of
a person means the power, direct or indirect, to direct or cause the direction
of the management and policies of such person whether by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Commission" means the United States Securities and Exchange Commission.
<PAGE> 2
"Common Stock" means the Common Stock, par value $.0034 per share, of
the Company.
"DTC" means The Depository Trust Company.
"Effectiveness Period" has the meaning set forth in Section 2(b) hereof.
"Effective Time" means the date on which the Commission declares the
Shelf Registration Statement effective or on which the Shelf Registration
Statement otherwise becomes effective.
"Electing Holder" has the meaning set forth in Section 3(a)(3) hereof.
"Exchange Act" means the United States Securities and Exchange Act of
1934, as amended.
The term "holder" means, when used with respect to any Security, the
holder (as defined in the Indenture) and, with respect to any Common Stock, the
record holder of such Common Stock.
"Indenture" means the Indenture, dated as of June 26, 1998, between the
Company and American Stock Transfer & Trust Company, as amended and supplemented
from time to time in accordance with its terms.
"Managing Underwriters" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten offering,
if any, as set forth in Section 6 hereof.
"NASD" means the National Association of Securities Dealers, Inc.
"NASD Rules" means the Rules of the NASD, as amended from time to time.
"Notice and Questionnaire" means a Notice of Registration Statement and
Selling Securityholder Questionnaire substantially in the form of Exhibit A
hereto.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Prospectus" means the prospectus included in any Shelf Registration
Statement (including, without limitation, any preliminary prospectus, any final
prospectus and any prospectus that discloses information previously omitted from
a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A under the Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by the Shelf Registration Statement and by all
other amendments and supplements to such prospectus, including all material
incorporated by reference in such prospectus and all documents filed after the
date of such prospectus by the Company under the Exchange Act and incorporated
by reference therein.
2
<PAGE> 3
"Purchasers" means collectively, Prudential Securities Incorporated and
Bear, Stearns & Co. Inc.
"Purchase Agreement" means the Purchase Agreement, dated June 23, 1998,
among the Purchasers and the Company.
"Registrable Securities" means all or any portion of the Securities
issued from time to time under the Indenture in registered form and the shares
of Common Stock issuable upon conversion of such Securities, including any
Securities initially issued in bearer form and constituting the unsold allotment
of a distributor (within the meaning of Regulation S under the Securities Act)
of such Securities and later exchanged for Securities in registered form;
provided, however, that a security ceases to be a Registrable Security when it
is no longer a Restricted Security.
"Restricted Security" means any Security or share of Common Stock
issuable upon conversion thereof except any such Security or share of Common
Stock which (i) has been effectively registered under the Securities Act and
sold in a manner contemplated by the Shelf Registration Statement, (ii) has been
transferred in compliance with Rule 144 under the Securities Act (or any
successor provision thereto) or is transferable pursuant to paragraph (k) of
such Rule 144 (or any successor provision thereto), (iii) has been sold in
compliance with Regulation S under the Securities Act (or any successor thereto)
and does not constitute the unsold allotment of a distributor within the meaning
of Regulation S under the Securities Act, or (iv) has otherwise been transferred
and a new Security or share of Common Stock not subject to transfer restrictions
under the Securities Act has been delivered by or on behalf of the Company in
accordance with Section 3.5 of the Indenture.
"Shelf Registration" means a registration effected pursuant to Section 2
hereof.
"Shelf Registration Statement" means a shelf registration statement of
the Company pursuant to the provisions of Section 2 hereof filed with the
Commission which covers some or all of the Registrable Securities, as
applicable, on an appropriate form under Rule 415 under the Act, or any similar
rule that may be adopted by the Commission, amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Suspension Event" shall have the meaning set forth in Section 3(j).
"Trust Indenture Act" means the Trust Indenture Act of 1939, or any
successor thereto, and the rules, regulations and forms promulgated thereunder,
as the same shall be amended from time to time.
"underwriter" means any underwriter of Registrable Securities in
connection with an offering thereof under a Shelf Registration Statement.
3
<PAGE> 4
(b) Wherever there is a reference in this Agreement to a
percentage of the "principal amount" of Registrable Securities or to a
percentage of Registrable Securities, Common Stock shall be treated as
representing the principal amount of Securities which was surrendered for
conversion or exchange in order to receive such number of shares of Common
Stock.
SECTION 2. Shelf Registration.
(a) The Company shall, within 90 calendar days following the Firm
Closing Date (as defined in the Purchase Agreement ), file with the Commission a
Shelf Registration Statement relating to the offer and sale of the Registrable
Securities by the holders from time to time in accordance with the methods of
distribution elected by such holders and set forth in such Shelf Registration
Statement and, thereafter, shall use its best efforts to cause such Shelf
Registration Statement to be declared effective under the Act by the Commission
as promptly as practicable but no later than 180 calendar days after the Firm
Closing Date; provided, however, that no holder shall be entitled to have the
Registrable Securities held by it covered by such Shelf Registration unless such
holder is an Electing Holder.
(b) The Company shall use its best efforts:
(i) To keep the Shelf Registration Statement continuously
effective in order to permit the Prospectus forming part thereof to be
usable by holders for a period of two years from the Effective Time of
the Shelf Registration Statement or, if shorter, the period that will
terminate when there are no Registrable Securities outstanding (in
either case, such period being referred to herein as the "Effectiveness
Period");
(ii) After the Effective Time of the Shelf Registration
Statement, promptly upon the request of any holder of Registrable
Securities that is not then an Electing Holder, to take any action
reasonably necessary to enable such holder to use the Prospectus forming
a part thereof for resales of Registrable Securities, including, without
limitation, any action necessary to identify such holder as a selling
securityholder in the Shelf Registration Statement; provided, however,
that nothing in this subparagraph shall relieve such holder of the
obligation to return a completed and signed Notice and Questionnaire to
the Company in accordance with Section 3(a)(2) hereof; and
(iii) If at any time the Securities, pursuant to Article XIII of
the Indenture, are convertible into securities other than Common Stock,
to cause such securities to be included in the Shelf Registration
Statement no later than the date on which the Securities may then be
convertible into such securities.
The Company shall be deemed not to have used its best efforts (within the
meaning of Section 11.12 of the Indenture) to keep the Shelf Registration
Statement effective during the Effectiveness Period if the Company voluntarily
takes any action that would result in any Electing Holders not being able
4
<PAGE> 5
to offer and sell any such Registrable Securities during such period unless such
(i) action is required by applicable law or (ii) a Suspension Event occurs and
the Company complies with Section 3(j).
SECTION 3. Registration Procedures.
In connection with any Shelf Registration Statement, the following
provisions shall apply:
(a) (i) Not less than 30 calendar days prior to the Effective
Time of the Shelf Registration Statement, the Company shall mail the
Notice and Questionnaire to the holders of Registrable Securities. No
holder shall be entitled to be named as a selling securityholder in the
Shelf Registration Statement as of the Effective Time, and no holder
shall be entitled to use the Prospectus forming a part thereof for
resales of Registrable Securities at any time, unless such holder has
returned a completed and signed Notice and Questionnaire to the Company
by the deadline for response set forth therein; provided, however,
holders of Registrable Securities shall have at least 28 calendar days
from the date on which the Notice and Questionnaire is first mailed to
such holders to return a completed and signed Notice and Questionnaire
to the Company.
(ii) After the Effective Time of the Shelf Registration
Statement, the Company shall, upon the request of any holder of
Registrable Securities that is not then an Electing Holder, promptly
send a Notice and Questionnaire to such holder. The Company shall not be
required to take any action to name such holder as a selling
securityholder in the Shelf Registration Statement or to enable such
holder to use the Prospectus forming a part thereof for resales of
Registrable Securities until such holder has returned a completed and
signed Notice and Questionnaire to the Company.
(iii) The term "Electing Holder" shall mean any holder of
Registrable Securities that has returned a completed and signed Notice
and Questionnaire to the Company in accordance with Section 3(a)(i) or
3(a)(ii) hereof.
(b) The Company shall furnish to each Electing Holder, prior to
the Effective Time, a copy of any Shelf Registration Statement initially filed
with the Commission, and shall furnish to such holders, prior to the filing
thereof with the Commission, copies of each amendment thereto and each amendment
or supplement, if any, to the Prospectus included therein and shall use its best
efforts to reflect in each such document, when so filed with the Commission,
such comments as the holders and their respective counsel reasonably may propose
(which comments shall be delivered to the Company within three Business Days
after receipt of any Shelf Registration Statement, each amendment thereto or any
amendment or supplement to the Prospectus).
(c) Subject to Section 3(j), the Company shall promptly take such
action as may be necessary so that (i) any Shelf Registration Statement and any
amendment thereto and any Prospectus forming part thereof and any amendment or
supplement thereto (and each report or other document incorporated therein by
reference in each case) complies in all material respects with the
5
<PAGE> 6
Securities Act and the Exchange Act and the respective rules and regulations
thereunder, (ii) any Shelf Registration Statement and any amendment thereto does
not, when it becomes effective, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (iii) any Prospectus forming part
of any Shelf Registration Statement, and any amendment or supplement to such
Prospectus, does not at any time during the Effectiveness Period include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements, in the light of the circumstances under which
they were made, not misleading.
(d) The Company shall promptly advise each Electing Holder and
shall confirm such advice in writing if so requested by any such holder:
(i) when a Shelf Registration Statement and any amendment
thereto has been filed with the Commission and when the Shelf
Registration Statement or any post-effective amendment thereto has
become effective;
(ii) of any request by the Commission for amendments or
supplements to the Shelf Registration Statement or the Prospectus
included therein or for additional information;
(iii) the issuance by the Commission of any stop order
suspending effectiveness of the Shelf Registration Statement or the
initiation of any proceedings for such purpose;
(iv) the receipt by the Company of any notification with respect
to the suspension of the qualification of the securities included in the
Shelf Registration Statement for sale in any jurisdiction or the
initiation of any proceeding for such purpose; and
(v) the happening of any event or the existence of any state of
facts that requires the making of any changes in the Shelf Registration
Statement or the Prospectus so that, as of such date, the Shelf
Registration Statement and the Prospectus do not contain an untrue
statement of a material fact and do not omit to state a material fact
required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of the circumstances
under which they were made) not misleading (which advice shall be
accompanied by an instruction to suspend the use of the Prospectus until
the requisite changes have been made).
(e) The Company shall use its best efforts to prevent the
issuance, and if issued to obtain the withdrawal, of any order suspending the
effectiveness of any Shelf Registration Statement at the earliest possible time.
(f) The Company shall furnish to each Electing Holder, without
charge, at least one copy of such Shelf Registration Statement and any
post-effective amendment thereto, including
6
<PAGE> 7
financial statements and schedules, and, if such holder so requests in writing,
all reports and exhibits (including those incorporated by reference).
(g) The Company shall, during the Effectiveness Period, deliver
to each Electing Holder, without charge, as many copies of the Prospectus
(including each preliminary Prospectus) included in such Shelf Registration
Statement and any amendment or supplement thereto as such holder may reasonably
request; and the Company consents (except during the continuance of any event
described in Section 3(d)(v)) to the use of the Prospectus or any amendment or
supplement thereto by each of the selling Electing Holders in connection with
the offering and sale of the Registrable Securities covered by the Prospectus or
any amendment or supplement thereto during the Effectiveness Period.
(h) Prior to any offering of Registrable Securities pursuant to
any Shelf Registration Statement, the Company shall (i) register or qualify or
cooperate with the Electing Holders and their respective counsel in connection
with the registration or qualification of such Registrable Securities for offer
and sale under the securities or blue sky laws of such jurisdictions within the
United States as any Electing Holder may reasonably request, (ii) keep such
registrations or qualifications in effect and comply with such laws so as to
permit the continuance of offers and sales in such jurisdictions for so long as
may be necessary to enable any Electing Holder or underwriter, if any, to
complete its distribution of Registrable Securities pursuant to the Shelf
Registration Statement and (iii) take any and all other actions necessary or
advisable to enable the offer and sale in such jurisdictions of the Registrable
Securities covered by such Shelf Registration Statement; provided, however, that
in no event shall the Company be obligated to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it would not
otherwise be required to so qualify but for this Section 3(h) or (ii) file any
general consent to service of process in any jurisdiction where it is not as of
the date hereof then so subject.
(i) Unless any Registrable Securities shall be in book-entry only
form, the Company shall cooperate with the Electing Holders to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be sold pursuant to any Shelf Registration Statement which
certificates, if so required by any securities exchange upon which any
Registrable Securities are listed, shall be penned, lithographed or engraved, or
produced by any combination of such methods, on steel engraved borders, and
which certificates shall be free of any restrictive legends and in such
permitted denominations and registered in such names as holders may request in
connection with the sale of Registrable Securities pursuant to such Shelf
Registration Statement.
(j) Upon the occurrence of any event contemplated by Section
3(d)(v) above, the Company shall promptly prepare a post-effective amendment to
any Shelf Registration Statement or an amendment or supplement to the related
Prospectus or file any other required document so that, as thereafter delivered
to Purchasers of the Registrable Securities included therein, the Prospectus
will not include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Notwithstanding the
foregoing, the Company may postpone, for a period not to exceed
7
<PAGE> 8
30 days, supplementing or amending the Shelf Registration Statement if (i) the
Company is in possession of material non-public information related to a
proposed financing, recapitalization, acquisition, business combination or other
material transaction and the Board of Directors of the Company determines (in
good faith in a written resolution) that disclosure of such information would
have a material adverse effect on the business or operations of the Company and
its subsidiaries and disclosure of such information is not otherwise required by
law and (ii) the Company delivers notice (which shall include a copy of the
resolution of the Board of Directors with respect to such determination) to the
Electing Holders and any placement agent or underwriter as contemplated by
Section 3(d)(v) to the effect that Electing Holders may not make offers or sales
under the Shelf Registration Statement (a "Suspension Event"); provided,
however, that the Company may deliver only two such notices within any 12-month
period. Promptly upon the earlier of (x) public disclosure of such material
non-public information, (y) the date on which such non-public information is no
longer material and (z) 30 days after the date notice is given by the Company
pursuant to clause (ii) above, the Company shall supplement or amend the Shelf
Registration Statement as required by the immediately preceding sentence and
give notice to the Electing Holders that offers and sales under the Shelf
Registration Statement may be resumed. If the Company notifies the Electing
Holders of the occurrence of any event contemplated by paragraph 3(d)(v) above,
each Electing Holder agrees, as a consequence of the inclusion of any of such
holder's Registrable Securities in the Shelf Registration Statement, to suspend
the use of the Prospectus until the requisite changes to the Prospectus have
been made.
(k) Not later than the Effective Time of any Shelf Registration
Statement hereunder, the Company shall obtain a CUSIP number for the Securities
registered under such Shelf Registration Statement.
(l) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make generally
available to their securityholders or otherwise provide in accordance with
Section 11(a) of the Securities Act as soon as practicable, but in any event not
later than eighteen months after (i) the effective date of the applicable Shelf
Registration Statement, (ii) the effective date (as defined in Rule 158(c) under
the Securities Act of each post-effective amendment to the Shelf Registration
Statement, and (iii) the date of each filing by the Company with the Commission
of an Annual Report on Form 10-K that is incorporated by reference in the Shelf
Registration Statement, an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder (including, at the option of the Company, Rule 158).
(m) Not later than the Effective Time of the Shelf Registration
Statement, the Company shall cause the Indenture and the Securities to be
qualified under the Trust Indenture Act in a timely manner and, in connection
with such qualification, the Company shall cooperate with the Trustee under the
Indenture and the Holders (as defined in the Indenture) to effect such changes
to the Indenture as may be required for such Indenture to be so qualified in
accordance with the terms of the Trust Indenture Act; and the Company shall
execute, and shall use all reasonable efforts to cause the Trustee to execute,
all documents that may be required to effect such changes and all other
8
<PAGE> 9
forms and documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner. In the event that any such
amendment or modification referred to in this Section 3(m) involves the
appointment of a new trustee under the Indenture, the Company shall appoint a
new trustee thereunder pursuant to the applicable provisions of the Indenture.
(n) The Company may require each holder of Registrable Securities
to be sold pursuant to any Shelf Registration Statement to furnish to the
Company such information regarding the holder and the distribution of such
Registrable Securities as may be required by applicable law or regulation for
inclusion in such Shelf Registration Statement and the Company may exclude from
such registration the Registrable Securities of any holder that fails to furnish
such information within a reasonable time after receiving such request.
(o) The Company shall, if requested, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to a Shelf
Registration Statement, such information as the Managing Underwriters reasonably
agree should be included therein and to which the Company does not reasonably
object and shall make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after they are notified of the
matters to be included or incorporated in such Prospectus supplement or
post-effective amendment.
(p) The Company shall enter into such customary agreements
(including underwriting agreements in customary form) and take all other
appropriate actions in order to expedite or facilitate the registration or the
disposition of the Registrable Securities, and in connection therewith, if an
underwriting agreement is entered into, cause the same to contain
indemnification provisions and procedures substantially identical to those set
forth in Section 5 (or such other provisions and procedures acceptable to the
Managing Underwriters, if any) with respect to all parties to be indemnified
pursuant to Section 5.
(q) The Company shall:
(i) make reasonably available for inspection by the Electing
Holders, any underwriter participating in any disposition pursuant to
such Shelf Registration Statement, and any attorney, accountant or other
agent retained by such holders or any such underwriter all relevant
financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries;
(ii) in connection with any underwritten offering conducted
pursuant to Section 6 hereof, cause the Company's officers, directors
and employees to supply all information reasonably requested by such
holders or any such underwriter, attorney, accountant or agent in
connection with any such Shelf Registration Statement, in each case, as
is customary for similar due diligence examinations; provided, however,
that any information that is designated in writing by the Company, in
good faith, as confidential at the time of delivery of such information
shall be kept confidential by such holders or any such underwriter,
attorney, accountant or agent, unless such disclosure is made in
connection with
9
<PAGE> 10
a court proceeding or required by law, or such information becomes
available to the public generally or through a third party without an
accompanying obligation of confidentiality; and provided further, that,
if the foregoing inspection and information gathering would otherwise
disrupt the Company's conduct of business, such inspection and
information gathering shall, to the greatest extent possible, be
coordinated on behalf of the Electing Holders and the other parties
entitled thereto by one counsel designated by and on behalf of such
Electing Holders and other parties;
(iii) in connection with any underwritten offering conducted
pursuant to Section 6 hereof, make such representations and warranties
to the Electing Holders registered thereunder and to the Managing
Underwriters, in form, substance and scope as are customarily made by
the Company to underwriters in primary underwritten offerings and
covering matters including, but not limited to, those set forth in the
Purchase Agreement;
(iv) in connection with any underwritten offering conducted
pursuant to Section 6 hereof, obtain opinions of counsel to the Company
and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the Managing
Underwriters) addressed to each selling holder and the underwriters
covering such matters as are customarily covered in opinions requested
in primary underwritten offerings of equity and convertible debt
securities and such other matters as may be reasonably requested by such
holders and underwriters (it being agreed that the matters to be covered
by such opinion or written statement by such counsel delivered in
connection with such opinions shall include, without limitation, as of
the date of the opinion and as of the effective date of the Shelf
Registration Statement or most recent post-effective amendment thereto,
as the case may be, the absence from such Shelf Registration Statement
and the Prospectus included therein, as then amended or supplemented,
including the documents incorporated by reference therein, of an untrue
statement of a material fact or the omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading);
(v) in connection with any underwritten offering conducted
pursuant to Section 6 hereof, obtain "cold comfort" letters and updates
thereof from the independent public accountants of the Company (and, if
necessary, any other independent public accountants of any subsidiary of
the Company or of any business acquired by the Company for which
financial statements and financial data are, or are required to be,
included in the Shelf Registration Statement), addressed to each selling
holder and the underwriters in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection
with primary underwritten offerings;
(vi) in connection with any underwritten offering conducted
pursuant to Section 6 hereof, deliver such documents and certificates as
may be reasonably requested by any such holders participating in such
underwritten offering and the Managing Underwriters,
10
<PAGE> 11
including those to evidence compliance with Section 3(i) and with any
customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
The foregoing actions set forth in clauses (iii), (iv), (v) and (vi) of this
Section 3(q) shall be performed at each closing under any underwritten offering
to the extent required thereunder.
(r) The Company will use its best efforts to cause the Common
Stock issuable upon conversion of the Securities to be listed on the Nasdaq
National Market or other stock exchange or trading system on which the Common
Stock primarily trades on or prior to the Effective Time of any Shelf
Registration Statement hereunder.
(s) In the event that any broker-dealer registered under the
Exchange Act shall be an "affiliate " (as defined in Rule 2720(b)(1) of the NASD
Rules (or any successor provision thereto)) of the Company or has a "conflict of
interest" ( as defined in Rule 2720(b)(7) of the NASD Rules (or any successor
provision thereto)) and such broker-dealer shall underwrite any Registrable
Securities or participate as a member of an underwriting syndicate or selling
group or assist in the distribution thereof, whether as a holder of such
Registrable Securities or as an underwriter, a placement or sales agent or a
broker or dealer in respect thereof, or otherwise, the Company shall assist such
broker-dealer in complying with the requirements of the NASD Rules, including,
without limitation, by (A) engaging a "qualified independent underwriter" (as
defined in Rule 2720(b)(15) of the NASD Rules (or any successor provision
thereto)) to participate in the preparation of the Shelf Registration Statement
relating to such Registrable Securities, to exercise usual standards of due
diligence in respect thereto, and to recommend the public offering price of such
Registrable Securities, (B) indemnifying any such qualified independent
underwriter to the extent of the indemnification of underwriters provided in
Section 5 hereof and (C) providing such information to such broker-dealer as may
be required in order for such broker-dealer to comply with the requirements of
the NASD Rules.
(t) The Company shall use its best efforts to take all other
steps necessary to effect the registration, offering and sale of the Registrable
Securities covered by the Shelf Registration Statement contemplated hereby.
SECTION 4. Registration Expenses.
The Company shall bear all fees and expenses incurred in connection with
the performance of its obligations under Sections 2, 3 and 6 hereof. In
addition, in the event of an underwritten offering of Registrable Securities
conducted pursuant to Section 6 hereof, or if in any other event the Company
requires that inspection and information gathering be coordinated by counsel for
the Electing Holders as provided in Section 3(q)(i) hereof, the Company shall
pay the fees and expenses of a single counsel selected by the Electing Holders
of not less than 25% of the Registrable Securities covered by the Shelf
Registration Statement to act as counsel therefor in connection therewith.
11
<PAGE> 12
SECTION 5. Indemnification and Contribution.
(a) Indemnification by the Company. Upon the registration of the
Registrable Securities pursuant to Section 2 hereof, the Company shall indemnify
and hold harmless each Electing Holder and each underwriter, selling agent or
other securities professional, if any, which facilitates the disposition of
Registrable Securities, and each of their respective officers and directors and
each person who controls such Electing Holder, underwriter, selling agent or
other securities professional within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act (each such person being sometimes referred
to as an "Indemnified Person") against any losses, claims, damages or
liabilities, joint or several, to which such Indemnified Person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Shelf Registration Statement under which such Registrable
Securities are to be registered under the Securities Act, or any Prospectus
contained therein or furnished by the Company to any Indemnified Person, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Company hereby agrees to reimburse such Indemnified Person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that the Company shall not be liable to any such Indemnified Person in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such Shelf Registration Statement or
Prospectus, or amendment or supplement, in reliance upon and in conformity with
written information furnished to the Company by such Indemnified Person
expressly for use therein.
(b) Indemnification by the Holders and any Agents and
Underwriters. Each Electing Holder agrees, as a consequence of, and as a
condition to, the inclusion of any of such holder's Registrable Securities in
such Shelf Registration Statement, and each underwriter, selling agent or other
securities professional, if any, which facilitates the disposition of
Registrable Securities shall agree (or the Electing Holder shall cause to
agree), as a consequence of facilitating such disposition of Registrable
Securities, severally and not jointly, to (i) indemnify and hold harmless the
Company, its directors, officers who sign any Shelf Registration Statement and
each person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, against any
losses, claims, damages or liabilities to which the Company or such other
persons may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in such Shelf Registration Statement or Prospectus,
or any amendment or supplement, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company by such holder,
12
<PAGE> 13
underwriter, selling agent or other securities professional expressly for use
therein, and (ii) reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
any such action or claim as such expenses are incurred.
(c) Notices of Claims, Etc. Promptly after receipt by an
indemnified party under subsection (a) or (b) above of notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party under this Section 5, notify
such indemnifying party in writing of the commencement thereof; but the omission
so to notify the indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under this Section 5.
In case any such action shall be brought against any indemnified party and it
shall notify an indemnifying party of the commencement thereof, such
indemnifying party shall be entitled to participate therein and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party; provided however, that if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be one or more
legal defenses available to it and/or other indemnified parties with are
different from or additional to those available to the indemnifying party, the
indemnifying party shall not have the right to direct the defense of such action
on behalf of such indemnified party or parties and such indemnified party or
parties shall have the right to select separate counsel to defend such action on
behalf of such indemnified party or parties. After notice from the indemnifying
party to such indemnified party of its election so to assume the defense thereof
and approval by such indemnified party of counsel appointed to defend such
action, the indemnifying party will not be liable to such indemnified party
under this Section 5 for any legal or other expenses, other than reasonable
costs of investigation, subsequently incurred by such indemnified party in
connection with the defense thereof, unless (i) the indemnified party shall have
employed separate counsel in accordance with the proviso to the next preceding
sentence (it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, representing the indemnified parties
under such paragraph (a) who are parties to such action or actions) or (ii) the
indemnifying party does not promptly retain counsel satisfactory to the
indemnified party or (iii) the indemnifying party has authorized the employment
of counsel for the indemnified party at the expense of the indemnifying party.
After such notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the consent
of the indemnifying party. No indemnifying party shall, without the written
consent of the indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified party is an actual or potential
party to such action or claim) unless such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to, or an admission of, fault, culpability or a failure to act, by
or on behalf of any indemnified party.
13
<PAGE> 14
(d) Contribution. If the indemnification provided for in this
Section 5 is unavailable to or insufficient to hold harmless an indemnified
party under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein, then
each indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such indemnifying party or by such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 5(d) were determined by
pro rata allocation (even if the Electing Holders or any underwriters, selling
agents or other securities professionals or all of them were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 5(d).
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Electing Holders and any underwriters,
selling agents or other securities professionals in this Section 5(d) to
contribute shall be several in proportion to the percentage of principal amount
of Registrable Securities registered or underwritten, as the case may be, by
them and not joint.
(e) Notwithstanding any other provision of this Section 5, in no
event will any (i) Electing Holder be required to undertake liability to any
person under this Section 5 for any amounts in excess of the dollar amount of
the proceeds to be received by such holder from the sale of such holder's
Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) pursuant to any Shelf Registration Statement under which
such Registrable Securities are to be registered under the Securities Act and
(ii) underwriter, selling agent or other securities professional be required to
undertake liability to any person hereunder for any amounts in excess of the
discount, commission or other compensation payable to such underwriter, selling
agent or other securities professional with respect to the Registrable
Securities underwritten by it and distributed to the public.
(f) The obligations of the Company under this Section 5 shall be
in addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 5 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 5 are
not
14
<PAGE> 15
exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.
SECTION 6. Underwritten Offering.
Any holder of Registrable Securities covered by the Shelf Registration
Statement who desires to do so may sell such Registrable Securities in an
underwritten offering. In any such underwritten offering, the investment banker
or bankers and manager or managers that will administer the offering will be
selected by, and the underwriting arrangements with respect thereto will be
approved by the holders of a majority of the Registrable Securities to be
included in such offering; provided, however, that (i) such investment bankers
and managers and underwriting arrangements must be reasonably satisfactory to
the Company and (ii) the Company shall not be obligated to arrange for more than
one underwritten offering during the Effectiveness Period. No holder may
participate in any underwritten offering contemplated hereby unless such holder
(a) agrees to sell such holder's Registrable Securities in accordance with any
approved underwriting arrangements, (b) completes and executes all reasonable
questionnaires, powers of attorney, indemnities, underwriting agreements,
lock-up letters and other documents required under the terms of such approved
underwriting arrangements and (c) at least 20% of the outstanding Registrable
Securities are included in such underwritten offering. The holders participating
in any underwritten offering shall be responsible for any expenses customarily
borne by selling securityholders, including underwriting discounts and
commissions and fees and expenses of counsel to the selling securityholders and
shall reimburse the Company for the fees and disbursements of their counsel,
their independent public accountants and any printing expenses incurred in
connection with such underwritten offerings.
SECTION 7. Miscellaneous.
(a) Other Registration Rights. The Company may grant registration
rights that would permit any Person that is a third party the right to
piggy-back on any Shelf Registration Statement, provided that if the Managing
Underwriter, if any, of such offering delivers an opinion to the Electing
Holders that the total amount of securities which they and the holders of such
piggyback rights intend to include in any Shelf Registration Statement is so
large as to materially adversely affect the success of such offering (including
the price at which such securities can be sold), then only the amount, the
number or kind of securities to be offered for the account of holders of such
piggy-back rights will be reduced to the extent necessary to reduce the total
amount of securities to be included in such offering to the amount, number or
kind recommended by the Managing Underwriter prior to any reduction in the
amount of Registrable Securities to be included.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the holders of a majority in aggregate principal amount of
Registrable Securities then outstanding. Each holder of Registrable Securities
outstanding at the time of any such amendment, waiver or consent or thereafter
shall be bound by any amendment, waiver or consent
15
<PAGE> 16
effected pursuant to this Section 7(b), whether or not any notice, writing or
marking indicating such amendment, waiver or consent appears on the Registrable
Securities or is deliverable to such holder.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be given as provided for in the Indenture.
The Purchasers or the Company by notice to the other may designate
additional or different addresses for subsequent notices or communications.
(d) Parties in Interest; Successors and Assigns. The parties to
this Agreement intend that all holders of Registrable Securities shall be
entitled to receive the benefits of this Agreement by reason of such election
with respect to the Registrable Securities which are included in a Shelf
Registration Statement. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties and the holders,
including, without the need for an express assignment or any consent by the
Company thereto, subsequent holders of Registrable Securities. The Company
hereby agrees to extend the benefits of this Agreement to any holder of
Registrable Securities and any such holder may specifically enforce the
provisions of this Agreement as if an original party hereto.
(e) Counterparts. This agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to any provisions relating to conflicts of laws.
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(i) Survival. The respective indemnities, agreements,
representations, warranties and other provisions set forth in this Agreement or
made pursuant hereto shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Electing Holder, any director, officer or partner of such holder, any
agent or underwriter, any director, officer or partner of such agent or
underwriter, or any controlling person of any of the foregoing, and shall
survive the transfer and registration of the Registrable Securities of such
holder.
16
<PAGE> 17
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
MRV COMMUNICATIONS, INC.
By: /s/ Noam Lotan
-------------------------------
Name: Noam Lotan
Title: President
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first above written.
PRUDENTIAL SECURITIES INCORPORATED
BEAR, STEARNS & CO. INC.
BY: PRUDENTIAL SECURITIES INCORPORATED
By: /s/ Jean-Claude Canfin
-------------------------------
Name: Jean-Claude Canfin
Title: Managing Director
17
<PAGE> 18
Exhibit A
MRV COMMUNICATIONS, INC.
Instruction to DTC Participants
____________ __, 199_
URGENT -- IMMEDIATE ATTENTION REQUESTED
Deadline for Response: ___________ _, 199_
The Depository Trust Company ("DTC") has identified you as a DTC
Participant through which beneficial interests in MRV Communications, Inc. (the
"Company") __% Convertible Subordinated Notes due 2003 (the "Securities") are
held.
The Company is in the process of registering the Securities under the
Securities Act of 1933 for resale by the beneficial owners thereof. In order to
have their Securities included in the registration statement, beneficial owners
must complete and return the enclosed Notice of Registration Statement and
Selling Securityholder Questionnaire.
It is important that beneficial owners of the Securities receive a copy
of the enclosed materials as soon as possible as their rights to have the
Securities included in the registration statement depend upon their returning
the Notice and Questionnaire by ________ __, 199_. Please forward a copy of the
enclosed documents to each beneficial owner that holds interests in the
Securities through you. If you require more copies of the enclosed materials or
have any questions pertaining to this matter, please contact MRV Communications,
Inc., 8943 Fullbright Avenue, Chatsworth, California 91311, Telephone: (818)
773-9044.
A-1
<PAGE> 19
MRV COMMUNICATIONS, INC.
Notice of Registration Statement and Selling Securityholder
Questionnaire
________ __, 199_
Reference is hereby made to the Registration Rights Agreement (the
"Registration Rights Agreement") between MRV Communications, Inc. (the
"Company") and the Purchasers named therein. Pursuant to the Registration Rights
Agreement, the Company has filed with the United States Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (the "Shelf
Registration Statement") for the registration and resale under Rule 415 of the
Securities Act of 1933, as amended (the "Securities Act"), of the Company's [ ]%
Convertible Subordinated Notes due 2003 (the "Securities") and the shares of
common stock, par value $.0034 per share (the "Common Stock"), issuable upon
conversion thereof. A copy of the Registration Rights Agreement is attached
hereto. All capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Registration Rights Agreement.
Each beneficial owner of Registrable Securities (as defined below) is
entitled to have the Registrable Securities beneficially owned by it included in
the Shelf Registration Statement. In order to have Registrable Securities
included in the Shelf Registration Statement, this Notice of Registration
Statement and Selling Securityholder Questionnaire ("Notice and Questionnaire")
must be completed, executed and delivered to the Company's counsel at the
address set forth herein for receipt on or before ________ __, 199_. Beneficial
owners of Registrable Securities who do not complete, execute and return this
Notice and Questionnaire by such date (i) will not be named as selling
securityholders in the Shelf Registration Statement and (ii) may not use the
Prospectus forming a part thereof for resales of Registrable Securities.
Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related Prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Shelf Registration
Statement and related Prospectus.
The term "Registrable Securities" is defined in the Registration Rights
Agreement to mean all or any portion of the Securities issued from time to time
under the Indenture in registered form and the shares of Common Stock issuable
upon conversion of such Securities, including any Securities initially issued in
bearer form and constituting the unsold allotment of a distributor (within the
meaning of Regulation S under the Securities Act) of such Securities and later
exchanged for Securities in registered form; provided, however, that a security
ceases to be a Registrable Security when it is no longer a Restricted Security.
The term "Restricted Security" is defined in the Registration Rights Agreement
to mean any Security or share of Common Stock issuable upon conversion thereof
except any such Security or share of Common Stock which (i) has been effectively
A-2
<PAGE> 20
registered under the Securities Act and sold in a manner contemplated by the
Shelf Registration Statement, (ii) has been transferred in compliance with Rule
144 under the Securities Act (or any successor provision thereto) or is
transferable pursuant to paragraph (k) of such Rule 144 (or any successor
provision thereto), (iii) has been sold in compliance with Regulation S under
the Securities Act (or any successor thereto) and does not constitute the unsold
allotment of a distributor within the meaning of Regulation S under the
Securities Act, or (iv) has otherwise been transferred and a new Security or
share of Common Stock not subject to transfer restrictions under the Securities
Act has been delivered by or on behalf of the Company in accordance with Section
3.5 of the Indenture.
ELECTION
The undersigned holder (the "Selling Securityholder") of Registrable
Securities hereby elects to include in the Shelf Registration Statement the
Registrable Securities beneficially owned by it and listed below in Item (3).
The undersigned, by signing and returning this Notice and Questionnaire, agrees
to be bound with respect to such Registrable Securities by the terms and
conditions of this Notice and Questionnaire and the Registration Rights
Agreement, including, without limitation, Section 5 of the Registration Rights
Agreement, as if the undersigned Selling Securityholder were an original party
thereto.(1)
Upon any sale of Registrable Securities pursuant to the Shelf
Registration Statement, the Selling Securityholder will be required to deliver
to the Company and Trustee the Notice of Transfer set forth in Appendix A to the
Prospectus. This Notice of Transfer is set forth as Exhibit A to the Prospectus.
The Selling Securityholder hereby provides the following information to
the Company and represents and warrants that such information is accurate and
complete:
QUESTIONNAIRE
(a) (i) Full Legal Name of Selling Securityholder:_________________.
(ii) Full Legal Name of Registered Holder (if not the same as in
(a) above) of Registrable Securities Listed in (3) below:______________.
(iii) Full Legal Name of DTC Participant (if applicable and if
not the same as (b) above) Through Which Registrable Securities Listed
in (3) below are Held:_________________________________________________
_______________________________________________________________________
(b) Address for Notices to Selling Securityholder:
_______________________________________________________________________
A-3
<PAGE> 21
_______________________________________________________________________
_______________________________________________________________________
Telephone: _________________________
Fax:________________________________
Contact Person:_____________________
(c) Beneficial Ownership of Securities and shares of Common Stock
issued upon conversion of Securities: _________________________________________.
Except as set forth below in this Item (3), the undersigned does not
beneficially own any Securities or shares of Common Stock issued upon conversion
of any Securities.
(i) Principal amount of Registrable Securities (as defined in
the Registration Rights Agreement) beneficially owned:_________________.
CUSIP No(s). of such Registrable Securities:___________________________
Number of shares of Common Stock (if any) issued upon conversion of such
Registrable Securities_________________________________________________
(ii) Principal amount of Securities other than Registrable
Securities beneficially owned:_________________________________________
CUSIP No(s). of such other Securities:______________________________
Number of shares of Common Stock (if any) issued upon conversion of such
other Securities:______________________________________________________
(iii) Principal amount of Registrable Securities which
the undersigned wishes to be included in the Shelf Registration
Statement:______________________________________________________________
CUSIP No(s). of such Registrable Securities to be included in the Shelf
Registration Statement:________________________________________________
Number of shares of Common Stock (if any) issued upon conversion of
Registrable Securities which are to be included in the Shelf
Registration Statement:________________________________________________
(d) Beneficial Ownership of Other Securities of the Company.
Except as set forth below in this Item (4), the undersigned Selling
Securityholder is not the beneficial or registered owner
A-4
<PAGE> 22
of any shares of Common Stock or any other securities of the Company, other than
the Securities and shares of Common Stock listed above in Item (3).
State any exceptions here:
(e) Relationships with the Company. Except as set forth below,
neither the Selling Securityholder nor any of its affiliates, officers,
directors or principal equity holders (5% or more) has held any position or
office or has had any other material relationship with the Company (or its
predecessors or affiliates) during the past three years. State any exceptions
here:
(f) Plan of Distribution. Except as set forth below, the
undersigned Selling Securityholder intends to distribute the Registrable
Securities listed above in Item (3) only as follows (if at all): Such
Registrable Securities may be sold from time to time directly by the undersigned
Selling Securityholder or, alternatively, through underwriters, broker-dealers
or agents. Such Registrable Securities may be sold in one or more transactions
at fixed prices, at prevailing market prices at the time of sale, at varying
prices determined at the time of sale, or at negotiated prices. Such sales may
be effected in transactions (which may involve crosses or block transactions)
(i) on any national securities exchange or quotation service on which the
Registered Securities may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such exchanges
or services or in the over-the-counter market, or (iv) through the writing of
options. In connection with sales of the Registrable Securities or otherwise,
the Selling Securityholder may enter into hedging transactions with
broker-dealers, which may in turn engage in short sales of the Registrable
Securities in the course of hedging the positions they assume. The Selling
Securityholder may also sell Registrable Securities short and deliver
Registrable Securities to close out such short positions, or loan or pledge
Registrable Securities to broker-dealers that in turn may sell such securities.
State any exceptions here:
Note: In no event may such method(s) of distribution take the form of an
underwritten offering of the Registrable Securities without the prior agreement
of the Company.
By signing below, the Selling Securityholder acknowledges that it
understands its obligation to comply, and agrees that it will comply, with the
provisions of the Exchange Act and the rules and regulations thereunder. In the
event that the Selling Securityholder transfers all or any portion of the
Registrable Securities listed in Item (3) above after the date on which such
information is provided to the Company, the Selling Securityholder agrees to
notify the transferee(s) at the time of the transfer of its rights and
obligations under this Notice and Questionnaire and the Registration Rights
Agreement.
A-5
<PAGE> 23
By signing below, the Selling Securityholder consents to the disclosure
of the information contained herein in its answers to Items (1) through (6)
above and the inclusion of such information in the Shelf Registration Statement
and related Prospectus. The Selling Securityholder understands that such
information will be relied upon by the Company in connection with the
preparation of the Shelf Registration Statement and related Prospectus.
In accordance with the Selling Securityholder's obligation under Section
3(a) of the Registration Rights Agreement to provide such information as may be
required by law for inclusion in the Shelf Registration Statement, the Selling
Securityholder agrees to promptly notify the Company of any inaccuracies or
changes in the information provided herein which may occur subsequent to the
date hereof at any time while the Shelf Registration Statement remains in
effect. All notices hereunder and pursuant to the Registration Rights Agreement
shall be made in writing, by hand-delivery, first-class mail, or air courier
guaranteeing overnight delivery as follows:
(i) To the Company:
MRV Communications, Inc.
8943 Fullbright Avenue
Chatsworth, California 91311
Attn: Chief Financial Officer
(ii) With a copy to:
Freshman, Marantz, Orlanski, Cooper & Klein
Eighth Floor, East Tower
9100 Wilshire Boulevard
Beverly Hills, California 90212
Attn: Mark A. Klein, Esq.
Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company's counsel, the terms of this Notice
and Questionnaire, and the representations and warranties contained herein,
shall be binding on, shall inure to the benefit of and shall be enforceable by
the respective successors, heirs, personal representatives, and assigns of the
Company and the Selling Securityholder (with respect to the Registrable
Securities beneficially owned by such Selling Securityholder and listed in Item
(3) above. This Agreement shall be governed in all respects by the laws of the
State of New York.
A-6
<PAGE> 24
IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.
Dated:
-----------------------------------------
Selling Securityholder
(Print/type full legal name of beneficial
owner of Registrable Securities)
By:
-------------------------------
Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE ___________ __, 199_ TO THE COMPANY'S COUNSEL AT:
Freshman, Marantz, Orlanski, Cooper & Klein
Eighth Floor, East Tower
9100 Wilshire Boulevard
Beverly Hills, California 90212
Attn: Mark A. Klein, Esq.
A-7
<PAGE> 25
Exhibit B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION
STATEMENT
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: Corporate Trust Services
Re: MRV Communications, Inc. (the "Company")
5% Convertible Subordinated Notes due 2003 (the "Notes")
Dear Sirs:
Please be advised that _____________________ has transferred
$___________ aggregate principal amount of the above-referenced Notes pursuant
to an effective Registration Statement on Form S-3 (File No. 333-____) filed by
the Company.
We hereby certify that the prospectus delivery requirements, if any, of
the Securities Act of 1933, as amended, have been satisfied and that the
above-named beneficial owner of the Notes is named as a "Selling Holder" in the
Prospectus dated ___________, 199_ or in supplements thereto, and that the
aggregate principal amount of the Notes transferred are the Notes listed in such
Prospectus opposite such owner's name.
Dated:
Very truly yours,
-------------------------------
(Name)
By:
-------------------------------
(Authorized Signature)
B-1
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 116,971
<SECURITIES> 38,622
<RECEIVABLES> 66,973
<ALLOWANCES> 6,337
<INVENTORY> 45,389
<CURRENT-ASSETS> 260,784
<PP&E> 23,971
<DEPRECIATION> 4,501
<TOTAL-ASSETS> 329,279
<CURRENT-LIABILITIES> 57,559
<BONDS> 100,000
0
0
<COMMON> 90
<OTHER-SE> 166,111
<TOTAL-LIABILITY-AND-EQUITY> 329,279
<SALES> 65,742
<TOTAL-REVENUES> 65,742
<CGS> 36,749
<TOTAL-COSTS> 17,401
<OTHER-EXPENSES> 16
<LOSS-PROVISION> 1,212
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,282
<INCOME-TAX> 3,530
<INCOME-CONTINUING> 8,735
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,735
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.31
</TABLE>
