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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended January 30, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to ________________
Commission file number 1-6395
SEMTECH CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-2119684
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
652 Mitchell Road, Newbury Park, California, 91320
(Address of principal executive offices, Zip Code)
Registrant's telephone number, including area code: (805) 498-2111
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock par value $.01 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 _____
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Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Aggregate market value of voting stock held by non affiliates of the registrant
as of April 24, 2000 was $1,897,104,619 and the market price of the Registrant's
stock was $58.19 per share. The number of shares outstanding of the
Registrant's common stock was 32,601,901 at April 24, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference in Part III of
this report: Definitive Proxy Statement in connection with registrant's annual
meeting of shareholders on June 8, 2000.
This report on Form 10-K contains a total of xx pages.
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SEMTECH CORPORATION
INDEX TO
FORM 10-K
FOR THE YEAR ENDED JANUARY 30, 2000
PART I
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Item 1 Business 2
Item 2 Properties 15
Item 3 Legal Proceedings 15
Item 4 Submission of Matters to a Vote of Security Holders 15
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PART II
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Item 5 Market for the Registrant's Common Equity and Related Shareholder Matters 16
Item 6 Selected Financial Data 16
Item 7 Management's Discussion and Analysis of Financial Condition and Results of
Operations 17
Item 7A Quantitative and Qualitative Disclosures About Market Risks 23
Item 8 Financial Statements and Supplementary Data 25
Item 9 Changes in or Disagreements with Accountants on Accounting and Financial
Disclosure 42
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PART III
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Item 10 Directors and Executive Officers of the Registrant 42
Item 11 Executive Compensation 42
Item 12 Security Ownership of Certain Beneficial Owners and Management 43
Item 13 Certain Relationships and Related Transactions 43
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PART IV
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Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K 44
Signatures 47
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PART I
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This Annual Report on Form 10-K for the year ended January 30, 2000 (the "Form
10-K") contains certain "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Forward-looking statements are statements other than historical
information or statements of current condition and relate to future events or
the future financial performance of the Company. Some forward-looking statements
may be identified by use of such terms as "expects," "anticipates," "intends,"
"estimates," "believes" and words of similar import. These forward-looking
statements relate to plans, objectives and expectations for future operations.
In light of the risks and uncertainties inherent in all such projected
operational matters, the inclusion of forward-looking statements in this Form
10-K should not be regarded as a representation by the Company or any other
person that the objectives or plans of the Company will be achieved or that any
of the Company's operating expectations will be realized. Net sales and results
of operations are difficult to forecast and could differ materially from those
projected in the forward-looking statements contained in this Form 10-K for the
reasons detailed in the "Risk Factors" section of this Form 10-K, beginning on
page 9, or elsewhere in this Form 10-K.
ITEM 1. BUSINESS
General
We are a leading supplier of analog and mixed-signal semiconductors. We
design, manufacture and market a range of products for commercial applications,
the majority of which are sold to the communications, industrial and computer
markets. Our semiconductors enable power management, test, protection and a
range of other functions in products that require analog or mixed-signal
processing. Our end customers are primarily original equipment manufacturers, or
OEMs, and include Agilent Technologies, IBM, Intel, Motorola, Samsung and
Schlumberger.
Overview of the Semiconductor Industry
In the broadest sense, the semiconductor industry is divided into two distinct
groups, analog semiconductors and digital semiconductors. Analog semiconductors
condition and regulate "real world" functions such as temperature, speed,
sound and electrical current. Analog signals behave in a continuous manner, in
contrast to digital circuits which behave as on's and off's (expressed in binary
code as 1's and 0's), such as those used by computers. Mixed-signal devices
incorporate both analog and digital functions into a single chip and provide the
ability for digital electronics to interface with the outside world. Where
digital processing exists in an end consumer application such as computers,
personal digital assistant devices (PDAs), networks, cellular phones, automated
test equipment (ATE), and medical devices, analog technology is required.
The market for analog and mixed-signal semiconductors differs from the market
for digital semiconductors. The analog and mixed-signal industry is
characterized by significantly longer product life cycles than the digital
industry because analog technology is applied to real-world functions that
remain relatively consistent. In addition, analog semiconductor manufacturers
tend to have lower capital for manufacturing because their facilities tend to be
less dependent than digital producers on state-of-the-art production equipment.
The end-product markets for analog and mixed-signal semiconductors are smaller
and more varied than the relatively standardized digital semiconductor product
markets. This has resulted in a fragmented market for analog semiconductors, in
contrast to the more homogenous digital semiconductor market.
Another difference between the analog and digital markets is the amount of
talented labor available. The analog industry relies more heavily than the
digital industry on design and applications talent to distinguish its products
from one another. While digital expertise is extensively taught due to its
overall market size, electrical engineering curricula addressing analog
functions are not widely available in universities. Analog and mixed-signal
expertise tends to be learned over time based on experience and hands-on
training. Consequently, personnel with this training are scarce, a fact that
makes it difficult for new suppliers to quickly gain significant market share.
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Dataquest, a market research firm, estimates that analog devices will
represent approximately $28 billion of the approximately $179 billion overall
market for semiconductors in 2000 and that demand for analog semiconductors will
grow at approximately 14% per year, compounded annually, until 2003. We expect
certain segments of the analog market, however, where end product demand is
strong, to grow at a faster rate than the overall semiconductor market. These
segments include advanced communications, industrial test and personal and
portable computing. The need for analog semiconductors in these markets is based
on the need to enable the reliability of emerging communications devices, extend
battery lives, achieve higher levels of integration, increase portability and
reduce size. Further, because the analog industry is smaller and more fragmented
than the digital industry, it tends to offer high-margin opportunities for those
companies able to introduce innovative new product solutions.
We believe that certain product segments within the analog semiconductor
market will grow even faster than the overall market in the coming years.
Specific factors contributing to the rapid growth in demand for analog and
mixed-signal semiconductors in these segments include the need to enable the
reliability of emerging communications devices, extend battery lives, decrease
voltage tolerances, achieve higher levels of integration, increase portability
and reduce size. These trends increase the need for more complex, high-
performance analog and mixed-signal semiconductors. "High-performance" refers
to devices that have advanced features and superior performance over widely
available "commodity" circuits.
Semtech End Markets
A majority of our products are sold to customers in the computer,
communications and industrial markets. Computer market applications include
desktop computers, servers, workstations, laptop computers, PDAs and computer
add-on cards. End-product applications for our products within the communication
market include local area networks, wide area networks, cellular phones and
base-stations. Industrial applications include automated test equipment, medical
devices and factory automation systems.
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Semtech Main Product Lines Specific End-Product Application by Market
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Computer Communications Industrial
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Power Management . Desktop PCs . Cellular phones . Industrial system
. Servers/workstations . Network interface power supplies
. PDAs Cards . Handheld
. Notebook computers Measurement devices
. Add-on cards
Protection . Notebook computers . Cellular phones . Handheld
. USB ports . Network interface Measurement devices
. Printers Cards
. Cellular base-
Stations
High Performance . Workstations . Routers / hubs . Automated test
. Cellular base- Equipment
Stations
Advanced Communications . SONET/ATM
Switches
. Fiber modems
. Cellular base-
Stations
System Management . Notebook computers . Cellular phones . Touch screen
. PDAs Controllers
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Business Strategy
Our objective is to be the leading supplier of analog and mixed-signal devices
to the fastest growing segments of our target markets, particularly within the
computer, communications and industrial segments. We will leverage our pool of
skilled technical personnel to develop new products, or where appropriate use
acquisitions, to serve the fastest growing segments of these markets. In order
to capitalize on our strengths in analog and mixed-signal processing design,
manufacturing and marketing, we intend to pursue the following strategies:
Focus on fastest growing market segments
We have chosen to target the analog segments of the fastest growing end
markets. We will enhance this growth potential by focusing on specific products
within the analog and mixed-signal market, including personal computers,
notebook computers, PDAs, cellular phones, and wide-area and local-area
networks. These products are characterized by their need for leading-edge, high-
performance, analog and mixed-signal semiconductor technology.
Continue to release new proprietary products
We are focused on developing proprietary new products to serve our target
markets. These markets have experienced significant levels of change as consumer
demand for increased product performance at competitive price points continues
to grow. Our technical talent markets and develops new products specifically for
these high-margin, fast growing market segments. Over the past three years, our
pool of skilled technical personnel has grown from 75 to over 200, and the
number of new products introduced in fiscal year 2000, fiscal year 1999 and
fiscal year 1998 was 88, 43, and 28, respectively. We believe that our rate of
new product introductions and number of skilled technical personnel are
indicators of our ability to meet our target markets' evolving needs.
Diversify into new markets
We will enter new markets that complement our existing operations through
internal development of new products and by strategic acquisitions. We believe
strategic acquisitions will allow us to expand our pool of skilled technical
personnel as well as expand the range of complementary products that we offer.
We have purchased four companies over the past three years that have permitted
us to successfully enter new market segments and develop new products.
Concentrate on cross-selling our products and services
We consider the ability to cross-sell our products and services a major
opportunity. Many of our large customers produce a wide variety of end products
that require analog and mixed-signal products. By leveraging existing
relationships, we believe that we will be able to sell a wider variety of our
products to these organizations. In addition, we believe our marketing
department's technical expertise permits it to identify and capitalize on these
cross-selling opportunities.
Product Segments
We categorize our business into three main product segments. Our strategically
most important product offerings are included in the Standard Semiconductor
Products segment. Standard Semiconductor Products represent approximately 88% of
our overall net sales for fiscal year 2000. The following is a description of
our main product segments:
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Standard Semiconductor Products. Included in Standard Semiconductor Products
are integrated circuits (ICs) and discrete components designed for use in
standard industry applications. Described below are the main product lines
within our Standard Semiconductor Products.
. Power Management Circuits. Power management circuits control, alter,
regulate and condition the electric pulses that flow through electronics.
The largest product types within the power management product line are
linear regulators, switching voltage regulators, combination regulators and
smart regulators. The primary application for these products is power
regulation for computer and communications systems.
. Protection Products. The largest type of protection products we design
and market are transient voltage suppressors (TVS). TVS devices provide
protection for electronic systems where large voltage spikes (called
transients), such as electrostatic discharge (ESD) generated by the human
body, can permanently damage voltage-sensitive components. We also have
developed filter and termination devices that can be sold as a complement
to TVS devices. Specific protection product applications are found in
computer, data-communications, telecommunications and industrial markets.
. High Performance/Automated Test Equipment Circuits. We design and market
a wide variety of high performance products, namely pin electronics,
timing, clock distribution and parametric measurement products for use in
ATE instrumentation applications. Automated test equipment systems are used
by electronic component manufacturers in the testing of their finished
devices. In fiscal year 2000, we began marketing high performance
clock/logic devices intended for use in both ATE and non-ATE applications.
. Advanced Communication Circuits. Through internal investment and the
acquisition of Acapella Limited and Practical Sciences, we are designing a
line of advanced communication ICs. These circuits are designed to
transmit/receive signals over fiber optic lines, provide timing and
synchronization, and other communication functions. Advanced communication
ICs are used for local area networks, wide area networks and cellular phone
base stations. We also derive a small amount of revenue from design
consulting services provided to other manufacturers.
. System Management. Through the acquisition of USAR Systems, we now offer a
line of system management products that include intelligent input/output
and smart battery management devices. The products included in this
offering are touch-screen and touch-pad controllers, pointing stick devices
and battery management circuits. These products are designed to handle
human interface and battery function in portable systems, like notebook
computers, PDSs and cellular phones.
Rectifier and Assembly Products. Rectifiers and assemblies are older-
technology products that are principally sold into the military and aerospace
markets.
. Rectifiers. We have several different categories of silicon rectifiers,
which are primarily used to convert alternating current to direct current.
These products are sold to military, aerospace and medical equipment
customers.
. Assemblies. An assembly is a package of rectifiers of one or more types
encased in epoxy or silicon by various molding techniques, constituting one
or more basic rectifier circuits. Assemblies are used for military,
aerospace and other specialized applications.
Other Products. We produce and sell Other Products, as detailed below.
. Custom and Application Specific Circuits. Other custom and application
specific integrated circuits (ASICs) include a wide variety of customer and
application-specific devices. The end markets for these products include
industrial, consumer, and automotive markets.
. Foundry Wafers. We fabricate silicon wafers for other semiconductor
manufacturers. Much of the processed silicon currently sold goes into
applications for the computer, automotive and industrial markets.
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Intellectual Capital and Product Development
We believe that emphasis on the development of our intellectual capital and
introduction of new proprietary product designs are key to our success. In
fiscal year 2000, we added 76 experienced engineers, including personnel hired
as the result of the acquisitions of two companies, USAR Systems and Practical
Sciences. In fiscal year 1999, we added 52 experienced engineers, including 36
in research and development. These new engineers were added to staff positions
in the areas of circuit design, applications support, product development and
strategic marketing.
As of the end of fiscal year 2000, we employed over 75 research and design
employees, including more than 70 circuit designers. A majority of these
individuals have senior-level expertise in the design and development of
circuits targeted for use in power management, protection, high performance and
communication applications. We intend to make further investment in research and
development functions during the coming fiscal years. Additional headcount along
with investment in design and development equipment and overall support of
development efforts are the focus of this investment.
In fiscal year 1996, we began to invest heavily in design and applications
intended to aid the introduction of new products. We now have dedicated design
centers in Santa Clara, California; Oxnard, California; Raleigh, North Carolina;
Glasgow, Scotland; and Southampton, England. In addition, dedicated high
performance circuit design occurs at the San Diego location and protection
product design occurs at the Company's Newbury Park headquarters. In the first
quarter of fiscal year 1999, we started a new design center, located in Raleigh,
North Carolina.
Sales and Marketing
Sales made directly to original equipment manufacturers in fiscal year 2000
and in fiscal year 1999 were approximately 80% of net sales and the remaining
20% of net sales were made through independent distributors. The percentage of
sales made directly to original equipment manufacturers has increased in the
last four fiscal years as we sell directly to large strategic customers and as
the contribution from the High Performance Products Group, which has only direct
sales, has increased. We have direct sales offices located in Southern
California, Texas and Connecticut which manage the sales activities of
independent sales representative firms and independent distributors within the
United States and Canada. We also have sales offices in France, Germany and
Scotland as well as independent sales representative firms and independent
distributors to serve the European markets. We maintain a branch sales office in
Taipei, Taiwan and a liaison office in Seoul, Korea along with independent
representatives and distributors for serving the Asian-Pacific territory. We are
also represented outside the United States, Europe and Asia by other independent
sales organizations.
Customers and Sales Data
For fiscal year 2000, we estimated that 2,500 customers purchased our products
either directly from us or through our authorized distributors. The following is
a representative sample of our larger customers:
Representative Customers by End Markets
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Computer Communications Industrial
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Acer Alcatel Agilent Technologies
Compaq Motorola Asia Electronics
Dell Samsung Honeywell/Allied Signal
IBM Siemens Schlumberger
Intel 3Com Varian
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No one customer accounted for 10% or more of our net sales for the year ended
January 30, 2000 or for fiscal years 1999 or 1998. Customers that buy our
products include major computer and peripheral manufacturers and their
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sub-contractors, automated test system manufacturers, communications equipment
producers (both data-communication and telecommunication), and a variety of both
large and small companies serving the industrial, automotive, aerospace and
military markets.
During fiscal years 2000, 1999, and 1998, foreign sales were 64%, 53% and 45%,
respectively, of net sales. Significant portions of the sales are to customers
located in the Asian-Pacific region. Sales to customers in this region were
approximately 52% in fiscal year 2000 and 41% of net sales in fiscal year 1999.
The increase in sales to Asia reflects the increased use of foreign-based
subsidiaries and subcontractors by original equipment manufacturers for
assembling their finished products. Due to this trend, we estimate that as much
as two-thirds of all shipments made into Asia are eventually exported back to
North America and European markets. Sales to Japanese and Korean customers,
which are included in the Asian-Pacific regions sales figures, were
approximately 16%, 7% and 4% of net sales in fiscal years 2000, 1999 and 1998,
respectively. Generally, we conduct sales in currency of the United States.
Manufacturing Capabilities
We have manufacturing facilities in California, Texas and Mexico. Our
commercial IC production facilities are located in Santa Clara, California and
Corpus Christi, Texas. Discrete wafer fabrication, testing, probe and some
assembly activity are performed in Newbury Park, California. The San Diego,
California location serves as the headquarters for our High Performance Products
Group, Edge Semiconductor. Design, applications, sales, and other administrative
activities related to the high performance group are conducted at this location.
Our Reynosa, Mexico facility provides relatively low cost assembly and test
capabilities for supporting military and legacy products. We own a manufacturing
facility in Glenrothes, Scotland that was previously used for value-added
manufacturing capabilities of certain legacy product lines for the military and
aerospace industries primarily in the European markets.
A large part of the manufacturing operation is performed by operators working
on standard equipment in our wafer fabrication lines. New designs or process
modifications are tested by both product and process engineering prior to being
incorporated into the manufacturing process. Our wafer fabrication facilities
employ a variety of Bipolar processes and a limited amount of CMOS processes.
The facilities and related fabrication processes used tend to be significantly
less costly than state-of-the-art digital fabrication facilities and likewise
utilize equipment that is less subject to obsolescence. Unlike the digital
industry, our products are less reliant on state-of-the-art manufacturing but
more on design and applications support.
We fabricate a majority of our products from basic materials (principally
silicon, ceramic materials, metals and plastics), all of which are available
from a number of suppliers. We support approximately 50% of our end products
with wafers that are fabricated internally. Outside foundries are used for the
remaining 50% of fabrication capacity. As of the end of fiscal year 2000, we
estimated that we were utilizing approximately 80% of our internal wafer
fabrication capacity. All of the Company's high performance circuits, advanced
communication ICs and a percentage of power management products are fabricated
at outside foundries. Currently all our protection products are fabricated
internally.
We use silicon wafer foundries that are based in the United States, Canada,
Europe and Asia. Currently, our largest foundry suppliers are based in the
United States and Asia. Contractual agreements exist with each of the outside
foundries. With expansion into higher-end communication product lines and
higher-performance devices, we expect that we will increase, as a percentage of
the total, the amount of outside foundries in order to utilize the best
available technology and leverage the capital investment of others.
Competition
The semiconductor industry is highly competitive and we expect competitive
pressures to continue. Our ability to compete effectively and to expand our
business will depend on our ability to continue to recruit applications and
design talent, our ability to introduce new products and the rate at which we
introduce such new products to offset the relatively short product life cycles
found in the industry which is characterized by decreasing unit selling prices
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over the life of a product, our ability to capitalize on efficiencies and
economies of scale in production and sales, and our ability to maintain or
improve our productivity and product yields to reduce manufacturing costs.
We are in direct and active competition, as to one or more of our product
lines, with at least 30 manufacturers of such products, of varying financial
size and strength. A number of these competitors are dependent on semiconductor
products as their principal source of income, and some are much larger than us.
The number of competitors has grown due to expansion of the market segments in
which we participate. We consider our primary competitors to include Texas
Instruments, National Semiconductor, Linear Technology, Fairchild Semiconductor
and Intersil Semiconductor, all with respect to our power management products;
ST Microelectronics N.V. with respect to our protection products; Analog
Devices, Maxim Integrated Products and ON Semiconductors, all with respect to
our high performance/ATE products; Applied Micro Circuits Corporation, PMC-
Sierra Inc. and Vitesse Semiconductor Corp., all with respect to our advanced
communications products; and Philips Semiconductors, Synaptics Inc. and
Mitsubishi Electric Corp, all with respect to our intelligent input/output
devices. Due to the fragmented nature of the analog semiconductor industry, we
estimate that we have no more than 30% product overlap with any single
competitor identified.
Patents and Licenses
Patents, licenses and other rights have not proven in the past to be
significant to our business. However, competition in the commercial marketplace
has required that certain developed devices be protected by patents. We have
pursued patent protection for certain devices. We intend to pursue these rights
for future products that may require protection from use by competitors. At this
time, we do not license our patents.
Environmental Matters
On February 7, 2000, we were notified by the United States Environmental
Protection Agency with respect to the Casmalia Disposal Site in Santa Barbara,
California. We have been included in the Superfund program to clean up this
disposal site for our involvement in utilizing this site for waste disposal. As
of January 30, 2000, we had provided approximately $245,000 for potential
settlement under this program, however, the ultimate resolution and timing of
the resolution is unknown at this time. We believe the amount provided is
sufficient to cover any liability existing based on the currently available
information.
Certain contaminants have been found in the ground water at the Company's
Newbury Park facility. The Company has data showing that the contaminants are
from an adjacent facility. The contaminants in question have never been used by
the Company at the Newbury Park facility. To protect its interests, the Company
utilizes an environmental firm, specializing in hydrogeology, to perform
periodic monitoring. It is currently not possible to determine the ultimate
amount of possible future clean-up costs, if any, that may be required of the
Company at this site. Accordingly, no reserves for clean-up have been provided
by the Company at this time.
Employees
As of January 30, 2000, we had 731 full-time employees. We have never had a
work stoppage, and our domestic and European employees are not unionized. Our
Mexican Maquiladora operation has unionized employees. Employee relations at the
Mexican plant have been, and are, satisfactory. Competition for key design and
application engineers is significant.
Government Regulations
We are required to comply with numerous government regulations that are normal
and customary to manufacturing businesses, which operate in our markets and
operating locations. In addition, a substantial portion of our sales that serve
the military and aerospace markets consist of products which have been qualified
to be sold in these markets by the U.S. Department of Defense (DOD). These
products mainly consist of discrete rectifiers and
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rectifier assemblies. In order to maintain these qualifications, we must comply
with certain specifications promulgated by the DOD. As part of maintaining these
qualifications we are routinely audited by DOD personnel. Based on the
specifications as they exist today, we believe we can maintain our
qualifications for the foreseeable future. However, these specifications can be
modified by the DOD in the future which may make the manufacturing of these
products more difficult and thus could adversely impact our profitability in
those product lines.
RISK FACTORS
You should carefully consider and evaluate all of the information in this Form
10-K, including the risk factors listed below. Any of these risks could
materially and adversely affect our business, financial condition and results of
operations.
Keep these risk factors in mind when you read "forward-looking" statements
elsewhere in this Form 10-K. These statements relate to our expectations about
future events and time periods. Generally, the words "anticipate," "expect,"
"intend" and similar expressions identify forward-looking statements. Forward-
looking statements involve risks and uncertainties, and future events and
circumstances could differ significantly from those anticipated in the forward-
looking statements.
Risks Related to Our Business
We may be unsuccessful in developing and selling new products required to
maintain or expand our business
We operate in a dynamic environment characterized by price erosion, rapid
technological change and design and other technological obsolescence. Our
competitiveness and future success depend on our ability to introduce new or
improved products that meet customer needs while achieving acceptable margins.
If we fail to introduce these new products in a timely manner or these products
fail to achieve market acceptance, our business, financial condition and results
of operations could be materially and adversely affected.
The introduction of new products presents significant business challenges
because product development commitments and expenditures must be made well in
advance of product sales. The success of a new product depends on accurate
forecasts of long-term market demand and future technological developments, as
well as on a variety of specific implementation factors including:
. timely and efficient completion of process design and development;
. timely and efficient implementation of manufacturing and assembly
processes;
. product performance;
. the quality and reliability of the product; and
. effective marketing, sales and service.
The failure of our products to achieve market acceptance due to these and other
factors could materially and adversely affect our business, financial condition,
and results of operations.
We may fail to attract or retain the specialized technical and management
personnel required to successfully operate our business
Our future success depends upon our ability to attract and retain highly
qualified technical, marketing and managerial personnel. We are particularly
dependent on a relatively small group of key technical personnel with analog and
mixed-signal expertise. Personnel with analog and mixed-signal expertise are
scarce and competition for personnel with these skills is intense. There can be
no assurance that we will be able to retain existing key technical,
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marketing and managerial employees or that we will be successful in attracting,
assimilating or retaining other highly qualified technical, marketing and
managerial personnel in the future. If we are unable to retain existing key
employees or are unsuccessful in attracting new highly qualified employees, our
business, financial condition and results of operations could be materially and
adversely affected.
The cyclical nature of the semiconductor industry may limit our ability to
maintain or increase revenue and profit levels during future industry downturns
The semiconductor industry is highly cyclical. Our financial performance may
be materially and adversely affected by significant downturns in the
semiconductor industry as a result of:
. general economic conditions;
. general reductions in inventory levels by customers;
. excess production capacity; and
. accelerated declines in average selling prices of our products.
The occurrence of these or other conditions in the semiconductor industry in the
future could have a material adverse effect on our business, financial condition
and results of operations.
Fluctuations and seasonality in the personal computer industry may have
adverse consequences for our business
Many of our products are used in personal computers and related peripherals.
Industry-wide fluctuations in the personal computer marketplace have in the past
and may in the future materially and adversely affect our business. In addition,
our past results have reflected some seasonality, with demand levels being
higher in computer segments during the third and fourth quarters of the year in
comparison to the first and second quarters.
Economic downturn in our end-markets may have adverse consequences for our
business
We market our products to several commercial markets, including computers and
peripherals, telecommunications, and industrial and test equipment. A downturn
in any of our markets, especially the consumer computer industry, could
materially and adversely affect our business, financial condition and results of
operations. In addition, current efforts being undertaken by companies in the
semiconductor manufacturing industry to increase worldwide semiconductor
manufacturing capacity could lead to general manufacturing overcapacity and to
underutilization of our manufacturing capacity.
We obtain certain components and materials necessary for our manufacturing
operations from a limited number of suppliers
Our reliance on a limited number of outside subcontractors for silicon wafers,
packaging and certain other tasks involves several risks, including potential
inability to obtain an adequate supply of required components and reduced
control over the price, timely delivery, reliability and quality of components.
There can be no assurance that problems will not occur in the future with
suppliers or subcontractors. Disruption or termination of our supply sources or
subcontractors could delay our shipments and could have a material adverse
effect on our business, financial condition and results of operations. Delays
could also damage relationships with current and prospective customers. Any
prolonged inability to obtain timely deliveries or any other circumstances that
would require us to seek alternative sources of supply or to manufacture or
package certain components internally could have a material adverse effect on
our business, financial condition and results of operations.
10
<PAGE>
Our future quarterly operating results may fluctuate and therefore may fail to
meet expectations
Our quarterly operating results may fluctuate in the future, may fail to match
our past performance and meet the expectations of analysts and investors. Our
quarterly operating results may fluctuate as a result of:
. general economic conditions in the countries where we sell our products;
. seasonality and variability in the computer market and our other end
markets;
. the timing of our and our competitors' new product introductions;
. product obsolescence;
. the scheduling, rescheduling and cancellation of large orders by our
customers;
. the cyclical nature of demand for our customers' products;
. our ability to develop new process technologies and achieve volume
production at our fabrication facilities;
. changes in manufacturing yields;
. adverse movements in exchange rates, interest rates or tax rates; and
. the availability of adequate supply commitments from our outside suppliers
or subcontractors.
As a result of these factors, our past financial results are not necessarily
indicative of our future results.
We receive a significant portion of our revenues from a small number of
customers
Historically, we have had significant customers, which individually accounted
for approximately 10% of consolidated revenues in certain quarters. The
composition of our largest customers has varied from year to year. In fiscal
year 2000, our top five customers accounted for approximately one-third of our
revenues, and for fiscal year 1999, our top five customers accounted for
approximately 25% of our revenues. We primarily conduct our sales on a purchase
order basis, rather than pursuant to long-term supply contracts. The loss of any
significant customer, any reduction in orders by any of our significant
customers, or the cancellation of a significant customer order, could materially
and adversely affect our business, financial condition and results of
operations.
We are expanding and diversifying our operations, and if we fail to manage our
expanding and more diverse operations successfully, our business, financial
condition and results of operations may be materially and adversely affected
Our strategy includes expansion and diversification of our operations through
internal development. Our diversification into new markets and product lines
will increase demand on our management, financial resources and information and
internal control systems. Our success depends in significant part on our ability
to implement, improve and expand our systems, procedures and controls. If we
fail to do this at a pace consistent with the development of our business, then
our business, financial condition and results of operations could be materially
and adversely affected.
As we seek to expand our operations, we expect to encounter a number of risks,
which may include those associated with:
. hiring additional management and other critical personnel;
11
<PAGE>
. adding equipment and capacity; and
. increasing the scope, geographic diversity and complexity of our
operations.
We have acquired and may continue to acquire other companies and may be unable
to successfully integrate such companies with our operations
In the past we have expanded our operations through strategic acquisitions and
we may continue to expand and diversify our operations with additional
acquisitions. If we are unsuccessful in integrating these companies with our
operations, or if integration is more difficult than anticipated, we may
experience disruptions that could have a material adverse effect on our
business, financial condition and results of operations. Some of the risks that
may affect our ability to integrate companies we acquire include those
associated with:
. unexpected losses of key employees or customers of the acquired company;
. conforming the acquired company's standards, processes, procedures and
controls with our operations;
. coordinating our new product and process development;
. hiring additional management and other critical personnel; and
. increasing the scope, geographic diversity and complexity of our
operations.
We compete against larger, more established entities
The semiconductor industry is intensely competitive and is characterized by
price erosion, rapid technological change and design and other technological
obsolescence. We compete with domestic and international semiconductor
companies, many of which have substantially greater financial and other
resources with which to pursue engineering, manufacturing, marketing and
distribution of their products. Some of these competitors include: Texas
Instruments, National Semiconductor, Linear Technology, Fairchild Semiconductor
and Intersil Semiconductor, all with respect to our power management products;
ST Microelectronics N.V. with respect to our protection products; Analog
Devices, Maxim Integrated Products and ON Semiconductor, all with respect to our
high performance/ATE products; Applied Micro Circuits Corporation, PMC-Sierra
Inc. and Vitesse Semiconductor Corp., all with respect to our advanced
communications products; and Philips Semiconductors, Synaptics Inc. and
Mitsubishi Electric Corp, all with respect to our intelligent input/output
devices. We expect continued competition from existing competitors as well as
competition from new entrants in the semiconductor market. Our ability to
compete successfully in the rapidly evolving area of integrated circuit
technology depends on several factors, including:
. success in designing and manufacturing new products that implement new
technologies;
. protection of our processes and know-how;
. maintaining high product quality and reliability;
. pricing policies of our competitors;
. performance of competitors' products;
. ability to deliver in large volume on a timely basis;
. marketing, manufacturing and distribution capability; and
12
<PAGE>
. financial strength.
Fluctuating production yields may increase production costs and cause
inventory shortages
The manufacture of semiconductor products is a highly complex and precise
process. Defects in masks, impurities in the materials used, contamination of
the manufacturing environment, failure of equipment and other difficulties in
the fabrication process can cause a substantial percentage of wafers to be
rejected or numerous die on each wafer to be nonfunctional. Wafer yields can
decline without warning, resulting in substantially higher production costs and
inventory shortages. Yield problems may take substantial time to analyze and
correct. Yield problems may also arise from our outsourced third party
manufacturers. We may experience production yield problems in the future that
could materially and adversely affect our business, financial condition and
results of operations.
We must commit resources to product production prior to receipt of purchase
commitments and could lose some or all of the associated investment
Sales are made primarily pursuant to purchase orders for current delivery,
rather than pursuant to long-term supply contracts, that may be revised or
canceled without penalty. As a result, we must commit resources to the
production of products without any advance purchase commitments from customers.
Our inability to sell products after we devote significant resources to them
could have a material adverse effect on our business, financial condition and
results of operations.
We may underutilize our manufacturing facilities or we may have inadequate
facilities to meet the demand for our products
We may underutilize our manufacturing facilities from time to time as a result
of reduced demand for our products. If demand for our products does not increase
consistent with our plans and expectations, we will likely underutilize our
manufacturing facilities which could have a material adverse effect on our
business, financial condition and results of operations.
Conversely, there may be situations in the future in which our manufacturing
facilities will be inadequate to meet the demand for our products. Our inability
to generate sufficient manufacturing capacities to meet demand, either through
our own facilities or through outsourcing to third parties, could have a
material adverse effect on our business, financial condition and results of
operations.
We sell and trade with foreign customers which subjects our business to
increased risks applicable to international sales
Sales to foreign customers accounted for approximately 64% of net sales in the
fiscal year ended January 30, 2000 and 53% of net sales for fiscal year 1999.
The percentage of international sales may increase in future years.
International sales are subject to certain risks, including unexpected changes
in regulatory requirements, fluctuations in exchange rates, tariffs and other
barriers, political and economic instability, difficulties in accounts
receivable collection, difficulties in managing distributors and
representatives, difficulties in staffing and managing foreign subsidiary
operations and potentially adverse tax consequences. There can be no assurance
that any of these factors will not have a material adverse effect on our
business, financial condition and results of operations. In addition, even
though the majority of our foreign sales are denominated in U.S. dollars,
currency exchange fluctuations in countries where we do business could
materially and adversely affect us by resulting in pricing that is not
competitive with prices denominated in local currencies.
We may be unable to adequately protect our intellectual property rights
13
<PAGE>
Few of our products are protected by patents and we rely primarily on a
combination of nondisclosure agreements and other contractual provisions, as
well as the commitment to confidentiality and loyalty of our employees, to
protect our know-how and processes. We intend to continue to protect our
proprietary technology through copyrights and trade secrets and, to a limited
extent, patents. Despite this intention, we may not be successful in achieving
adequate protection. Our failure to adequately protect our material know-how and
processes could have a material adverse effect on our business, financial
condition and results of operations. There can be no assurance that the steps we
have taken will be adequate to protect our proprietary rights or that a
competitor will not independently develop similar or superior know-how or
processes.
The semiconductor industry is characterized by frequent litigation regarding
patent and intellectual property rights. Due to the number of competitors, the
potential for patent infringement exists and is an ongoing risk since other
companies in our industry could have patent rights which may not be identifiable
when we initiate development efforts. Litigation, which could result in
substantial cost and diversion of resources, may be necessary to enforce our
intellectual property rights or to defend ourselves against infringement claims.
We may also be subject to future intellectual property claims or judgments. If
these were to occur, we may be unable to obtain a license on favorable terms, if
at all, or without a material adverse effect on our business, financial
condition and results of operations.
We are subject to environmental regulations
We are subject to a variety of United States federal, foreign, state and local
governmental laws, rules and regulations related to the use, storage, handling,
discharge or disposal of certain toxic, volatile or otherwise hazardous
chemicals used in our manufacturing process. Any of these regulations could
require us to acquire equipment or to incur substantial other expenses to comply
with environmental regulations. If we were to incur substantial additional
expenses, product costs could significantly increase, thus materially and
adversely affecting our business, financial condition and results of operations.
Any failure to comply with present or future environmental laws, rules and
regulations could result in fines, suspension of production or cessation of
operations, any of which could have a material adverse effect on our business,
financial condition and results of operations.
Our products may be found to be defective, product liability claims may be
asserted against us and we may not have sufficient liability insurance
One or more of our products may be found to be defective after we have already
shipped such products in volume, requiring a product replacement, recall, or a
software fix which would cure the defect but impede performance. We may also be
subject to product returns which could impose substantial costs and have a
material and adverse effect on our business, financial condition and results of
operations.
Product liability claims may be asserted with respect to our technology or
products. Although we currently have product liability insurance, there can be
no assurance that we have obtained sufficient insurance coverage, or that we
will have sufficient resources, to satisfy any product liability claims.
Some of our facilities are located near major earthquake fault lines
Our corporate headquarters, a portion of our manufacturing facilities,
assembly and research and development activities and certain other critical
business operations are located near major earthquake fault lines. We could be
materially and adversely affected in the event of a major earthquake. We do not
maintain earthquake insurance.
Information technology and year 2000 issues
As of the date of this Form 10-K, we have not experienced any significant
disruptions or computer processing errors or failures related to any Year 2000
issues. A significant percentage of the software that runs most of the computers
in the United States relies on two-digit date codes to perform a number of
computation and decision
14
<PAGE>
making functions. Commencing on January 1, 2000 these computer programs may fail
from an inability to interpret date codes properly, misreading "00" for the
year 1900 instead of the year 2000.
We have completed a comprehensive program intended to identify, evaluate and
address issues associated with the ability of our information technology and
non-information technology systems to properly recognize the Year 2000 in order
to avoid interruption of the operation of these systems and a material adverse
effect on our operations as a result of the century change. By December 1999, we
completed all Year 2000 compliance testing and any necessary conversions. We
estimate the costs to reprogram, replace and test our information and non-
information technology systems for Year 2000 compliance was between $100,000 and
$150,000 over the life of the project. Costs incurred in connection with Year
2000 compliance efforts were expensed as incurred. We believe that our
information technology and non-information technology systems are Year 2000
compliant. No adverse effects were encountered and no future expense is
expected as a result of Year 2000.
ITEM 2. PROPERTIES
Our headquarters facility is located in Newbury Park, California where we
lease approximately 53,000 square feet under a lease that extends through August
2003. This facility supports certain of our manufacturing operations, as well as
all of our inside sales, marketing and administrative offices.
In addition, we lease two facilities in Santa Clara, California. One facility
houses wafer fabrication operations, contains 10,345 square feet and has a lease
that extends until November 2004. The other facility which houses design
engineering, test and administration, contains 13,250 square feet and has a
lease that extends until November 2000. We lease a facility in Corpus Christi,
Texas, which houses a wafer fabrication line, production testing, and certain
engineering functions, and contains approximately 44,000 square feet under a
lease that extends through December 2001. In addition, we lease space to house
certain of our other manufacturing, design, sales and marketing facilities in
San Diego, California; Oxnard, California; Raleigh, North Carolina; Connecticut;
France; Germany; Taiwan; Korea; Southampton, England; St. Gallen, Switzerland
and Glasgow, Scotland.
In November 1999, we purchased a parcel of land in Camarillo, California for
approximately $5.1 million. We plan to use the land to build a new corporate
headquarters over the next eighteen months. We also own a 20,000 square foot
manufacturing facility in Glenrothes, Fife, Scotland and a 22,000 square foot
building in Reynosa, Mexico.
We believe that our existing leased and owned space is more than adequate for
our current operations, and that suitable replacement and additional space will
be available in the future on commercially reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
We periodically become subject to legal proceedings in the ordinary course of
our business. Other than the action detailed below, we are not currently
involved in any proceedings which we believe will materially and adversely
affect us.
On February 7, 2000, we were notified by the United States Environmental
Protection Agency with respect to the Casmalia Disposal Site in Santa Barbara,
California. We have been included in the Superfund program to clean up this
disposal site for our involvement in utilizing this site for waste disposal. As
of January 30, 2000, we had provided approximately $245,000 for potential
settlement under this program, however, the ultimate resolution and timing of
the resolution is unknown at this time. We believe the amount provided is
sufficient to cover any liability existing based on the currently available
information.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this report no matter
was submitted to a vote of the security holders through the solicitation of
proxies or otherwise.
15
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock is traded on the NASDAQ National Market under the
symbol "SMTC". The following table sets forth, for the fiscal periods indicated,
the quarterly high and low closing prices.
High Low
--------------------------
Fiscal Year 2000:
First Quarter............................. $17.63 $12.38
Second Quarter............................ 34.03 16.41
Third Quarter............................. 42.69 28.00
Fourth Quarter............................ 68.00 37.25
Fiscal Year 1999:
First Quarter............................. $14.88 $10.56
Second Quarter............................ 13.00 5.19
Third Quarter............................. 11.91 6.44
Fourth Quarter............................ 19.56 11.88
As of April 24, 2000, there were approximately 15,900 recorded holders of the
Company's common stock. The last reported sales price for the Company's common
stock on the NASDAQ National Market System at April 24, 2000 was $58.19 per
share.
The Company discontinued its cash dividend in 1980 and does not anticipate
paying a cash dividend in the current year. The Company declared a two for one
stock split in fiscal years 2000 and 1998 in the form of 100% stock dividends to
shareholders. The Company does not anticipate another stock dividend being
declared in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth summary financial information. Amounts are in
thousands, except per share amounts. The acquisitions of USAR Systems (USAR) in
December 1999, Acapella Limited (Acapella) in April 1998, and Edge Semiconductor
(Edge) in April 1997 were accounted for as poolings of interests. The financial
positions and results of operations of USAR, Acapella, and Edge were included
from November 1, 1999, February 1, 1998, and January 28, 1996, respectively (see
Note 2 to the Consolidated Financial Statements). Weighted average number of
shares and net income per share reflects two-for-one stock splits, effected in
the form of stock dividends that were paid on January 13, 1998 and September 14,
1999. The information set forth below should be read in conjunction with the
Company's complete financial statements, appearing elsewhere in this report.
<TABLE>
<CAPTION>
Year Ended January
------------------
<S> <C> <C> <C> <C> <C>
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Net Sales $61,684 $71,595 $102,808 $114,519 $173,768
Gross Profit 25,809 30,683 48,929 54,278 91,037
Operating Income 11,289 12,663 21,809 18,576 42,958
Income Before Taxes 11,343 12,714 22,159 19,362 44,104
Net Income $ 7,531 $ 8,487 $ 14,761 $ 12,895 $ 29,395
- --------------------------------------------------------------------------------------------------------------------
Net Income per Share:
Basic $0.32 $0.31 $0.53 $0.44 $0.95
Diluted $0.30 $0.30 $0.49 $0.41 $0.83
- --------------------------------------------------------------------------------------------------------------------
Weighted Average Number of Shares:
Basic 23,652 27,178 27,956 29,344 30,835
</TABLE>
16
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Diluted 24,776 28,100 30,236 31,784 35,315
- --------------------------------------------------------------------------------------------------------------------
Total Assets $35,225 $45,688 $67,135 $92,556 $149,350
Long-Term Obligations, Less Current
Maturities $ 1,157 $ 1,256 $ 33 $ 57 $ 131
Working Capital $19,378 $25,585 $41,312 $65,844 $ 96,687
Total Stockholders' Equity $24,937 $33,986 $54,661 $79,771 $125,482
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
You should read the following discussion of our financial condition and
results of operations together with the consolidated financial statements and
the notes to consolidated financial statements included elsewhere in this Form
10-K. This discussion contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about us and our industry.
These forward-looking statements involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, as more fully described in the "Risk
Factors" section and elsewhere in this Form 10-K. We undertake no obligation to
update any forward-looking statements for any reason, even if new information
becomes available or other events occur in the future.
Overview
We design, develop, manufacture and market a wide range of analog and mixed-
signal semiconductors for commercial and military applications. Our products are
sold principally to customers in the computer, communications and industrial
markets. Computer market applications include desktop computers, servers,
workstations, laptop computers, personal digital assistants (PDAs) and computer
add-on cards. Products within the communications market include local area
networks, wide area networks, cellular phones and base-stations. Industrial
applications include automated test equipment (ATE), medical devices and factory
automation systems. Our focus on these commercial applications over the past
several years represents a substantial transition from our historical business,
which was predominantly military and aerospace applications.
Sales to customers are made on the basis of individual customer purchase
orders. Many large commercial customers, particularly in the personal computer
industry, include terms in their purchase orders, which provide liberal
cancellation provisions. Recent trends within the industry toward shorter lead-
times and "just-in-time" deliveries have resulted in our reduced ability to
predict future shipments. As a result, we expect the percentage of turns-fill
business (orders received and shipped within the same quarter) to increase as a
percentage of net sales.
With a portion of our sales emanating from retail computer and computer
related applications, our past results have reflected some seasonality, with
demand levels being higher in computer segments during the third and fourth
quarters of the year in comparison to the first and second quarters.
One of our strategies is to expand our business through strategic
acquisitions. Over the past three years, we have made several small acquisitions
in order to increase our pool of skilled technical personnel and penetrate new
market segments such as high performance, advanced communications and system
management devices. These acquisitions include: USAR Systems Incorporated;
Practical Sciences, Inc.; Acapella Limited and Edge Semiconductor. The
acquisitions of USAR, Acapella and Edge were accounted for as poolings of
interests.
The results of operations described below give effect to our two-for-one stock
split in the form of a 100% stock dividend that was paid on September 14, 1999.
On October 12, 1999, the Company authorized an increase in the number of shares
of its common stock from 40,000,000 to 100,000,000.
Results of Operations
17
<PAGE>
Fiscal Year 2000 Compared With Fiscal Year 1999
Net Sales. We generally recognize revenue upon shipment of our products. We
defer revenue recognition on shipment of certain products to distributors where
return privileges exist until the products are sold through to end users. Net
sales for fiscal year 2000 were $173.8 million, compared to $114.5 million for
fiscal year 1999, a 52% increase. This increase was due in part to favorable
market conditions in the overall semiconductor industry and the growth in sales
into the communications end market.
Gross Profit. Gross profit is equal to our net sales less our cost of sales.
Our cost of sales includes materials, direct labor and overhead. Cost of
inventory is determined by the first-in, first-out method. Gross profit for
fiscal year 2000 was $91.0 million, compared to $54.3 million for the comparable
period in the prior year, a 68% increase. Our gross margins (defined as gross
profit as a percentage of net sales) are generally affected by price changes
over the life of the products and the overall mix of products sold. Higher gross
margins are generally expected from new products and improved production
efficiencies as a result of increased utilization. Conversely, prices for
existing products generally will continue to decrease over their respective life
cycles. Our gross margin was 52% for fiscal year 2000. This compared to a gross
margin of 47% for fiscal year 1999. The improvement is attributed to increased
operating efficiencies associated with higher shipment levels, higher revenue
contribution from products introduced in the last year, and a favorable shift in
product mix toward higher margin product lines. Gross profit for fiscal year
1999 was adversely effected by one-time charges of $1.2 million for write-offs
of discontinued inventory associated with restructuring our Corpus Christi
facility.
Operating Costs and Expenses. Operating costs and expenses generally consist
of selling, general and administrative (SG&A), product development and
engineering costs (R&D), costs associated with acquisitions, and other operating
related charges. Operating costs and expenses were $48.1 million, or 28% of net
sales, for fiscal year 2000. Operating costs and expenses for fiscal year 1999
were $35.7 million, or 31% of net sales. Operating costs and expenses, as a
percentage of net sales, are lower for fiscal year 2000 than previous levels due
to higher shipment rates and greater efficiencies.
SG&A expenses for fiscal year 2000 were $27.2 million, or 16% of net sales,
compared to $20.1 million, or 18% of net sales for fiscal year 1999. The
increase in expenditures was due primarily to the overall growth of our
business, while the decrease in percentage of net sales reflects higher revenue
contributions from newer products. R&D expenses were relatively consistent at
$20.3 million, or 12% of net sales, for fiscal year 2000, compared to $14.0
million, or 12% of net sales, for fiscal year 1999. We continue to invest
heavily in areas deemed critical for developing and marketing new products,
which are generally targeted at broadening our customer base, product lines and
end-product applications.
Operating costs and expenses for fiscal year 2000 include one-time costs of
$531,000 associated with the December 1999 acquisition of USAR Systems.
Operating costs and expenses for fiscal year 1999 include one-time costs of
$255,000 associated with the April 1998 acquisition of Acapella Limited.
Additionally, a one-time restructuring charge of $1.3 million was taken in the
same period in connection with the consolidation of manufacturing capacity and
the write-down of impaired assets at our Corpus Christi, Texas facility.
Interest and Other Income. Interest and other income of $1.2 million was
realized in fiscal year 2000. For fiscal year 1999, interest and other income
was $808,000. Other income and expenses for both periods is primarily interest
income.
Provision for Taxes. Expense for income taxes was $14.7 million in fiscal
year 2000, compared to $6.5 million in fiscal year 1999. The effective tax rate
for fiscal years 2000 and 1999 remained constant at 33%.
Fiscal Year 1999 Compared with Fiscal Year 1998
Net Sales. Net sales for fiscal year 1999 totaled $114.5 million, compared
to $102.8 million in fiscal year 1998, an increase of 11%. The growth in net
sales between fiscal years 1999 and 1998 was primarily due to increased
shipments of integrated circuits and discrete products. Power management,
protection and high
18
<PAGE>
performance/ATE specific products were a principal reason for the increase in
sales for both 1999 and 1998. The majority of power management product line
sales are for applications in the computer market. Protection products are used
in both portable computers and communication applications. We experienced a
significant decline in demand during the second quarter of fiscal year 1999
because of weakness in the automated test equipment and personal computer end
markets. The downturn was significant, but relatively brief in that our net
sales returned to higher levels in the third and fourth quarters of fiscal year
1999.
Gross Profit. Gross profit for fiscal year 1999 was $54.3 million, compared
to $48.9 million for fiscal year 1998, an 11% increase. The gross margin,
exclusive of one-time charges for fiscal year 1999, was 48% of net sales. During
the second quarter in fiscal year 1999, we scaled back production capabilities
at the Corpus Christi, Texas facility, which is now solely dedicated to
producing wafers for the protection product line. Included in cost of goods sold
for fiscal year 1999 were one-time charges of $1.2 million for write-offs of
discontinued inventory associated with restructuring our Corpus Christi
facility. Net of one-time charges, gross margin for fiscal year 1999 was 47%.
For fiscal year 1998, our gross margin was 48%.
Operating Costs and Expenses. Operating costs and expenses for fiscal year
1999 were $35.7 million, or 31% of net sales. For fiscal year 1998 operating
costs and expenses were $27.1 million, or 26% of net sales.
Spending on SG&A grew moderately in fiscal year 1999, and was 18% of net
sales. Increased headcount in key sales and strategic marketing positions
accounted for a large portion of the increase. SG&A was 16% of net sales in
fiscal year 1998.
For the fiscal years 1999 and 1998, we spent approximately $14.0 million and
$9.2 million, respectively, on R&D. Fiscal year 1999 R&D expense included the
initial costs associated with the establishment of our Raleigh, North Carolina
design center. Fiscal year 1998 R&D expense included costs associated with the
establishment of our Glasgow, Scotland design center.
Included in fiscal year 1999 operating costs and expenses were one-time
restructuring charges totaling $1.3 million taken during the second quarter. The
charges were for the consolidation of certain manufacturing capacity and the
write-down of impaired assets. The restructuring included the elimination of 60
manufacturing positions and the transition of all commercial integrated circuit
production from our Corpus Christi, Texas facility to our Santa Clara,
California wafer fabrication facility and to outside wafer foundries.
In fiscal years 1999 and 1998, we incurred costs of $255,000 and $1.0 million
for expenses associated with the acquisitions of Acapella Limited and Edge
Semiconductor, respectively. A large portion of the costs associated with these
transactions were for legal, accounting and investment banking fees.
Interest and Other Income. We generated other income of $808,000 for fiscal
year 1999 in comparison to $386,000 in 1998. A majority of other income is
interest income.
Provision for Taxes. Expense for income taxes was $6.5 million in fiscal
year 1999, compared to $7.4 million in fiscal year 1998. The effective tax rate
for fiscal years 1999 and 1998 remained constant at 33%.
Selected Quarterly Financial Data (Unaudited)
The following tables set forth our unaudited consolidated statements of income
data for each of the eight quarterly periods ended January 30, 2000, as well as
that data expressed as a percentage of our net sales for the quarters presented.
You should read this information in conjunction with our consolidated financial
statements and related notes appearing elsewhere in this Form 10-K. We have
prepared this unaudited consolidated information on a basis consistent with our
audited consolidated financial statements, and, in the opinion of our
management, it reflects all normal recurring adjustments that we consider
necessary for a fair presentation of our financial position and operating
results for the quarters presented. You should not draw any conclusions about
our future results from the operating results for any quarter.
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------------------------------------
<S> <C>
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
May 3, Aug. 2, Nov. 1, Jan. 31, May 2, Aug. 1, Oct. 31, Jan. 30,
1998 1998 1998 1999 1999 1999 1999 2000
-----------------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $29,534 $25,539 $28,535 $30,911 $33,044 $38,253 $47,072 $55,399
Cost of sales 15,060 14,882 14,747 15,552 16,445 18,609 22,087 25,590
------- ------- ------- ------- ------- ------- ------- -------
Gross profit (1) 14,474 10,657 13,788 15,359 16,599 19,644 24,985 29,809
Operating costs and expenses:
Selling, general and
Administrative 4,633 4,948 5,147 5,363 5,642 6,067 7,173 8,324
Product development and
Engineering 2,945 3,320 3,689 4,072 4,117 4,527 5,532 6,166
One-time charges 255 1,330 - - - - - 531
------- ------- ------- ------- ------- ------- ------- -------
Total operating costs
and expenses 7,833 9,598 8,836 9,435 9,759 10,594 12,705 15,021
------- ------- ------- ------- ------- ------- ------- -------
Operating income 6,641 1,059 4,952 5,924 6,840 9,050 12,280 14,788
Interest and other income, net 171 199 182 234 254 231 244 417
------- ------- ------- ------- ------- ------- ------- -------
Income before taxes 6,812 1,258 5,134 6,158 7,094 9,281 12,524 15,205
Provisions for taxes 2,275 420 1,715 2,057 2,341 3,063 4,133 5,172
------- ------- ------- ------- ------- ------- ------- -------
Net income $ 4,537 $ 838 $ 3,419 $ 4,101 $ 4,753 $ 6,218 $ 8,391 $10,033
======= ======= ======= ======= ======= ======= ======= =======
Net income per share (2):
Basic $0.16 $0.03 $0.12 $0.14 $0.16 $0.20 $0.27 $0.31
======= ======= ======= ======= ======= ======= ======= =======
Diluted $0.14 $0.03 $0.11 $0.12 $0.14 $0.18 $0.24 $0.27
======= ======= ======= ======= ======= ======= ======= =======
Weighted average number of
shares (2):
Basic 28,892 29,114 29,390 29,984 30,058 30,466 30,933 31,864
Diluted 31,488 30,998 31,326 33,424 33,102 34,612 34,625 36,854
</TABLE>
(1) Approximately $1.2 million, related to the write-down of discontinued
product inventories, was originally classified in operating expenses but has
been reclassified to ''Cost of Sales'' for the second quarter of fiscal year
1999.
(2) Reflects a two-for-one stock split effected in the form of a stock dividend
paid on September 14, 1999.
<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
May 3, Aug. 2, Nov. 1, Jan. 31, May 2, Aug. 1, Oct. 31, Jan. 30,
1998 1998 1998 1999 1999 1999 1999 2000
----------------------------------------------------------------------------------------
As a Percentage of Net Sales:
Net sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales 51.0 58.3 51.7 50.3 49.8 48.6 46.9 46.2
----- ----- ----- ----- ----- ----- ----- -----
Gross profit 49.0 41.7 48.3 49.7 50.2 51.4 53.1 53.8
Operating costs and expenses:
Selling, general & administrative 15.7 19.4 18.0 17.3 17.1 15.9 15.2 15.0
Product development and
Engineering 10.0 13.0 12.9 13.2 12.5 11.8 11.8 11.1
One-time charges 0.9 5.2 -- -- -- -- -- 1.0
----- ----- ----- ----- ----- ----- ----- -----
Total operating costs and
Expenses 26.5 37.6 31.0 30.5 29.5 27.7 27.0 27.1
----- ----- ----- ----- ----- ----- ----- -----
Operating income 22.5 4.1 17.4 19.2 20.7 23.7 26.1 26.7
Interest and other income, net 0.6 0.8 0.6 0.8 0.8 0.6 0.5 0.1
----- ----- ----- ----- ----- ----- ----- -----
</TABLE>
20
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income before taxes 23.1 4.9 18.0 19.9 21.5 24.3 26.6 27.4
Provision for taxes 7.7 1.6 6.0 6.7 7.1 8.0 8.8 9.3
----- ----- ----- ----- ----- ----- ----- -----
Net income 15.4% 3.3% 12.0% 13.3% 14.4% 16.3% 17.8% 18.1%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
Net Sales. Our net sales increased quarter over quarter in seven of the
eight quarters ended January 30, 2000. We realized a decrease in net sales in
the quarter ended August 2, 1998 from the quarter ended May 3, 1998, due to
unfavorable market conditions, primarily related to a weakness in the automated
test equipment and personal computer markets. The increase in net sales in
subsequent periods reflects the impact of new product introductions and more
favorable market conditions in the overall semiconductor industry, primarily in
the communications market.
Gross Profit. Gross profit as a percentage of net sales ranged from 41.7% to
53.8% during the eight quarters ended January 30, 2000. The quarter ended August
2, 1998 reflects the impact of unfavorable market conditions, primarily related
to a weakness in the automated test equipment and personal computer markets and
a $1.2 million inventory write-down. The improvement in subsequent quarters is
attributed to increased operating efficiencies associated with higher shipment
levels, higher revenue contribution and a favorable shift in product mix toward
higher margin product lines.
Operating Costs and Expenses. Operating costs and expenses as a percentage of
net sales increased in the quarter ended August 2, 1998 from the quarter ended
May 3, 1998 due to lower sales volumes, less than maximum utilization of our
infrastructure, establishment of a design center in Raleigh, North Carolina and
$1.3 million in one-time charges. On an absolute dollar basis, operating
expenses generally increased quarter over quarter due to an increase in sales
and strategic marketing personnel and increased specialized technical engineers
as well as continued focus on production development and engineering.
Liquidity and Capital Resources
Subsequent to the end of fiscal year 2000, we completed a private offering of
$400.0 million principal amount of convertible subordinated debentures that pay
an interest rate of 4 1/2% and are convertible into our common stock at a
conversion price of $84.46 per share. The notes are due in seven years. We
intend to use the net proceeds of the offering for general corporate purposes,
including working capital, expansion of sales, marketing and customer service
capabilities, and product development. In addition, we may use a portion of the
net proceeds to acquire or invest in complementary businesses, technologies,
services or products.
On January 30, 2000, we had working capital of $96.7 million, compared with
$65.8 million at January 31, 1999. The ratio of current assets to current
liabilities at January 30, 2000 was 5.1 to 1, compared to 6.2 to 1 at January
31, 1999. The decline was primarily due to our use of cash to repurchase stock
and invest in capital equipment.
Cash provided by operating activities was $36.6 million for fiscal year 2000,
compared to $21.2 million for fiscal year 1999. Net operating cash flows were
favorably impacted by net income of $29.4 million compared to $12.9 million in
the prior year period. Net cash provided by operating activities for fiscal year
2000 was also positively impacted by an increase in accounts payable and accrued
liabilities of $9.2 million and an increased income tax liability of $18.3
million. Net income for fiscal year 2000 was reduced by non-cash charges for
depreciation and amortization of $4.1 million. These items were partially offset
by a $9.9 million increase in receivables and an $9.8 million increase in
inventories.
Cash provided by operating activities was $21.2 million in fiscal year 1999
and $16.1 million in fiscal year 1998. The Company had an increase in operating
cash flows for fiscal year 1999 over fiscal year 1998 despite a reduction in net
income year over year, due to depreciation expense of $3.7 million and non-cash
restructuring charges of $2.4 million. In addition the Company increased its tax
liabilities by $4.8 million. Fiscal year 1998 operating cash flows were
favorably impacted by increased tax liability of $4.3 million and accrued
liabilities of $1.8 million, which were partially offset by increases in
inventories and receivables of $2.6 million and $4.7 million, respectively.
21
<PAGE>
Investing activities used $31.4 million for fiscal year 2000 compared to $5.3
million in fiscal year 1999 and $7.3 million in fiscal year 1998. Investing
activities for fiscal year 2000 consist of increases in temporary cash
investments and capital expenditures of $16.4 million and $15.0 million,
respectively. Cash used in investing activities for the comparable prior year
period reflects primarily additions to property and equipment.
Our financing activities used $1.0 million during fiscal year 2000 and
provided $6.4 million in fiscal year 1999 and $421,000 in fiscal year 1998.
Financing activities for fiscal year 2000 reflect primarily $13.9 million in
funds used for stock repurchases, partially offset by funds from stock option
exercises. Financing activities for the comparable prior period represent
primarily cash from stock option exercises.
In August of 1998 we agreed to a credit arrangement with a financial
institution for borrowings up to $20.0 million. The line of credit consists of
two parts, the first facility being a $10.0 million line of credit for working
capital needs and the second facility being a reducing revolver loan for
equipment acquisitions. Through our foreign subsidiary, we also maintain an
overdraft credit line in the amount of 300,000 pounds sterling. As January 30,
2000, we had no borrowings outstanding under either of these credit facilities.
New products have been introduced for use in a wide variety of computer, test
and communications systems. In order to develop, design and manufacture new
products, we had to make significant expenditures during the past four years.
These investments aimed at developing new products, including the hiring of many
design and applications engineers and related equipment, will continue. We fully
intend to continue to invest in those areas that have shown potential for viable
and profitable market opportunities. Certain of these expenditures, particularly
the addition of design engineers, do not generate significant payback in the
short-term. We plan to finance these expenditures with cash generated by
operations and cash on-hand.
Purchases of new capital equipment were made primarily to expand manufacturing
capacity and improve efficiency. Funding for these purchases was made from our
operating cash flows and cash reserves. We have made significant investments in
product and process technology, including capital expenditures of $15.0 million,
$5.6 million and $6.2 million in fiscal years 2000, 1999 and 1998, respectively.
We believe that sales generating cash flows, together with the proceeds of the
debt offering, cash reserves and existing credit facilities, are sufficient to
fund operations and capital expenditures for the foreseeable future.
Inflation
Inflationary factors have not had a significant effect on our performance over
the past several years. A significant increase in inflation would affect our
future performance.
Recently Issued Accounting Standards
In June 1998 and June 1999, the FASB issued SFAS No. 133, "Accounting for
Derivative Investments and Hedging Activities," and SFAS No. 137, which delayed
the effective date of SFAS No. 133. We will adopt the statement in February 2001
and do not expect the adoption of this statement to have a material impact on
our financial position or results of operations.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition." SAB No. 101 provides
additional guidance on the recognition, presentation and disclosure of revenue
in financial statements. The Company has reviewed this bulletin and believes
that its current revenue recognition policy is consistent with the guidance of
SAB No. 101.
Year 2000 Compliance
As of the date of this Form 10-K, we have not experienced any significant
disruptions or computer processing errors or failures related to any Year 2000
issues. A significant percentage of the software that runs most of the computers
in the United States relies on two-digit date codes to perform a number of
computation and decision
22
<PAGE>
making functions. Commencing on January 1, 2000 these computer programs may fail
from an inability to interpret date codes properly, misreading ''00'' for the
year 1900 instead of the year 2000.
We have completed a comprehensive program intended to identify, evaluate and
address issues associated with the ability of our information technology and
non-information technology systems to properly recognize the Year 2000 in order
to avoid interruption of the operation of these systems and a material adverse
effect on our operations as a result of the century change. By December 1999, we
completed all Year 2000 compliance testing and any necessary conversions. We
estimate the costs to reprogram, replace and test our information and non-
information technology systems for Year 2000 compliance was between $100,000 and
$150,000 over the life of the project. Costs incurred in connection with Year
2000 compliance efforts were expensed as incurred. We believe that our
information technology and non-information technology systems are Year 2000
compliant. No adverse effects were encountered and no future expense is
expected as a result of Year 2000.
FORWARD LOOKING STATEMENTS
In addition to historical information, this Form 10-K contains statements
relating to our future results. These statements include certain projections and
business trends which are ''forward-looking'' within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
made only as of the date of this Form 10-K. We do not undertake to update or
revise the forward-looking statements, whether as a result of new information,
future events or otherwise.
Actual results may differ materially from projected results as a result of
certain risks and uncertainties. These risks and uncertainties include, without
limitation, those described under ''Risk Factors'' including those set forth
below and those detailed from time to time in our filings with the SEC:
. successful development and timing of new products;
. ability to attract or retain specialized technical personnel;
. cyclical nature of the semiconductor industry due to global and market
conditions;
. availability of manufacturing capacity;
. fluctuation of quarterly operating results;
. loss of a significant customer or customer order;
. our ability to manage and integrate our expanding and more diverse
operations;
. our ability to integrate strategic acquisitions;
. our ability to compete against larger, more established entities;
. fluctuations in manufacturing yields;
. our ability to protect our intellectual property rights;
. uncertainties of litigation; and
. other risks and uncertainties.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
23
<PAGE>
Foreign Currency Risk
As a global enterprise, the Company faces exposure to adverse movements in
foreign currency exchange rates. The Company's foreign currency exposures may
change over time as the level of activity in foreign markets grows and could
have a adverse impact upon the Company's financial results.
Certain of the Company's assets, including certain bank accounts and accounts
receivable, exist in nondollar-denominated currencies, which are sensitive to
foreign currency exchange rate fluctuations. The nondollar-denominated
currencies are principally German Deutschmarks, British Pounds Sterling and
French Francs. Additionally, certain of the Company's current and long-term
liabilities are denominated principally in British Pounds Sterling currencies,
which are also sensitive to foreign currency exchange rate fluctuations.
Because of the relatively small size of each individual currency exposure, the
Company does not employ hedging techniques designed to mitigate foreign currency
exposures. Likewise, the Company could experience unanticipated currency gains
or losses.
Interest Rate Risk
The Company has a line of credit with a financial institution at an interest
rate of 30-day commercial paper plus 2.2%. At any time, a sharp rise in
interest rates could have a material adverse impact upon the Company's cost of
working capital and interest expense. The Company does not currently hedge this
potential interest rate exposure. As of January 30, 2000 the Company had no
long-term debt outstanding.
24
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF INCOME
THREE YEARS ENDED JANUARY 30, 2000
(In thousands-except per share amounts)
<TABLE>
2000 1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $173,768 $114,519 $102,808
Cost of Sales 82,731 60,241 53,879
-------- -------- --------
Gross Profit 91,037 54,278 48,929
-------- -------- --------
Operating costs and expenses:
Selling, general and administrative 27,206 20,091 16,925
Product development and engineering 20,342 14,026 9,195
Restructuring charge - 1,330 -
Acquisition costs 531 255 1,000
-------- -------- --------
Total operating costs and expenses 48,079 35,702 27,120
-------- -------- --------
Operating Income 42,958 18,576 21,809
Interest expense (57) (22) (36)
Other income, net 1,203 808 386
-------- -------- --------
Income before taxes 44,104 19,362 22,159
Provision for taxes 14,709 6,467 7,398
-------- -------- --------
NET INCOME $ 29,395 $ 12,895 $ 14,761
======== ======== ========
Earnings per share:
Net income per share -
Basic $0.95 $0.44 $0.53
Diluted $0.83 $0.41 $0.49
Weighted average number of shares -
Basic 30,835 29,344 27,956
Diluted 35,315 31,784 30,236
</TABLE>
See accompanying notes.
25
<PAGE>
CONSOLIDATED BALANCE SHEETS
JANUARY 30, 2000 AND JANUARY 31, 1999
(Dollars in thousands-except share amount)
<TABLE>
2000 1999
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 45,225 $41,035
Temporary investments 18,066 1,648
Receivables, less allowances of $750 in 2000 and $878 in 1999 25,223 15,414
Income taxes refundable - 258
Inventories 26,581 16,803
Other current assets 1,223 1,275
Deferred income taxes 4,106 2,139
-------- -------
Total current assets 120,424 78,572
-------- -------
Property, plant and equipment, net 24,397 13,417
Other assets 1,482 89
Deferred income taxes 3,047 478
-------- -------
TOTAL ASSETS $149,350 $92,556
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,723 $ 5,296
Accrued liabilities 8,869 5,102
Income taxes payable 1,389 -
Other current liabilities 2,756 2,330
-------- -------
Total current liabilities 23,737 12,728
-------- -------
Other long-term liabilities 131 57
-------- -------
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value, 100,000,000 authorized
Issued and outstanding 32,048,252 in 2000 and 30,387,960 in 320 304
1999
Additional paid-in capital 53,885 30,309
Retained earnings 71,498 49,411
Accumulated other comprehensive loss (221) (253)
-------- -------
Total Stockholders' equity 125,482 79,771
-------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $149,350 $92,556
======== =======
</TABLE>
See accompanying notes.
26
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
THREE YEARS ENDED JANUARY 30, 2000
(Dollars in thousands-except share amounts)
<TABLE>
<CAPTION>
Common Stock
-------------------------------------
Additional Accumulated
Number Paid-in Retained Treasury Other Stockholders'
of Shares Amount Capital Earnings Stock, at Cost Comprehensive Equity
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 26, 1997 27,365,040 $274 $12,420 $21,571 - $ (279) $ 33,986
Comprehensive income:
Net income - - - 14,761 - - 14,761
Translation adjustment - - - - - 60 60
--------
Comprehensive income - - - - - - 14,821
Exercise of stock options 1,023,420 10 1,921 - - - 1,931
Tax benefit from exercised
stock options - - 3,923 - - - 3,923
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at February 1, 1998 28,388,460 $284 $18,264 $36,332 - (219) $ 54,661
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net income - - - 12,895 - - 12,895
Translation adjustment - - - - - (34) (34)
--------
Comprehensive income - - - - - - 12,861
Effect of pooling with Acapella
Limited 351,548 4 57 184 - - 245
Exercise of stock options 1,647,952 16 6,129 - - - 6,145
Tax benefit from exercised
stock options - - 5,859 - - - 5,859
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at January 31, 1999 30,387,960 $304 $30,309 $49,411 - (253) $ 79,771
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net income - - - 29,395 - - 29,395
Translation adjustment - - - - - 32 32
--------
Comprehensive income - - - - - - 29,427
Effect of pooling with USAR
Systems 495,404 5 1,229 (143) - - 1,091
Stock repurchase (701,000) (7) - - (13,843) (13,850)
Reissued treasury stock 691,000 7 - (7,165) 13,843 - 6,685
Purchase of Practical Sciences 10,000 - 349 - - - 349
Exercise of stock options 1,164,888 11 5,047 - - - 5,058
Tax benefit from exercised
stock options - - 16,951 - - - 16,951
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at January 30, 2000 32,048,252 $320 $53,885 $71,498 - $(221) $125,482
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
27
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED JANUARY 30, 2000
(Dollars in thousands)
<TABLE>
2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 29,395 $12,895 $14,761
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 4,118 3,723 2,775
Deferred income taxes (4,536) (802) (876)
(Gain) Loss on disposition of property, plant and equipment - (1) 20
Provision for doubtful accounts 45 135 480
Non-cash portion of restructuring charge - 2,366 -
Changes in assets and liabilities, net of effect of acquisition:
Receivables (9,854) (1,827) (4,732)
Income taxes refundable 258 (258) 68
Inventories (9,778) (955) (2,566)
Other assets (1,081) (251) 9
Accounts payable 5,427 55 (344)
Accrued liabilities 3,767 643 1,813
Income taxes payable 18,340 4,839 4,279
Other liabilities 500 633 457
-------- ------- -------
Net cash provided by operating activities 36,601 21,195 16,144
-------- ------- -------
Cash flows from investing activities:
Temporary investments, net (16,418) 204 (1,095)
Proceeds from sale of property, plant and
equipment - 62 31
Purchases of property, plant and equipment (15,009) (5,590) (6,192)
-------- ------- -------
Net cash used in investing activities (31,427) (5,324) (7,256)
-------- ------- -------
Cash flows from financing activities:
Net repayments under line of credit - - (80)
Repayment of long-term debt - - (1,430)
Exercise of stock options 5,058 6,145 1,931
Repurchase of treasury stock (13,850) - -
Reissuance of treasury stock 6,685 - -
Effect of pooling of interests 1,091 245 -
-------- ------- -------
Net cash provided (used) by financing activities (1,016) 6,390 421
-------- ------- -------
Effect of exchange rate changes on cash and cash equivalents 32 (34) 60
Net increase in cash and cash equivalents 4,190 22,227 9,369
Cash and cash equivalents at beginning of year 41,035 18,808 9,439
-------- ------- -------
Cash and cash equivalents at end of year $ 45,225 $41,035 $18,808
======== ======= =======
</TABLE>
See accompanying notes.
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Business
Semtech Corporation and its wholly owned subsidiaries (Semtech International,
Semtech Corpus Christi, Semtech Limited, Semtech Santa Clara, Edge
Semiconductor, Acapella Limited, and USAR Systems, together, the Company)
design, develop and manufacture Standard Semiconductor Products, Rectifier and
Assembly Products and Other Products which are used in computer, communications,
military, aerospace, industrial, automotive and consumer applications. The
Company's primary facilities are in Newbury Park, Santa Clara and San Diego,
California; Corpus Christi, Texas; New York, New York; St. Gallen, Switzerland;
Reynosa, Mexico; and Southampton, England.
Fiscal Year
The Company reports results on the basis of fifty-two and fifty-three week
periods. The fiscal years ended January 30, 2000 and January 31, 1999 each
consisted of fifty-two weeks. The fiscal year ended February 1, 1998 consisted
of fifty-three weeks.
Revenue Recognition
The Company generally recognizes product revenue upon shipment. Product design
and engineering revenue is recognized during the period in which services are
performed. The Company defers revenue recognition on shipment of certain
products to distributors where return privileges exist until the products are
sold through to end users.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Semtech Corporation and its wholly owned subsidiaries. All significant
intercompany transactions and accounts have been eliminated.
Reclassifications
Certain prior year balances have been reclassified to be consistent with
current year presentation.
Recently Issued Accounting Standards
In June 1998 and June 1999, the FASB issued SFAS No. 133, "Accounting for
Derivative Investments and Hedging Activities," and SFAS No. 137, which delayed
the effective date of SFAS No. 133. The Company will adopt the statement in
February 2001 and do not expect the adoption of this statement to have a
material impact on the Company's financial position or results of operations.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition." SAB No. 101 provides
additional guidance on the recognition, presentation and disclosure of revenue
in financial statements. The Company has reviewed this bulletin and believes
that its current revenue recognition policy is consistent with the guidance of
SAB No. 101.
Inventories
Inventories are stated at the lower of cost or market and consist of
materials, labor and overhead. Cost is determined by the first-in, first-out
method.
Property, Plant and Equipment
29
<PAGE>
Property, plant and equipment are stated at cost. Depreciation is computed
primarily using the straight-line method over the following estimated useful
lives: buildings for thirty years; leasehold improvements for the lesser of
estimated useful life or lease term; machinery and equipment for two to six
years; and furniture and office equipment for three to six years. Maintenance
and repairs are charged to expense as incurred and the costs of additions and
betterments that increase the useful lives of the assets are capitalized.
Income Taxes
Deferred income tax assets or liabilities are computed based on the temporary
differences between the financial statement and income tax bases of assets and
liabilities using the statutory marginal income tax rate in effect for the years
in which the differences are expected to reverse. Deferred income tax expenses
or credits are based on the changes in the deferred income tax assets or
liabilities from period to period.
As of January 30, 2000 and January 31, 1999, approximately $2.6 million and
$3.0 million, respectively, of unremitted income related to the Company's wholly
owned European subsidiaries are not subject to federal and state income taxes
except when such income is paid to the parent company. Federal and state income
taxes have not been provided on this income, as it is management's intention
that these amounts will not be distributed in a taxable transaction.
Earnings per Share
Basic earnings per common share are computed using the weighted average number
of common shares outstanding during the period. Diluted earnings per common
share incorporate the incremental shares issuable upon the assumed exercise of
stock options. The weighted average number of shares used to compute basic
earnings per share in fiscal years 2000, 1999 and 1998 were 30,835,000,
29,344,000, and 27,956,000, respectively. For computation of diluted earnings
per share, the weighted average number of shares used in fiscal years 2000, 1999
and 1998 were 35,315,000, 31,784,000, and 30,236,000, respectively.
Options to purchase approximately 100,000, 1,130,000, and 376,000 shares were
not included in the computation of fiscal years 2000, 1999 and 1998 diluted net
income per share because such options were considered anti-dilutive.
Stock Distribution
On September 14, 1999, the Company effected a two-for-one stock split in the
form of a 100% stock dividend which was payable to shareholders of record as of
August 30, 1999. All shares, per share data, common stock, and stock option
amounts herein have been restated to reflect the effect of this split.
Translation
The assets and liabilities of the Company's foreign subsidiaries are
translated using currency exchange rates at fiscal year end. Income statement
items are translated at average exchange rates prevailing during the period. The
translation gains or losses are included in accumulated other comprehensive
income in the accompanying financial statements. Transaction gains and losses
are insignificant.
Software Development Costs
In accordance with SFAS No. 86, "Accounting for the Costs of Computer Software
to be Sold, Leased, or Otherwise Marketed," development costs related to
software products are expensed as incurred until the technological feasibility
of the product has been established. The cost of purchased software is
capitalized when related to a product which has achieved technological
feasibility or that has an alternative future use. Software development costs
incurred prior to achieving technological feasibility as well as certain
licensing costs are charged to research and development expense as incurred.
Capitalized software development costs are reported at the lower of
unamortized cost or net realizable value. Commencing upon initial product
release, these costs are amortized based on the straight-line method over the
30
<PAGE>
estimated life, or a ratio of current revenues to total anticipated revenues,
generally three years for internal software development costs. Fully amortized
software costs are removed from the financial records. As of January 30, 2000,
$1.2 million of capitalized software costs are included in "Other Assets" in the
accompanying consolidated balance sheets. Amortization expense of capitalized
software costs totaled $26,000 as of January 30, 2000 and are included in "Cost
of Sales" in the accompanying consolidated statements of income.
Estimates Used by Management
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
2. Business Combinations and Purchases
On December 6, 1999, the Company completed a merger with USAR Systems
Incorporated (USAR), based in New York, New York. Under the agreement, USAR
shareholders received 495,404 shares of Semtech common stock for all outstanding
shares of USAR stock. The Company acquired USAR Systems to broaden its product
line for serving the market for portable systems.
The acquisition of USAR was accounted for as a pooling of interests in
accordance with APB Opinion No. 16 and related Securities and Exchange
Commission pronouncements. USAR's financial position and results of operations
prior to the fourth quarter of fiscal year 2000 were immaterial in relation to
Semtech's overall results. Therefore, the effect of the merger prior to November
1, 1999 has been adjusted to retained earnings. Merger related costs of
$531,000 associated with the acquisition of USAR are reflected in the Company's
net income.
During the third quarter of fiscal year 2000, Semtech purchased a
communication design firm, Practical Sciences. Semtech issued 10,000 shares to
the owner of Practical Sciences. The purchase price, based on the Company's
closing stock price on the day of the transaction, was approximately $349,000
and resulted in goodwill of approximately $260,000, which is amortized over six
years. The purchase was made to strengthen the Company's ability to develop
high-speed communications devices.
In fiscal year 1999, the Company acquired Acapella Limited (Acapella) for
approximately 352,000 shares of Semtech common stock. The acquisition of
Acapella was accounted for as a pooling of interests. Acapella's financial
position and results of operations prior to fiscal year 1999 were immaterial in
relation to Semtech's overall results. Therefore, the effect of the merger prior
to February 1, 1998 has been adjusted to retained earnings. The consolidated
balance sheet at January 31, 1999 as well as the consolidated statements of
income and cash flows for the twelve months ended January 31, 1999 include the
results of Acapella. Merger related costs of $255,000 associated with the
acquisition of Acapella are reflected in the Company's net income. The Company
acquired Acapella to strengthen its ability to develop advanced communication
solutions.
In fiscal year 1998, the Company acquired Edge Semiconductor (Edge). The
acquisition was accounted for as a pooling of interests and Edge shareholders
received 2,999,908 shares of common stock. Costs of $1 million were recorded to
cover the expense associated with the acquisition of Edge. The financial
statements of the Company have been restated to include the results of
operations, financial position and cash flows of Edge, as though it had always
been a part of Semtech. The Company acquired Edge to integrate and complement
its existing businesses and technology.
3. Stock Repurchase Programs
On February 2, 1999, the Company announced that its board of directors had
approved a program to repurchase up to $10.0 million of its common stock. On
July 28, 1999, the Company completed this repurchase program and announced that
its board of directors approved the repurchase of an additional $10.0 million of
its common stock. The Company repurchased 701,000 shares under these programs
for approximately $13.9 million. Through
31
<PAGE>
December 3, 1999, the Company had reissued all 701,000 shares to cover the
exercise of employee stock options and the acquisition of Practical Sciences
(see Note 2). On December 3, 1999, the Company discontinued any additional
repurchases under its stock repurchase program.
4. Impairment of Assets and Restructuring Charge
Operating income for fiscal year 1999 included total charges of $2.5
million, comprised of $136,000 related to a restructuring program, $1.2 million
for the write-down of long-lived assets, and a $1.2 million write-down of
inventory included in ''Cost of Sales.'' The restructuring program resulted in a
significant reduction of capacity and the elimination of approximately 60
positions during fiscal year 1999.
The asset impairment loss of $1.2 million consists of a write-down of the
Company's Corpus Christi wafer fab, and results from the evaluation of the
Company's ability to recover asset costs after an extensive review of its
business model. The asset impairment loss was determined by comparing the
estimated future cash flows associated with each long-lived asset or group
thereof, as appropriate, to the carrying amount of such asset or group of
assets. The $1.2 million inventory write-down consists of inventory that was
written-down to its estimated net realizable value. As of the end of fiscal year
1999, no amounts included in the charges remained to be spent.
5. Temporary Investments
Temporary investments consist of bank and corporate obligations with
original maturities in excess of three months at the time of purchase. At
January 30, 2000, and January 31, 1999, the fair market value of temporary
investments classified as ''available for sale securities'', approximated cost,
thus no unrealized holding gains or losses were reported in the accompanying
balance sheets. During fiscal year 2000 and 1999, the Company had no sales of
available for sale securities and likewise no realized gain or loss. As of
January 30, 2000, temporary investments consisted of $8.5 million in bank
obligations and $9.5 million in corporate obligations, all of which mature on
various dates through the fiscal year 2001. As of January 31, 1999, temporary
investments consisted solely of corporate obligations.
6. Inventories
The commercial semiconductor industry and the markets in which the
Company's products are used are characterized by rapid changes and short product
life cycles. Consistent with the industry, the Company has experienced declines
in average selling prices over the life of its product lines. The Company has
generally reserved inventory which is considered obsolete or estimated to be in
excess of 18 months demand, and has provided reserves for declines in selling
price below cost. Inventories consisted of the following:
<TABLE>
<CAPTION>
Raw Work in Finished
------------- ------------- -------------
Materials Process Goods Total
------------- ------------- ------------- -------------
(thousands)
<S> <C> <C> <C> <C>
2000
Gross inventories............ $1,471 $17,276 $12,588 $31,335
Total reserves............... (288) (2,030) (2,436) (4,754)
------ ------- ------- -------
Net inventories........... $1,183 $15,246 $10,152 $26,581
====== ======= ======= =======
1999
Gross inventories............ $1,879 $ 9,906 $ 9,016 $20,801
Total reserves............... (426) (1,329) (2,243) (3,998)
------ ------- ------- -------
Net inventories........... $1,453 $ 8,577 $ 6,773 $16,803
====== ======= ======= =======
</TABLE>
7. Property, Plant and Equipment
32
<PAGE>
Property, plant and equipment consisted of the following:
<TABLE>
2000 1999
-------- --------
(thousands)
<S> <C> <C>
Property............................................... $ 5,279 $ 165
Building ............................................. 827 1,119
Leasehold improvements ............................... 1,264 1,423
Machinery and equipment .............................. 28,664 22,683
Furniture and office equipment ....................... 6,352 3,537
Construction in progress ............................. 1,642 3
-------- --------
44,028 28,930
Less accumulated depreciation and amortization ....... (19,631) (15,513)
-------- --------
Property, plant and equipment, net ................. $ 24,397 $ 13,417
======== ========
</TABLE>
8. Lines of Credit
The Company has a credit arrangement with a financial institution for
borrowings up to $20.0 million at an interest rate of 30 day commercial paper
plus 2.2% that is available through August 2000. The line of credit consists of
two parts, the first facility is a $10.0 million line of credit for working
capital needs and the second facility is a reducing revolver loan for equipment
acquisitions. The available amount under the reducing revolver loan declines in
equal increments over 84 months. As of January 30, 2000, the Company had
approximately $8.2 million available under the reducing revolver portion. The
arrangement is collateralized by the Company's domestic assets and provides for
financial and non-financial covenants. As of January 30, 2000, the Company had
no borrowings outstanding under this credit facility. Through its foreign
subsidiary, the Company also maintains an overdraft credit line in the amount of
300,000 pounds sterling.
9. Accrued Liabilities
Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
2000 1999
------ ------
(thousands)
<S> <C> <C>
Payroll and related ............. $5,617 $3,934
Commissions ..................... 1,191 269
Environmental ................... 245 -
Non-income related taxes ........ - 110
Other............................. 1,816 789
------ ------
Accrued liabilities ........... $8,869 $5,102
====== ======
</TABLE>
10. Income Taxes
The provision for taxes consisted of the following:
<TABLE>
<CAPTION>
2000 1999 1998
------- ------ ------
(thousands)
Current:
<S> <C> <C> <C>
Federal............. $18,868 $6,331 $6,963
State............... 377 870 918
Foreign............. - 68 393
------- ------ ------
19,245 7,269 8,274
Deferred:
Federal............. (4,023) (672) (800)
State............... (513) (130) (76)
</TABLE>
33
<PAGE>
<TABLE>
<S> <C> <C> <C>
Foreign.............. - - -
------- ------ ------
Provision for taxes.. $14,709 $6,467 $7,398
======= ====== ======
</TABLE>
The components of the net deferred income tax assets at January 30, 2000 and
January 31, 1999 are as follows:
Net short-term deferred income taxes:
<TABLE>
<CAPTION>
2000 1999
------ ------
(thousands)
<S> <C> <C>
Deferred tax assets:
Payroll and related ..................... $ 281 $ 544
Environmental ........................... 100 -
Deferred revenue ........................ 2,188 1,211
Bad debt reserve ........................ 266 245
State income taxes ...................... 1 309
AMT credit carryforward ................. 658 -
Other deferred assets ................... 612 4
------ ------
Total short-term deferred assets .......... 4,106 2,313
Valuation reserve ......................... - (174)
------ ------
Net short-term deferred income taxes ...... $4,106 $2,139
====== ======
</TABLE>
Net long-term deferred income taxes:
<TABLE>
<CAPTION>
2000 1999
------- ------
(thousands)
<S> <C> <C>
Deferred tax assets:
Inventory valuation ......................... $ 1,773 $1,342
Research and development charges ............ 2,484 210
------- ------
Total long-term deferred assets ............... 4,257 1,552
------- ------
Deferred tax liabilities:
Depreciation and amortization ............... (1,173) (792)
Foreign deferred taxes ...................... (37) (37)
------- ------
Total long-term deferred liabilities .......... (1,210) (829)
------- ------
Subtotal ...................................... 3,047 723
Valuation reserve ............................. - (245)
------- ------
Net long-term deferred income taxes ........... $ 3,047 $ 478
======= ======
</TABLE>
The provision for taxes reconciles to the amount computed by applying the
statutory federal rate to income before taxes as follows:
<TABLE>
2000 1999 1998
------- ------ ------
(thousands)
<S> <C> <C> <C>
Computed expected federal income tax .............................. $15,436 $6,583 $7,534
State income taxes, net of federal benefit ........................ 2 599 640
Foreign sales corporation at rates less than statutory rates ...... (385) (276) (346)
Foreign taxes at rates less than domestic rates ................... 28 (7) (5)
Utilization of net operating loss and tax credit carryforwards .... - (644) (546)
Changes in valuation reserve ...................................... (419) - (263)
Permanent differences ............................................. 381 (160) 83
Other ............................................................. (334) 372 301
------- ------ ------
Provision for taxes ............................................... $14,709 $6,467 $7,398
======= ====== ======
</TABLE>
Realization of the net deferred tax assets is dependent on generating
sufficient taxable income during the periods in which temporary differences will
reverse. Although realization is not assured, management believes it is more
likely than not that the net deferred tax assets will be realized. The amount of
the net deferred tax assets considered
34
<PAGE>
realizable, however, could be adjusted in the near term if estimates of future
taxable income during the reversal periods are revised.
11. Commitments and Contingencies
The Company leases facilities and certain equipment under lease arrangements
expiring in various years through fiscal year 2008. The aggregate minimum annual
lease payments under leases in effect on January 30, 2000 were as follows:
<TABLE>
<CAPTION>
Capital Operating
Fiscal Year Ending ------- ---------
------------------ Leases Leases
------ ------
(thousands)
<S> <C> <C>
2001 ...................................... $ 46 $1,704
2002 ...................................... 29 1,642
2003 ...................................... 11 1,337
2004 ...................................... - 1,005
2005 ...................................... - 377
Thereafter ................................ - 463
---- ------
Total minimum lease commitments ........... $ 86 $6,528
======
Less: amount representing interest (13)
----
Sub-total 73
Less: current portion (37)
----
Total $ 36
====
</TABLE>
The current portion of capital lease obligations are included in "Other
current liabilities" and the remaining capital lease obligations are included in
"Other long-term liabilities" in the accompanying consolidated balance sheets.
Annual rent expense was $1.5 million, $1.3 million and $1.0 million for fiscal
years 2000, 1999, and 1998, respectively.
On February 7, 2000, the Company was notified by the United States
Environmental Protection Agency with respect to the Casmalia Disposal Site in
Santa Barbara, California. The Company has been included in the Superfund
program to clean up this disposal site for its involvement in utilizing this
site for waste disposal. As of January 30, 2000, the Company provided
approximately $245,000 for potential settlement under this program, however, the
ultimate resolution and timing of the resolution is unknown at this time. The
Company believes the amount provided is sufficient to cover any liability
existing based on the currently available information.
Certain contaminants have been found in the ground water at the Company's
Newbury Park facility. The Company has data showing that the contaminants are
from an adjacent facility. The contaminants in question have never been used by
the Company at the Newbury Park facility. To protect its interests, the Company
utilizes an environmental firm, specializing in hydrogeology, to perform
periodic monitoring. It is currently not possible to determine the ultimate
amount of possible future clean-up costs, if any, that may be required of the
Company at this site. Accordingly, no reserves for clean-up have been provided
by the Company at this time.
Effective June 11, 1998, the Company's Board of Directors approved a
Stockholder Protection Agreement to issue a Right for each share of common stock
outstanding on July 31, 1998 and each share issued thereafter (subject to
certain limitations). These Rights, if not cancelled by the Board of Directors,
can be exercised into a certain number of Series X Junior Participating
Preferred Stock after a person or group of affiliated persons acquire 25% or
more of the Company's common stock and subsequently allow the holder to receive
certain additional Company or acquirer common stock if the Company is acquired
in a hostile takeover.
From time to time, the Company is a defendant in lawsuits involving matters
which are routine to the nature of its business. Management is of the opinion
that the ultimate resolution of all such matters will not have a material
adverse effect on the accompanying consolidated financial statements.
35
<PAGE>
12. Stockholders' Equity
On October 12, 1999, the Company authorized an increase in the number of
shares of the Company's common stock from 40,000,000 to 100,000,000.
The Company has various stock option plans that provide for granting options
to purchase shares of the Company's common stock to employees, directors and
consultants of the Company. The plans provide for the granting of options which
meet the Internal Revenue Code requirements for qualification as incentive stock
options, as well as nonstatutory options. Under these plans, the option price
must be at least equal to the fair market value of the Company's common stock at
the date of the grant for incentive stock options. Most incentive stock options
expire within ten years from the date of grant. Generally, the options vest in
equal annual increments over three to four years from the date of grant.
The plans provide for the issuance of 6,400,000 shares over the remaining life
of the plans. The plans also provide for the further issuance of up to 4,000,000
additional shares, if authorized by the Board, which are reacquired in the open
market or in a private transaction.
Stock option information with respect to the Company's stock option plans is
as follows (in thousands):
<TABLE>
2000 1999 1998
---- ---- ----
Weighted Weighted Weighted
--------- --------- ---------
Shares Average Shares Average Shares Average
----------- --------- ----------- --------- ----------- ---------
Under Exercise Under Exercise Under Exercise
----------- --------- ----------- --------- ----------- ---------
Option Price Option Price Option Price
----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Options Outstanding, beginning of year ... 9,578 $ 7.26 7,938 $5.95 4,727 $2.45
Granted .................................. 2,610 23.97 3,794 8.41 4,732 8.17
Canceled ................................. (117) 12.04 (507) 6.92 (498) 3.20
Exercised ................................ (1,856) 6.25 (1,647) 3.73 (1,023) 1.89
------ ------ ------
Options Outstanding, end of year ......... 10,215 $11.65 9,578 $7.26 7,938 $5.88
====== ====== ======
Options exercisable at the end of year ... 3,514 $ 6.68 2,342 $5.65 1,179 $2.27
Weighted average fair value of options
Granted during year ..................... $13.37 $5.25 $5.56
</TABLE>
Information about stock options outstanding at January 30, 2000 is summarized
as follows (in thousands):
<TABLE>
Number Weighted Average Number
------ ---------------- ------
Outstanding Remaining Exercisable
----------- --------- -----------
Exercise Prices 1/30/00 Contract Life at 1/30/00
- --------------- ------- ------------- ----------
<S> <C> <C> <C>
$ 0.63-$ 0.66 87 4.0 Years 87
$ 1.94-$ 2.72 820 6.2 Years 580
$ 3.38-$ 4.88 1,238 6.7 Years 703
$ 5.19-$ 7.88 2,587 8.2 Years 1,011
$ 8.84-$ 13.31 2,906 7.4 Years 1,120
$ 13.56-$ 18.41 1,268 8.4 Years 13
$ 20.00-$ 28.00 737 9.1 Years 0
$ 30.94-$ 41.38 474 9.6 Years 0
$ 48.00-$ 56.94 98 9.9 Years 0
- ------------------- ------- ----------------- -----
$ 0.63-$ 56.94 10,215 7.8 Years 3,514
=================== ======= ================= =====
</TABLE>
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation" under which no compensation cost has
been recognized. If the Company had elected to recognize compensation costs
based on the fair value at the date of grant for awards in 2000, 1999, and 1998,
consistent with the provisions of SFAS No. 123, net income and net income per
share would have been reduced to the following pro forma amounts:
36
<PAGE>
<TABLE>
2000 1999 1998
---- ---- ----
(in thousands, except per
share amounts)
<S> <C> <C> <C>
Additional compensation expense ............. $21,383 $15,080 $8,095
Proforma net income ......................... $15,230 $ 3,063 $9,609
Proforma basic net income per share ......... $ 0.49 $ 0.10 $ 0.34
Proforma diluted net income per share ....... $ 0.43 $ 0.10 $ 0.32
</TABLE>
The pro forma effect on net income for fiscal years 2000, 1999, and 1998, may
not be representative of the pro forma effect on net income of future years
because the SFAS No. 123 method of accounting for pro forma compensation expense
has not been applied to options granted prior to January 30, 1995.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. Option valuation models also require the input of highly
subjective assumptions such as expected option life and expected stock price
volatility. The following assumptions were applied: (i) expected dividend yields
of 0% for all periods, (ii) expected volatility rates of 0.666 for 2000, 0.778
for 1999, and 0.828 for 1998, (iii) expected lives of 4 to 6 years for all
years, and (iv) risk-free interest rates ranging from 4.63% to 7.01% for all
years.
Because the Company's employee stock-based compensation plans have
characteristics significantly different from those of traded options and because
changes in the subjective input assumptions can materially affect the fair value
estimate, the Company believes that the existing option valuation models do not
necessarily provide a reliable single measure of the fair value of awards from
those plans.
13. Other Income and Expense
Other income (expense) consisted of the following:
<TABLE>
<CAPTION>
2000 1999 1998
------ ----- -----
(thousands)
<S> <C> <C> <C>
Interest income ........................ $1,710 $ 992 $ 469
Gain (loss) on disposition of assets ... - 1 (20)
Foreign currency transaction losses .... (60) (24) (63)
Miscellaneous expense .................. (447) (161) -
------ ----- -----
Other income, net .................... $1,203 $ 808 $ 386
====== ===== =====
</TABLE>
14. Statements of Cash Flows
The Company had the following non-cash activities for each year:
<TABLE>
<CAPTION>
2000 1999 1998
------- ------ ------
(thousands)
<S>
Tax benefits related to exercised <C> <C> <C>
stock options ................. $16,951 $5,859 $3,923
======= ====== ======
</TABLE>
In connection with the acquisition of Practical Sciences (see Note 2), the
Company received property and equipment of approximately $89,000 and recorded
goodwill of approximately $260,000.
Income taxes paid in fiscal years 2000, 1999, and 1998, were $440,000, $2.8
million and $3.5 million, respectively. For those same periods, the Company paid
interest in the amounts of $57,000, $22,000, and $36,000, respectively.
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
37
<PAGE>
15. Business Segments and Concentrations of Risk
As of January 30, 2000, the Company operates in three reportable segments:
Standard Semiconductor Products, Rectifier and Assembly Products, and Other
Products. Included in the Standard Semiconductor Products segment are the power
management, protection, high-performance, advanced communications and system
management product lines. The Rectifier and Assembly Products segment includes
the Company's line of assembly and rectifier products. The Other Products
segment is made up of other custom IC and foundry sales.
The accounting policies of the segments are the same as those described above
in the summary of significant accounting policies. The Company evaluates segment
performance based on net sales and operating income of each segment. Management
does not track segment data or evaluate segment performance on additional
financial information. As such, there are no separately identifiable segment
assets nor is there any separately identifiable statements of income data (below
operating income).
Prior to fiscal year 1999, the Company did not track operating income by
reportable segments. Therefore, operating income by segment prior to fiscal 1999
is not available. The Company does not track or assign assets to individual
reportable segments. Likewise, depreciation expense and capital additions are
also not tracked by reportable segments.
<TABLE>
Net Sales 2000 1999 1998
- ------------------------------------------ -------- -------- --------
(in thousands)
<S> <C> <C> <C>
Standard Semiconductor Products ........ $153,229 $ 89,238 $ 76,691
Rectifier and Assembly Products ........ 11,995 13,769 14,865
Other Products ......................... 8,544 11,512 11,252
-------- -------- --------
Total Net Sales ...................... $173,768 $114,519 $102,808
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Operating Income 2000 1999
- ------------------------------------------ ------- -------
(in thousands)
<S> <C> <C>
Standard Semiconductor Products ......... $41,618 $17,062
Rectifier and Assembly Products ....... 745 2,196
Other Products ........................ 1,126 2,075
One-time charges ...................... (531) (2,757)
------- -------
Total Operating Income .............. $42,958 $18,576
======= =======
</TABLE>
The one-time charges include charges in fiscal year 1999 of $2.5 million
related to Standard Semiconductor Products, comprised of $136,000 related to a
restructuring program, $1.2 million for the write-down of long-lived assets, and
a $1.2 million write-down of inventory included in ''Cost of Sales" for the
Standard Semiconductor Products segment.
For the three fiscal years ended January 30, 2000, the Company had no customer
that accounted for more than 10% of net sales. As of January 30, 2000, one
customer accounted for approximately 15% of total accounts receivable. For the
two fiscal years ended January 31, 1999, no customer accounted for more than 10%
of total accounts receivable. A summary of net external sales by region
follows. The Company does not track customer sales by region for each individual
reporting segment.
<TABLE>
<CAPTION>
Net Sales 2000 1999 1998
- ----------------------------- -------- -------- --------
(in thousands)
<S> <C> <C> <C>
Domestic ................. $ 62,574 $ 53,824 $ 56,754
Asia-Pacific ............. 90,151 46,953 32,899
European ................. 21,043 13,742 13,155
-------- -------- --------
Total Net Sales ........ $173,768 $114,519 $102,808
======== ======== ========
</TABLE>
Long lived assets located outside the United States as of the end of fiscal
years 2000 and 1999 were approximately $1.5 million and $2.6 million,
respectively.
38
<PAGE>
16. Subsequent Event
In February 2000, the Company completed the private offering of $400.0 million
aggregate principal amount of its 4 1/2% Convertible Subordinated Notes. The
notes are convertible into the Company's common stock at a conversion price of
$84.46 per share at anytime on or before February 1, 2007 and are redeemable by
the Company after February 5, 2003.
The Company intends to use the net proceeds of the offering for general
corporate purposes, including working capital, expansion of sales, marketing and
customer service capabilities, and product development. In addition, the
Company may use a portion of the net proceeds to acquire or invest in
complementary businesses, technologies, services or products; however, it
currently has no commitments or agreements with respect to any acquisition or
investment.
39
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Semtech Corporation:
We have audited the accompanying consolidated balance sheets of Semtech
Corporation (a Delaware corporation) and subsidiaries as of January 30, 2000 and
January 31, 1999, and the related consolidated statements of income,
stockholders' equity and comprehensive income, and cash flows for each of the
three years in the period ended January 30, 2000. These financial statements
and the schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Semtech Corporation and
subsidiaries as of January 30, 2000 and January 31, 1999, and the results of
their operations and their cash flows for each of the three years in the period
ended January 30, 2000, in conformity with accounting principles generally
accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. Schedule II - Valuation and Qualifying Accounts is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
information has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
/S/Arthur Andersen LLP
---------------------------------
ARTHUR ANDERSEN LLP
Los Angeles, California
April 12, 2000
40
<PAGE>
SCHEDULE II
SEMTECH CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED FEBRUARY 1, 1998, JANUARY 31, 1999 AND JANUARY 30, 2000
<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning of Costs and End
Year Other Expenses Deductions of Year
---- ----- ----------- ----------- ----------
Year Ended February 1, 1998
- ---------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
Accounts $1,473,000 $(1,141,000) $480,000 $ (15,000) $797,000
Year Ended January 31, 1999
- ---------------------------
Allowance for doubtful
Accounts $ 797,000 $ - $135,000 $ (54,000) $878,000
Year Ended January 30, 2000
- ---------------------------
Allowance for doubtful
Accounts $ 878,000 $ - $ 45,000 $(173,000) $750,000
</TABLE>
41
<PAGE>
ITEM 9. CHANGES IN OR DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained at Pages 5 through 11 in Management's Proxy Statement
(the "Proxy Statement"), to be filed within 120 days of the Company's fiscal
year end, under the heading "Election of Directors" and the information
contained on Page 18 of the Proxy Statement regarding appointment of independent
accounts is incorporated by reference herein.
Executive Officers and Certain Other Significant Employees of Registrant
------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name Age Office
---- --- ------
<S> <C> <C>
John D. Poe 48 Chairman and Chief Executive Officer
Raymond E. Bregar 52 Executive Vice President, Power Management Products
David G. Franz, Jr. 38 Vice President, Finance and Chief Financial Officer, and
Secretary
Wylie J. Plummer 45 Vice President, High Performance Products
Jean-Claude Zambelli 56 Vice President, Sales and Marketing
</TABLE>
Mr. Poe became Chairman and Chief Executive Officer of the Company in October
1985. He is a director of the Company. Before serving in this capacity at the
Company, Mr. Poe served as Vice President, Operations, for Silicon General, Inc.
from August 1984 through September 1985. Prior to that position, Mr. Poe was
Military Operations Manager in the Discrete Division at Fairchild Camera and
Instrument, Inc. where he managed the manufacture, design and marketing of
military discrete semiconductors for more than four years.
Mr. Bregar joined the Company in February 1988 and was appointed Vice President,
Engineering. From fiscal 1989 through fiscal 1993, Mr. Bregar served as Vice
President of Discrete Products. Currently Mr. Bregar serves as Executive Vice
President, Corporate Operations, a position he has held since February 1993.
Prior to joining the Company, Mr. Bregar served as business manager of Power
Discretes with Fairchild Semiconductor where he directed the research and
development and manufacturing of the power mosfet and power rectifier product
lines.
Mr. Franz became Vice President, Finance, Chief Financial Officer, and Secretary
in August of 1993. Prior to joining the Company, Mr. Franz was Director of
Finance of the Large Computer Systems Division (formerly Teradata Corporation)
of AT&T from May 1990 through August 1993. Prior to that position Mr. Franz was
employed by the Wickes Companies and Arthur Andersen LLP. Mr. Franz is a
Certified Public Accountant.
Mr. Plummer joined the Company as Vice President, High Performance Products as a
result of the April 1997 acquisition of Edge Semiconductor. Mr. Plummer co-
founded Edge Semiconductor and served as its president until the acquisition.
Prior to Edge, Mr. Plummer held positions with Brooktree, Intel and National
Semiconductor.
Mr. Zambelli was named Vice President of Sales and Marketing in December of
1996. Mr. Zambelli has more than 25 years of experience in the semiconductor
industry and has held senior management positions with several companies. Most
recently, Mr. Zambelli was vice president of sales for Exar Corporation.
None of the officers has any family relationship to any other officer. The
officers are elected annually by the Board of directors and serve at the
discretion of the Board.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in the Proxy Statement at Pages 12 through 15 under
the heading "Executive Compensation" is incorporated by reference herein.
42
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth in the Proxy Statement at Page 5 under the heading
"Principal Shareholders" and Pages 5 and 11 under the heading "Election of
Directors" is incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the Proxy Statement at Pages 12 through 15 under
the heading "Executive Compensation" is incorporated by reference herein.
43
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) The financial statements and the Report of Arthur Andersen LLP are
included in Part II of this Report on the pages indicated.
<TABLE>
<CAPTION>
Page
----
Index of Financial Statements:
<S> <C>
Report of Independent Public Accountants 40
Consolidated statements of income, three years ended January 30, 2000 25
Consolidated balance sheets, January 30, 2000 and January 31, 1999 26
Consolidated statements of stockholders' equity and comprehensive income, three
years ended January 30, 2000 27
Consolidated statements of cash flows, three years ended January 30, 2000 28
Notes to consolidated financial statements 29
</TABLE>
(2) The following financial statement schedule of the Company for the years
ended January 30, 2000, January 31, 1999 and February 1, 1998, is filed as part
of this Report and should be read in conjunction with the financial statements:
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Schedule II - Valuation and Qualifying Accounts 41
</TABLE>
Schedules other than those listed above are omitted since they are not
applicable, not required, or the information required to be set forth herein is
included in the consolidated financial statements or notes thereto.
44
<PAGE>
(3) Exhibits - Incorporated by reference from the Company's previous 10-K
--------
filings unless otherwise indicated
<TABLE>
<S> <C>
3.1 - Certificate of Incorporation, as amended
3.2 - Bylaws
4.1* - Indenture between Semtech Corporation and State Street Bank and Trust
Company of California, N.A.
4.2* - Form of Debenture
4.3* - Registration Rights Agreement by and among Semtech Corporation
as issuer, and Morgan Stanley & Co. Incorporated and Banc of
America Securities LLC, as initial purchasers dated as of February 14, 2000.
10.1 - Security Agreement and Collateral Installment Note
between the Company and Merrill Lynch in the aggregate
amount of $7,500,000, dated August 24, 1992, as amended
on August 15, 1996 for establishing a WCMA line of credit
and an equipment acquisition line
10.2 - Agreement of sublease executed on December 23, 1991,
effective January 1, 1991, by the Company and the Corpus
Christi Airport Development Corporation for a portion of
the Company's plant and facilities
10.3 - Overdraft facility agreement executed on May 26, 1987
between the Company and the Bank of Scotland in the
amount of 300,000 pounds sterling
10.4 - Lease executed on May 1, 1988 and amended on November 1,
1991 by the Company for a portion of its plant and
facilities
10.5 - Lease executed on September 12, 1988 by the Company for a
portion of its plant and facilities
10.6 - The Company's 1987 Stock Option Plan and the related Form
of Option Agreement
10.7 - The Company's 1994 Long-term Stock Incentive Plan and the
related Form of Option Agreement, as amended.
10.8 - The Company's 1994 Non-Employee Directors Stock Option
Plan and the related Form of Option Agreement, as amended.
10.9 - The Company's Long-term Stock Incentive Plan
10.10* - The Company's Non-Director, Non-Executive Officer Long-term
Stock Incentive Plan
13.1 - Annual Report to Shareholders
22.1 - Subsidiaries of the Company
27 - Financial Data Schedule, Article 5, attached
</TABLE>
* Attached as exhibits to this Form 10-K.
45
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SEMTECH CORPORATION
By /S/ John D. Poe
----------------------------
John D. Poe, Chairman of the Board
and Chief Executive Officer
Date April 25, 2000
------------------------
46
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: April 25, 2000 /S/ John D. Poe
-------------------- -----------------------------
John D. Poe
Chairman of the Board and Chief
Executive Officer
Date: April 25, 2000 /S/ David G. Franz Jr.
-------------------- ------------------------------
David G. Franz, Jr.
Vice President, Finance
and Chief Financial Officer,
and Secretary
(Principal Accounting
and Financial Officer)
Date: April 25, 2000 /S/ Rock N. Hankin
-------------------- ------------------------------
Rock N. Hankin
Vice Chairman of the Board
Date: April 25, 2000 /S/ James P. Burra
-------------------- ------------------------------
James P. Burra
Director
Date: April 25, 2000 /S/ Allen H. Orbuch
-------------------- ------------------------------
Allen H. Orbuch
Director
Date: April 25, 2000 /S/ James T. Schraith
-------------------- ------------------------------
James T. Schraith
Director
Date: April 25, 2000 /S/ Jack O. Vance
-------------------- ------------------------------
Jack O. Vance
Director
The information contained in the Proxy Statement at Pages 12 and 15 under the
heading "Executive Compensation" is incorporated by reference herein.
47
<PAGE>
EXHIBIT 4.1
_______________________________________________
SEMTECH CORPORATION
To
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
___________________________
INDENTURE
Dated as of
February 14, 2000
___________________________
4 1/2% Convertible Subordinated Notes due 2007
_______________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE 1. DEFINITIONS............................................................................................. 1
Section 1.1. Definitions.................................................................................... 1
ARTICLE 2. ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES......................................... 8
Section 2.1. Designation Amount And Issue Of Notes........................................................... 8
Section 2.2. Form Of Notes................................................................................... 8
Section 2.3. Date And Denomination Of Notes; Payments Of Interest............................................ 9
Section 2.4. Execution Of Notes.............................................................................. 10
Section 2.5. Exchange And Registration Of Transfer Of Notes; Restrictions On Transfer; Depositary............ 11
Section 2.6. Mutilated, Destroyed, Lost Or Stolen Notes...................................................... 18
Section 2.7. Temporary Notes................................................................................. 19
Section 2.8. Cancellation Of Notes Paid, Etc................................................................. 20
Section 2.9. Cusip Numbers................................................................................... 20
ARTICLE 3. REDEMPTION OF NOTES 20
Section 3.1. (a) Initial Prohibition On Redemption.......................................................... 20
Section 3.2. Notice Of Redemptions; Selection Of Notes....................................................... 20
Section 3.3. Payment Of Notes Called For Redemption.......................................................... 22
Section 3.4. Conversion Arrangement On Call For Redemption................................................... 23
Section 3.5. Redemption At Option Of Holders................................................................. 23
ARTICLE 4. SUBORDINATION OF NOTES.................................................................................... 25
Section 4.1. Agreement Of Subordination...................................................................... 25
Section 4.2. Payments To Noteholders......................................................................... 26
Section 4.3. Subrogation Of Notes............................................................................ 28
Section 4.4. Authorization To Effect Subordination........................................................... 29
Section 4.5. Notice To Trustee............................................................................... 30
Section 4.6. Trustee's Relation To Senior Indebtedness....................................................... 30
Section 4.7. No Impairment Of Subordination.................................................................. 31
Section 4.8. Certain Conversions Not Deemed Payment.......................................................... 31
Section 4.9. Article Applicable To Paying Agents............................................................. 31
Section 4.10. Senior Indebtedness Entitled To Rely............................................................ 32
Section 4.11. Reliance On Judicial Order Or Certificate Of Liquidating Agent.................................. 32
ARTICLE 5. PARTICULAR COVENANTS OF THE COMPANY........................................................................ 32
Section 5.1. Payment Of Principal, Premium And Interest...................................................... 32
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 5.2. Maintenance Of Office Or Agency................................................................. 32
Section 5.3. Appointments To Fill Vacancies In Trustee's Office.............................................. 33
Section 5.4. Provisions As To Paying Agent................................................................... 33
Section 5.5. Existence....................................................................................... 34
Section 5.6. Maintenance Of Properties....................................................................... 34
Section 5.7. Payment Of Taxes And Other Claims............................................................... 35
Section 5.8. Rule 144a Information Requirement............................................................... 35
Section 5.9. Stay, Extension And Usury Laws.................................................................. 35
Section 5.10. Compliance Certificate.......................................................................... 36
Section 5.11. Liquidated Damages Notice....................................................................... 36
ARTICLE 6. NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE.............................................. 36
Section 6.1. Noteholders' Lists.............................................................................. 36
Section 6.2. Preservation And Disclosure Of Lists............................................................ 37
Section 6.3. Reports By Trustee.............................................................................. 37
Section 6.4. Reports By Company.............................................................................. 37
ARTICLE 7. REMEDIES OF THE TRUSTEE AND NOTEHOLDERS ON AN EVENT OF DEFAULT............................................ 38
Section 7.1. Events Of Default............................................................................... 38
Section 7.2. Payments Of Notes On Default; Suit Therefor..................................................... 39
Section 7.3. Application Of Monies Collected By Trustee...................................................... 41
Section 7.4. Proceedings By Noteholder....................................................................... 42
Section 7.5. Proceedings By Trustee.......................................................................... 42
Section 7.6. Remedies Cumulative And Continuing.............................................................. 43
Section 7.7. Direction Of Proceedings And Waiver Of Defaults By Majority Of Noteholders...................... 43
Section 7.8. Notice Of Defaults.............................................................................. 43
Section 7.9. Undertaking To Pay Costs........................................................................ 44
ARTICLE 8. THE TRUSTEE................................................................................................ 44
Section 8.1. Duties And Responsibilities Of Trustee.......................................................... 44
Section 8.2. Reliance On Documents, Opinions, Etc............................................................ 45
Section 8.3. No Responsibility For Recitals, Etc............................................................. 46
Section 8.4. Trustee, Paying Agents, Conversion Agents Or Registrar May Own Notes............................ 46
Section 8.5. Monies To Be Held In Trust...................................................................... 46
Section 8.6. Compensation And Expenses Of Trustee............................................................ 47
Section 8.7. Officers' Certificate As Evidence............................................................... 47
Section 8.8. Conflicting Interests Of Trustee................................................................ 47
Section 8.9. Eligibility Of Trustee.......................................................................... 47
Section 8.10. Resignation or Removal Of Trustee............................................................... 48
Section 8.11. Acceptance By Successor Trustee................................................................. 49
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 8.12. Succession By Merger, Etc....................................................................... 50
Section 8.13. Preferential Collection Of Claims............................................................... 50
Section 8.14. Trustee's Application For Instructions From The Company......................................... 50
ARTICLE 9. THE NOTEHOLDERS............................................................................................ 51
Section 9.1. Action By Noteholders........................................................................... 51
Section 9.2. Proof Of Execution By Noteholders............................................................... 51
Section 9.3. Who Are Deemed Absolute Owners.................................................................. 51
Section 9.4. Company-Owned Notes Disregarded................................................................. 51
Section 9.5. Revocation Of Consents; Future Holders Bound.................................................... 52
ARTICLE 10. MEETINGS OF NOTEHOLDERS................................................................................... 52
Section 10.1. Purpose Of Meetings............................................................................. 52
Section 10.2. Call Of Meetings By Trustee..................................................................... 53
Section 10.3. Call Of Meetings By Company Or Noteholders...................................................... 53
Section 10.4. Qualifications For Voting....................................................................... 53
Section 10.5. Regulations..................................................................................... 53
Section 10.6. Voting.......................................................................................... 54
Section 10.7. No Delay Of Rights By Meeting................................................................... 54
ARTICLE 11. SUPPLEMENTAL INDENTURES................................................................................... 54
Section 11.1. Supplemental Indentures Without Consent Of Noteholders.......................................... 54
Section 11.2. Supplemental Indenture With Consent Of Noteholders.............................................. 56
Section 11.3. Effect Of Supplemental Indenture................................................................ 57
Section 11.4. Notation On Notes............................................................................... 57
Section 11.5. Evidence Of Compliance Of Supplemental Indenture To Be Furnished To Trustee..................... 57
ARTICLE 12. CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE......................................................... 57
Section 12.1. Company May Consolidate, Etc. On Certain Terms.................................................. 57
Section 12.2. Successor Corporation To Be Substituted......................................................... 58
Section 12.3. Opinion Of Counsel To Be Given Trustee.......................................................... 58
ARTICLE 13. SATISFACTION AND DISCHARGE OF INDENTURE................................................................... 59
Section 13.1. Discharge Of Indenture.......................................................................... 59
Section 13.2. Deposited Monies To Be Held In Trust By Trustee................................................. 59
Section 13.3. Paying Agent To Repay Monies Held............................................................... 59
Section 13.4. Return Of Unclaimed Monies...................................................................... 60
Section 13.5. Reinstatement................................................................................... 60
ARTICLE 14. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS......................................... 60
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Section 14.1. Indenture And Notes Solely Corporate Obligations................................................ 60
ARTICLE 15. CONVERSION OF NOTES....................................................................................... 60
Section 15.1. Right To Convert................................................................................ 60
Section 15.2. Exercise Of Conversion Privilege; Issuance Of Common Stock On Conversion; No Adjustment For
Interest Or Dividends........................................................................... 61
Section 15.3. Cash Payments In Lieu Of Fractional Shares...................................................... 62
Section 15.4. Conversion Price................................................................................ 63
Section 15.5. Adjustment Of Conversion Price.................................................................. 63
Section 15.6. Effect Of Reclassification, Consolidation, Merger Or Sale....................................... 72
Section 15.7. Taxes On Shares Issued.......................................................................... 73
Section 15.8. Reservation Of Shares; Shares To Be Fully Paid; Compliance With Governmental Requirements;
Listing Of Common Stock......................................................................... 73
Section 15.9. Responsibility Of Trustee....................................................................... 74
Section 15.10. Notice To Holders Prior To Certain Actions...................................................... 74
ARTICLE 16. MISCELLANEOUS PROVISIONS.................................................................................. 75
Section 16.1. Provisions Binding On Company's Successors...................................................... 75
Section 16.2. Official Acts By Successor Corporation.......................................................... 75
Section 16.3. Addresses For Notices, Etc...................................................................... 75
Section 16.4. Governing Law................................................................................... 76
Section 16.5. Evidence Of Compliance With Conditions Precedent; Certificates To Trustee....................... 76
Section 16.6. Legal Holidays.................................................................................. 76
Section 16.7. Trust Indenture Act............................................................................. 76
Section 16.8. No Security Interest Created.................................................................... 77
Section 16.9. Benefits Of Indenture........................................................................... 77
Section 16.10. Table Of Contents, Headings, Etc................................................................ 77
Section 16.11. Authenticating Agent............................................................................ 77
Section 16.12. Execution In Counterparts....................................................................... 78
Section 16.13. Severability.................................................................................... 78
</TABLE>
iv
<PAGE>
Reconciliation and Tie Between the Trust Indenture Act of 1939 and Indenture,
dated as of February 14, 2000, between Semtech Corporation and State Street Bank
and Trust Company of California, N.A., as Trustee.
<TABLE>
<CAPTION>
TRUST INDENTURE ACT SECTION INDENTURE SECTION
<S> <C>
Section 310(a)(1)...........................................................8.9
(a)(2)......................................................................8.9
(a)(3)......................................................................N.A.
(a)(4)......................................................................N.A.
(a)(5)......................................................................8.9
(b)..................................................8.8; 8.9; 8.10; 8.11
Section 311(a)..............................................................8.13
(b)..................................................................8.13
(b)(2)...............................................................8.13
Section 312(a).......................................................6.1; 6.2(a)
(b)................................................................6.2(b)
(c)................................................................6.2(c)
Section 313(a)............................................................6.3(a)
(b)................................................................6.3(a)
(c)................................................................6.3(a)
(d)................................................................6.3(b)
Section 314(a)...............................................................6.4
(b)..................................................................N.A.
(c)(1)...............................................................16.5
(c)(2)...............................................................16.5
(c)(3)...............................................................N.A.
(d)..................................................................N.A.
(e)..................................................................16.5
Section 315(a)...............................................................8.1
(b)...................................................................7.8
(c)...................................................................8.1
(d)...................................................................8.1
(d)(1).............................................................8.1(a)
(d)(2).............................................................8.1(b)
(d)(3).............................................................8.1(c)
(e)...................................................................7.9
Section 316(a)...............................................................7.7
(a)(1)(A).............................................................7.7
(a)(1)(B).............................................................7.7
(a)(2)...............................................................N.A.
(b)...................................................................7.4
Section 317(a)(1)............................................................7.5
(a)(2)................................................................7.5
(b)...................................................................5.4
Section 318(a)..............................................................16.7
- -----------------------
</TABLE>
* Note: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Indenture.
** Note: N.A. means Not Applicable.
<PAGE>
INDENTURE
INDENTURE, dated as of February 14, 2000, between Semtech Corporation,
a Delaware corporation (hereinafter called the "Company"), having its principal
office at 652 Mitchell, Road, Newbury Park, California 91320-2289, and State
Street Bank and Trust Company of California, N.A., a national banking
association organized under the laws of the United States, as trustee hereunder
(hereinafter called the "Trustee"), having its principal corporate office at 633
West 5th Street, 12th Floor, Los Angeles, California 90071.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issue of its 4 1/2% Convertible Subordinated Notes due 2007
(hereinafter called the "Notes"), in an aggregate principal amount of
$400,000,000 and, to provide the terms and conditions upon which the Notes are
to be authenticated, issued and delivered, the Company has duly authorized the
execution and delivery of this Indenture; and
WHEREAS, the Notes, the certificate of authentication to be borne by
the Notes, a form of assignment, a form of option to elect repayment upon a
Fundamental Change, and a form of conversion notice to be borne by the Notes are
to be substantially in the forms hereinafter provided for; and
WHEREAS, all acts and things necessary to make the Notes, when
executed by the Company and authenticated and delivered by the Trustee or a duly
authorized authenticating agent, as in this Indenture provided, the valid,
binding and legal obligations of the Company, and to constitute this Indenture a
valid agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Notes have in all
respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Notes
are, and are to be, authenticated, issued and delivered, and in consideration of
the premises and of the purchase and acceptance of the Notes by the holders
thereof, the Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time of the Notes
(except as otherwise provided below), as follows:
ARTICLE 1.
DEFINITIONS
-----------
Section 1.1. Definitions. The terms defined in this Section 1.1
-----------
(except as herein otherwise expressly provided or unless the context otherwise
requires) for all purposes of this Indenture and of any indenture supplemental
hereto shall have the respective meanings specified in this Section 1.1. All
other terms used in this Indenture that are defined in the Trust Indenture Act
or which are by reference therein defined in the Securities Act (except as
herein otherwise expressly provided or unless the context otherwise requires)
shall have the meanings assigned to such terms in said Trust Indenture Act and
in said Securities Act as in force at the
<PAGE>
date of the execution of this Indenture. The words "herein", "hereof",
"hereunder", and words of similar import refer to this Indenture as a whole and
not to any particular Article, Section or other Subdivision. The terms defined
in this Article include the plural as well as the singular.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Board Of Directors" means the Board of Directors of the Company or a
committee of such Board duly authorized to act for it hereunder.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which the banking institutions in The City of New
York or the city in which the Corporate Trust Office is located are authorized
or obligated by law or executive order to close or be closed.
"Closing Price" has the meaning specified in Section 15.5(h)(1).
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Stock" means any stock of any class of the Company which has
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company. Subject to the
provisions of Section 15.6, however, shares issuable on conversion of Notes
shall include only shares of the class designated as common stock of the Company
at the date of this Indenture (namely, the Common Stock, par value $.01 per
share) or shares of any class or classes resulting from any reclassification or
reclassifications thereof and which have no preference in respect of dividends
or of amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company and which are not subject to redemption
by the Company; provided, however, that if at any time there shall be more than
one such resulting class, the shares of each such class then so issuable shall
be substantially in the proportion which the total number of shares of such
class resulting from all such reclassifications bears to the total number of
shares of all such classes resulting from all such reclassifications.
"Company" means the corporation named as the "Company" in the first
paragraph of this Indenture, and, subject to the provisions of Article Twelve,
shall include its successors and assigns.
"Company Notice" has the meaning specified in Section 3.5(b).
2
<PAGE>
"Conversion Price" has the meaning specified in Section 15.4.
"Corporate Trust Office" or other similar term, means the designated
office of the Trustee at which at any particular time its corporate trust
business shall be administered, which office is, at the date as of which this
Indenture is dated, located at 633 West 5th Street, 12th Floor, Los Angeles,
California 90071, Attention: Corporate Trust Department (Semtech Corporation, 4
1/2% Convertible Subordinated Notes due 2007).
"Credit Agreement" means that certain WCMA Reducing Revolver Loan and
Security Agreement No. 230-07976, dated October 8, 1998 in the principal amount
of $10,000,000 and that certain Security Agreement and Collateral Installment
Note between the Company and Merrill Lynch in the aggregate amount of
$10,000,000, dated August 24, 1992, as amended on August 15, 1996 and on
October 8, 1998 for establishing a line of credit and an equipment acquisition
line (including all deferrals, renewals, extensions or refundings of, or
amendments, modifications or supplements to, the foregoing).
"Custodian" means State Street Bank and Trust Company of California,
N.A., as custodian with respect to the Notes in global form, or any successor
entity thereto.
"Default" means any event that is, or after notice or passage of time,
or both, would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 2.3.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.5(d) as the
Depositary with respect to such Notes, until a successor shall have been
appointed and become such pursuant to the applicable provisions of this
Indenture, and thereafter, "Depositary" shall mean or include such successor.
"Designated Senior Indebtedness" means Senior Indebtedness under the
Credit Agreement and the Company's obligations under any other particular Senior
Indebtedness in which the instrument creating or evidencing the same or the
assumption or guarantee thereof (or related agreements or documents to which the
Company is a party) expressly provides that such Senior Indebtedness shall be
"Designated Senior Indebtedness" for purposes of this Indenture (provided that
such instrument, agreement or other document may place limitations and
conditions on the right of such Senior Indebtedness to exercise the rights of
Designated Senior Indebtedness); provided that while the Credit Agreement shall
be outstanding, "Designated Senior Indebtedness" shall not include any Senior
Indebtedness other than Senior Indebtedness incurred in connection with the
Credit Agreement and Senior Indebtedness incurred in connection with the
Indebtedness described in clause (c) of the definition of "Indebtedness." If
any payment made to any holder of any Designated Senior Indebtedness or its
Representative with respect to such Designated Senior Indebtedness is rescinded
or must otherwise be returned by such holder or Representative upon the
insolvency, bankruptcy or reorganization of the Company or otherwise, the
reinstated Indebtedness of the Company arising as a result of such rescission or
return shall constitute Designated Senior Indebtedness effective as of the date
of such rescission or return.
3
<PAGE>
"Event Of Default" means any event specified in Section 7.1(a), (b),
(c), (d) or (e).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder, as in effect from time to
time.
"Fundamental Change" means the occurrence of any transaction or event
in connection with which all or substantially all of the Common Stock shall be
exchanged for, converted into, acquired for or constitute solely the right to
receive consideration (whether by means of an exchange offer, liquidation,
tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) which is not all or substantially all common
stock listed (or, upon consummation of or immediately following such transaction
or event, which will be listed) on a United States national securities exchange
or approved for quotation on the Nasdaq National Market or any similar United
States system of automated dissemination of quotations of securities prices.
"Global Note" has the meaning set forth in Section 2.5(b).
"Indebtedness" means, with respect to any Person, and without
duplication, (a) all indebtedness, obligations and other liabilities (contingent
or otherwise) of such Person for borrowed money (including obligations of the
Company in respect of overdrafts, foreign exchange contracts, currency exchange
agreements, interest rate protection agreements, and any loans or advances from
banks, whether or not evidenced by notes or similar instruments) or evidenced by
bonds, debentures, notes or similar instruments (whether or not the recourse of
the lender is to the whole of the assets of such Person or to only a portion
thereof), other than any account payable or other accrued current liability or
obligation incurred in the ordinary course of business in connection with the
obtaining of materials or services; (b) all reimbursement obligations and other
liabilities (contingent or otherwise) of such Person with respect to letters of
credit, bank guarantees or bankers' acceptances; (c) all obligations and
liabilities (contingent or otherwise) in respect of leases of such Person
required, in conformity with generally accepted accounting principles, to be
accounted for as capitalized lease obligations on the balance sheet of such
Person and all obligations and other liabilities (contingent or otherwise) under
any lease or related document (including a purchase agreement) in connection
with the lease of real property which provides that such Person is contractually
obligated to purchase or cause a third party to purchase the leased property and
thereby guarantee a minimum residual value of the leased property to the lessor
and the obligations of such Person under such lease or related document to
purchase or to cause a third party to purchase such leased property; (d) all
obligations of such Person (contingent or otherwise) with respect to an interest
rate or other swap, cap or collar agreement or other similar instrument or
agreement or foreign currency hedge, exchange, purchase or similar instrument or
agreement; (e) all direct or indirect guaranties or similar agreements by such
Person in respect of, and obligations or liabilities (contingent or otherwise)
of such Person to purchase or otherwise acquire or otherwise assure a creditor
against loss in respect of, indebtedness, obligations or liabilities of another
Person of the kind described in clauses (a) through (d); (f) any indebtedness or
other obligations described in clauses (a) through (e) secured by any mortgage,
pledge, lien or other encumbrance existing on property which is owned or held by
such Person, regardless of whether the indebtedness or other obligation secured
thereby shall have been assumed by such Person; and (g) any and all deferrals,
renewals,
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extensions and refundings of, or amendments, modifications or supplements to,
any indebtedness, obligation or liability of the kind described in clauses (a)
through (f).
"Indenture" means this instrument as originally executed or, if
amended or supplemented as herein provided, as so amended or supplemented.
"Initial Purchasers" means Morgan Stanley & Co. Incorporated and Banc
of America Securities LLC.
"Institutional Accredited Investor" means an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Liquidated Damages" has the meaning specified for "Liquidated Damages
Amount" in Section 2(e) of the Registration Rights Agreement.
"Non-Payment Default" has the meaning specified in Section 4.2(ii).
"Note" or "Notes" means any Note or Notes, as the case may be,
authenticated and delivered under this Indenture, including the Global Note.
"Note Register" has the meaning specified in Section 2.5(a).
"Note Registrar" has the meaning specified in Section 2.5(a).
"Noteholder" or "Holder" as applied to any Note, or other similar
terms (but excluding the term "beneficial holder"), means any Person in whose
name at the time a particular Note is registered on the Note registrar's books.
"Notice Date" has the meaning specified in Section 3.1(b).
"Officers' Certificate", when used with respect to the Company, means
a certificate of the Company signed by both (a) the Chairman of the Board, the
Chief Executive Officer, the President or any Vice President (whether or not
designated by a number or numbers or word or words added before or after the
title "Vice President") and (b) the Treasurer or any Assistant Treasurer, the
Controller or any Assistant Controller, or the Secretary or any Assistant
Secretary of the Company.
"Opinion Of Counsel" means an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company, or other counsel
reasonably acceptable to the Trustee.
"Optional Redemption" has the meaning specified in Section 3.1(b).
"Outstanding", when used with reference to Notes and subject to the
provisions of Section 9.4, means, as of any particular time, all Notes
authenticated and delivered by the Trustee under this Indenture, except:
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(a) Notes theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Notes, or portions thereof, (i) for the redemption of which monies
in the necessary amount shall have been deposited in trust with the Trustee
or with any paying agent (other than the Company) or (ii) which shall have
been otherwise defeased in accordance with Article Thirteen;
(c) Notes in lieu of which, or in substitution for which, other Notes
shall have been authenticated and delivered pursuant to the terms of
Section 2.6; and
(d) Notes converted into Common Stock pursuant to Article Fifteen and
Notes deemed not outstanding pursuant to Article Three.
"Payment Blockage Notice" has the meaning specified in Section
4.2(ii).
"Person" means a corporation, an association, a partnership, a limited
liability company, an individual, a joint venture, a joint stock company, a
trust, an unincorporated organization or a government or an agency or a
political subdivision thereof.
"Portal Market" means The Portal Market operated by the National
Association of Securities Dealers, Inc. or any successor thereto.
"Predecessor Note" of any particular Note means every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note, and, for the purposes of this definition, any Note
authenticated and delivered under Section 2.6 in lieu of a lost, destroyed or
stolen Note shall be deemed to evidence the same debt as the lost, destroyed or
stolen Note that it replaces.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of February 14, 2000, among the Company and the Initial
Purchasers, as amended from time to time in accordance with its terms.
"Representative" means (a) the indenture trustee or other trustee,
agent or representative for holders of Senior Indebtedness or (b) with respect
to any Senior Indebtedness that does not have any such trustee, agent or other
representative, (i) in the case of such Senior Indebtedness issued pursuant to
an agreement providing for voting arrangements as among the holders or owners of
such Senior Indebtedness, any holder or owner of such Senior Indebtedness acting
with the consent of the required persons necessary to bind such holders or
owners of such Senior Indebtedness and (ii) in the case of all other such Senior
Indebtedness, the holder or owner of such Senior Indebtedness.
"Responsible Officer", when used with respect to the Trustee, means an
officer of the Trustee in the Corporate Trust Office assigned and duly
authorized by the Trustee to administer this Indenture.
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"Restricted Securities" has the meaning specified in Section 2.5(d).
"Rule 144A" means Rule 144A as promulgated under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, as in effect from time to time.
"Senior Indebtedness" means the principal of, premium, if any,
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) and rent payable on or
in connection with, and all fees, costs, expenses and other amounts accrued or
due on or in connection with, Indebtedness of the Company, whether outstanding
on the date of this Indenture or thereafter created, incurred, assumed,
guaranteed or in effect guaranteed by the Company (including all deferrals,
renewals, extensions or refundings of, or amendments, modifications or
supplements to, the foregoing), unless in the case of any particular
Indebtedness the instrument creating or evidencing the same or the assumption or
guarantee thereof expressly provides that such Indebtedness shall not be senior
in right of payment to the Notes or expressly provides that such Indebtedness is
"PARI PASSU" or "junior" to the Notes. Notwithstanding the foregoing, the term
Senior Indebtedness shall not include any Indebtedness of the Company to any
subsidiary of the Company, a majority of the voting stock of which is owned,
directly or indirectly, by the Company. If any payment made to any holder of
any Senior Indebtedness or its Representative with respect to such Senior
Indebtedness is rescinded or must otherwise be returned by such holder or
Representative upon the insolvency, bankruptcy or reorganization of the Company
or otherwise, the reinstated Indebtedness of the Company arising as a result of
such rescission or return shall constitute Senior Indebtedness effective as of
the date of such rescission or return.
"Significant Subsidiary" means, as of any date of determination, a
Subsidiary of the Company, if as of such date of determination either (a) the
assets of such subsidiary equal 10% or more of the Company's total consolidated
assets or (b) the total revenue of which represented 10% or more of the
Company's consolidated total revenue for the most recently completed fiscal
year.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock or other equity interest entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other subsidiaries
of that Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or managing general partner of which is such Person or a
subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more subsidiaries of such Person (or any combination
thereof).
"Trading Day" has the meaning specified in Section 15.5(h)(5).
"Trigger Event" has the meaning specified in Section 15.5(d).
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"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, as it was in force at the date of this Indenture, except as provided in
Sections 11.3 and 15.6; provided, however, that, in the event the Trust
Indenture Act of 1939 is amended after the date hereof, the term "Trust
Indenture Act" shall mean, to the extent required by such amendment, the Trust
Indenture Act of 1939 as so amended.
"Trustee" means State Street Bank and Trust Company of California,
N.A. and its successors and any corporation resulting from or surviving any
consolidation or merger to which it or its successors may be a party and any
successor trustee at the time serving as successor trustee hereunder.
The definitions of certain other terms are as specified in Sections
2.5 and 3.5 and Article Fifteen.
ARTICLE 2.
ISSUE, DESCRIPTION, EXECUTION,
REGISTRATION AND EXCHANGE OF NOTES
----------------------------------
Section 2.1. Designation Amount And Issue Of Notes. The Notes shall
----------- -------------------------------------
be designated as "4 1/2% Convertible Subordinated Notes due 2007". Notes not to
exceed the aggregate principal amount of $400,000,000 (except pursuant to
Sections 2.5, 2.6, 3.3, 3.5 and 15.2 hereof) upon the execution of this
Indenture, or from time to time thereafter, may be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Notes to or upon the written order of the Company,
signed by (a) its Chairman of the Board, Chief Executive Officer, President or
any Vice President (whether or not designated by a number or numbers or word or
words added before or after the title "Vice President") and (b) its Treasurer or
any Assistant Treasurer, its Controller or any Assistant Controller or its
Secretary or any Assistant Secretary, without any further action by the Company
hereunder.
Section 2.2. Form Of Notes. The Notes and the Trustee's certificate
----------- -------------
of authentication to be borne by such Notes shall be substantially in the form
set forth in EXHIBIT A, which is incorporated in and made a part of this
Indenture.
Any of the Notes may have such letters, numbers or other marks of
identification and such notations, legends and endorsements as the officers
executing the same may approve (execution thereof to be conclusive evidence of
such approval) and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Notes may be
listed, or to conform to usage.
Any Global Note shall represent such of the outstanding Notes as shall
be specified therein and shall provide that it shall represent the aggregate
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate amount of outstanding Notes represented thereby may from time to time
be increased or reduced to reflect transfers or exchanges permitted hereby. Any
endorsement of a Global Note to reflect the amount of any
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increase or decrease in the amount of outstanding Notes represented thereby
shall be made by the Trustee or the Custodian, at the direction of the Trustee,
in such manner and upon instructions given by the holder of such Notes in
accordance with this Indenture. Payment of principal of and interest and
premium, if any, on any Global Note shall be made to the holder of such Note.
The terms and provisions contained in the form of Note attached as
EXHIBIT A hereto shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Section 2.3. Date And Denomination Of Notes; Payments Of Interest.
----------------------------------------------------
The Notes shall be issuable in registered form without coupons in denominations
of $1,000 principal amount and integral multiples thereof. Every Note shall be
dated the date of its authentication and shall bear interest from the applicable
date in each case as specified on the face of the form of Note attached as
EXHIBIT A hereto. Interest on the Notes shall be computed on the basis of a 360-
day year comprised of twelve (12) 30-day months.
The Person in whose name any Note (or its Predecessor Note) is
registered on the Note register at the close of business on any record date with
respect to any interest payment date shall be entitled to receive the interest
payable on such interest payment date, except (i) that the interest payable upon
redemption (unless the date of redemption is an interest payment date) will be
payable to the Person to whom principal is payable and (ii) as set forth in the
next succeeding sentence. In the case of any Note (or portion thereof) that is
converted into Common Stock during the period from (but excluding) a record date
to (but excluding) the next succeeding interest payment date either (x) if such
Note (or portion thereof) has been called for redemption on a redemption date
which occurs during such period, or is to be redeemed in connection with a
Fundamental Change on a Repurchase Date (as defined in Section 3.5) that occurs
during such period, the Company shall not be required to pay interest on such
interest payment date in respect of any such Note (or portion thereof) except to
the extent required to be paid upon redemption of such Note or portion thereof
pursuant to Section 3.3 or 3.5 hereof or (y) if such Note (or portion thereof)
has not been called for redemption on a redemption date that occurs during such
period and is not to be redeemed in connection with a Fundamental Change on a
Repurchase Date that occurs during such period, such Note (or portion thereof)
that is submitted for conversion during such period shall be accompanied by
funds equal to the interest payable on such succeeding interest payment date on
the principal amount so converted, as provided in the penultimate paragraph of
Section 15.2 hereof. Interest shall be payable at the office of the Company
maintained by the Company for such purposes in the Borough of Manhattan, City of
New York, which shall initially be an office or agency of the Trustee and may,
as the Company shall specify to the paying agent in writing by each record date,
be paid either (i) by check mailed to the address of the Person entitled thereto
as it appears in the Note register (provided that the holder of Notes with an
aggregate principal amount in excess of $2,000,000 shall, at the written
election of such holder, be paid by wire transfer in immediately available
funds) or (ii) by transfer to an account maintained by such Person located in
the United States; provided, however, that payments to the Depositary will be
made by wire transfer of immediately available funds to the account of the
Depositary or its nominee. The term "record date" with respect to any interest
payment date shall mean the January 15 or July 15 preceding the relevant
February 1 or August 1, respectively.
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Any interest on any Note which is payable, but is not punctually paid
or duly provided for, on any February 1 or August 1 (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Noteholder on the relevant
record date by virtue of his having been such Noteholder, and such Defaulted
Interest shall 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 Notes (or their respective Predecessor Notes) 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
to be paid on each Note and the date of the payment (which shall be not less
than twenty-five (25) days after the receipt by the Trustee of such notice,
unless the Trustee shall consent to an earlier date), and at the same time the
Company shall deposit with the Trustee an amount of money equal to the aggregate
amount 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 Person 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 fifteen (15) days and
not less than ten (10) days prior to the date of the proposed payment, and not
less than ten (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 Noteholder at
his address as it appears in the Note register, not less than ten (10) days
prior to such special record date. Notice of the proposed payment of such
Defaulted Interest and the special record date therefor having been so mailed,
such Defaulted Interest shall be paid to the Persons in whose names the Notes
(or their respective Predecessor Notes) were registered at the close of business
on such special record date and shall no longer be payable pursuant to the
following clause (2) of this Section 2.3.
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange or automated quotation system on which the Notes may be listed or
designated for issuance, and upon such notice as may be required by such
exchange or automated quotation system, 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.
Section 2.4. Execution Of Notes. The Notes shall be signed in the
------------------
name and on behalf of the Company by the manual or facsimile signature of its
Chairman of the Board, Chief Executive Officer, President, any Vice President
(whether or not designated by a number or numbers or word or words added before
or after the title "Vice President") or Treasurer and attested by the manual or
facsimile signature of its Secretary or any of its Assistant Secretaries or its
Treasurer or any of its Assistant Treasurers (which may be printed, engraved or
otherwise reproduced thereon, by facsimile or otherwise). Only such Notes as
shall bear thereon a certificate of authentication substantially in the form set
forth on the form of Note attached as EXHIBIT A hereto, manually executed by the
Trustee (or an authenticating agent appointed by the Trustee as provided by
Section 16.11), shall be entitled to the benefits of this Indenture or be
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valid or obligatory for any purpose. Such certificate by the Trustee (or such an
authenticating agent) upon any Note executed by the Company shall be conclusive
evidence that the Note so authenticated has been duly authenticated and
delivered hereunder and that the holder is entitled to the benefits of this
Indenture.
In case any officer of the Company who shall have signed any of the
Notes shall cease to be such officer before the Notes so signed shall have been
authenticated and delivered by the Trustee, or disposed of by the Company, such
Notes nevertheless may be authenticated and delivered or disposed of as though
the person who signed such Notes had not ceased to be such officer of the
Company, and any Note may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Note, shall be the proper officers
of the Company, although at the date of the execution of this Indenture any such
person was not such an officer.
Section 2.5. Exchange And Registration Of Transfer Of Notes;
-----------------------------------------------
Restrictions On Transfer; Depositary.
- -------------------- ---------------
(a) The Company shall cause to be kept at the Corporate Trust Office a
register (the register maintained in such office and in any other office or
agency of the Company designated pursuant to Section 5.2 being herein
sometimes collectively referred to as the "Note register") in which,
subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Notes and of transfers of Notes. The
Note register shall be in written form or in any form capable of being
converted into written form within a reasonably prompt period of time. The
Trustee is hereby appointed "Note registrar" for the purpose of registering
Notes and transfers of Notes as herein provided. The Company may appoint
one or more co-registrars in accordance with Section 5.2.
Upon surrender for registration of transfer of any Note to the Note
registrar or any co-registrar, and satisfaction of the requirements for such
transfer set forth in this Section 2.5, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Notes of any authorized denominations and of a
like aggregate principal amount and bearing such restrictive legends as may be
required by this Indenture.
Notes may be exchanged for other Notes of any authorized denominations
and of a like aggregate principal amount, upon surrender of the Notes to be
exchanged at any such office or agency maintained by the Company pursuant to
Section 5.2. Whenever any Notes are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Notes which
the Noteholder making the exchange is entitled to receive bearing registration
numbers not contemporaneously outstanding.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
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<PAGE>
All Notes presented or surrendered for registration of transfer or for
exchange, redemption or conversion shall (if so required by the Company or the
Note registrar) be duly endorsed, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company, and the Notes shall
be duly executed by the Noteholder thereof or his attorney duly authorized in
writing.
No service charge shall be made to any holder for any registration of
transfer or exchange of Notes, but the Company may require payment by the holder
of a sum sufficient to cover any tax, assessment or other governmental charge
that may be imposed in connection with any registration of transfer or exchange
of Notes.
Neither the Company nor the Trustee nor any Note registrar shall be
required to exchange or register a transfer of (a) any Notes for a period of
fifteen (15) days next preceding any selection of Notes to be redeemed, (b) any
Notes or portions thereof called for redemption pursuant to Section 3.2, (c) any
Notes or portions thereof surrendered for conversion pursuant to Article Fifteen
or (d) any Notes or portions thereof tendered for redemption (and not withdrawn)
pursuant to Section 3.5.
(b) So long as the Notes are eligible for book-entry settlement with
the Depositary, or unless otherwise required by law, all Notes that, upon
initial issuance are beneficially owned by QIBs or as a result of a sale or
transfer after initial issuance are beneficially owned by QIBs, will be
represented by one or more Notes in global form registered in the name of
the Depositary or the nominee of the Depositary (the "Global Note"), except
as otherwise specified below. The transfer and exchange of beneficial
interests in any such Global Note shall be effected through the Depositary
in accordance with this Indenture and the procedures of the Depositary
therefor. The Trustee shall make appropriate endorsements to reflect
increases or decreases in the principal amounts of any such Global Note as
set forth on the face of the Note ("Principal Amount") to reflect any such
transfers. Except as provided below, beneficial owners of a Global Note
shall not be entitled to have certificates registered in their names, will
not receive or be entitled to receive physical delivery of certificates in
definitive form and will not be considered holders of such Global Note.
(c) So long as the Notes are eligible for book-entry settlement with
the Depositary, or unless otherwise required by law, upon any transfer of a
definitive Note to a QIB in accordance with Rule 144A, and upon receipt of
the definitive Note or Notes being so transferred, together with a
certification, substantially in the form on the reverse of the Note, from
the transferor that the transfer is being made in compliance with Rule 144A
(or other evidence satisfactory to the Trustee), the Trustee shall make an
endorsement on the Global Note to reflect an increase in the aggregate
Principal Amount of the Notes represented by such Global Note, and the
Trustee shall cancel such definitive Note or Notes in accordance with the
standing instructions and procedures of the Depositary, the aggregate
Principal Amount of the Notes represented by such Global Note to be
increased accordingly; provided, however, that no definitive Note, or
portion thereof, in respect of which the Company or an Affiliate of the
Company held any beneficial interest shall be included in such Global Note
until such definitive Note is freely tradable in accordance with Rule
144(k) under the Securities Act, provided further
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<PAGE>
that the Trustee shall issue Notes in definitive form upon any transfer of
a beneficial interest in the Global Note to the Company or any Affiliate of
the Company.
Upon any sale or transfer of a Note to an Institutional Accredited
Investor (other than pursuant to a registration statement that has been declared
effective under the Securities Act), such Institutional Accredited Investor
shall, prior to such sale or transfer, furnish to the Company and/or the Trustee
a signed letter containing representations and agreements relating to
restrictions on transfer substantially in the form set forth in EXHIBIT B to
this Indenture. Upon any transfer of a beneficial interest in the Global Note
to an Institutional Accredited Investor, the Trustee shall make an endorsement
on the Global Note to reflect a decrease in the aggregate Principal Amount of
the Notes represented by such Global Note, and the Company shall execute a
definitive Note or Notes in exchange therefore, and the Trustee, upon receipt of
such definitive Note or Notes and the written order of the Company, shall
authenticate and deliver such, definitive Note or Notes.
Any Global Note may be endorsed with or have incorporated in the text
thereof such legends or recitals or changes not inconsistent with the provisions
of this Indenture as may be required by the Custodian, the Depositary or by the
National Association of Securities Dealers, Inc. in order for the Notes to be
tradeable on The Portal Market or as may be required for the Notes to be
tradeable on any other market developed for trading of securities pursuant to
Rule 144A or required to comply with any applicable law or any regulation
thereunder or with the rules and regulations of any securities exchange or
automated quotation system upon which the Notes may be listed or traded or to
conform with any usage with respect thereto, or to indicate any special
limitations or restrictions to which any particular Notes are subject.
(d) Every Note that bears or is required under this Section 2.5(d) to
bear the legend set forth in this Section 2.5(d) (together with any Common
Stock issued upon conversion of the Notes and required to bear the legend
set forth in Section 2.5(e), collectively, the "Restricted Securities")
shall be subject to the restrictions on transfer set forth in this Section
2.5(d) (including those set forth in the legend set forth below) unless
such restrictions on transfer shall be waived by written consent of the
Company, and the holder of each such Restricted Security, by such
Noteholder's acceptance thereof, agrees to be bound by all such
restrictions on transfer. As used in Sections 2.5(d) and 2.5(e), the term
"transfer" encompasses any sale, pledge, loan, transfer or other
disposition whatsoever of any Restricted Security.
Until the expiration of the holding period applicable to sales thereof
under Rule 144(k) under the Securities Act (or any successor provision), any
certificate evidencing such Note (and all securities issued in exchange therefor
or substitution thereof, other than Common Stock, if any, issued upon conversion
thereof, which shall bear the legend set forth in Section 2.5(e), if applicable)
shall bear a legend in substantially the following form, unless such Note has
been sold pursuant to a registration statement that has been declared effective
under the Securities Act (and which continues to be effective at the time of
such transfer), or unless otherwise agreed by the Company in writing, with
written notice thereof to the Trustee:
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
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<PAGE>
ACT"), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR
(B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL
ACCREDITED INVESTOR"); (2) AGREES THAT IT WILL NOT, PRIOR TO EXPIRATION OF
THE HOLDING PERIOD APPLICABLE TO SALES OF THE NOTE EVIDENCED HEREBY UNDER
RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL
OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK
ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO SEMTECH CORPORATION OR
ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO STATE STREET BANK AND TRUST COMPANY OF
CALIFORNIA, N.A., AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR A SUCCESSOR TRUSTEE, AS
APPLICABLE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME
OF SUCH TRANSFER); (3) PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER
PURSUANT TO CLAUSE (2)(F) ABOVE), IT WILL FURNISH TO STATE STREET BANK AND
TRUST COMPANY OF CALIFORNIA, N.A., AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
THE TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING
MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (4) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED HEREBY PRIOR TO THE
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE NOTE EVIDENCED
HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF
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<PAGE>
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., AS TRUSTEE (OR A
SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR OR IS A PURCHASER WHO IS NOT A U.S.
PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO STATE STREET
BANK AND TRUST COMPANY OF CALIFORNIA, N.A., AS TRUSTEE (OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS SUCH TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS
LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE NOTE
EVIDENCED HEREBY PURSUANT TO CLAUSE (2)(F) ABOVE OR UPON ANY TRANSFER OF
THE NOTE EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR
ANY SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
Any Note (or security issued in exchange or substitution therefor) as
to which such restrictions on transfer shall have expired in accordance with
their terms or as to conditions for removal of the foregoing legend set forth
therein have been satisfied may, upon surrender of such Note for exchange to the
Note registrar in accordance with the provisions of this Section 2.5, be
exchanged for a new Note or Notes, of like tenor and aggregate principal amount,
which shall not bear the restrictive legend required by this Section 2.5(d).
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in the second paragraph of Section 2.5(c) and in this
Section 2.5(d)), a Global Note may not be transferred as a whole or in part
except by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary.
The Depositary shall be a clearing agency registered under the
Exchange Act. The Company initially appoints The Depository Trust Company to
act as Depositary with respect to the Notes in global form. Initially, the
Global Note shall be issued to the Depositary, registered in the name of Cede &
Co., as the nominee of the Depositary, and deposited with the Custodian for Cede
& Co.
If at any time the Depositary for a Global Note notifies the Company
that it is unwilling or unable to continue as Depositary for such Note, the
Company may appoint a successor Depositary with respect to such Note. If a
successor Depositary is not appointed by the Company within ninety (90) days
after the Company receives such notice, the Company will execute, and the
Trustee, upon receipt of an Officers' Certificate for the authentication and
delivery of Notes, will authenticate and deliver, Notes in certificated form, in
aggregate principal amount equal to the principal amount of such Global Note, in
exchange for such Global Note.
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<PAGE>
If a Note in certificated form is issued in exchange for any portion
of a Global Note after the close of business at the office or agency where such
exchange occurs on any record date and before the opening of business at such
office or agency on the next succeeding interest payment date, interest will not
be payable on such interest payment date in respect of such certificated Note,
but will be payable on such interest payment date, subject to the provisions of
Section 2.3, only to the Person to whom interest in respect of such portion of
such Global Note is payable in accordance with the provisions of this Indenture.
Notes in certificated form issued in exchange for all or a part of a
Global Note pursuant to this Section 2.5 shall be registered in such names and
in such authorized denominations as the Depositary, pursuant to instructions
from its direct or indirect participants or otherwise, shall instruct the
Trustee. Upon execution and authentication, the Trustee shall deliver such
Notes in certificated form to the Persons in whose names such Notes in
certificated form are so registered.
At such time as all interests in a Global Note have been redeemed,
converted, canceled, exchanged for Notes in certificated form, or transferred to
a transferee who receives Notes in certificated form thereof, such Global Note
shall, upon receipt thereof, be canceled by the Trustee in accordance with
standing procedures and instructions existing between the Depositary and the
Custodian. At any time prior to such cancellation, if any interest in a Global
Note is exchanged for Notes in certificated form, redeemed, converted,
repurchased or canceled, or transferred to a transferee who receives Notes in
certificated form therefor or any Note in certificated form is exchanged or
transferred for part of a Global Note, the principal amount of such Global Note
shall, in accordance with the standing procedures and instructions existing
between the Depositary and the Custodian, be appropriately reduced or increased,
as the case may be, and an endorsement shall be made on such Global Note, by the
Trustee or the Custodian, at the direction of the Trustee, to reflect such
reduction or increase.
(e) Until the expiration of the holding period applicable to sales
thereof under Rule 144(k) under the Securities Act (or any successor
provision), any stock certificate representing Common Stock issued upon
conversion of any Note shall bear a legend in substantially the following
form, unless such Common Stock has been sold pursuant to a registration
statement that has been declared effective under the Securities Act (and
which continues to be effective at the time of such transfer) or such
Common Stock has been issued upon conversion of Notes that have been
transferred pursuant to a registration statement that has been declared
effective under the Securities Act, or unless otherwise agreed by the
Company in writing with written notice thereof to the transfer agent:
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES
THAT, UNTIL THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE
COMMON STOCK EVIDENCED HEREBY
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<PAGE>
UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION),
(1) IT WILL NOT RESELL OR OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED
HEREBY EXCEPT (A) TO SEMTECH CORPORATION OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) IN COMPLIANCE WITH RULE 144A, (C)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) THAT
PRIOR TO SUCH TRANSFER, FURNISHES TO CHASEMELLON SHAREHOLDER SERVICES,
L.L.C., AS TRANSFER AGENT (OR A SUCCESSOR TRANSFER AGENT, AS APPLICABLE), A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRANSFER AGENT OR A SUCCESSOR
TRANSFER AGENT, AS APPLICABLE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES LAWS (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE),
OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT
THE TIME OF SUCH TRANSFER); (2) PRIOR TO SUCH TRANSFER (OTHER THAN A
TRANSFER PURSUANT TO CLAUSE (1)(F) ABOVE), IT WILL FURNISH TO CHASEMELLON
SHAREHOLDER SERVICES, L.L.C., AS TRANSFER AGENT (OR A SUCCESSOR TRANSFER
AGENT, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT; AND (3) IT WILL DELIVER TO EACH PERSON TO WHOM THE COMMON STOCK
EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE
1(F) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR IS A
PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO CHASEMELLON SHAREHOLDER SERVICES, L.L.C. (OR A
SUCCESSOR TRANSFER AGENT, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE
COMMON STOCK EVIDENCED HEREBY PURSUANT TO CLAUSE (1)(E) ABOVE OR UPON ANY
TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY AFTER THE EXPIRATION OF THE
HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER
RULE 144(K) UNDER THE
17
<PAGE>
SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
Any such Common Stock as to which such restrictions on transfer shall
have expired in accordance with their terms or as to which the conditions for
removal of the foregoing legend set forth therein have been satisfied may, upon
surrender of the certificates representing such shares of Common Stock for
exchange in accordance with the procedures of the transfer agent for the Common
Stock, be exchanged for a new certificate or certificates for a like number of
shares of Common Stock, which shall not bear the restrictive legend required by
this Section 2.5(e).
(f) Any Note or Common Stock issued upon the conversion or exchange of
a Note that, prior to the expiration of the holding period applicable to
sales thereof under Rule 144(k) under the Securities Act (or any successor
provision), is purchased or owned by the Company or any Affiliate thereof
may not be resold by the Company or such Affiliate unless registered under
the Securities Act or resold pursuant to an exemption from the registration
requirements of the Securities Act in a transaction which results in such
Notes or Common Stock, as the case may be, no longer being "restricted
securities" (as defined under Rule 144).
Section 2.6. Mutilated, Destroyed, Lost Or Stolen Notes. In case any
------------------------------------------
Note shall become mutilated or be destroyed, lost or stolen, the Company in its
discretion may execute, and upon its written request the Trustee or an
authenticating agent appointed by the Trustee shall authenticate and make
available for delivery, a new Note, bearing a number not contemporaneously
outstanding, in exchange and substitution for the mutilated Note, or in lieu of
and in substitution for the Note so destroyed, lost or stolen. In every case the
applicant for a substituted Note shall furnish to the Company, to the Trustee
and, if applicable, to such authenticating agent such security or indemnity as
may be required by them to save each of them harmless for any loss, liability,
cost or expense caused by or connected with such substitution, and, in every
case of destruction, loss or theft, the applicant shall also furnish to the
Company, to the Trustee and, if applicable, to such authenticating agent
evidence to their satisfaction of the destruction, loss or theft of such Note
and of the ownership thereof.
Following receipt by the Trustee or such authenticating agent, as the
case may be, of satisfactory security or indemnity and evidence, as described in
the preceding paragraph, the Trustee or such authenticating agent may
authenticate any such substituted Note and make available for delivery such
Note. Upon the issuance of any substituted Note, the Company may require the
payment by the holder of a sum sufficient to cover any tax, assessment or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. In case any Note which has matured or is about to
mature or has been called for redemption or has been tendered for redemption
(and not withdrawn) or is to be converted into Common Stock shall become
mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a
substitute Note, pay or authorize the payment of or convert or authorize the
conversion of the same (without surrender thereof except in the case of a
mutilated Note), as the case may be, if the applicant for such payment or
conversion shall furnish to the Company, to the Trustee and, if applicable, to
such authenticating agent such security or indemnity as may be
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<PAGE>
required by them to save each of them harmless for any loss, liability, cost or
expense caused by or connected with such substitution, and, in every case of
destruction, loss or theft, the applicant shall also furnish to the Company, the
Trustee and, if applicable, any paying agent or conversion agent evidence to
their satisfaction of the destruction, loss or theft of such Note and of the
ownership thereof.
Every substitute Note issued pursuant to the provisions of this
Section 2.6 by virtue of the fact that any Note is destroyed, lost or stolen
shall constitute an additional contractual obligation of the Company, whether or
not the destroyed, lost or stolen Note shall be found at any time, and shall be
entitled to all the benefits of (but shall be subject to all the limitations set
forth in) this Indenture equally and proportionately with any and all other
Notes duly issued hereunder. To the extent permitted by law, all Notes shall be
held and owned upon the express condition that the foregoing provisions are
exclusive with respect to the replacement or payment or conversion of mutilated,
destroyed, lost or stolen Notes and shall preclude any and all other rights or
remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment or conversion of negotiable
instruments or other securities without their surrender.
Section 2.7. Temporary Notes. Pending the preparation of Notes in
---------------
certificated form, the Company may execute and the Trustee or an authenticating
agent appointed by the Trustee shall, upon the written request of the Company,
authenticate and deliver temporary Notes (printed or lithographed). Temporary
Notes shall be issuable in any authorized denomination, and substantially in the
form of the Notes in certificated form, but with such omissions, insertions and
variations as may be appropriate for temporary Notes, all as may be determined
by the Company. Every such temporary Note shall be executed by the Company and
authenticated by the Trustee or such authenticating agent upon the same
conditions and in substantially the same manner, and with the same effect, as
the Notes in certificated form. Without unreasonable delay the Company will
execute and deliver to the Trustee or such authenticating agent Notes in
certificated form (other than in the case of Notes in global form) and thereupon
any or all temporary Notes (other than any such Global Note) may be surrendered
in exchange therefor, at each office or agency maintained by the Company
pursuant to Section 5.2 and the Trustee or such authenticating agent shall
authenticate and make available for delivery in exchange for such temporary
Notes an equal aggregate principal amount of Notes in certificated form. Such
exchange shall be made by the Company at its own expense and without any charge
therefor. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits and subject to the same limitations under this
Indenture as Notes in certificated form authenticated and delivered hereunder.
Section 2.8. Cancellation Of Notes Paid, Etc. All Notes surrendered
--------------------------------
for the purpose of payment, redemption, conversion, exchange or registration of
transfer shall, if surrendered to the Company or any paying agent or any Note
registrar or any conversion agent, be surrendered to the Trustee and promptly
canceled by it, or, if surrendered to the Trustee, shall be promptly canceled by
it, and no Notes shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Indenture. The Trustee shall dispose of such
canceled Notes in accordance with its customary procedures. If the Company shall
acquire any of the Notes, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Notes unless and until the
same are delivered to the Trustee for cancellation.
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Section 2.9. Cusip Numbers. The Company in issuing the Notes may
-------------
use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Noteholders;
provided, however, that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Notes or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Notes, and any such redemption
shall not be affected by any defect in or omission of such numbers. The Company
will promptly notify the Trustee of any change in the "CUSIP" numbers.
ARTICLE 3.
REDEMPTION OF NOTES
Section 3.1. (a) Initial Prohibition On Redemption. Except as
---------------------------------
otherwise provided in Section 3.5, the Notes may not be redeemed by the Company,
in whole or in part, at any time prior to February 6, 2003.
(b) Optional Redemption By The Company. At any time on or after
February 6, 2003, and prior to maturity, the Notes may be redeemed at the option
of the Company, in whole or in part, upon notice as set forth in Section 3.2, at
the following redemption prices (expressed as percentages of the principal
amount), together in each case with accrued and unpaid interest, if any
(including Liquidated Damages, if any) to, but excluding, the date fixed for
redemption:
<TABLE>
<CAPTION>
Period Redemption Price
------ ----------------
<S> <C>
Beginning on February 6, 2003 and ending on January 31, 2004........... 102.571%
Beginning on February 1, 2004 and ending on January 31, 2005........... 101.929%
Beginning on February 1, 2005 and ending on January 31, 2006........... 101.286%
Beginning on February 1, 2006 and ending on January 31, 2007........... 100.643%
</TABLE>
and 100% on February 1, 2007; provided, however, that if the date fixed for
redemption is on a February 1 or August 1, then the interest payable on such
date shall be paid to the holder of record on the preceding January 15 or July
15, respectively.
Section 3.2. Notice Of Redemptions; Selection Of Notes. In case
-----------------------------------------
the Company shall desire to exercise the right to redeem all or, as the case may
be, any part of the Notes pursuant to Section 3.1, it shall fix a date for
redemption and it or, at its written request received by the Trustee not fewer
than forty-five (45) days prior (or such shorter period of time as may be
acceptable to the Trustee) to the date fixed for redemption, the Trustee in the
name of and at the expense of the Company, shall mail or cause to be mailed a
notice of such redemption not fewer than thirty (30) nor more than sixty (60)
days prior to the date fixed for redemption to the holders of Notes so to be
redeemed as a whole or in part at their last addresses as the same appear on the
Note register; provided, however, that if the Company shall give such notice, it
shall also give written notice, and written notice of the Notes to be redeemed,
to the Trustee. Such mailing shall be by first class mail. The notice if mailed
in the manner herein provided shall be conclusively presumed to have been duly
given, whether or not the holder receives such notice. In any case,
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<PAGE>
failure to give such notice by mail or any defect in the notice to the holder of
any Note designated for redemption as a whole or in part shall not affect the
validity of the proceedings for the redemption of any other Note. Concurrently
with the mailing of any such notice of redemption, the Company shall issue a
press release announcing such redemption, the form and content of which press
release shall be determined by the Company in its sole discretion. The failure
to issue any such press release or any defect therein shall not affect the
validity of the redemption notice or any of the proceedings for the redemption
of any Note called for redemption.
Each such notice of redemption shall specify the aggregate principal
amount of Notes to be redeemed, the CUSIP number or numbers of the Notes being
redeemed, the date fixed for redemption (which shall be a Business Day), the
redemption price at which Notes are to be redeemed, the place or places of
payment, that payment will be made upon presentation and surrender of such
Notes, that interest accrued to the date fixed for redemption will be paid as
specified in said notice, and that on and after said date interest thereon or on
the portion thereof to be redeemed will cease to accrue. Such notice shall also
state the current Conversion Price and the date on which the right to convert
such Notes or portions thereof into Common Stock will expire. If fewer than all
the Notes are to be redeemed, the notice of redemption shall identify the Notes
to be redeemed (including CUSIP numbers, if any). In case any Note is to be
redeemed in part only, the notice of redemption shall state the portion of the
principal amount thereof to be redeemed and shall state that, on and after the
date fixed for redemption, upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion thereof will be issued.
On or prior to the redemption date specified in the notice of
redemption given as provided in this Section 3.2, the Company will deposit with
the Trustee or with one or more paying agents (or, if the Company is acting as
its own paying agent, set aside, segregate and hold in trust as provided in
Section 5.4) an amount of money in immediately available funds sufficient to
redeem on the redemption date all the Notes (or portions thereof) so called for
redemption (other than those theretofore surrendered for conversion into Common
Stock) at the appropriate redemption price, together with accrued interest to,
but excluding, the date fixed for redemption; provided, however, that if such
payment is made on the redemption date it must be received by the Trustee or
paying agent, as the case may be, by 10:00 a.m. New York City time on such date.
The Company shall be entitled to retain any interest, yield or gain on amounts
deposited with the Trustee or any paying agent pursuant to this Section 3.2 in
excess of amounts required hereunder to pay the redemption price together with
accrued interest to, but excluding, the date fixed for redemption. If any Note
called for redemption is converted pursuant hereto prior to such redemption, any
money deposited with the Trustee or any paying agent or so segregated and held
in trust for the redemption of such Note shall be paid to the Company upon its
written request, or, if then held by the Company, shall be discharged from such
trust. Whenever any Notes are to be redeemed, the Company will give the Trustee
written notice in the form of an Officers' Certificate not fewer than forty-five
(45) days (or such shorter period of time as may be acceptable to the Trustee)
prior to the redemption date as to the aggregate principal amount of Notes to be
redeemed.
If less than all of the outstanding Notes are to be redeemed, the
Trustee shall select the Notes or portions thereof of the Global Note or the
Notes in certificated form to be
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<PAGE>
redeemed (in principal amounts of $1,000 or integral multiples thereof) by lot,
on a pro rata basis or by another method the Trustee deems fair and appropriate.
If any Note selected for partial redemption is submitted for conversion in part
after such selection, the portion of such Note submitted for conversion shall be
deemed (so far as may be) to be the portion to be selected for redemption. The
Notes (or portions thereof) so selected shall be deemed duly selected for
redemption for all purposes hereof, notwithstanding that any such Note is
submitted for conversion in part before the mailing of the notice of redemption.
Upon any redemption of less than all of the outstanding Notes, the
Company and the Trustee may (but need not), solely for purposes of determining
the pro rata allocation among such Notes as are unconverted and outstanding at
the time of redemption, treat as outstanding any Notes surrendered for
conversion during the period of fifteen (15) days next preceding the mailing of
a notice of redemption and may (but need not) treat as outstanding any Note
authenticated and delivered during such period in exchange for the unconverted
portion of any Note converted in part during such period.
Section 3.3. Payment Of Notes Called For Redemption. If notice of
--------------------------------------
redemption has been given as above provided, the Notes or portion of Notes with
respect to which such notice has been given shall, unless converted into Common
Stock pursuant to the terms hereof, become due and payable on the date fixed for
redemption and at the place or places stated in such notice at the applicable
redemption price, together with interest accrued to (but excluding) the date
fixed for redemption, and on and after said date (unless the Company shall
default in the payment of such Notes at the redemption price, together with
interest accrued to said date) interest on the Notes or portion of Notes so
called for redemption shall cease to accrue and, after the close of business on
the Business Day next preceding the date fixed for redemption, such Notes shall
cease to be convertible into Common Stock and, except as provided in Sections
8.5 and 13.4, to be entitled to any benefit or security under this Indenture,
and the holders thereof shall have no right in respect of such Notes except the
right to receive the redemption price thereof and unpaid interest to (but
excluding) the date fixed for redemption. On presentation and surrender of such
Notes at a place of payment in said notice specified, the said Notes or the
specified portions thereof shall be paid and redeemed by the Company at the
applicable redemption price, together with interest accrued thereon to (but
excluding) the date fixed for redemption; provided, however, that if the
applicable redemption date is an interest payment date, the semi-annual payment
of interest becoming due on such date shall be payable to the holders of such
Notes registered as such on the relevant record date instead of the holders
surrendering such Notes for redemption on such date.
Upon presentation of any Note redeemed in part only, the Company shall
execute and the Trustee shall authenticate and make available for delivery to
the holder thereof, at the expense of the Company, a new Note or Notes, of
authorized denominations, in principal amount equal to the unredeemed portion of
the Notes so presented.
Notwithstanding the foregoing, the Trustee shall not redeem any Notes
or mail any notice of redemption during the continuance of a default in payment
of interest or premium, if any, on the Notes. If any Note called for redemption
shall not be so paid upon surrender thereof for redemption, the principal and
premium, if any, shall, until paid or duly provided for, bear interest from the
date fixed for redemption at the rate borne by the Note and such Note shall
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<PAGE>
remain convertible into Common Stock until the principal and premium, if any,
and interest shall have been paid or duly provided for.
Section 3.4. Conversion Arrangement On Call For Redemption. In
---------------------------------------------
connection with any redemption of Notes, the Company may arrange for the
purchase and conversion of any Notes by an agreement with one or more investment
bankers or other purchasers to purchase such Notes by paying to the Trustee in
trust for the Noteholders, on or before the date fixed for redemption, an amount
not less than the applicable redemption price, together with interest accrued to
(but excluding) the date fixed for redemption, of such Notes. Notwithstanding
anything to the contrary contained in this Article Three, the obligation of the
Company to pay the redemption price of such Notes, together with interest
accrued to (but excluding) the date fixed for redemption, shall be deemed to be
satisfied and discharged to the extent such amount is so paid by such
purchasers. If such an agreement is entered into, a copy of which will be filed
with the Trustee prior to the date fixed for redemption, any Notes not duly
surrendered for conversion by the holders thereof may, at the option of the
Company, be deemed, to the fullest extent permitted by law, acquired by such
purchasers from such holders and (notwithstanding anything to the contrary
contained in Article Fifteen) surrendered by such purchasers for conversion, all
as of immediately prior to the close of business on the date fixed for
redemption (and the right to convert any such Notes shall be extended through
such time), subject to payment of the above amount as aforesaid. At the
direction of the Company, the Trustee shall hold and dispose of any such amount
paid to it in the same manner as it would monies deposited with it by the
Company for the redemption of Notes. Without the Trustee's prior written
consent, no arrangement between the Company and such purchasers for the purchase
and conversion of any Notes shall increase or otherwise affect any of the
powers, duties, responsibilities or obligations of the Trustee as set forth in
this Indenture.
Section 3.5. Redemption At Option Of Holders.
-------------------------------
(a) If there shall occur a Fundamental Change at any time prior to
maturity of the Notes, then each Noteholder shall have the right, at such
holder's option, to require the Company to redeem all of such holder's
Notes, or any portion thereof that is an integral multiple of $1,000
principal amount, on the date (the "Repurchase Date") that is thirty (30)
days after the date of the Company Notice (as defined in Section 3.5(b)
below) of such Fundamental Change (or, if such 30th day is not a Business
Day, the next succeeding Business Day) at a redemption price equal to 100%
of the principal amount thereof, together with accrued interest to (but
excluding) the Repurchase Date; provided, however, that, if such Repurchase
Date is a February 1 or August 1, then the interest payable on such date
shall be paid to the holders of record of the Notes on the next preceding
January 15 or July 15, respectively.
Upon presentation of any Note redeemed in part only, the Company shall
execute and, upon the Company's written direction to the Trustee, the Trustee
shall authenticate and deliver to the holder thereof, at the expense of the
Company, a new Note or Notes, of authorized denominations, in principal amount
equal to the unredeemed portion of the Notes so presented.
(b) On or before the tenth day after the occurrence of a Fundamental
Change, the Company or at its written request (which must be received by
the Trustee at least five
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(5) Business Days prior to the date the Trustee is requested to give notice
as described below, unless the Trustee shall agree in writing to a shorter
period), the Trustee, in the name of and at the expense of the Company,
shall mail or cause to be mailed to all holders of record on the date of
the Fundamental Change a notice (the "Company Notice") of the occurrence of
such Fundamental Change and of the redemption right at the option of the
holders arising as a result thereof. Such notice shall be mailed in the
manner and with the effect set forth in the first paragraph of Section 3.2
(without regard for the time limits set forth therein). If the Company
shall give such notice, the Company shall also deliver a copy of the
Company Notice to the Trustee at such time as it is mailed to Noteholders.
Concurrently with the mailing of any Company Notice, the Company shall
issue a press release announcing such Fundamental Change referred to in the
Company Notice, the form and content of which press release shall be
determined by the Company in its sole discretion. The failure to issue any
such press release or any defect therein shall not affect the validity of
the Company Notice or any proceedings for the redemption of any Note which
any Noteholder may elect to have the Company redeem as provided in this
Section 3.5.
Each Company Notice shall specify the circumstances constituting the
Fundamental Change, the Repurchase Date, the price at which the Company shall be
obligated to redeem Notes, that the holder must exercise the redemption right on
or prior to the close of business on the Repurchase Date (the "Fundamental
Change Expiration Time"), that the holder shall have the right to withdraw any
Notes surrendered prior to the Fundamental Change Expiration Time, a description
of the procedure which a Noteholder must follow to exercise such redemption
right and to withdraw any surrendered Notes, the place or places where the
holder is to surrender such holder's Notes, the amount of interest accrued on
each Note to the Repurchase Date and the "CUSIP" number or numbers of the Notes
(if then generally in use).
No failure of the Company to give the foregoing notices and no defect
therein shall limit the Noteholders' redemption rights or affect the validity of
the proceedings for the redemption of the Notes pursuant to this Section 3.5.
(c) For a Note to be so redeemed at the option of the holder, the
Company must receive at the office or agency of the Company maintained for
that purpose or, at the option of such holder, the Corporate Trust Office,
such Note with the form entitled "Option to Elect Repayment Upon A
Fundamental Change" on the reverse thereof duly completed, together with
such Notes duly endorsed for transfer, on or before the Fundamental Change
Expiration Time. All questions as to the validity, eligibility (including
time of receipt) and acceptance of any Note for repayment shall be
determined by the Company, whose determination shall be final and binding
absent manifest error.
(d) On or prior to the Repurchase Date, the Company will deposit with
the Trustee or with one or more paying agents (or, if the Company is acting
as its own paying agent, set aside, segregate and hold in trust as provided
in Section 5.4) an amount of money sufficient to redeem on the Repurchase
Date all the Notes to be redeemed on such date at the appropriate
redemption price, together with accrued interest to (but excluding) the
Repurchase Date; provided, however, that if such payment is made on the
Repurchase Date it must be received by the Trustee or paying agent, as the
case may be, by 10:00
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a.m. New York City time, on such date. Payment for Notes surrendered for
redemption (and not withdrawn) prior to the Fundamental Change Expiration
Time will be made promptly (but in no event more than five (5) Business
Days) following the Repurchase Date by mailing checks for the amount
payable to the holders of such Notes entitled thereto as they shall appear
on the registry books of the Company.
(e) In the case of a reclassification, change, consolidation, merger,
combination, sale or conveyance to which Section 15.6 applies, in which the
Common Stock of the Company is changed or exchanged as a result into the
right to receive stock, securities or other property or assets (including
cash), which includes shares of Common Stock of the Company or shares of
common stock of another Person that are, or upon issuance will be, traded
on a United States national securities exchange or approved for trading on
an established automated over-the-counter trading market in the United
States and such shares constitute at the time such change or exchange
becomes effective in excess of 50% of the aggregate fair market value of
such stock, securities or other property or assets (including cash) (as
determined by the Company, which determination shall be conclusive and
binding), then 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 (accompanied by
an Opinion of Counsel that such supplemental indenture complies with the
Trust Indenture Act as in force at the date of execution of such
supplemental indenture) modifying the provisions of this Indenture relating
to the right of holders of the Notes to cause the Company to repurchase the
Notes following a Fundamental Change, including without limitation the
applicable provisions of this Section 3.5 and the definitions of Common
Stock and Fundamental Change, as appropriate, as determined in good faith
by the Company (which determination shall be conclusive and binding), to
make such provisions apply to such other Person if different from the
Company and the common stock issued by such Person (in lieu of the Company
and the Common Stock of the Company).
(f) The Company will comply with the provisions of Rule 13e-4 and any
other tender offer rules under the Exchange Act to the extent then
applicable in connection with the redemption rights of the holders of Notes
in the event of a Fundamental Change.
ARTICLE 4.
SUBORDINATION OF NOTES
----------------------
Section 4.1. Agreement Of Subordination. The Company covenants and
--------------------------
agrees, and each holder of Notes issued hereunder by its acceptance thereof
likewise covenants and agrees, that all Notes shall be issued subject to the
provisions of this Article Four, and each Person holding any Note, whether upon
original issue or upon registration of transfer, assignment or exchange thereof,
accepts and agrees to be bound by such provisions.
The payment of the principal of, premium, if any, and interest
(including Liquidated Damages, if any) on all Notes (including, but not limited
to, the redemption price with respect to the Notes called for redemption in
accordance with Section 3.2 or submitted for
25
<PAGE>
redemption in accordance with Section 3.5, as the case may be, as provided in
this Indenture) issued hereunder shall, to the extent and in the manner
hereinafter set forth, be subordinated and subject in right of payment to the
prior payment in full of all Senior Indebtedness, whether outstanding at the
date of this Indenture or thereafter incurred.
No provision of this Article Four shall prevent the occurrence of any
default or Event of Default hereunder.
Section 4.2. Payments To Noteholders. No payment shall be made with
-----------------------
respect to the principal of, premium, if any, or interest (including Liquidated
Damages, if any) on the Notes (including, but not limited to, the redemption
price with respect to the Notes to be called for redemption in accordance with
Section 3.2 or submitted for redemption in accordance with Section 3.5, as the
case may be, as provided in this Indenture), except payments and distributions
made by the Trustee as permitted by the first or second paragraph of Section
4.5, if:
(i) a default in the payment of principal, premium, if any,
interest, rent or other obligations in respect of Designated Senior Indebtedness
occurs and is continuing (or, in the case of Designated Senior Indebtedness for
which there is a period of grace, in the event of such a default that continues
beyond the period of grace, if any, specified in the instrument or lease
evidencing such Designated Senior Indebtedness) (a "Payment Default"), unless
and until such Payment Default shall have been cured or waived or shall have
ceased to exist; or
(ii) a default, other than a Payment Default, on any Designated
Senior Indebtedness occurs and is continuing that then permits holders of such
Designated Senior Indebtedness to accelerate its maturity (or in the case of any
lease, a default occurs and is continuing that permits the lessor to either
terminate the lease or require the Company to make an irrevocable offer to
terminate the lease following an event of default thereunder) and the Trustee
receives a notice of the default (a "Payment Blockage Notice") from a holder of
Designated Senior Indebtedness, a Representative of Designated Senior
Indebtedness or the Company (a "Non-Payment Default").
If the Trustee receives any Payment Blockage Notice pursuant to clause
(ii) above, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section 4.2 unless and until at least 365 days shall have
elapsed since the initial effectiveness of the immediately prior Payment
Blockage Notice. No Non-Payment Default that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice.
The Company may and shall resume payments on and distributions in
respect of the Notes upon the earlier of:
(1) the date upon which any such Payment Default is
cured or waived or ceases to exist, or
(2) in the case of a Non-Payment Default, the
earlier of (a) the date upon which such default is cured or waived or ceases to
exist or (b) 179 days after the applicable Payment Blockage Notice is received
by the Trustee if the maturity of such Designated Senior Indebtedness has not
been accelerated (or in the case of any lease, 179 days after notice is
26
<PAGE>
received if the Company has not received notice that the lessor under such lease
has exercised its right to terminate the lease or require the Company to make an
irrevocable offer to terminate the lease following an event of default
thereunder), unless this Article Four otherwise prohibits the payment or
distribution at the time of such payment or distribution.
Upon any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding up or liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due upon all
Senior Indebtedness shall first be paid in full in cash or other payment
satisfactory to the holders of such Senior Indebtedness (and satisfactory to the
holders of Senior Indebtedness in the case such Senior Indebtedness includes
Designated Senior Indebtedness), or payment thereof in accordance with its terms
provided for in cash or other payment satisfactory to the holders of such Senior
Indebtedness (and satisfactory to the holders of Senior Indebtedness in the case
such Senior Indebtedness includes Designated Senior Indebtedness) before any
payment is made on account of the principal of, premium, if any, or interest
(including Liquidated Damages, if any) on the Notes (except payments made
pursuant to Article Thirteen from monies deposited with the Trustee pursuant
thereto prior to commencement of proceedings for such dissolution, winding up,
liquidation or reorganization), and upon any such dissolution or winding up or
liquidation or reorganization of the Company or bankruptcy, insolvency,
receivership or other similar proceeding, any payment by the Company, or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to which the holders of the Notes or the Trustee would
be entitled, except for the provisions of this Article Four, shall (except as
aforesaid) be paid by the Company or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other Person making such payment or distribution,
or by the holders of the Notes or by the Trustee under this Indenture if
received by them or it, directly to the holders of Senior Indebtedness (pro rata
to such holders on the basis of the respective amounts of Senior Indebtedness
held by such holders, or as otherwise required by law or a court order) or their
Representative or Representatives, as their respective interests may appear, to
the extent necessary to pay all Senior Indebtedness in full, in cash or other
payment satisfactory to the holders of such Senior Indebtedness (and
satisfactory to the holders of Senior Indebtedness in the case such Senior
Indebtedness includes Designated Senior Indebtedness), after giving effect to
any concurrent payment or distribution to or for the holders of Senior
Indebtedness, before any payment or distribution is made to the holders of the
Notes or to the Trustee.
For purposes of this Article Four, the words, "cash, property or
securities" shall not be deemed to include shares of stock 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, the payment of which
is subordinated at least to the extent provided in this Article Four with
respect to the Notes to the payment of all Senior Indebtedness which may at the
time be outstanding PROVIDED THAT (i) the Senior Indebtedness is assumed by the
new corporation, if any, resulting from any reorganization or readjustment, and
(ii) the rights of the holders of Senior Indebtedness (other than leases which
are not assumed by the Company or the new corporation, as the case may be) are
not, without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety,
27
<PAGE>
to another Person upon the terms and conditions provided for in Article Twelve
shall not be deemed a dissolution, winding-up, liquidation or reorganization for
the purposes of this Section 4.2 if such other Person shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions stated
in Article Twelve.
In the event of the acceleration of the Notes because of an Event of
Default, no payment or distribution shall be made to the Trustee or any holder
of Notes in respect of the principal of, premium, if any, or interest (including
Liquidated Damages, if any) on the Notes (including, but not limited to, the
redemption price with respect to the Notes called for redemption in accordance
with Section 3.2 or submitted for redemption in accordance with Section 3.5, as
the case may be, as provided in this Indenture), except payments and
distributions made by the Trustee as permitted by the first or second paragraph
of Section 4.5, until all Senior Indebtedness has been paid in full in cash or
other payment satisfactory to the holders of Senior Indebtedness (and
satisfactory to the holders of Designated Senior Indebtedness in the case such
Senior Indebtedness includes Designated Senior Indebtedness) or such
acceleration is rescinded in accordance with the terms of this Indenture. If
payment of the Notes is accelerated because of an Event of Default, the Company
or the Trustee shall promptly notify holders of Senior Indebtedness (including
the agent under the Credit Agreement) of the acceleration.
In the event that, notwithstanding the foregoing provisions, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities (including, without limitation, by way
of setoff or otherwise), prohibited by the foregoing provisions in this Section
4.2, shall be received by the Trustee or the holders of the Notes before all
Senior Indebtedness is paid in full in cash or other payment satisfactory to the
holders of such Senior Indebtedness (and satisfactory to the holders of Senior
Indebtedness in the case such Senior Indebtedness includes Designated Senior
Indebtedness), or provision is made for such payment thereof in accordance with
its terms in cash or other payment satisfactory to the holders of such Senior
Indebtedness (and satisfactory to the holders of Senior Indebtedness in the case
such Senior Indebtedness includes Designated Senior Indebtedness), such payment
or distribution shall be held in trust for the benefit of and shall be paid over
or delivered to the holders of Senior Indebtedness or their Representative or
Representatives, as their respective interests may appear, as calculated by the
Company, for application to the payment of any Senior Indebtedness remaining
unpaid to the extent necessary to pay all Senior Indebtedness in full in cash or
other payment satisfactory to the holders of such Senior Indebtedness (and
satisfactory to the holders of Senior Indebtedness in the case such Senior
Indebtedness includes Designated Senior Indebtedness), after giving effect to
any concurrent payment or distribution to or for the holders of such Senior
Indebtedness.
Nothing in this Section 4.2 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 8.6. This Section 4.2 shall be subject
to the further provisions of Section 4.5.
Section 4.3. Subrogation Of Notes. Subject to the payment in full of
--------------------
all Senior Indebtedness, the rights of the holders of the Notes shall be
subrogated to the extent of the payments or distributions made to the holders of
such Senior Indebtedness pursuant to the provisions of this Article Four
(equally and ratably with the holders of all indebtedness of the Company which
by its express terms is subordinated to other indebtedness of the Company to
28
<PAGE>
substantially the same extent as the Notes are subordinated and is entitled to
like rights of subrogation) to the rights of the holders of Senior Indebtedness
to receive payments or distributions of cash, property or securities of the
Company applicable to the Senior Indebtedness until the principal, premium, if
any, and interest (including Liquidated Damages, if any) on the Notes shall be
paid in full, and, for the purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness of any cash, property or
securities to which the holders of the Notes or the Trustee would be entitled
except for the provisions of this Article Four, and no payment pursuant to the
provisions of this Article Four, to or for the benefit of the holders of Senior
Indebtedness by holders of the Notes or the Trustee, shall, as among the
Company, its creditors other than holders of Senior Indebtedness, and the
holders of the Notes, be deemed to be a payment by the Company to or on account
of the Senior Indebtedness, and no payments or distributions of cash, property
or securities to or for the benefit of the holders of the Notes pursuant to the
subrogation provisions of this Article Four, which would otherwise have been
paid to the holders of Senior Indebtedness, shall be deemed to be a payment by
the Company to or for the account of the Notes. It is understood that the
provisions of this Article Four are intended solely for the purposes of defining
the relative rights of the holders of the Notes, on the one hand, and the
holders of the Senior Indebtedness, on the other hand.
Nothing contained in this Article Four or elsewhere in this Indenture
or in the Notes is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Indebtedness, and the holders of the
Notes, the obligation of the Company, which is absolute and unconditional, to
pay to the holders of the Notes the principal of, premium, if any, and interest
(including Liquidated Damages, if any) on the Notes as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the holders of the Notes and creditors of
the Company other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the Trustee or the holder of any Note from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article Four of the
holders of Senior Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to
in this Article Four, the Trustee, subject to the provisions of Section 8.1, and
the holders of the Notes shall be entitled to rely upon any order or decree made
by any court of competent jurisdiction in which such bankruptcy, dissolution,
winding up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other Person making such payment or distribution, delivered to the Trustee or
to the holders of the Notes, for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon and all other facts pertinent thereto or to this Article Four.
Section 4.4. Authorization To Effect Subordination. Each holder of a
-------------------------------------
Note by the holder's acceptance thereof authorizes and directs the Trustee on
the holder's behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Article Four and appoints the
Trustee to act as the holder's attorney-in-fact for any and all such purposes.
If the Trustee does not file a proper proof of claim or proof of debt in the
form required in any proceeding referred to in the third paragraph of Section
7.2 hereof at least thirty (30) days
29
<PAGE>
before the expiration of the time to file such claim, the holders of any Senior
Indebtedness or their Representatives are hereby authorized to file an
appropriate claim for and on behalf of the holders of the Notes.
Section 4.5. Notice To Trustee. The Company shall give prompt written
-----------------
notice in the form of an Officers' Certificate to a Responsible Officer of the
Trustee and to any paying agent of any fact known to the Company that would
prohibit the making of any payment of monies to or by the Trustee or any paying
agent in respect of the Notes pursuant to the provisions of this Article Four.
Notwithstanding the provisions of this Article Four or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts that would prohibit the making of any payment of monies to or by
the Trustee in respect of the Notes pursuant to the provisions of this Article
Four, unless and until a Responsible Officer of the Trustee shall have received
written notice thereof at the Corporate Trust Office from the Company (in the
form of an Officers' Certificate) or a Representative or a holder or holders of
Senior Indebtedness, and before the receipt of any such written notice, the
Trustee, subject to the provisions of Section 8.1, shall be entitled in all
respects to assume that no such facts exist; provided, however, that if on a
date not less than one Business Day prior to the date upon which by the terms
hereof any such monies may become payable for any purpose (including, without
limitation, the payment of the principal of, or premium, if any, or interest
(including Liquidated Damages, if any) on any Note) the Trustee shall not have
received, with respect to such monies, the notice provided for in this Section
4.5, then, anything herein contained to the contrary notwithstanding, the
Trustee shall have full power and authority to apply monies received to the
purpose for which they were received, and shall not be affected by any notice to
the contrary that may be received by it on or after such prior date.
Notwithstanding anything in this Article Four to the contrary, nothing
shall prevent any payment by the Trustee to the Noteholders of monies deposited
with it pursuant to Section 13.1, if a Responsible Officer of the Trustee shall
not have received written notice at the Corporate Trust Office on or before one
Business Day prior to the date such payment is due that such payment is not
permitted under Section 4.1 or 4.2.
The Trustee, subject to the provisions of Section 8.1, shall be
entitled to rely on the delivery to it of a written notice by a Representative
or a person representing himself to be a holder of Senior Indebtedness (or a
trustee on behalf of such holder) to establish that such notice has been given
by a Representative or a holder of Senior Indebtedness or a trustee on behalf of
any such holder or holders. The Trustee shall not be required to make any
payment or distribution to or on behalf of a holder of Senior Indebtedness
pursuant to this Article Four unless it has received satisfactory evidence as to
the amount of Senior Indebtedness 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 Four.
Section 4.6. Trustee's Relation To Senior Indebtedness. The Trustee,
-----------------------------------------
in its individual capacity, shall be entitled to all the rights set forth in
this Article Four in respect of any Senior Indebtedness at any time held by it,
to the same extent as any other holder of Senior Indebtedness, and nothing in
Section 8.13 or elsewhere in this Indenture shall deprive the Trustee of any of
its rights as such holder.
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With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Four, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and, subject to the
provisions of Section 8.1, the Trustee shall not be liable to any holder of
Senior Indebtedness (i) for any failure to make any payments or distributions to
such holder or (ii) if it shall pay over or deliver to holders of Notes, the
Company or any other Person money in compliance with this Article Four.
Section 4.7. No Impairment Of Subordination. No right of any present
------------------------------
or future holder of any Senior Indebtedness 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 which any such holder may have or otherwise be charged with. Senior
Indebtedness may be created, renewed or extended and holders of Senior
Indebtedness may exercise any rights under any instrument creating or evidencing
such Senior Indebtedness, including, without limitation, any waiver of default
thereunder, without any notice to or consent from the holders of the Notes or
the Trustee. No compromise, alteration, amendment, modification, extension,
renewal or other change of, or waiver, consent or other action in respect of,
any liability or obligation under or in respect of the Senior Indebtedness or
any terms or conditions of any instrument creating or evidencing such Senior
Indebtedness shall in any way alter or affect any of the provisions of this
Article Four or the subordination of the Notes provided thereby.
Section 4.8. Certain Conversions Not Deemed Payment. For the
--------------------------------------
purposes of this Article Four only, (1) the issuance and delivery of junior
securities upon conversion of Notes in accordance with Article Fifteen shall not
be deemed to constitute a payment or distribution on account of the principal
of, premium, if any, or interest (including Liquidated Damages, if any) on Notes
or on account of the purchase or other acquisition of Notes, and (2) the
payment, issuance or delivery of cash (except in satisfaction of fractional
shares pursuant to Section 15.3), property or securities (other than junior
securities) upon conversion of a Note shall be deemed to constitute payment on
account of the principal of, premium, if any, or interest (including Liquidated
Damages, if any) on such Note. For the purposes of this Section 4.8, the term
"junior securities" means (a) shares of any stock of any class of the Company or
(b) securities of the Company that are subordinated in right of payment to all
Senior Indebtedness that 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 Notes are so subordinated as provided in this Article Four. Nothing
contained in this Article Four or elsewhere in this Indenture or in the Notes is
intended to or shall impair, as among the Company, its creditors (other than
holders of Senior Indebtedness) and the Noteholders, the right, which is
absolute and unconditional, of the Holder of any Note to convert such Note in
accordance with Article Fifteen.
Section 4.9. Article Applicable To Paying Agents. If at any time any
-----------------------------------
paying agent other than the Trustee shall have been appointed by the Company and
be then acting hereunder, the term "Trustee" as used in this Article Four shall
(unless the context otherwise
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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 Four in addition to or in place of the Trustee; provided,
however, that the first paragraph of Section 4.5 shall not apply to the Company
or any Affiliate of the Company if it or such Affiliate acts as paying agent.
The Trustee shall not be responsible for the actions or inactions of
any other paying agents (including the Company if acting as its own paying
agent) and shall have no control of any funds held by such other paying agents.
Section 4.10. Senior Indebtedness Entitled To Rely. The holders of
------------------------------------
Senior Indebtedness (including, without limitation, Designated Senior
Indebtedness) shall have the right to rely upon this Article Four, and no
amendment or modification of the provisions contained herein shall diminish the
rights of such holders unless such holders shall have agreed in writing thereto.
Section 4.11. Reliance On Judicial Order Or Certificate Of
--------------------------------------------
Liquidating Agent. Upon any payment or distribution of assets of the Company
- -----------------
referred to in this Article Four, the Trustee and the Noteholders shall be
entitled to rely upon any order or decree entered by any court of competent
jurisdiction in which such insolvency, bankruptcy, receivership, liquidation,
reorganization, dissolution, winding up or similar case or proceeding is
pending, or a certificate of the trustee in bankruptcy, liquidating trustee,
custodian, receiver, assignee for the benefit of creditors, agent or other
Person making such payment or distribution, delivered to the Trustee or to the
Noteholders, for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article Four.
ARTICLE 5.
PARTICULAR COVENANTS OF THE COMPANY
-----------------------------------
Section 5.1. Payment Of Principal, Premium And Interest. The Company
------------------------------------------
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any (including the redemption price upon
redemption pursuant to Article Three), and interest (including Liquidated
Damages, if any), on each of the Notes at the places, at the respective times
and in the manner provided herein and in the Notes.
Section 5.2. Maintenance Of Office Or Agency. The Company will
-------------------------------
maintain an office or agency in the Borough of Manhattan, the City of New York,
where the Notes may be surrendered for registration of transfer or exchange or
for presentation for payment or for conversion or redemption and where notices
and demands to or upon the Company in respect of the Notes and this Indenture
may be served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency not
designated or appointed by the Trustee. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office or the
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office of agency of the Trustee in The Borough of Manhattan, The City of New
York (which shall initially be located at State Street Bank and Trust Company,
N.A., 61 Broadway, New York, NY 10006, Attention: Corporate Trust Department
(Semtech Corporation, 4 1/2% Convertible Subordinated Notes due 2007).
The Company may also from time to time designate co-registrars and one
or more offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations.
The Company will give prompt written notice of any such designation or
rescission and of any change in the location of any such other office or agency.
The Company hereby initially designates the Trustee as paying agent,
Note registrar, Custodian and conversion agent and each of the Corporate Trust
Office and the office of agency of the Trustee in The Borough of Manhattan, The
City of New York (which shall initially be located at State Street Bank and
Trust Company, N.A., 61 Broadway, New York, NY 10006, Attention: Corporate
Trust Department (Semtech Corporation, 4 1/2% Convertible Subordinated Notes due
2007 )), shall be considered as one such office or agency of the Company for
each of the aforesaid purposes.
So long as the Trustee is the Note registrar, the Trustee agrees to
mail, or cause to be mailed, the notices set forth in Section 8.10(a) and the
third paragraph of Section 8.11. If co-registrars have been appointed in
accordance with this Section , the Trustee shall mail such notices only to the
Company and the holders of Notes it can identify from its records.
Section 5.3. Appointments To Fill Vacancies In Trustee's Office. The
--------------------------------------------------
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 8.10, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 5.4. Provisions As To Paying Agent.
-----------------------------
(a) If the Company shall appoint a paying agent other than the
Trustee, or if the Trustee shall appoint such a paying agent, the Company
will cause such paying agent to execute and deliver to the Trustee an
instrument in which such agent shall agree with the Trustee, subject to the
provisions of this Section 5.4:
(1) that it will hold all sums held by it as such agent for
the payment of the principal of and premium, if any, or interest (including
Liquidated Damages, if any) on the Notes (whether such sums have been paid to it
by the Company or by any other obligor on the Notes) in trust for the benefit of
the holders of the Notes;
(2) that it will give the Trustee notice of any failure by
the Company (or by any other obligor on the Notes) to make any payment of the
principal of and premium, if any, or interest on the Notes when the same shall
be due and payable; and
(3) that at any time during the continuance of an Event of
Default, upon request of the Trustee, it will forthwith pay to the Trustee all
sums so held in trust.
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The Company shall, on or before each due date of the principal
of, premium, if any, or interest on the Notes, deposit with the paying agent a
sum (in funds which are immediately available on the due date for such payment)
sufficient to pay 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 to take such action; provided, however, that if such deposit is made on
the due date, such deposit shall be received by the paying agent by 10:00 a.m.
New York City time, on such date.
(b) If the Company shall act as its own paying agent, it
will, on or before each due date of the principal of, premium, if any, or
interest (including Liquidated Damages, if any) on the Notes, set aside,
segregate and hold in trust for the benefit of the holders of the Notes a
sum sufficient to pay such principal, premium, if any, or interest
(including Liquidated Damages, if any) so becoming due and will promptly
notify the Trustee of any failure to take such action and of any failure by
the Company (or any other obligor under the Notes) to make any payment of
the principal of, premium, if any, or interest (including Liquidated
Damages, if any) on the Notes when the same shall become due and payable.
(c) Anything in this Section 5.4 to the contrary
notwithstanding, the Company may, at any time, for the purpose of obtaining
a satisfaction and discharge of this Indenture, or for any other reason,
pay or cause to be paid to the Trustee all sums held in trust by the
Company or any paying agent hereunder as required by this Section 5.4, such
sums to be held by the Trustee upon the trusts herein contained and upon
such payment by the Company or any paying agent to the Trustee, the Company
or such paying agent shall be released from all further liability with
respect to such sums.
(d) Anything in this Section 5.4 to the contrary
notwithstanding, the agreement to hold sums in trust as provided in this
Section 5.4 is subject to Sections 13.3 and 13.4.
The Trustee shall not be responsible for the actions of any
other paying agents (including the Company if acting as its own paying agent)
and shall have no control of any funds held by such other paying agents.
Section 5.5. Existence. Subject to Article Twelve, the Company will
---------
do or cause to be done all things necessary to preserve and keep in full force
and effect its existence and rights (charter and statutory); provided, however,
that the Company shall not be required to preserve any such right if 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 Noteholders.
Section 5.6. Maintenance Of Properties. The Company will cause all
-------------------------
properties used or useful in the conduct of its business or the business of any
Significant 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
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times; provided, however, that nothing in this Section 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 Noteholders.
Section 5.7. Payment Of Taxes And Other Claims. The Company will pay
---------------------------------
or discharge, or cause to be paid or discharged, before the same may become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Significant Subsidiary or upon the income,
profits or property of the Company or any Significant Subsidiary, (ii) all
claims for labor, materials and supplies which, if unpaid, might by law become a
lien or charge upon the property of the Company or any Significant Subsidiary
and (iii) all stamps and other duties, if any, which may be imposed by the
United States or any political subdivision thereof or therein in connection with
the issuance, transfer, exchange or conversion of any Notes or with respect to
this Indenture; provided, however, that, in the case of clauses (i) and (ii),
the Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim (A) if the failure to do so
will not, in the aggregate, have a material adverse impact on the Company, or
(B) if the amount, applicability or validity is being contested in good faith by
appropriate proceedings.
Section 5.8. Rule 144A Information Requirement. Within the period
---------------------------------
prior to the expiration of the holding period applicable to sales thereof under
Rule 144(k) under the Securities Act (or any successor provision), the Company
covenants and agrees that it shall, during any period in which it is not subject
to Section 13 or 15(d) under the Exchange Act, make available to any holder or
beneficial holder of Notes or any Common Stock issued upon conversion thereof
which continue to be Restricted Securities in connection with any sale thereof
and any prospective purchaser of Notes or such Common Stock designated by such
holder or beneficial holder, the information required pursuant to Rule
144A(d)(4) under the Securities Act upon the request of any holder or beneficial
holder of the Notes or such Common Stock and it will take such further action as
any holder or beneficial holder of such Notes or such Common Stock may
reasonably request, all to the extent required from time to time to enable such
holder or beneficial holder to sell its Notes or Common Stock without
registration under the Securities Act within the limitation of the exemption
provided by Rule 144A, as such Rule may be amended from time to time. Upon the
request of any holder or any beneficial holder of the Notes or such Common
Stock, the Company will deliver to such holder a written statement as to whether
it has complied with such requirements.
Section 5.9. Stay, Extension And Usury Laws. The Company covenants
------------------------------
(to the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal of, premium,
if any, or interest (including Liquidated Damages, if any) on the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not, by resort
to any such law, hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
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Section 5.10. Compliance Certificate. The Company shall deliver to
----------------------
the Trustee, within one hundred twenty (120) days after the end of each fiscal
year of the Company, a certificate signed by either the principal executive
officer, principal financial officer or principal accounting officer of the
Company, stating whether or not to the best knowledge of the signer 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 the status thereof
of which the signer may have knowledge.
The Company will deliver to the Trustee, forthwith upon becoming aware
of (i) any default in the performance or observance of any covenant, agreement
or condition contained in this Indenture, or (ii) 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 5.10 or Section 4.5
shall be delivered to a Responsible Officer of the Trustee at its Corporate
Trust Office. In the event that the payment of the Notes is accelerated because
of an Event of Default, the Company shall promptly provide written notice to the
Trustee specifying the names and addresses of the holders of Senior Indebtedness
if the Trustee (and not the Company) is to provide holders of Senior
Indebtedness notice of such acceleration under Section 4.5 of the Indenture.
Section 5.11. Liquidated Damages Notice. In the event that the
-------------------------
Company is required to pay Liquidated Damages to holders of Notes pursuant to
the Registration Rights Agreement, the Company will provide written notice
("Liquidated Damages Notice") to the Trustee of its obligation to pay Liquidated
Damages no later than fifteen days prior to the proposed payment date for the
Liquidated Damages, and the Liquidated Damages Notice shall set forth the amount
of Liquidated Damages to be paid by the Company on such payment date. The
Trustee shall not at any time be under any duty to responsibility to any holder
of Notes to determine the Liquidated Damages, or with respect to the nature,
extent or calculation of the amount of Liquidated Damages when made, or with
respect to the method employed in such calculation of the Liquidated Damages.
ARTICLE 6.
NOTEHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
------------------------------
Section 6.1. Noteholders' Lists. The Company covenants and agrees
------------------
that it will furnish or cause to be furnished to the Trustee, semiannually, not
more than fifteen (15) days after each January 15 and July 15 in each year
beginning with July 15, 2000, and at such other times as the Trustee may request
in writing, within thirty (30) days after receipt by the Company of any such
request (or such lesser time as the Trustee may reasonably request in order to
enable it to timely provide any notice to be provided by it hereunder), a list
in such form as the Trustee may reasonably require of the names and addresses of
the holders of Notes as of a date not more than fifteen (15) days (or such other
date as the Trustee may reasonably request in order to so provide any such
notices) prior to the time such information is furnished, except that no such
list
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need be furnished by the Company to the Trustee so long as the Trustee is acting
as the sole Note registrar.
Section 6.2. Preservation And Disclosure Of Lists.
------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders
of Notes contained in the most recent list furnished to it as provided in
Section 6.1 or maintained by the Trustee in its capacity as Note registrar
or co-registrar in respect of the Notes, if so acting. The Trustee may
destroy any list furnished to it as provided in Section 6.1 upon receipt of
a new list so furnished.
(b) The rights of Noteholders to communicate with other holders of
Notes with respect to their rights under this Indenture or under the Notes,
and the corresponding rights and duties of the Trustee, shall be as
provided by the Trust Indenture Act.
(c) Every Noteholder, 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 of Notes
made pursuant to the Trust Indenture Act.
Section 6.3. Reports By Trustee.
------------------
(a) Within sixty (60) days after February 1 of each year commencing
with the year 2000, the Trustee shall transmit to holders of Notes such
reports dated as of February 1 of the year in which such reports are made
concerning the Trustee and its actions under this Indenture as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant thereto.
(b) A copy of such report shall, at the time of such transmission to
holders of Notes, be filed by the Trustee with each stock exchange and
automated quotation system upon which the Notes are listed and with the
Company. The Company will promptly notify the Trustee in writing when the
Notes are listed on any stock exchange or automated quotation system or
delisted therefrom.
Section 6.4. Reports By Company. The Company shall file with the
------------------
Trustee (and the Commission if at any time after the Indenture becomes qualified
under the Trust Indenture Act), and transmit to holders of Notes, such
information, documents and other reports and such summaries thereof, as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant to such Act, whether or not the Notes are governed by such
Act; provided, however, that any such information, documents or reports required
to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange
Act shall be filed with the Trustee within fifteen (15) days after the same is
so required to be filed with the Commission. Delivery of such reports,
information and documents to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
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ARTICLE 7.
REMEDIES OF THE TRUSTEE AND
NOTEHOLDERS ON AN EVENT OF DEFAULT
----------------------------------
Section 7.1. Events Of Default. In case one or more of the following
-----------------
Events of Default (whatever the reason for such Event of Default and whether it
shall 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) shall have occurred and be
continuing:
(a) default in the payment of any installment of interest (including
Liquidated Damages, if any) upon any of the Notes as and when the same
shall become due and payable, and continuance of such default for a period
of thirty (30) days, whether or not such payment is permitted under Article
Four hereof; or
(b) default in the payment of the principal of or premium, if any, on
any of the Notes as and when the same shall become due and payable either
at maturity or in connection with any redemption pursuant to Article Three,
by acceleration or otherwise, whether or not such payment is permitted
under Article Four hereof; or
(c) failure on the part of the Company duly to observe or perform any
other of the covenants or agreements on the part of the Company in the
Notes or in this Indenture (other than a covenant or agreement a default in
whose performance or whose breach is elsewhere in this Section 7.1
specifically dealt with) continued for a period of sixty (60) days after
the date on which written notice of such failure, requiring the Company to
remedy the same, shall have been given to the Company by the Trustee, or
the Company and a Responsible Officer of the Trustee by the holders of at
least twenty-five percent (25%) in aggregate principal amount of the Notes
at the time outstanding determined in accordance with Section 9.4; or
(d) the Company shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to the
Company or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of the Company or
any substantial part of the property of the Company, or shall consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against the
Company, or shall make a general assignment for the benefit of creditors,
or shall fail generally to pay its debts as they become due; or
(e) an involuntary case or other proceeding shall be commenced
against the Company seeking liquidation, reorganization or other relief
with respect to the Company or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar official of
the Company or any substantial part of the property of the Company,
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and such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of ninety (90) consecutive days;
then, and in each and every such case (other than an Event of Default specified
in Section 7.1(d) or (e)), unless the principal of all of the Notes shall have
already become due and payable, either the Trustee or the holders of not less
than twenty-five percent (25%) in aggregate principal amount of the Notes then
outstanding hereunder determined in accordance with Section 9.4, by notice in
writing to the Company (and to the Trustee if given by Noteholders), may declare
the principal of and premium, if any, on all the Notes and the interest accrued
thereon (including Liquidated Damages, if any) to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, anything in this Indenture or in the Notes
contained to the contrary notwithstanding. If an Event of Default specified in
Section 7.1(d) or (e) occurs, the principal of all the Notes and the interest
accrued thereon shall (including Liquidated Damages, if any) be immediately and
automatically due and payable without necessity of further action. This
provision, however, is subject to the conditions that if, at any time after the
principal of the Notes shall have been so declared due and payable, and before
any judgment or decree for the payment of the monies due shall have been
obtained or entered as hereinafter provided, the Company shall pay or shall
deposit with the Trustee a sum sufficient to pay all matured installments of
interest upon (including Liquidated Damages, if any) all Notes and the principal
of and premium, if any, on any and all Notes which shall have become due
otherwise than by acceleration (with interest on overdue installments of
interest (including Liquidated Damages, if any) (to the extent that payment of
such interest is enforceable under applicable law) and on such principal and
premium, if any, at the rate borne by the Notes, to the date of such payment or
deposit) and amounts due to the Trustee pursuant to Section 8.6, and if any and
all defaults under this Indenture, other than the nonpayment of principal of and
premium, if any, and accrued interest on (including Liquidated Damages, if any)
Notes which shall have become due by acceleration, shall have been cured or
waived pursuant to Section 7.7, then and in every such case the holders of a
majority in aggregate principal amount of the Notes then outstanding, by written
notice to the Company and to the Trustee, may waive all defaults or Events of
Default and rescind and annul such declaration and its consequences; but no such
waiver or rescission and annulment shall extend to or shall affect any
subsequent default or Event of Default, or shall impair any right consequent
thereon. The Company shall notify a Responsible Officer of the Trustee,
promptly upon becoming aware thereof, of any Event of Default.
In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such waiver or rescission and annulment or for any other reason or
shall have been determined adversely to the Trustee, then and in every such case
the Company, the holders of Notes, and the Trustee shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the holders of Notes, and the Trustee shall
continue as though no such proceeding had been taken.
Section 7.2. Payments Of Notes On Default; Suit Therefor. The Company
-------------------------------------------
covenants that (a) in case default shall be made in the payment of any
installment of interest upon (including Liquidated Damages, if any) any of the
Notes as and when the same shall become due and payable, and such default shall
have continued for a period of thirty (30) days,
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or (b) in case default shall be made in the payment of the principal of or
premium, if any, on any of the Notes as and when the same shall have become due
and payable, whether at maturity of the Notes or in connection with any
redemption, by or under this Indenture declaration or otherwise, then, upon
demand of the Trustee, the Company will pay to the Trustee, for the benefit of
the holders of the Notes, the whole amount that then shall have become due and
payable on all such Notes for principal and premium, if any, or interest
(including Liquidated Damages, if any), as the case may be, with interest upon
the overdue principal and premium, if any, and (to the extent that payment of
such interest is enforceable under applicable law) upon the overdue installments
of interest (including Liquidated Damages, if any) at the rate borne by the
Notes, and, in addition thereto, such further amount as shall be sufficient to
cover the costs and expenses of collection, including reasonable compensation to
the Trustee, its agents, attorneys and counsel, and all other amounts due the
Trustee under Section 8.6. Until such demand by the Trustee, the Company may pay
the principal of and premium, if any, and interest on (including Liquidated
Damages, if any) the Notes to the registered holders, whether or not the Notes
are overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Notes
and collect in the manner provided by law out of the property of the Company or
any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable.
In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Notes under Title
11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the Company or
such other obligor, or in the case of any other judicial proceedings relative to
the Company or such other obligor upon the Notes, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Notes 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 pursuant to the provisions of this Section 7.2, shall
be entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of principal, premium, if
any, and interest (including Liquidated Damages, if any) owing and unpaid in
respect of the Notes, and, in case of any judicial proceedings, to file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and of the Noteholders allowed in
such judicial proceedings relative to the Company or any other obligor on the
Notes, its or their creditors, or its or their property, and to collect and
receive any monies or other property payable or deliverable on any such claims,
and to distribute the same after the deduction of any amounts due the Trustee
under Section 8.6, and any receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, custodian or similar official is hereby authorized
by each of the Noteholders 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 Noteholders, to pay to the Trustee any amount due it for reasonable
compensation, expenses, advances and disbursements, including
40
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counsel fees incurred by it up to the date of such distribution. To the extent
that such payment of reasonable compensation, expenses, advances and
disbursements out of the estate in any such proceedings shall be denied for any
reason, payment of the same shall be secured by a lien on, and shall be paid out
of, any and all distributions, dividends, monies, securities and other property
which the holders of the Notes may be entitled to receive in such proceedings,
whether in liquidation or under any plan of reorganization or arrangement or
otherwise.
All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Trustee without the possession of
any of the Notes, or the production thereof at any trial or other proceeding
relative thereto, and any such suit or 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, its agent and
counsel, be for the ratable benefit of the holders of the Notes.
In any proceedings brought by the Trustee (and in any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Notes, and it shall not be necessary to make any holders of the Notes
parties to any such proceedings.
Section 7.3. Application Of Monies Collected By Trustee. Any monies
------------------------------------------
collected by the Trustee pursuant to this Article Seven shall be applied in the
order following, at the date or dates fixed by the Trustee for the distribution
of such monies, upon presentation of the several Notes, and stamping thereon 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
8.6;
SECOND: Subject to the provisions of Article Four, in case the
principal of the outstanding Notes shall not have become due and be unpaid, to
the payment of interest on (including Liquidated Damages, if any) the Notes in
default in the order of the maturity of the installments of such interest, with
interest (to the extent that such interest has been collected by the Trustee)
upon the overdue installments of interest (including Liquidated Damages, if any)
at the rate borne by the Notes, such payments to be made ratably to the Persons
entitled thereto;
THIRD: Subject to the provisions of Article Four, in case the
principal of the outstanding Notes shall have become due, by declaration or
otherwise, and be unpaid to the payment of the whole amount then owing and
unpaid upon the Notes for principal and premium, if any, and interest (including
Liquidated Damages, if any), with interest on the overdue principal and premium,
if any, and (to the extent that such interest has been collected by the Trustee)
upon overdue installments of interest (including Liquidated Damages, if any) at
the rate borne by the Notes, and in case such monies shall be insufficient to
pay in full the whole amounts so due and unpaid upon the Notes, then to the
payment of such principal and premium, if any, and interest (including
Liquidated Damages, if any) without preference or priority of principal and
premium, if any, over interest (including Liquidated Damages, if any), or of
interest (including Liquidated Damages, if any) over principal and premium, if
any, or of any installment of interest over any
41
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other installment of interest, or of any Note over any other Note, ratably to
the aggregate of such principal and premium, if any, and accrued and unpaid
interest; and
FOURTH: Subject to the provisions of Article Four, to the payment of
the remainder, if any, to the Company or any other Person lawfully entitled
thereto.
Section 7.4. Proceedings By Noteholder. No holder of any Note shall
-------------------------
have any right by virtue of or by reference to any provision of this Indenture
to institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture, or for the appointment of a receiver, trustee,
liquidator, custodian or other similar official, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee written
notice of an Event of Default and of the continuance thereof, as hereinbefore
provided, and unless also the holders of not less than twenty-five percent (25%)
in aggregate principal amount of the Notes then outstanding shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee hereunder and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee for sixty (60)
days after its receipt of such notice, request and offer of indemnity, shall
have neglected or refused to institute any such action, suit or proceeding and
no direction inconsistent with such written request shall have been given to the
Trustee pursuant to Section 7.7; it being understood and intended, and being
expressly covenanted by the taker and holder of every Note with every other
taker and holder and the Trustee, that no one or more holders of Notes shall
have any right in any manner whatever by virtue of or by reference to any
provision of this Indenture to affect, disturb or prejudice the rights of any
other holder of Notes, or to obtain or seek to obtain priority over or
preference to any other such holder, or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all holders of Notes (except as otherwise provided herein).
For the protection and enforcement of this Section 7.4, each and every
Noteholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
Notwithstanding any other provision of this Indenture and any
provision of any Note, the right of any holder of any Note to receive payment of
the principal of and premium, if any (including the redemption price upon
redemption pursuant to Article Three), and accrued interest on (including
Liquidated Damages, if any) such Note, on or after the respective due dates
expressed in such Note or in the event of redemption, or to institute suit for
the enforcement of any such payment on or after such respective dates against
the Company shall not be impaired or affected without the consent of such
holder.
Anything in this Indenture or the Notes to the contrary
notwithstanding, the holder of any Note, without the consent of either the
Trustee or the holder of any other Note, in its own behalf and for its own
benefit, may enforce, and may institute and maintain any proceeding suitable to
enforce, its rights of conversion as provided herein.
Section 7.5. Proceedings By Trustee. In case of an Event of Default
----------------------
known to a Responsible Officer of the Trustee, the Trustee may, in its
discretion, proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as are necessary to protect
and enforce any of such rights, either by suit in equity or by action at law or
by proceeding in bankruptcy or otherwise, whether for the specific enforcement
of any covenant
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or agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.
Section 7.6. Remedies Cumulative And Continuing. Except as provided
----------------------------------
in Section 2.6, all powers and remedies given by this Article Seven to the
Trustee or to the Noteholders shall, to the extent permitted by law, be deemed
cumulative and not exclusive of any thereof or of any other powers and remedies
available to the Trustee or the holders of the Notes, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained in this Indenture, and no delay or omission of the Trustee
or of any holder of any of the Notes to exercise any right or power accruing
upon any default or Event of Default occurring and continuing as aforesaid shall
impair any such right or power, or shall be construed to be a waiver of any such
default or any acquiescence therein, and, subject to the provisions of Section
7.4, every power and remedy given by this Article Seven or by law to the Trustee
or to the Noteholders may be exercised from time to time, and as often as shall
be deemed expedient, by the Trustee or by the Noteholders.
Section 7.7. Direction Of Proceedings And Waiver Of Defaults By
--------------------------------------------------
Majority Of Noteholders. The holders of a majority in aggregate principal amount
- -----------------------
of the Notes at the time outstanding determined in accordance with Section 9.4
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, however, that (a) such direction shall
not be in conflict with any rule of law or with this Indenture, (b) the Trustee
may take any other action which is not inconsistent with such direction and (c)
the Trustee may decline to take any action that would benefit some Noteholder to
the detriment of other Noteholders. The holders of a majority in aggregate
principal amount of the Notes at the time outstanding determined in accordance
with Section 9.4 may, on behalf of the holders of all of the Notes, waive any
past default or Event of Default hereunder and its consequences except (i) a
default in the payment of interest (including Liquidated Damages, if any) or
premium, if any, on, or the principal of, the Notes, (ii) a failure by the
Company to convert any Notes into Common Stock, (iii) a default in the payment
of redemption price pursuant to Article Three or (iv) a default in respect of a
covenant or provisions hereof which under Article Eleven cannot be modified or
amended without the consent of the holders of each or all Notes then outstanding
or affected thereby. Upon any such waiver, the Company, the Trustee and the
holders of the Notes shall be restored to their former positions and rights
hereunder; but no such waiver shall extend to any subsequent or other default or
Event of Default or impair any right consequent thereon. Whenever any default or
Event of Default hereunder shall have been waived as permitted by this Section
7.7, said default or Event of Default shall for all purposes of the Notes and
this Indenture be deemed to have been cured and to be not continuing; but no
such waiver shall extend to any subsequent or other default or Event of Default
or impair any right consequent thereon.
Section 7.8. Notice Of Defaults. The Trustee shall, within ninety
------------------
(90) days after a Responsible Officer of the Trustee has knowledge of the
occurrence of a default, mail to all Noteholders, as the names and addresses of
such holders appear upon the Note register, notice of all defaults known to a
Responsible Officer, unless such defaults shall have been cured or waived before
the giving of such notice; provided, however, that except in the case of default
in the payment of the principal of, or premium, if any, or interest (including
Liquidated Damages, if
43
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any) on any of the Notes, the Trustee shall be protected in withholding such
notice if and so long as a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interests of the Noteholders.
Section 7.9. Undertaking To Pay Costs. All parties to this Indenture
------------------------
agree, and each holder of any Note 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 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; provided, however, that the provisions of this
Section 7.9 (to the extent permitted by law) shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Noteholder, or group of
Noteholders, holding in the aggregate more than ten percent in principal amount
of the Notes at the time outstanding determined in accordance with Section 9.4,
or to any suit instituted by any Noteholder for the enforcement of the payment
of the principal of or premium, if any, or interest on any Note on or after the
due date expressed in such Note or to any suit for the enforcement of the right
to convert any Note in accordance with the provisions of Article Fifteen.
ARTICLE 8.
THE TRUSTEE
-----------
Section 8.1. Duties And Responsibilities Of Trustee. The Trustee,
--------------------------------------
prior to the occurrence of an Event of Default and after the curing of all
Events of Default which may have occurred, undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture. In case an
Event of Default has occurred (which has not been cured or waived), the Trustee
shall exercise such of 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 his own affairs.
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 willful misconduct, except that:
(a) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default which may have occurred:
(1) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture and the Trust
Indenture Act, and the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this Indenture and
no implied covenants or obligations shall be read into this Indenture and the
Trust Indenture Act against the Trustee; and
(2) in the absence of bad faith and willful misconduct on the
part of the Trustee, the Trustee may conclusively rely as to the truth of the
statements and the
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<PAGE>
correctness of the opinions expressed therein, upon any 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 provisions
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;
(b) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer or Officers of the Trustee, unless
the Trustee was negligent in ascertaining the pertinent facts;
(c) 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
written direction of the holders of not less than a majority in principal
amount of the Notes at the time outstanding determined as provided in
Section 9.4 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;
(d) whether or not therein 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 ;
(e) the Trustee shall not be liable in respect of any payment (as to
the correctness of amount, entitlement to receive or any other matters
relating to payment) or notice effected by the Company or any paying agent
or any records maintained by any co-registrar with respect to the Notes;
and
(f) if any party fails to deliver a notice relating to an event the
fact of which, pursuant to this Indenture, requires notice to be sent to
the Trustee, the Trustee may conclusively rely on its failure to receive
such notice as reason to act as if no such event occurred.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
Section 8.2. Reliance On Documents, Opinions, Etc. Except as
------------------------------------
otherwise provided in Section 8.1:
(a) the Trustee may rely and shall be protected in acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture, note, coupon or other paper or
document (whether in its original or facsimile form) believed by it in good
faith to be genuine and to have been signed or presented by the proper
party or parties;
(b) any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officers'
Certificate (unless other evidence in
45
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respect thereof be herein specifically prescribed); and any resolution of
the Board of Directors may be evidenced to the Trustee by a copy thereof
certified by the Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel of its own selection and
any advice or Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken or omitted by it hereunder in
good faith and in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Noteholders pursuant to the provisions of this
Indenture, unless such Noteholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby;
(e) 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 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
(f) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed by it with due
care hereunder.
Section 8.3. No Responsibility For Recitals, Etc. The recitals
-----------------------------------
contained herein and in the Notes (except in the Trustee's certificate of
authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes. The Trustee shall not be accountable for the use or application by the
Company of any Notes or the proceeds of any Notes authenticated and delivered by
the Trustee in conformity with the provisions of this Indenture.
Section 8.4. Trustee, Paying Agents, Conversion Agents Or Registrar
------------------------------------------------------
May Own Notes. The Trustee, any paying agent, any conversion agent or Note
- -------------
registrar, in its individual or any other capacity, may become the owner or
pledgee of Notes with the same rights it would have if it were not Trustee,
paying agent, conversion agent or Note registrar.
Section 8.5. Monies To Be Held In Trust. Subject to the provisions
--------------------------
of Section 13.4 and Section 4.2, all monies received by the Trustee shall, until
used or applied as herein provided, be held in trust for the purposes for which
they were received. 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 may be agreed in writing from time to time by the Company and the
Trustee.
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Section 8.6. Compensation And Expenses Of Trustee. The Company
------------------------------------
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to, reasonable compensation for all services rendered by it
hereunder in any capacity (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust) as mutually agreed
to from time to time in writing between the Company and the Trustee, and the
Company will pay or reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances reasonably incurred or made by the Trustee
in accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all Persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence, willful misconduct, recklessness or
bad faith. The Company also covenants to indemnify the Trustee (or any officer,
director or employee of the Trustee), in any capacity under this Indenture and
its agents and any authenticating agent for, and to hold them harmless against,
any and all loss, liability, claim or expense incurred without negligence,
willful misconduct, recklessness or bad faith on the part of the Trustee or such
officers, directors, employees and agent or authenticating agent, as the case
may be, and arising out of or in connection with the acceptance or
administration of this trust or in any other capacity hereunder, including the
costs and expenses of defending themselves against any claim of liability in the
premises. The obligations of the Company under this Section 8.6 to compensate or
indemnify the Trustee and to pay or reimburse the Trustee for expenses,
disbursements and advances shall be secured by a lien prior to that of the Notes
upon all property and funds held or collected by the Trustee as such, except
funds held in trust for the benefit of the holders of particular Notes. The
obligation of the Company under this Section shall survive the satisfaction and
discharge of this Indenture.
When the Trustee and its agents and any authenticating agent incur
expenses or render services after an Event of Default specified in Section
7.1(d) or (e) with respect to the Company occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any bankruptcy, insolvency or similar laws.
Section 8.7. Officers' Certificate As Evidence. Except as otherwise
---------------------------------
provided in Section 8.1, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence or willful misconduct on the part
of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee.
Section 8.8. Conflicting Interests Of Trustee. 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.
Section 8.9. Eligibility Of Trustee. There shall at all times be a
----------------------
Trustee hereunder which shall be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of at least
$50,000,000 (or if such Person is a member of a bank holding company system, its
bank holding company shall have a combined capital and surplus of at least
$50,000,000). If such Person publishes reports of condition at least
47
<PAGE>
annually, pursuant to law or to the requirements of any supervising or examining
authority, then for the purposes of this Section the combined capital and
surplus of such Person 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 8.9, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Section 8.10. Resignation or Removal Of Trustee.
---------------------------------
(a) The Trustee may at any time resign by giving written notice of
such resignation to the Company and to the holders of Notes. Upon receiving
such notice of resignation, the Company shall promptly appoint a successor
trustee by written instrument, in duplicate, executed by order of the Board
of Directors, one copy of which instrument shall be delivered to the
resigning Trustee and one copy to the successor trustee. If no successor
trustee shall have been so appointed and have accepted appointment sixty
(60) days after the mailing of such notice of resignation to the
Noteholders, the resigning Trustee may, upon ten (10) business days' notice
to the Company and the Noteholders, appoint a successor identified in such
notice or may petition, at the expense of the Company, any court of
competent jurisdiction for the appointment of a successor trustee, or, if
any Noteholder who has been a bona fide holder of a Note or Notes for at
least six (6) months may, subject to the provisions of Section 7.9, on
behalf of himself and all others similarly situated, petition any such
court for the appointment of a successor trustee. Such court may thereupon,
after such notice, if any, as it may deem proper and prescribe, appoint a
successor trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with Section 8.8 after
written request therefor by the Company or by any Noteholder who has been a bona
fide holder of a Note or Notes for at least six (6) months; or
(2) the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.9 and shall fail to resign after written
request therefor by the Company or by any such Noteholder;
or
(3) 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, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee, or, subject to the
provisions of Section 7.9, any Noteholder who has been a bona fide holder of a
Note or Notes for at least six (6) 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
48
<PAGE>
appointment of a successor trustee; provided, however, that if no successor
Trustee shall have been appointed and have accepted appointment sixty (60) days
after either the Company or the Noteholders has removed the Trustee, the Trustee
so removed may petition any court of competent jurisdiction for an appointment
of a successor trustee. Such court may thereupon, after such notice, if any, as
it may deem proper and prescribe, remove the Trustee and appoint a successor
trustee.
(c) The holders of a majority in aggregate principal amount of the
Notes at the time outstanding may at any time remove the Trustee and
nominate a successor trustee which shall be deemed appointed as successor
trustee unless, within ten (10) days after notice to the Company of such
nomination, the Company objects thereto, in which case the Trustee so
removed or any Noteholder, or if such Trustee so removed or any Noteholder
fails to act, the Company, upon the terms and conditions and otherwise as
in Section 8.10(a) provided, may petition any court of competent
jurisdiction for an appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.10
shall become effective upon acceptance of appointment by the successor
trustee as provided in Section 8.11.
Section 8.11. Acceptance By Successor Trustee. Any successor trustee
-------------------------------
appointed as provided in Section 8.10 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written request
of the Company or of the successor trustee, the trustee ceasing to act shall,
upon payment of any amount then due it pursuant to the provisions of Section
8.6, execute and deliver an instrument transferring to such successor trustee
all the rights and powers of the trustee so ceasing to act. Upon request of any
such successor trustee, the Company shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such successor
trustee all such rights and powers. Any trustee ceasing to act shall,
nevertheless, retain a lien upon all property and funds held or collected by
such trustee as such, except for funds held in trust for the benefit of holders
of particular Notes, to secure any amounts then due it pursuant to the
provisions of Section 8.6.
No successor trustee shall accept appointment as provided in this
Section 8.11 unless, at the time of such acceptance, such successor trustee
shall be qualified under the provisions of Section 8.8 and be eligible under the
provisions of Section 8.9.
Upon acceptance of appointment by a successor trustee as provided in
this Section 8.11, the Company (or the former trustee, at the written direction
of the Company) shall mail or cause to be mailed notice of the succession of
such trustee hereunder to the holders of Notes at their addresses as they shall
appear on the Note register. If the Company fails to mail such notice within
ten (10) days after acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Company.
49
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Section 8.12. Succession By Merger, Etc. 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 (including any
trust created by this Indenture), shall be the successor to the Trustee
hereunder without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that in the case of any corporation
succeeding to all or substantially all of the corporate trust business of the
Trustee, such corporation shall be qualified under the provisions of Section 8.8
and eligible under the provisions of Section 8.9.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture, any of the Notes shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the certificate
of authentication of any predecessor trustee or authenticating agent appointed
by such predecessor trustee, and deliver such Notes so authenticated; and in
case at that time any of the Notes shall not have been authenticated, any
successor to the Trustee or any authenticating agent appointed by such successor
trustee may authenticate such Notes in the name of the successor trustee; and in
all such cases such certificates shall have the full force that is provided in
the Notes or in this Indenture; provided, however, that the right to adopt the
certificate of authentication of any predecessor Trustee or authenticate Notes
in the name of any predecessor Trustee shall apply only to its successor or
successors by merger, conversion or consolidation.
Section 8.13. Preferential Collection Of Claims. If and when the
---------------------------------
Trustee shall be or become a creditor of the Company (or any other obligor upon
the Notes), the Trustee shall be subject to the provisions of the Trust
Indenture Act regarding the collection of the claims against the Company (or any
such other obligor).
Section 8.14. Trustee's Application For Instructions From The
-----------------------------------------------
Company. Any application by the Trustee for written instructions from the
- -------
Company (other than with regard to any action proposed to be taken or omitted to
be taken by the Trustee that affects the rights of the holders of the Notes or
holders of Senior Indebtedness under this Indenture, including, without
limitation, under Article Four hereof) may, at the option of the Trustee, set
forth in writing any action proposed to be taken or omitted by the Trustee under
this Indenture and the date on and/or after which such action shall be taken or
such omission shall be effective. The Trustee shall not be liable for any action
taken by, or omission of, the Trustee in accordance with a proposal included in
such application on or after the date specified in such application (which date
shall not be less than three (3) Business Days after the date any officer of the
Company actually receives such application, unless any such officer shall have
consented in writing to any earlier date) unless prior to taking any such action
(or the effective date in the case of an omission), the Trustee shall have
received written instructions in response to such application specifying the
action to be taken or omitted.
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ARTICLE 9.
THE NOTEHOLDERS
---------------
Section 9.1. Action By Noteholders. Whenever in this Indenture it is
---------------------
provided that the holders of a specified percentage in aggregate principal
amount of the Notes may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action, the holders of
such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by Noteholders
in person or by agent or proxy appointed in writing, or (b) by the record of the
holders of Notes voting in favor thereof at any meeting of Noteholders duly
called and held in accordance with the provisions of Article Ten, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of Noteholders. Whenever the Company or the Trustee solicits the taking
of any action by the holders of the Notes, the Company or the Trustee may fix in
advance of such solicitation, a date as the record date for determining holders
entitled to take such action. The record date shall be not more than fifteen
(15) days prior to the date of commencement of solicitation of such action.
Section 9.2. Proof Of Execution By Noteholders. Subject to the
---------------------------------
provisions of Sections 8.1, 8.2 and 10.5, proof of the execution of any
instrument by a Noteholder or its agent or proxy shall be sufficient if made in
accordance with such reasonable rules and regulations as may be prescribed by
the Trustee or in such manner as shall be satisfactory to the Trustee. The
holding of Notes shall be proved by the registry of such Notes or by a
certificate of the Note registrar.
The record of any Noteholders' meeting shall be proved in the manner
provided in Section 10.6.
Section 9.3. Who Are Deemed Absolute Owners. The Company, the
------------------------------
Trustee, any paying agent, any conversion agent and any Note registrar may deem
the Person in whose name such Note shall be registered upon the Note register to
be, and may treat it as, the absolute owner of such Note (whether or not such
Note shall be overdue and notwithstanding any notation of ownership or other
writing thereon made by any Person other than the Company or any Note registrar)
for the purpose of receiving payment of or on account of the principal of,
premium, if any, and interest on such Note, for conversion of such Note and for
all other purposes; and neither the Company nor the Trustee nor any paying agent
nor any conversion agent nor any Note registrar shall be affected by any notice
to the contrary. All such payments so made to any holder for the time being, or
upon his order, shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for monies payable upon any
such Note.
Section 9.4. Company-Owned Notes Disregarded. In determining whether
-------------------------------
the holders of the requisite aggregate principal amount of Notes have concurred
in any direction, consent, waiver or other action under this Indenture, Notes
which are owned by the Company or any other obligor on the Notes or any
Affiliate of the Company or any other obligor on the Notes shall be disregarded
and deemed not to be outstanding for the purpose of any such determination;
provided, however, that, for the purposes of determining whether the Trustee
shall be protected
51
<PAGE>
in relying on any such direction, consent, waiver or other action, only Notes
which a Responsible Officer knows are so owned shall be so disregarded. Notes so
owned which have been pledged in good faith may be regarded as outstanding for
the purposes of this Section 9.4 if the pledgee shall establish to the
satisfaction of the Trustee the pledgee's right to vote such Notes and that the
pledgee is not the Company, any other obligor on the Notes or any Affiliate of
the Company or any such other obligor. In the case of a dispute as to such
right, any decision by the Trustee taken upon the advice of counsel shall be
full protection to the Trustee. Upon request of the Trustee, the Company shall
furnish to the Trustee promptly an Officers' Certificate listing and identifying
all Notes, if any, known by the Company to be owned or held by or for the
account of any of the above described Persons, and, subject to Section 8.1, the
Trustee shall be entitled to accept such Officers' Certificate as conclusive
evidence of the facts therein set forth and of the fact that all Notes not
listed therein are outstanding for the purpose of any such determination.
Section 9.5. Revocation Of Consents; Future Holders Bound. At any time
--------------------------------------------
prior to (but not after) the evidencing to the Trustee, as provided in Section
9.1, of the taking of any action by the holders of the percentage in aggregate
principal amount of the Notes specified in this Indenture in connection with
such action, any holder of a Note which is shown by the evidence to be included
in the Notes the holders of which have consented to such action may, by filing
written notice with the Trustee at its Corporate Trust Office and upon proof of
holding as provided in Section 9.2, revoke such action so far as concerns such
Note. Except as aforesaid, any such action taken by the holder of any Note shall
be conclusive and binding upon such holder and upon all future holders and
owners of such Note and of any Notes issued in exchange or substitution
therefor, irrespective of whether any notation in regard thereto is made upon
such Note or any Note issued in exchange or substitution therefor.
ARTICLE 10.
MEETINGS OF NOTEHOLDERS
-----------------------
Section 10.1. Purpose Of Meetings. A meeting of Noteholders may be
-------------------
called at any time and from time to time pursuant to the provisions of this
Article Ten for any of the following purposes:
(1) to give any notice to the Company or to the Trustee or
to give any directions to the Trustee permitted under this Indenture, or to
consent to the waiving of any default or Event of Default hereunder and its
consequences, or to take any other action authorized to be taken by Noteholders
pursuant to any of the provisions of Article Seven;
(2) to remove the Trustee and nominate a successor trustee
pursuant to the provisions of Article Eight;
(3) to consent to the execution of an indenture or
indentures supplemental hereto pursuant to the provisions of Section 11.2; or
(4) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of the Notes
under any other provision of this Indenture or under applicable law.
52
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Section 10.2. Call Of Meetings By Trustee. The Trustee may at any
---------------------------
time call a meeting of Noteholders to take any action specified in Section 10.1,
to be held at such time and at such place as the Trustee shall determine. Notice
of every meeting of the Noteholders, setting forth the time and the place of
such meeting and in general terms the action proposed to be taken at such
meeting and the establishment of any record date pursuant to Section 9.1, shall
be mailed to holders of Notes at their addresses as they shall appear on the
Note register. Such notice shall also be mailed to the Company. Such notices
shall be mailed not less than twenty (20) nor more than ninety (90) days prior
to the date fixed for the meeting.
Any meeting of Noteholders shall be valid without notice if the
holders of all Notes then outstanding are present in person or by proxy or if
notice is waived before or after the meeting by the holders of all Notes
outstanding, and if the Company and the Trustee are either present by duly
authorized representatives or have, before or after the meeting, waived notice.
Section 10.3. Call Of Meetings By Company Or Noteholders. In case at
------------------------------------------
any time the Company, pursuant to a resolution of its Board of Directors, or the
holders of at least ten percent (10%) in aggregate principal amount of the Notes
then outstanding, shall have requested the Trustee to call a meeting of
Noteholders, by written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not have mailed the
notice of such meeting within twenty (20) days after receipt of such request,
then the Company or such Noteholders may determine the time and the place for
such meeting and may call such meeting to take any action authorized in Section
10.1, by mailing notice thereof as provided in Section 10.2.
Section 10.4. Qualifications For Voting. To be entitled to vote at
-------------------------
any meeting of Noteholders a person shall (a) be a holder of one or more Notes
on the record date pertaining to such meeting or (b) be a person appointed by an
instrument in writing as proxy by a holder of one or more Notes on the record
date pertaining to such meeting. The only persons who shall be entitled to be
present or to speak at any meeting of Noteholders shall be the persons entitled
to vote at such meeting and their counsel and any representatives of the Trustee
and its counsel and any representatives of the Company and its counsel.
Section 10.5. Regulations. Notwithstanding any other provisions of
-----------
this Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Noteholders, in regard to proof of the holding of
Notes 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 think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Noteholders as provided in Section 10.3, in which case the Company
or the Noteholders 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 holders of a majority in principal
amount of the Notes represented at the meeting and entitled to vote at the
meeting.
53
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Subject to the provisions of Section 9.4, at any meeting each
Noteholder or proxyholder shall be entitled to one vote for each $1,000
principal amount of Notes held or represented by him; provided, however, that no
vote shall be cast or counted at any meeting in respect of any Note 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 other than
by virtue of Notes held by him or instruments in writing as aforesaid duly
designating him as the proxy to vote on behalf of other Noteholders. Any
meeting of Noteholders duly called pursuant to the provisions of Section 10.2 or
10.3 may be adjourned from time to time by the holders of a majority of the
aggregate principal amount of Notes represented at the meeting, whether or not
constituting a quorum, and the meeting may be held as so adjourned without
further notice.
Section 10.6. Voting. The vote upon any resolution submitted to any
------
meeting of Noteholders shall be by written ballot on which shall be subscribed
the signatures of the holders of Notes or of their representatives by proxy and
the outstanding principal amount of the Notes 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 in duplicate of
the proceedings of each meeting of Noteholders 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 mailed as
provided in Section 10.2. The record shall show the principal amount of the
Notes voting in favor of or against any resolution. The record shall be signed
and verified by the affidavits of the permanent chairman and secretary of the
meeting and one of the duplicates shall be delivered to the Company and the
other 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.
Section 10.7. No Delay Of Rights By Meeting. Nothing contained in
-----------------------------
this Article Ten shall be deemed or construed to authorize or permit, by reason
of any call of a meeting of Noteholders or any rights expressly or impliedly
conferred hereunder to make such call, any hindrance or delay in the exercise of
any right or rights conferred upon or reserved to the Trustee or to the
Noteholders under any of the provisions of this Indenture or of the Notes.
ARTICLE 11.
SUPPLEMENTAL INDENTURES
-----------------------
Section 11.1. Supplemental Indentures Without Consent Of Noteholders.
------------------------------------------------------
The Company, when authorized by the resolutions of the Board of Directors, and
the Trustee may, from time to time, and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
54
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(a) make provision with respect to the conversion rights of the
holders of Notes pursuant to the requirements of Section 15.6 and the
redemption obligations of the Company pursuant to the requirements of
Section 3.5(e);
(b) subject to Article Four, to convey, transfer, assign, mortgage or
pledge to the Trustee as security for the Notes, any property or assets;
(c) to evidence the succession of another Person to the Company, or
successive successions, and the assumption by the successor Person of the
covenants, agreements and obligations of the Company pursuant to Article
Twelve;
(d) to add to the covenants of the Company such further covenants,
restrictions or conditions as the Board of Directors and the Trustee shall
consider to be for the benefit of the holders of Notes, and to make the
occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions or conditions a default or an Event of
Default permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; provided, however, that in
respect of any such additional covenant, restriction or condition, such
supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the
case of other defaults) or may provide for an immediate enforcement upon
such default or may limit the remedies available to the Trustee upon such
default;
(e) to provide for the issuance under this Indenture of Notes in
coupon form (including Notes registrable as to principal only) and to
provide for exchangeability of such Notes with the Notes issued hereunder
in fully registered form and to make all appropriate changes for such
purpose;
(f) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture that may be defective or
inconsistent with any other provision contained herein or in any
supplemental indenture, or to make such other provisions in regard to
matters or questions arising under this Indenture that shall not materially
adversely affect the interests of the holders of the Notes;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes; or
(h) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualifications of this
Indenture under the Trust Indenture Act, or under any similar federal
statute hereafter enacted.
Upon the written request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any supplemental indenture, the Trustee
is hereby authorized to join with the Company in the execution of any such
supplemental indenture, to make any further appropriate agreements and
stipulations that may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in
55
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its discretion, enter into any supplemental indenture
that affects the Trustee's own rights, duties or immunities under this Indenture
or otherwise.
Any supplemental indenture authorized by the provisions of this
Section 11.1 may be executed by the Company and the Trustee without the consent
of the holders of any of the Notes at the time outstanding, notwithstanding any
of the provisions of Section 11.2.
Notwithstanding any other provision of the Indenture or the Notes, the
Registration Rights Agreement and the obligation to pay Liquidated Damages
thereunder may be amended, modified or waived in accordance with the provisions
of the Registration Rights Agreement.
Section 11.2. Supplemental Indenture With Consent Of Noteholders.
--------------------------------------------------
With the consent (evidenced as provided in Article Nine) of the holders of not
less than a majority in aggregate principal amount of the Notes at the time
outstanding, the Company, when authorized by the resolutions of the Board of
Directors, and the Trustee may, from time to time and at any time, 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 any supplemental indenture or of modifying in any manner the
rights of the holders of the Notes; provided, however, that no such supplemental
indenture shall (i) extend the fixed maturity of any Note, or reduce the rate or
extend the time of payment of interest thereon, or reduce the principal amount
thereof or premium, if any, thereon, or reduce any amount payable on redemption
thereof, or impair the right of any Noteholder to institute suit for the payment
thereof, or make the principal thereof or interest or premium, if any, thereon
payable in any coin or currency other than that provided in the Notes, or modify
the provisions of this Indenture with respect to the subordination of the Notes
in a manner adverse to the Noteholders in any material respect, or change the
obligation of the Company to redeem any Note upon the happening of a Fundamental
Change in a manner adverse to the holder of Notes, or impair the right to
convert the Notes into Common Stock subject to the terms set forth herein,
including Section 15.6, in each case, without the consent of the holder of each
Note so affected, or (ii) reduce the aforesaid percentage of Notes, the holders
of which are required to consent to any such supplemental indenture, without the
consent of the holders of all Notes then outstanding.
Upon the written request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any such supplemental indenture, and upon
the filing with the Trustee of evidence of the consent of Noteholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
It shall not be necessary for the consent of the Noteholders under
this Section 11.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
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Section 11.3. Effect Of Supplemental Indenture. Any supplemental
--------------------------------
indenture executed pursuant to the provisions of this Article Eleven shall
comply with the Trust Indenture Act, as then in effect, provided that this
Section 11.3 shall not require such supplemental indenture or the Trustee to be
qualified under the Trust Indenture Act prior to the time such qualification is
in fact required under the terms of the Trust Indenture Act or the Indenture has
been qualified under the Trust Indenture Act, nor shall it constitute any
admission or acknowledgment by any party to such supplemental indenture that any
such qualification is required prior to the time such qualification is in fact
required under the terms of the Trust Indenture Act or the Indenture has been
qualified under the Trust Indenture Act. Upon the execution of any supplemental
indenture pursuant to the provisions of this Article Eleven, this Indenture
shall be and be deemed to be modified and amended in accordance therewith and
the respective rights, limitation of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Company and the holders of Notes shall
thereafter be determined, exercised and enforced hereunder, subject in all
respects to such modifications and amendments and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
Section 11.4. Notation On Notes. Notes authenticated and delivered
-----------------
after the execution of any supplemental indenture pursuant to the provisions of
this Article Eleven may bear a notation in form approved by the Trustee as to
any matter provided for in such supplemental indenture. If the Company or the
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Trustee and the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may, at the Company's expense, be
prepared and executed by the Company, authenticated by the Trustee (or an
authenticating agent duly appointed by the Trustee pursuant to Section 16.11)
and delivered in exchange for the Notes then outstanding, upon surrender of such
Notes then outstanding.
Section 11.5. Evidence Of Compliance Of Supplemental Indenture To Be
------------------------------------------------------
Furnished To Trustee. Prior to entering into any supplemental indenture, the
- --------------------
Trustee may request an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Article Eleven.
ARTICLE 12.
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
-------------------------------------------------
Section 12.1. Company May Consolidate, Etc. On Certain Terms. Subject
----------------------------------------------
to the provisions of Section 12.2, nothing contained in this Indenture or in any
of the Notes shall prevent any consolidation or merger of the Company with or
into any other Person or Persons (whether or not affiliated with the Company),
or successive consolidations or mergers in which the Company or its successor or
successors shall be a party or parties, or shall prevent any sale, conveyance or
lease (or successive sales, conveyances or leases) of all or substantially all
of the property of the Company, to any other Person (whether or not affiliated
with the Company), authorized to acquire and operate the same and that shall be
organized under the laws of the United States of America, any state thereof or
the District of Columbia; provided, however, that upon any such consolidation,
merger, sale, conveyance or lease, the due and punctual payment of
57
<PAGE>
the principal of and premium, if any, and interest (including Liquidated
Damages, if any) on all of the Notes, according to their tenor and the due and
punctual performance and observance of all of the covenants and conditions of
this Indenture to be performed by the Company, shall be expressly assumed, by
supplemental indenture satisfactory in form to the Trustee, executed and
delivered to the Trustee by the Person (if other than the Company) formed by
such consolidation, or into which the Company shall have been merged, or by the
Person that shall have acquired or leased such property, and such supplemental
indenture shall provide for the applicable conversion rights set forth in
Section 15.6.
Section 12.2. Successor Corporation To Be Substituted. In case of
---------------------------------------
any such consolidation, merger, sale, conveyance or lease and upon the
assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the due and
punctual payment of the principal of and premium, if any, and interest on all of
the Notes and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, such successor
Person shall succeed to and be substituted for the Company, with the same effect
as if it had been named herein as the party of this first part. Such successor
Person thereupon may cause to be signed, and may issue either in its own name or
in the name of Semtech Corporation any or all of the Notes, issuable hereunder
that theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor Person instead of the Company and
subject to all the terms, conditions and limitations in this Indenture
prescribed, the Trustee shall authenticate and shall deliver, or cause to be
authenticated and delivered, any Notes that previously shall have been signed
and delivered by the officers of the Company to the Trustee for authentication,
and any Notes that such successor Person thereafter shall cause to be signed and
delivered to the Trustee for that purpose. All the Notes so issued shall in all
respects have the same legal rank and benefit under this Indenture as the Notes
theretofore or thereafter issued in accordance with the terms of this Indenture
as though all of such Notes had been issued at the date of the execution hereof.
In the event of any such consolidation, merger, sale, conveyance or lease, the
Person named as the "Company" in the first paragraph of this Indenture or any
successor that shall thereafter have become such in the manner prescribed in
this Article Twelve may be dissolved, wound up and liquidated at any time
thereafter and such Person shall be released from its liabilities as obligor and
maker of the Notes and from its obligations under this Indenture.
In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form (but not in substance) may be made in the
Notes thereafter to be issued as may be appropriate.
Section 12.3. Opinion Of Counsel To Be Given Trustee. The Trustee
--------------------------------------
shall receive an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any such consolidation, merger, sale, conveyance or lease and any
such assumption complies with the provisions of this Article Twelve.
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ARTICLE 13.
SATISFACTION AND DISCHARGE OF INDENTURE
---------------------------------------
Section 13.1. Discharge Of Indenture. When (a) the Company shall
----------------------
deliver to the Trustee for cancellation all Notes theretofore authenticated
(other than any Notes that have been destroyed, lost or stolen and in lieu of or
in substitution for which other Notes shall have been authenticated and
delivered) and not theretofore canceled, or (b) all the Notes not theretofore
canceled or delivered to the Trustee for cancellation shall have become due and
payable, or are by their terms to become due and payable within one year or are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption, and the Company shall
deposit with the Trustee, in trust, funds sufficient to pay at maturity or upon
redemption of all of the Notes (other than any Notes that shall have been
mutilated, destroyed, lost or stolen and in lieu of or in substitution for which
other Notes shall have been authenticated and delivered) not theretofore
canceled or delivered to the Trustee for cancellation, including principal and
premium, if any, and interest due or to become due to such date of maturity or
redemption date, as the case may be, accompanied by a verification report, as to
the sufficiency of the deposited amount, from an independent certified
accountant or other financial professional satisfactory to the Trustee, and if
the Company shall also pay or cause to be paid all other sums payable hereunder
by the Company, then this Indenture shall cease to be of further effect (except
as to (i) remaining rights of registration of transfer, substitution and
exchange and conversion of Notes, (ii) rights hereunder of Noteholders to
receive payments of principal of and premium, if any, and interest on, the Notes
and the other rights, duties and obligations of Noteholders, as beneficiaries
hereof with respect to the amounts, if any, so deposited with the Trustee and
(iii) the rights, obligations and immunities of the Trustee hereunder), and the
Trustee, on written demand of the Company accompanied by an Officers'
Certificate and an Opinion of Counsel as required by Section 16.5 and at the
cost and expense of the Company, shall execute proper instruments acknowledging
satisfaction of and discharging this Indenture; the Company, however, hereby
agrees to reimburse the Trustee for any costs or expenses thereafter reasonably
and properly incurred by the Trustee and to compensate the Trustee for any
services thereafter reasonably and properly rendered by the Trustee in
connection with this Indenture or the Notes.
Section 13.2. Deposited Monies To Be Held In Trust By Trustee.
-----------------------------------------------
Subject to Section 13.4, all monies deposited with the Trustee pursuant to
Section 13.1, provided such deposit was not in violation of Article Four, shall
be held in trust for the sole benefit of the Noteholders and not to be subject
to the subordination provisions of Article Four, and such monies shall be
applied by the Trustee to the payment, either directly or through any paying
agent (including the Company if acting as its own paying agent), to the holders
of the particular Notes for the payment or redemption of which such monies have
been deposited with the Trustee, of all sums due and to become due thereon for
principal and interest and premium, if any.
Section 13.3. Paying Agent To Repay Monies Held. Upon the
---------------------------------
satisfaction and discharge of this Indenture, all monies then held by any paying
agent of the Notes (other than the Trustee) shall, upon written request of the
Company, be repaid to it or paid to the Trustee, and
59
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thereupon such paying agent shall be released from all further liability
with respect to such monies.
Section 13.4. Return Of Unclaimed Monies. Subject to the requirements
--------------------------
of applicable law, any monies deposited with or paid to the Trustee for payment
of the principal of, premium, if any, or interest on Notes and not applied but
remaining unclaimed by the holders of Notes for two years after the date upon
which the principal of, premium, if any, or interest on such Notes, as the case
may be, shall have become due and payable, shall be repaid to the Company by the
Trustee on demand and all liability of the Trustee shall thereupon cease with
respect to such monies; and the holder of any of the Notes shall thereafter look
only to the Company for any payment that such holder may be entitled to collect
unless an applicable abandoned property law designates another Person.
Section 13.5. Reinstatement. If the Trustee or the paying agent is
-------------
unable to apply any money in accordance with Section 13.2 by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 13.1 until such time as the Trustee or the paying
agent is permitted to apply all such money in accordance with Section 13.2;
provided, however, that if the Company makes any payment of interest on or
principal of any Note following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the holders of such Notes to
receive such payment from the money held by the Trustee or paying agent.
ARTICLE 14.
IMMUNITY OF INCORPORATORS,
STOCKHOLDERS, OFFICERS AND DIRECTORS
------------------------------------
Section 14.1. Indenture And Notes Solely Corporate Obligations. No
------------------------------------------------
recourse for the payment of the principal of or premium, if any, or interest on
any Note, or for any claim based thereon or otherwise in respect thereof, and no
recourse under or upon any obligation, covenant or agreement of the Company in
this Indenture or in any supplemental indenture or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, employee, agent, officer, director or subsidiary, as
such, past, present or future, of the Company or of any successor corporation,
either directly or through the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that all such
liability is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of the Notes.
ARTICLE 15.
CONVERSION OF NOTES
-------------------
Section 15.1. Right To Convert. Subject to and upon compliance with
----------------
the provisions of this Indenture, including, without limitation, Article Four,
the holder of any Note
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shall have the right, at its option, at any time after the original issuance of
the Notes hereunder through the close of business on the final maturity date of
the Notes (except that, with respect to any Note or portion of a Note that shall
be called for redemption, such right shall terminate, except as provided in
Section 15.2, Section 3.2 or Section 3.4, at the close of business on the
Business Day next preceding the date fixed for redemption of such Note or
portion of a Note unless the Company shall default in payment due upon
redemption thereof) to convert the principal amount of any such Note, or any
portion of such principal amount which is $1,000 or an integral multiple
thereof, into that number of fully paid and non-assessable shares of Common
Stock (as such shares shall then be constituted) obtained by dividing the
principal amount of the Note or portion thereof surrendered for conversion by
the Conversion Price in effect at such time, by surrender of the Note so to be
converted in whole or in part in the manner provided, together with any required
funds, in Section 15.2. A Note in respect of which a holder is exercising its
option to require redemption upon a Fundamental Change pursuant to Section 3.5
may be converted only if such holder withdraws its election to exercise in
accordance with Section 3.5. A holder of Notes is not entitled to any rights of
a holder of Common Stock until such holder has converted his Notes to Common
Stock, and only to the extent such Notes are deemed to have been converted to
Common Stock under this Article Fifteen.
Section 15.2. Exercise Of Conversion Privilege; Issuance Of Common
----------------------------------------------------
Stock On Conversion; No Adjustment For Interest Or Dividends. In order to
- ------------------------------------------------------------
exercise the conversion privilege with respect to any Note in certificated form,
the holder of any such Note to be converted in whole or in part shall surrender
such Note, duly endorsed, at an office or agency maintained by the Company
pursuant to Section 5.2, accompanied by the funds, if any, required by the
penultimate paragraph of this Section 15.2, and shall give written notice of
conversion in the form provided on the Notes (or such other notice which is
acceptable to the Company) to the office or agency that the holder elects to
convert such Note or the portion thereof specified in said notice. Such notice
shall also state the name or names (with address or addresses) in which the
certificate or certificates for shares of Common Stock which shall be issuable
on such conversion shall be issued, and shall be accompanied by transfer taxes,
if required pursuant to Section 15.7. Each such Note surrendered for conversion
shall, unless the shares issuable on conversion are to be issued in the same
name as the registration of such Note, be duly endorsed by, or be accompanied by
instruments of transfer in form satisfactory to the Company duly executed by,
the holder or his duly authorized attorney.
In order to exercise the conversion privilege with respect to any
interest in a Global Note, the beneficial holder must complete, or cause to be
completed, the appropriate instruction form for conversion pursuant to the
Depository's book-entry conversion program, deliver, or cause to be delivered,
by book-entry delivery an interest in such Global Note, furnish appropriate
endorsements and transfer documents if required by the Company or the Trustee or
conversion agent, and pay the funds, if any, required by this Section 15.2 and
any transfer taxes if required pursuant to Section 15.7.
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, subject to compliance with any restrictions on
transfer if shares issuable on conversion are to be issued in a name other than
that of the Noteholder (as if such transfer were a transfer of the Note or Notes
(or portion thereof) so converted), the Company shall issue and shall deliver to
such Noteholder at the office or agency maintained by the Company for such
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purpose pursuant to Section 5.2, a certificate or certificates for the number of
full shares of Common Stock issuable upon the conversion of such Note or portion
thereof as determined by the Company in accordance with the provisions of this
Article Fifteen and a check or cash in respect of any fractional interest in
respect of a share of Common Stock arising upon such conversion, calculated by
the Company as provided in Section 15.3. In case any Note of a denomination
greater than $1,000 shall be surrendered for partial conversion, and subject to
Section 2.3, the Company shall execute and the Trustee shall authenticate and
deliver to the holder of the Note so surrendered, without charge to him, a new
Note or Notes in authorized denominations in an aggregate principal amount equal
to the unconverted portion of the surrendered Note.
Each conversion shall be deemed to have been effected as to any such
Note (or portion thereof) on the date on which the requirements set forth above
in this Section 15.2 have been satisfied as to such Note (or portion thereof),
and the Person in whose name any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder of record of the shares represented thereby;
provided, however, that any such surrender on any date when the stock transfer
books of the Company shall be closed shall constitute the Person in whose name
the certificates are to be issued as the record holder thereof for all purposes
on the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such Note shall be surrendered.
No adjustment in respect of interest on any Note converted or
dividends on any shares issued upon conversion of such Note will be made upon
any conversion except as set forth in the next sentence. If this Note (or
portion hereof) is surrendered for conversion during the period from the close
of business on any record date for the payment of interest to the close of
business on the Business Day preceding the following interest payment date and
either (x) has not been called for redemption on a redemption date that occurs
during such period or (y) is not to be redeemed in connection with a Fundamental
Change on a Repurchase Date that occurs during such period, this Note (or
portion hereof being converted) must be accompanied by an amount, in New York
Clearing House funds or other funds acceptable to the Company, equal to the
interest payable on such interest payment date on the principal amount being
converted; provided, however, that no such payment shall be required if there
shall exist at the time of conversion a default in the payment of interest on
the Notes.
Upon the conversion of an interest in a Global Note, the Trustee (or
other conversion agent appointed by the Company), or the Custodian at the
direction of the Trustee (or other conversion agent appointed by the Company),
shall make a notation on such Global Note as to the reduction in the principal
amount represented thereby. The Company shall notify the Trustee in writing of
any conversions of Notes effected through any conversion agent other than the
Trustee.
Section 15.3. Cash Payments In Lieu Of Fractional Shares. No
------------------------------------------
fractional shares of Common Stock or scrip representing fractional shares shall
be issued upon conversion of Notes. If more than one Note shall be surrendered
for conversion at one time by the same holder, the number of full shares that
shall be issuable upon conversion shall be computed on the basis of the
aggregate principal amount of the Notes (or specified portions thereof to the
extent
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permitted hereby) so surrendered. If any fractional share of stock would be
issuable upon the conversion of any Note or Notes, the Company shall make an
adjustment and payment therefor in cash at the current market price thereof to
the holder of Notes. The current market price of a share of Common Stock shall
be the Closing Price on the last Business Day immediately preceding the day on
which the Notes (or specified portions thereof) are deemed to have been
converted.
Section 15.4. Conversion Price. The conversion price shall be as
----------------
specified in the form of Note (herein called the "Conversion Price") attached as
Exhibit A hereto, subject to adjustment as provided in this Article Fifteen.
Section 15.5. Adjustment Of Conversion Price. The Conversion Price
------------------------------
shall be adjusted from time to time by the Company as follows:
(a) In case the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of
Common Stock, the Conversion Price shall be reduced so that the same shall
equal the price determined by multiplying the Conversion Price in effect at
the opening of business on the date following the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution by a fraction, the numerator of which shall be the number of
shares of the Common Stock outstanding at the close of business on the date
fixed for such determination, and the denominator of which shall be the sum
of such number of shares and the total number of shares constituting such
dividend or other distribution, such reduction to become effective
immediately after the opening of business on the day following the date
fixed for such determination. For the purpose of this paragraph (a), the
number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company. The Company will not pay any
dividend or make any distribution on shares of Common Stock held in the
treasury of the Company. If any dividend or distribution of the type
described in this Section 15.5(a) is declared but not so paid or made, the
Conversion Price shall again be adjusted to the Conversion Price that would
then be in effect if such dividend or distribution had not been declared.
(b) In case the Company shall issue rights or warrants to all
holders of its outstanding shares of Common Stock entitling them (for a
period expiring within forty-five (45) days after the date fixed for
determination of stockholders entitled to receive such rights or warrants)
to subscribe for or purchase shares of Common Stock at a price per share
less than the Current Market Price (as defined below) on the date fixed for
determination of stockholders entitled to receive such rights or warrants,
the Conversion Price shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in effect immediately
prior to the date fixed for determination of stockholders entitled to
receive such rights or warrants by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding at the close of
business on the date fixed for determination of stockholders entitled to
receive such rights or warrants
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plus the number of shares that the aggregate offering price of the total
number of shares so offered would purchase at such Current Market Price,
and the denominator of which shall be the number of shares of Common Stock
outstanding on the date fixed for determination of stockholders entitled to
receive such rights or warrants plus the total number of additional shares
of Common Stock offered for subscription or purchase. Such adjustment shall
be successively made whenever any such rights or warrants are issued, and
shall become effective immediately after the opening of business on the day
following the date fixed for determination of stockholders entitled to
receive such rights or warrants. To the extent that shares of Common Stock
are not delivered after the expiration of such rights or warrants, the
Conversion Price shall be readjusted to the Conversion Price that would
then be in effect had the adjustments made upon the issuance of such rights
or warrants been made on the basis of delivery of only the number of shares
of Common Stock actually delivered. In the event that such rights or
warrants are not so issued, the Conversion Price shall again be adjusted to
be the Conversion Price that would then be in effect if such date fixed for
the determination of stockholders entitled to receive such rights or
warrants had not been fixed. In determining whether any rights or warrants
entitle the holders to subscribe for or purchase shares of Common Stock at
less than such Current Market Price, and in determining the aggregate
offering price of such shares of Common Stock, there shall be taken into
account any consideration received by the Company for such rights or
warrants and any amount payable on exercise or conversion thereof, the
value of such consideration, if other than cash, to be determined by the
Board of Directors.
(c) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and
conversely, in case outstanding shares of Common Stock shall be combined
into a smaller number of shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the day upon which
such combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(d) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock shares of any class of capital stock of
the Company (other than any dividends or distributions to which Section
15.5(a) applies) or evidences of its indebtedness or assets (including
securities, but excluding any rights or warrants referred to in Section
15.5(b), and excluding any dividend or distribution (x) paid exclusively in
cash or (y) referred to in Section 15.5(a) (any of the foregoing
hereinafter in this Section 15.5(d) called the "Securities")), then, in
each such case (unless the Company elects to reserve such Securities for
distribution to the Noteholders upon the conversion of the Notes so that
any such holder converting Notes will receive upon such conversion, in
addition to the shares of Common Stock to which such holder is entitled,
the amount and kind of such Securities which such holder would have
received if such holder had converted its Notes into Common Stock
immediately prior to the Record Date (as defined in Section 15.5(h)(4) for
such distribution of the Securities)), the Conversion Price shall be
reduced so that the same shall be equal to the price determined by
multiplying the Conversion Price in effect on the Record Date with respect
to such distribution by a fraction, the numerator of which shall be the
Current Market Price per share of the Common Stock on such Record Date less
the fair market value (as determined by the
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Board of Directors, whose determination shall be conclusive, and described
in a resolution of the Board of Directors) on the Record Date of the
portion of the Securities so distributed applicable to one share of Common
Stock and the denominator of which shall be the Current Market Price per
share of the Common Stock, such reduction to become effective immediately
prior to the opening of business on the day following such Record Date;
provided, however, that in the event the then fair market value (as so
determined) of the portion of the Securities so distributed applicable to
one share of Common Stock is equal to or greater than the Current Market
Price of the Common Stock on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Noteholder shall
have the right to receive upon conversion the amount of Securities such
holder would have received had such holder converted each Note on the
Record Date. In the event that such dividend or distribution is not so paid
or made, the Conversion Price shall again be adjusted to be the Conversion
Price that would then be in effect if such dividend or distribution had not
been declared. If the Board of Directors determines the fair market value
of any distribution for purposes of this Section 15.5(d) by reference to
the actual or when issued trading market for any securities, it must in
doing so consider the prices in such market over the same period used in
computing the Current Market Price of the Common Stock.
Under the provisions of the Company's Preferred Shares Rights Plan
(the "Rights Plan"), upon conversion of the Notes into Common Stock, to the
extent that the Rights Plan is still in effect upon such conversion, the holders
of Notes will receive, in addition to the Common Stock, the rights described
therein (whether or not the rights have separated from the Common Stock at the
time of conversion), subject to the limitations set forth in the Rights Plan.
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of the
Company's capital stock (either initially or under certain circumstances), which
rights or warrants, until the occurrence of a specified event or events
("Trigger Event"): (i) are deemed to be transferred with such shares of Common
Stock; (ii) are not exercisable; and (iii) are also issued in respect of future
issuances of Common Stock, shall be deemed not to have been distributed for
purposes of this Section 15.5 (and no adjustment to the Conversion Price under
this Section 15.5 will be required) until the occurrence of the earliest Trigger
Event, whereupon such rights and warrants shall be deemed to have been
distributed and an appropriate adjustment (if any is required) to the Conversion
Price shall be made under this Section 15.5(d). If any such right or warrant,
including any such existing rights or warrants distributed prior to the date of
this Indenture, are subject to events, upon the occurrence of which such rights
or warrants become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the date of the occurrence of any and each
such event shall be deemed to be the date of distribution and record date with
respect to new rights or warrants with such rights (and a termination or
expiration of the existing rights or warrants without exercise by any of the
holders thereof). In addition, in the event of any distribution (or deemed
distribution) of rights or warrants, or any Trigger Event or other event (of the
type described in the preceding sentence) with respect thereto that was counted
for purposes of calculating a distribution amount for which an adjustment to the
Conversion Price under this Section 15.5 was made, (1) in the case of any such
rights or warrants that shall all have been redeemed or repurchased without
exercise by any holders thereof, the Conversion Price shall be readjusted upon
such final redemption repurchase to give effect to such
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distribution or Trigger Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or repurchase price received by
a holder or holders of Common Stock with respect to such rights or warrants
(assuming such holder had retained such rights or warrants), made to all holders
of Common Stock as of the date of such redemption or repurchase, and (2) in the
case of such rights or warrants that shall have expired or been terminated
without exercise by any holders thereof, the Conversion Price shall be
readjusted as if such rights and warrants had not been issued.
No adjustment of the Conversion Price shall be made pursuant to this
Section 15.5(d) in respect of rights or warrants distributed or deemed
distributed on any Trigger Event to the extent that such rights or warrants are
actually distributed, or reserved by the Company for distribution to holders of
Notes upon conversion by such holders of Notes to Common Stock.
For purposes of this Section 15.5(d) and Sections 15.5(a) and (b), any
dividend or distribution to which this Section 15.5(d) is applicable that also
includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets or shares of
capital stock other than such shares of Common Stock or rights or warrants (and
any Conversion Price reduction required by this Section 15.5(d) with respect to
such dividend or distribution shall then be made) immediately followed by (2) a
dividend or distribution of such shares of Common Stock or such rights or
warrants (and any further Conversion Price reduction required by Sections
15.5(a) and (b) with respect to such dividend or distribution shall then be
made), except (A) the Record Date of such dividend or distribution shall be
substituted as "the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution", "the date fixed for the
determination of stockholders entitled to receive such rights or warrants" and
"the date fixed for such determination" within the meaning of Sections 15.5(a)
and (b), and (B) any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of business on the
date fixed for such determination" within the meaning of Section 15.5(a).
(e) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock cash (excluding (x) any quarterly cash
dividend on the Common Stock to the extent the aggregate cash dividend per
share of Common Stock in any fiscal quarter does not exceed the greater of
(A) the amount per share of Common Stock of the next preceding quarterly
cash dividend on the Common Stock to the extent that such preceding
quarterly dividend did not require any adjustment of the Conversion Price
pursuant to this Section 15.5(e) (as adjusted to reflect subdivisions, or
combinations of the Common Stock), and (B) 3.75% of the arithmetic average
of the Closing Price (determined as set forth in Section 15.5(h)) during
the ten Trading Days (as defined in Section 15.5(h)) immediately prior to
the date of declaration of such dividend, and (y) any dividend or
distribution in connection with the liquidation, dissolution or winding up
of the Company, whether voluntary or involuntary), then, in such case, the
Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to the close of business on such record date by a fraction, the numerator
of which shall be the Current Market Price of the Common Stock on the
record date less the amount of cash so distributed (and not
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excluded as provided above) applicable to one share of Common Stock, and
the denominator of which shall be such Current Market Price of the Common
Stock, such reduction to be effective immediately prior to the opening of
business on the day following the record date; provided, however, that in
the event the portion of the cash so distributed applicable to one share of
Common Stock is equal to or greater than the Current Market Price of the
Common Stock on the record date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Noteholder shall have the
right to receive upon conversion the amount of cash such holder would have
received had such holder converted each Note on the record date. In the
event that such dividend or distribution is not so paid or made, the
Conversion Price shall again be adjusted to be the Conversion Price that
would then be in effect if such dividend or distribution had not been
declared. If any adjustment is required to be made as set forth in this
Section 15.5(e) as a result of a distribution that is a quarterly dividend,
such adjustment shall be based upon the amount by which such distribution
exceeds the amount of the quarterly cash dividend permitted to be excluded
pursuant hereto. If an adjustment is required to be made as set forth in
this Section 15.5(e) above as a result of a distribution that is not a
quarterly dividend, such adjustment shall be based upon the full amount of
the distribution.
(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 stockholders of consideration per share of Common
Stock having a fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a resolution of
the Board of Directors) that as of the last time (the "Expiration Time")
tenders or exchanges may be made pursuant to such tender or exchange offer
(as it may be amended) exceeds the Current Market Price of the Common Stock
on the Trading Day next succeeding the Expiration Time, the Conversion
Price shall be reduced so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the
Expiration Time by a fraction the numerator of which shall be the number of
shares of Common Stock outstanding (including any tendered or exchanged
shares) at the Expiration Time multiplied by the Current Market Price of
the Common Stock on the Trading Day next succeeding the Expiration Time and
the denominator of which shall be the sum of (x) the fair market value
(determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the
terms of the tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchased
Shares") and (y) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares) at the Expiration Time and the
Current Market Price of the Common Stock on the Trading Day next succeeding
the Expiration Time, such reduction to become effective immediately prior
to the opening of business on the Trading Day following the Expiration
Time. In the event that the Company is obligated to purchase shares
pursuant to any such tender or exchange offer, but the Company is
permanently prevented by applicable law from effecting any such purchases
or all such purchases are rescinded, the Conversion Price shall again be
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adjusted to be the Conversion Price that would then be in effect if such
tender or exchange offer had not been made.
(g) In case of a tender or exchange offer made by a Person other
than the Company or any Subsidiary for an amount that increases the
offeror's ownership of Common Stock to more than twenty-five percent (25%)
of the Common Stock outstanding and shall involve the payment by such
Person of consideration per share of Common Stock having a fair market
value (as determined by the Board of Directors, whose determination shall
be conclusive, and described in a resolution of the Board of Directors)
that as of the last time (the "Offer Expiration Time") tenders or exchanges
may be made pursuant to such tender or exchange offer (as it shall have
been amended) that exceeds the Current Market Price of the Common Stock on
the Trading Day next succeeding the Offer Expiration Time, and in which, as
of the Offer Expiration Time the Board of Directors is not recommending
rejection of the offer, the Conversion Price shall be reduced so that the
same shall equal the price determined by multiplying the Conversion Price
in effect immediately prior to the Offer Expiration Time by a fraction the
numerator of which shall be the number of shares of Common Stock
outstanding (including any tendered or exchanged shares) at the Offer
Expiration Time multiplied by the Current Market Price of the Common Stock
on the Trading Day next succeeding the Offer Expiration Time and the
denominator of which shall be the sum of (x) the fair market value
(determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the
terms of the tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as of the Offer Expiration Time (the shares
deemed so accepted, up to any such maximum, being referred to as the
"Accepted Purchased Shares") and (y) the product of the number of shares of
Common Stock outstanding (less any Accepted Purchased Shares) at the Offer
Expiration Time and the Current Market Price of the Common Stock on the
Trading Day next succeeding the Offer Expiration Time, such reduction to
become effective immediately prior to the opening of business on the
Trading Day following the Offer Expiration Time. In the event that such
Person is obligated to purchase shares pursuant to any such tender or
exchange offer, but such Person is permanently prevented by applicable law
from effecting any such purchases or all such purchases are rescinded, the
Conversion Price shall again be adjusted to be the Conversion Price that
would then be in effect if such tender or exchange offer had not been made.
Notwithstanding the foregoing, the adjustment described in this Section
15.5(g) shall not be made if, as of the Offer Expiration Time, the offering
documents with respect to such offer disclose a plan or intention to cause
the Company to engage in any transaction described in Article Twelve.
(h) For purposes of this Section 15.5, the following terms shall
have the meaning indicated:
(1) "Closing Price" with respect to any security on any day
shall mean the closing sale price, regular way, on such day or, in case no such
sale takes place on such day, the average of the reported closing bid and asked
prices, regular way, in each case as quoted on the Nasdaq National Market or, if
such security is not quoted or listed or admitted to trading on such Nasdaq
National Market, on the principal national securities exchange or quotation
system
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on which such security is quoted or listed or admitted to trading or, if
not quoted or listed or admitted to trading on any national securities
exchange or quotation system, the average of the closing bid and asked
prices of such security on the over-the-counter market on the day in
question as reported by the National Quotation Bureau Incorporated, or a
similar generally accepted reporting service, or if not so available, in
such manner as furnished by any New York Stock Exchange member firm
selected from time to time by the Board of Directors for that purpose, or a
price determined in good faith by the Board of Directors or, to the extent
permitted by applicable law, a duly authorized committee thereof, whose
determination shall be conclusive.
(2) "Current Market Price" shall mean the average of the
daily Closing Prices per share of Common Stock for the ten consecutive
Trading Days immediately prior to the date in question except as
hereinafter provided for purposes of any computation under Section 15.5(f)
or (g); provided, however, that (1) if the "ex" date (as hereinafter
defined) for any event (other than the issuance or distribution requiring
such computation and other than the tender or exchange offer requiring such
computation under Section 15.5(f) or (g)) that requires an adjustment to
the Conversion Price pursuant to Section 15.5(a), (b), (c), (d), (e), (f)
or (g) occurs during such ten consecutive Trading Days, the Closing Price
for each Trading Day prior to the "ex" date for such other event shall be
adjusted by multiplying such Closing Price by the same fraction by which
the Conversion Price is so required to be adjusted as a result of such
other event, (2) if the "ex" date for any event (other than the issuance or
distribution requiring such computation and other than the tender or
exchange offer requiring such computation under Section 15.5(f) or (g))
that requires an adjustment to the Conversion Price pursuant to Section
15.5(a), (b), (c), (d), (e), (f) or (g) occurs on or after the "ex" date
for the issuance or distribution requiring such computation and prior to
the day in question, the Closing Price for each Trading Day on and after
the "ex" date for such other event shall be adjusted by multiplying such
Closing Price by the reciprocal of the fraction by which the Conversion
Price is so required to be adjusted as a result of such other event, and
(3) if the "ex" date for the issuance or distribution requiring such
computation is prior to the day in question, after taking into account any
adjustment required pursuant to clause (1) or (2) of this proviso, the
Closing Price for each Trading Day on or after such "ex" date shall be
adjusted by adding thereto the amount of any cash and the fair market value
(as determined by the Board of Directors or, to the extent permitted by
applicable law, a duly authorized committee thereof in a manner consistent
with any determination of such value for purposes of Section 15.5(d), (f)
or (g), whose determination shall be conclusive and described in a
resolution of the Board of Directors or such duly authorized committee
thereof, as the case may be) of the evidences of indebtedness, shares of
capital stock or assets being distributed applicable to one share of Common
Stock as of the close of business on the day before such "ex" date. For
purposes of any computation under Section 15.5(f) or (g), the "Current
Market Price" of the Common Stock on any date shall be deemed to be the
average of the daily Closing Prices per share of Common Stock for such day
and the next two succeeding Trading Days; provided, however, that if the
"ex" date for any event (other than the tender or exchange offer requiring
such computation under Section 15.5(f) or (g)) that requires an adjustment
to the Conversion Price pursuant to Section 15.5(a), (b), (c), (d), (e),
(f) or (g) occurs on or after the Expiration Time or Offer Expiration Time,
as the case may be, for the tender or exchange offer requiring such
computation and prior to the day in question, the Closing Price for each
Trading Day on and after the "ex" date for such other event shall be
adjusted as provided in clauses (1), (2) and (3) of the proviso contained
in the first sentence of
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this Section 15.5(h)(2). For purpose of this paragraph, the term "ex" date, (1)
when used with respect to any issuance or distribution, means the first date on
which the Common Stock trades, regular way, on the relevant exchange or in the
relevant market from which the Closing Price was obtained without the right to
receive such issuance or distribution, (2) when used with respect to any
subdivision or combination of shares of Common Stock, means the first date on
which the Common Stock trades, regular way, on such exchange or in such market
after the time at which such subdivision or combination becomes effective, and
(3) when used with respect to any tender or exchange offer means the first date
on which the Common Stock trades, regular way, on such exchange or in such
market after the Expiration Time or the Offer Expiration Time of such offer.
(3) "Fair Market Value" shall mean the amount which a
willing buyer would pay a willing seller in an arm's-length transaction.
(4) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common Stock
have the right to receive any cash, securities or other property or in which the
Common Stock (or other applicable security) is exchanged for or converted into
any combination of cash, securities or other property, the date fixed for
determination of stockholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
(5) "Trading Day" shall mean (x) if the applicable security
is quoted on the Nasdaq National Market, a day on which trades may be made
thereon or (y) if the applicable security is listed or admitted for trading on
the New York Stock Exchange or another national securities exchange, a day on
which the New York Stock Exchange or another national securities exchange is
open for business or (z) if the applicable security is not so listed, admitted
for trading or quoted, any day other than a Saturday or Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by law
or executive order to close.
(i) The Company may make such reductions in the Conversion Price,
in addition to those required by Sections 15.5(a), (b), (c), (d), (e), (f)
or (g) as the Board of Directors considers to be advisable to avoid or
diminish any income tax to holders of Common Stock or rights to purchase
Common Stock resulting from any dividend or distribution of stock (or
rights to acquire stock) or from any event treated as such for income tax
purposes.
To the extent permitted by applicable law, the Company from time to
time may reduce the Conversion Price by any amount for any period of time if the
period is at least twenty (20) days, the reduction is irrevocable during the
period and the Board of Directors shall have made a determination that such
reduction would be in the best interests of the Company, which determination
shall be conclusive. Whenever the Conversion Price is reduced pursuant to the
preceding sentence, the Company shall mail to holders of record of the Notes a
notice of the reduction at least fifteen (15) days prior to the date the reduced
Conversion Price takes effect, and such notice shall state the reduced
Conversion Price and the period during which it will be in effect.
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(j) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least one
percent (1%) in such price; provided, however, that any adjustments that by
reason of this Section 15.5(j) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations under this Article Fifteen shall be made by the Company and
shall be made to the nearest cent or to the nearest one-hundredth (1/100)
of a share, as the case may be. No adjustment need be made for rights to
purchase Common Stock pursuant to a Company plan for reinvestment of
dividends or interest. To the extent the Notes become convertible into
cash, assets, property or securities (other than capital stock of the
Company), no adjustment need be made thereafter as to the cash, assets,
property or such securities. Interest will not accrue on the cash.
(k) Whenever the Conversion Price is adjusted as herein provided,
the Company shall promptly file with the Trustee and any conversion agent
other than the Trustee an Officers' Certificate setting forth the
Conversion Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment. Unless and until a Responsible
Officer of the Trustee shall have received such Officers' Certificate, the
Trustee shall not be deemed to have knowledge of any adjustment of the
Conversion Price and may assume that the last Conversion Price of which it
has knowledge is still in effect. Promptly after delivery of such
certificate, the Company shall prepare a notice of such adjustment of the
Conversion Price setting forth the adjusted Conversion Price and the date
on which each adjustment becomes effective and shall mail such notice of
such adjustment of the Conversion Price to the holder of each Note at his
last address appearing on the Note register provided for in Section 2.5 of
this Indenture, within twenty (20) days after execution thereof. Failure to
deliver such notice shall not affect the legality or validity of any such
adjustment.
(l) In any case in which this Section 15.5 provides that an
adjustment shall become effective immediately after (1) a record date or
Record Date for an event, (2) the date fixed for the determination of
stockholders entitled to receive a dividend or distribution pursuant to
Section 15.5(a), (3) a date fixed for the determination of stockholders
entitled to receive rights or warrants pursuant to Section 15.5(b), (4) the
Expiration Time for any tender or exchange offer pursuant to Section
15.5(f), or (5) the Offer Expiration Time for a tender or exchange offer
pursuant to Section 15.5(g) (each a "Determination Date"), the Company may
elect to defer until the occurrence of the relevant Adjustment Event (as
hereinafter defined) (x) issuing to the holder of any Note converted after
such Determination Date and before the occurrence of such Adjustment Event,
the additional shares of Common Stock or other securities issuable upon
such conversion by reason of the adjustment required by such Adjustment
Event over and above the Common Stock issuable upon such conversion before
giving effect to such adjustment and (y) paying to such holder any amount
in cash in lieu of any fraction pursuant to Section 15.3. For purposes of
this Section 15.5(l), the term "Adjustment Event" shall mean:
(a) in any case referred to in clause (1) hereof, the
occurrence of such event,
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(b) in any case referred to in clause (2) hereof, the date
any such dividend or distribution is paid or made,
(c) in any case referred to in clause (3) hereof, the date
of expiration of such rights or warrants, and
(d) in any case referred to in clause (4) or clause (5)
hereof, the date a sale or exchange of Common Stock pursuant to such
tender or exchange offer is consummated and becomes irrevocable.
(m) For purposes of this Section 15.5, the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of shares of Common Stock.
The Company will not pay any dividend or make any distribution on shares of
Common Stock held in the treasury of the Company.
Section 15.6. Effect Of Reclassification, Consolidation, Merger Or
----------------------------------------------------
Sale. If any of the following events occur, namely (i) any reclassification or
- ----
change of the outstanding shares of Common Stock (other than a subdivision or
combination to which Section 15.5(c) applies), (ii) any consolidation, merger or
combination of the Company with another Person as a result of which holders of
Common Stock shall be entitled to receive stock, other securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, or (iii) any sale or conveyance of all or substantially all of the
properties and assets of the Company to any other Person as a result of which
holders of Common Stock shall be entitled to receive stock, other securities or
other property or assets (including cash) with respect to or in exchange for
such Common Stock, then the Company or the successor or purchasing Person, as
the case may be, shall execute with the Trustee a supplemental indenture (which
shall comply with the Trust Indenture Act as in force at the date of execution
of such supplemental indenture) providing that such Note shall be convertible
into the kind and amount of shares of stock, other securities or other property
or assets (including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance by a holder of a number
of shares of Common Stock issuable upon conversion of such Notes (assuming, for
such purposes, a sufficient number of authorized shares of Common Stock are
available to convert all such Notes) immediately prior to such reclassification,
change, consolidation, merger, combination, sale or conveyance assuming such
holder of Common Stock did not exercise his rights of election, if any, as to
the kind or amount of stock, other securities or other property or assets
(including cash) receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance (provided that, if the kind or amount of
stock, other securities or other property or assets (including cash) receivable
upon such reclassification, change, consolidation, merger, combination, sale or
conveyance is not the same for each share of Common Stock in respect of which
such rights of election shall not have been exercised ("non-electing share"),
then for the purposes of this Section 15.6 the kind and amount of stock, other
securities or other property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, sale or conveyance
for each non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares). Such
supplemental indenture shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
Fifteen.
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The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Notes, at its address appearing on the
Note register provided for in Section 2.5 of this Indenture, within twenty (20)
days after execution thereof. Failure to deliver such notice shall not affect
the legality or validity of such supplemental indenture.
The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
If this Section 15.6 applies to any event or occurrence, Section 15.5
shall not apply.
Section 15.7. Taxes On Shares Issued. The issue of stock certificates
----------------------
on conversions of Notes shall be made without charge to the converting
Noteholder for any tax in respect of the issue thereof. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of stock in any name other than that
of the holder of any Note converted, and the Company shall not be required to
issue or deliver any such stock certificate unless and until the Person or
Persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
Section 15.8. Reservation Of Shares; Shares To Be Fully Paid;
-----------------------------------------------
Compliance With Governmental Requirements; Listing Of Common Stock. The Company
- ------------------------------------------------------------------
shall provide, free from preemptive rights, out of its authorized but unissued
shares or shares held in treasury, sufficient shares of Common Stock to provide
for the conversion of the Notes from time to time as such Notes are presented
for conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Notes, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted Conversion Price.
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Notes will upon issue be fully paid and non-assessable
by the Company and free from all taxes, liens and charges with respect to the
issue thereof.
The Company further covenants that, if at any time the Common Stock
shall be listed on the Nasdaq National Market or any other national securities
exchange or automated quotation system, the Company will, if permitted by the
rules of such exchange or automated quotation system, list and keep listed, so
long as the Common Stock shall be so listed on such exchange or automated
quotation system, all Common Stock issuable upon conversion of the Note;
provided, however, that, if the rules of such exchange or automated quotation
system permit the Company to defer the listing of such Common Stock until the
first conversion of the Notes into Common Stock in accordance with the
provisions of this Indenture, the Company covenants to list such Common Stock
issuable upon conversion of the Notes in accordance with the requirements of
such exchange or automated quotation system at such time.
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Section 15.9. Responsibility Of Trustee. The Trustee and any other
-------------------------
conversion agent shall not at any time be under any duty or responsibility to
any holder of Notes to determine the Conversion Price or whether any facts exist
which may require any adjustment of the Conversion Price, or with respect to the
nature or extent or calculation of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. The Trustee and any other
conversion agent shall not be accountable with respect to the validity or value
(or the kind or amount) of any shares of Common Stock, or of any securities or
property, which may at any time be issued or delivered upon the conversion of
any Note; and the Trustee and any other conversion agent make no representations
with respect thereto. Neither the Trustee nor any conversion agent shall be
responsible for any failure of the Company to issue, transfer or deliver any
shares of Common Stock or stock certificates or other securities or property or
cash upon the surrender of any Note for the purpose of conversion or to comply
with any of the duties, responsibilities or covenants of the Company contained
in this Article Fifteen. Without limiting the generality of the foregoing,
neither the Trustee nor any conversion agent shall be under any responsibility
to determine the correctness of any provisions contained in any supplemental
indenture entered into pursuant to Section 15.6 relating either to the kind or
amount of shares of stock or securities or property (including cash) receivable
by Noteholders upon the conversion of their Notes after any event referred to in
such Section 15.6 or to any adjustment to be made with respect thereto, but,
subject to the provisions of Section 8.1, may accept as conclusive evidence of
the correctness of any such provisions, and shall be protected in relying upon,
the Officers' Certificate (which the Company shall be obligated to file with the
Trustee prior to the execution of any such supplemental indenture) with respect
thereto.
Section 15.10. Notice To Holders Prior To Certain Actions. In case:
------------------------------------------
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock that would require an adjustment in the
Conversion Price pursuant to Section 15.5; or
(b) the Company shall authorize the granting to the holders of all
or substantially all of its Common Stock of rights or warrants to subscribe
for or purchase any share of any class or any other rights or warrants; or
(c) of any reclassification or reorganization of the Common Stock
of the Company (other than a subdivision or combination of its outstanding
Common Stock, or a change in par value, or from par value to no par value,
or from no par value to par value), or of any consolidation or merger to
which the Company is a party and for which approval of any stockholders of
the Company is required, or of the sale or transfer of all or substantially
all of the assets of the Company or any Significant Subsidiary; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company or any Significant Subsidiary;
the Company shall cause to be filed with the Trustee and to be mailed to each
holder of Notes at his address appearing on the Note register provided for in
Section 2.5 of this Indenture, as promptly as possible but in any event at least
ten (10) days prior to the applicable date
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hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution or rights or warrants, or,
if a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution or rights are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up is expected to
become effective or occur, and the date as of which it is expected that holders
of Common Stock of record shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up.
Failure to give such notice, or any defect therein, shall not affect the
legality or validity of such dividend, distribution, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up.
ARTICLE 16.
MISCELLANEOUS PROVISIONS
------------------------
Section 16.1. Provisions Binding On Company's Successors. All the
------------------------------------------
covenants, stipulations, promises and agreements by the Company contained in
this Indenture shall bind its successors and assigns whether so expressed or
not.
Section 16.2. Official Acts By Successor Corporation. Any act or
--------------------------------------
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any Person that shall at the time be the lawful sole successor of the
Company.
Section 16.3. Addresses For Notices, Etc. Any notice or demand which
--------------------------
by any provision of this Indenture is required or permitted to be given or
served by the Trustee or by the holders of Notes on the Company shall be deemed
to have been sufficiently given or made, for all purposes, if given or served by
being deposited postage prepaid by registered or certified mail in a post office
letter box addressed (until another address is filed by the Company with the
Trustee) to Semtech Corporation, 652 Mitchell Road, Newbury Park, CA 91320-2289,
Attention: Treasurer. Any notice, direction, request or demand hereunder to or
upon the Trustee shall be deemed to have been sufficiently given or made, for
all purposes, if given or served by being deposited, postage prepaid, by
registered or certified mail in a post office letter box addressed to the
Corporate Trust Office, which office is, at the date as of which this Indenture
is dated, located at 633 West 5th Street, 12th Floor, Los Angeles, California
90071, Attention: Corporate Trust Department (Semtech Corporation, 4 1/2%
Convertible Subordinated Notes due 2007 ).
The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed to a Noteholder shall be mailed to
him by first class mail, postage prepaid, at his address as it appears on the
Note register and shall be sufficiently given to him if so mailed within the
time prescribed.
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Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
If a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Section 16.4. Governing Law. This Indenture and each Note shall be
-------------
deemed to be a contract made under the laws of the State of New York, and for
all purposes shall be construed in accordance with the laws of the State of New
York, without regard to the conflict of laws provisions thereof.
Section 16.5. Evidence Of Compliance With Conditions Precedent;
-------------------------------------------------
Certificates To Trustee. Upon any application or demand by the Company to the
- -----------------------
Trustee to take any action under any of the provisions 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 have been complied
with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include: (1) a statement that the person
making such certificate or opinion has read such covenant or condition; (2) a
brief statement as to the nature and scope of the examination or investigation
upon which the statement or opinion contained in such certificate or opinion is
based; (3) a statement that, in the opinion of such person, 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 or not, in the opinion of such
person, such condition or covenant has been complied with.
Section 16.6. Legal Holidays. In any case in which the date of
--------------
maturity of interest on or principal of the Notes or the date fixed for
redemption of any Note will not be a Business Day, then payment of such interest
on or principal of the Notes need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the date of maturity or the date fixed for redemption, and no interest shall
accrue for the period from and after such date.
Section 16.7. Trust Indenture Act. This Indenture is hereby made
-------------------
subject to, and shall be governed by, the provisions of the Trust Indenture Act
required to be part of and to govern indentures qualified under the Trust
Indenture Act; provided, however, that, unless otherwise required by law,
notwithstanding the foregoing, this Indenture and the Notes issued hereunder
shall not be subject to the provisions of subsections (a)(1), (a)(2), and (a)(3)
of Section 314 of the Trust Indenture Act as now in effect or as hereafter
amended or modified; provided further that this Section 16.7 shall not require
this Indenture or the Trustee to be qualified under the Trust Indenture Act
prior to the time such qualification is in fact required under the terms of the
Trust Indenture Act, nor shall it constitute any admission or acknowledgment by
any party to the Indenture that any such qualification is required prior to the
time such qualification is in fact required under the terms of the Trust
Indenture Act. If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in an indenture
qualified under the Trust Indenture Act, such required provision shall control.
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Section 16.8. No Security Interest Created. Nothing in this
----------------------------
Indenture or in the Notes, expressed or implied, shall be construed to
constitute a security interest under the Uniform Commercial Code or similar
legislation, as now or hereafter enacted and in effect, in any jurisdiction in
which property of the Company or its subsidiaries is located.
Section 16.9. Benefits Of Indenture. Nothing in this Indenture or in
---------------------
the Notes, express or implied, shall give to any Person, other than the parties
hereto, any paying agent, any authenticating agent, any Note registrar and their
successors hereunder, the holders of Notes and the holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
Section 16.10. Table Of Contents, Headings, Etc. The table of
--------------------------------
contents and the titles and headings of the articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
Section 16.11. Authenticating Agent. The Trustee may appoint an
--------------------
authenticating agent that shall be authorized to act on its behalf, and subject
to its direction, in the authentication and delivery of Notes in connection with
the original issuance thereof and transfers and exchanges of Notes hereunder,
including under Sections 2.4, 2.5, 2.6, 2.7, 3.3 and 3.5, as fully to all
intents and purposes as though the authenticating agent had been expressly
authorized by this Indenture and those Sections to authenticate and deliver
Notes. For all purposes of this Indenture, the authentication and delivery of
Notes by the authenticating agent shall be deemed to be authentication and
delivery of such Notes "by the Trustee" and a certificate of authentication
executed on behalf of the Trustee by an authenticating agent shall be deemed to
satisfy any requirement hereunder or in the Notes for the Trustee's certificate
of authentication. Such authenticating agent shall at all times be a Person
eligible to serve as trustee hereunder pursuant to Section 8.9.
Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section 16.11, without the execution or filing of any paper or any further act
on the part of the parties hereto or the authenticating agent or such successor
corporation.
Any authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any authenticating agent by giving written notice
of termination 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
any authenticating agent shall cease to be eligible under this Section , the
Trustee shall either promptly appoint a successor authenticating agent or itself
assume the duties and obligations of the former authenticating agent under this
Indenture and, upon such appointment of a successor authenticating agent, if
made, shall give written notice of such appointment of a successor
authenticating agent to the Company and shall mail notice of
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such appointment of a successor authenticating agent to all holders of Notes as
the names and addresses of such holders appear on the Note register.
The Company agrees to pay to the authenticating agent from time to
time such reasonable compensation for its services as shall be agreed upon in
writing between the Company and the authenticating agent.
The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this Section 16.11
shall be applicable to any authenticating agent.
Section 16.12. Execution In Counterparts. This Indenture may be
-------------------------
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
Section 16.13. Severability. In case any provision in this Indenture
------------
or in the Notes shall be invalid, illegal or unenforceable, then (to the extent
permitted by law) the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
State Street Bank and Trust Company of California, N.A. hereby accepts
the trusts in this Indenture declared and provided, upon the terms and
conditions herein above set forth.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed.
SEMTECH CORPORATION
By:
-----------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A.,
as Trustee
By:
-----------------------------
Name:
Title:
S-1
<PAGE>
EXHIBIT A
For Global Note only: UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW
YORK, NEW YORK) (THE "DEPOSITARY", WHICH TERM INCLUDES ANY SUCCESSOR DEPOSITARY
FOR THE CERTIFICATES) 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 REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITARY (AND ANY PAYMENT HEREIN IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), 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 NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
("INSTITUTIONAL ACCREDITED INVESTOR"); (2) AGREES THAT IT WILL NOT, PRIOR TO
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE NOTE EVIDENCED
HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION),
RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK
ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO SEMTECH CORPORATION OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.,
AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH
TRUSTEE OR A SUCCESSOR TRUSTEE, AS APPLICABLE), (D) OUTSIDE THE UNITED STATES IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE)
OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF
SUCH TRANSFER); (3) PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO
CLAUSE (2)(F) ABOVE), IT WILL FURNISH TO STATE STREET BANK
<PAGE>
AND TRUST COMPANY OF CALIFORNIA, N.A., AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE
TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (4) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THE NOTE EVIDENCED HEREBY PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD
APPLICABLE TO SALES OF THE NOTE EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE
SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO STATE STREET BANK AND TRUST COMPANY OF
CALIFORNIA, N.A., AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR IS A PURCHASER
WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., AS TRUSTEE (OR A
SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS SUCH TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED
UPON THE EARLIER OF THE TRANSFER OF THE NOTE EVIDENCED HEREBY PURSUANT TO CLAUSE
(2)(F) ABOVE OR UPON ANY TRANSFER OF THE NOTE EVIDENCED HEREBY UNDER RULE 144(K)
UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION
S UNDER THE SECURITIES ACT.
A-2
<PAGE>
SEMTECH CORPORATION
4 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2007
CUSIP:_____________________
No. __________ $____________________
Semtech Corporation, a corporation duly organized and validly existing
under the laws of the State of Delaware (herein called the "Company", which term
includes any successor corporation under the Indenture referred to on the
reverse hereof), for value received hereby promises to pay to
___________________________registered assigns, the principal sum of
_________________ ($___________) on February 1, 2007, at the office or agency of
the Company maintained for that purpose in accordance with the terms of the
Indenture, in such coin or currency of the United States of America as at the
time of payment shall be legal tender for the payment of public and private
debts, and to pay interest, semi-annually on February 1 and August 1 of each
year, commencing August 1, 2000, on said principal sum at said office or agency,
in like coin or currency, at the rate per annum of 4 1/2%, from February 1 or
August 1, as the case may be, next preceding the date of this Note to which
interest has been paid or duly provided for, unless the date hereof is a date to
which interest has been paid or duly provided for, in which case from the date
of this Note, or unless no interest has been paid or duly provided for on the
Notes, in which case from February 14, 2000, until payment of said principal sum
has been made or duly provided for. Notwithstanding the foregoing, if the date
hereof is after any February 1 or August 1, as the case may be, and before the
following February 1 or August 1, this Note shall bear interest from such
February 1 or August 1; PROVIDED, HOWEVER, that if the Company shall default in
the payment of interest due on such February 1 or August 1, then this Note shall
bear interest from the next preceding February 1 or August 1 to which interest
has been paid or duly provided for or, if no interest has been paid or duly
provided for on such Note, from February 14, 2000. Except as otherwise provided
in the Indenture, the interest payable on the Note pursuant to the Indenture on
any February 1 or August 1 will be paid to the Person entitled thereto as it
appears in the Note register at the close of business on the record date, which
shall be the January 15 or July 15 (whether or not a Business Day) next
preceding such February 1 or August 1, as provided in the Indenture; provided,
however, that any such interest not punctually paid or duly provided for shall
be payable as provided in the Indenture. Interest may, at the option of the
Company, be paid either (i) by check mailed to the registered address of such
Person (provided that the holder of Notes with an aggregate principal amount in
excess of $2,000,000 shall, at the written election of such holder, be paid by
wire transfer of immediately available funds) or (ii) by transfer to an account
maintained by such Person located in the United States; PROVIDED, HOWEVER, that
payments to the Depositary will be made by wire transfer of immediately
available funds to the account of the Depositary or its nominee.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, including, without limitation, provisions subordinating the
payment of principal of and premium, if any, and interest on the Notes to the
prior payment in full of all Senior Indebtedness, as defined in the Indenture,
and provisions giving the holder of this Note the right to convert this Note
into Common Stock of the Company on the terms and subject to the limitations
referred to
A-3
<PAGE>
on the reverse hereof and as more fully specified in the Indenture. Such further
provisions shall for all purposes have the same effect as though fully set forth
at this place.
This Note shall be deemed to be a contract made under the laws of the
State of New York, and for all purposes shall be construed in accordance with
and governed by the laws of the State of New York, without regard to principles
of conflicts of laws.
This Note shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been manually signed
by the Trustee or a duly authorized authenticating agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed.
SEMTECH CORPORATION
By:______________________________
Name:____________________________
Title:___________________________
Attest:
---------------------
Name:
---------------------
Title:
---------------------
Dated:
---------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-named Indenture.
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Trustee
[By:
---------------------
Name:
Title:
,or
By:_________________________________]
As Authenticating Agent
(if different from Trustee)
A-4
<PAGE>
FORM OF REVERSE OF NOTE
SEMTECH CORPORATION
4 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2007
This Note is one of a duly authorized issue of Notes of the Company,
designated as its 4 1/2% Convertible Subordinated Notes due 2007 (herein called
the "Notes"), limited to the aggregate principal amount of $400,000,000 all
issued or to be issued under and pursuant to an Indenture dated as of February
14, 2000 (herein called the "Indenture"), between the Company and State Street
Bank and Trust Company of California, N.A., as trustee (herein called the
"Trustee"), to which Indenture and all indentures supplemental thereto reference
is hereby made for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
the holders of the Notes.
In case an Event of Default (as defined in the Indenture) shall have
occurred and be continuing, the principal of, premium, if any, and accrued
interest (including Liquidated Damages (as defined in the Registration Rights
Agreement), if any) on all Notes may be declared by either the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then
outstanding, and upon said declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Notes at the time outstanding, to execute
supplemental indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any supplemental
indenture or modifying in any manner the rights of the holders of the Notes;
PROVIDED, HOWEVER, that no such supplemental indenture shall (i) extend the
fixed maturity of any Note, or reduce the rate or extend the time of payment of
interest thereon, or reduce the principal amount thereof or premium, if any,
thereon, or reduce any amount payable upon redemption thereof, or impair the
right of any Noteholder to institute suit for the payment thereof, or make the
principal thereof or interest or premium, if any, thereon payable in any coin or
currency other than that provided in the Notes, or modify the provisions of the
Indenture with respect to the subordination of the Notes in a manner adverse to
the Noteholders in any material respect, or change the obligation of the Company
to redeem any Note upon the happening of a Fundamental Change (as defined in the
Indenture) in a manner adverse to the holder of the Notes, or impair the right
to convert the Notes into Common Stock subject to the terms set forth in the
Indenture, including Section 15.6 thereof, without the consent of the holder of
each Note so affected or (ii) reduce the aforesaid percentage of Notes, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of all Notes then outstanding. Subject to
the provisions of the Indenture, the holders of a majority in aggregate
principal amount of the Notes at the time outstanding may on behalf of the
holders of all of the Notes waive any past default or Event of Default under the
Indenture and its consequences except a default in the payment of interest
(including Liquidated Damages, if any) or any premium on, or the principal of,
any of the Notes, or a failure by the Company to convert any Notes into Common
Stock of the Company, or a default in the payment of the redemption price
pursuant to Article Three of the Indenture, or a default in respect of a
covenant or provisions of the Indenture
A-5
<PAGE>
which under Article Eleven of the Indenture cannot be modified without the
consent of the holders of each or all Notes then outstanding or affected
thereby. Any such consent or waiver by the holder of this Note (unless revoked
as provided in the Indenture) shall be conclusive and binding upon such holder
and upon all future holders and owners of this Note and any Notes which may be
issued in exchange or substitution hereof, irrespective of whether or not any
notation thereof is made upon this Note or such other Notes.
The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, expressly subordinated and subject in right of
payment to the prior payment in full of all Senior Indebtedness of the Company,
whether outstanding at the date of the Indenture or thereafter incurred, and
this Note is issued subject to the provisions of the Indenture with respect to
such subordination. Each holder of this Note, by accepting the same, agrees to
and shall be bound by such provisions and authorizes the Trustee on its behalf
to take such action as may be necessary or appropriate to effectuate the
subordination so provided and appoints the Trustee his attorney-in-fact for such
purpose.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
(including Liquidated Damages, if any) on this Note at the place, at the
respective times, at the rate and in the coin or currency herein prescribed.
Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months.
The Notes are issuable in fully registered form, without coupons, in
denominations of $1,000 principal amount and any integral multiple of $1,000. At
the office or agency of the Company referred to on the face hereof, and in the
manner and subject to the limitations provided in the Indenture, without payment
of any service charge but with payment of a sum sufficient to cover any tax,
assessment or other governmental charge that may be imposed in connection with
any registration or exchange of Notes, Notes may be exchanged for a like
aggregate principal amount of Notes of any other authorized denominations.
The Notes will not be redeemable at the option of the Company prior to
February 6, 2003. At any time on or after February 6, 2003, and prior to
maturity, the Notes may be redeemed at the option of the Company, in whole or in
part, upon notice as set forth in Section 3.2, at the following redemption
prices (expressed as percentages of the principal amount), together in each case
with accrued and unpaid interest, if any (including Liquidated Damages, if any)
to, but excluding, the date fixed for redemption:
<TABLE>
<CAPTION>
Period Redemption Price
------ ----------------
<S> <C>
Beginning on February 6 , 2003 and ending on January 31, 2004.......... 102.571%
Beginning on February 1, 2004 and ending on January 31, 2005.......... 101.929%
Beginning on February 1, 2005 and ending on January 31, 2006.......... 101.286%
Beginning on February 1, 2006 and ending on January 31, 2007.......... 100.643%
</TABLE>
A-6
<PAGE>
and 100% on February 1, 2007; provided, however, that if the date fixed for
redemption is on a February 1 or August 1, then the interest payable on such
date shall be paid to the holder of record on the preceding January 15 or July
15, respectively.
The Company may not give notice of any redemption of the Notes if a
default in the payment of interest or premium, if any, on the Notes has occurred
and is continuing.
The Notes are not subject to redemption through the operation of any
sinking fund.
If a Fundamental Change occurs at any time prior to maturity of the
Notes, the Notes will be redeemable on the 30th day after notice thereof (the
"Repurchase Date") at the option of the holder of the Notes at a redemption
price equal to 100% of the principal amount thereof, together with accrued
interest to (but excluding) the date of redemption; provided, however, that, if
such Repurchase Date is a February 1 or August 1, the interest payable on such
date shall be paid to the holder of record of the Notes on the preceding January
15 or July 15, respectively. The Notes will be redeemable in multiples of
$1,000 principal amount. The Company shall mail to all holders of record of the
Notes a notice of the occurrence of a Fundamental Change and of the redemption
right arising as a result thereof on or before the 10th day after the occurrence
of such Fundamental Change. For a Note to be so redeemed at the option of the
holder, the Company must receive at the office or agency of the Company
maintained for that purpose in accordance with the terms of the Indenture, such
Note with the form entitled "Option to Elect Repayment Upon a Fundamental
Change" on the reverse thereof duly completed, together with such Note, duly
endorsed for transfer, on or before the 30th day after the date of such notice
of a Fundamental Change (or if such 30th day is not a Business Day, the
immediately succeeding Business Day).
Subject to the provisions of the Indenture, the holder hereof has the
right, at its option, at any time after the original issuance of any Notes
through the close of business on the final maturity date of the Notes, or, as to
all or any portion hereof called for redemption, prior to the close of business
on the Business Day immediately preceding the date fixed for redemption (unless
the Company shall default in payment due upon redemption thereof), to convert
the principal hereof or any portion of such principal which is $1,000 or an
integral multiple thereof into that number of shares of the Company's Common
Stock (as such shares shall be constituted at the date of conversion) obtained
by dividing the principal amount of this Note or portion thereof to be converted
by the Conversion Price of $84.46, as may adjusted from time to time as provided
in the Indenture, upon surrender of this Note, together with a conversion notice
as provided in the Indenture (the form entitled "Conversion Notice" on the
reverse hereof), to the Company at the office or agency of the Company
maintained for that purpose in accordance with the terms of the Indenture, or at
the option of such holder, the Corporate Trust Office, and, unless the shares
issuable on conversion are to be issued in the same name as this Note, duly
endorsed by, or accompanied by instruments of transfer in form satisfactory to
the Company duly executed by, the holder or by his duly authorized attorney. No
adjustment in respect of interest on any Note converted or dividends on any
shares issued upon conversion of such Note will be made upon any conversion
except as set forth in the next sentence. If this Note (or portion hereof) is
surrendered for conversion during the period from the close of business on any
record date for the payment of interest to the close of business on the Business
Day preceding the following
A-7
<PAGE>
interest payment date and either (x) has not been called for redemption on a
redemption date that occurs during such period or (y) is not to be redeemed in
connection with a Fundamental Change on a Repurchase Date that occurs during
such period, this Note (or portion hereof being converted) must be accompanied
by an amount, in New York Clearing House funds or other funds acceptable to the
Company, equal to the interest payable on such interest payment date on the
principal amount being converted; provided, however, that no such payment shall
be required if there shall exist at the time of conversion a default in the
payment of interest on the Notes. No fractional shares will be issued upon any
conversion, but an adjustment and payment in cash will be made, as provided in
the Indenture, in respect of any fraction of a share which would otherwise be
issuable upon the surrender of any Note or Notes for conversion. A Note in
respect of which a holder is exercising its right to require redemption upon a
Fundamental Change may be converted only if such holder withdraws its election
to exercise such right in accordance with the terms of the Indenture. Any Notes
called for redemption, unless surrendered for conversion by the holders thereof
on or before the close of business on the Business Day preceding the date fixed
for redemption, may be deemed to be redeemed from the holders of such Notes for
an amount equal to the applicable redemption price, together with accrued but
unpaid interest (including Liquidated Damages, if any) to (but excluding) the
date fixed for redemption, by one or more investment banks or other purchasers
who may agree with the Company (i) to purchase such Notes from the holders
thereof and convert them into shares of the Company's Common Stock and (ii) to
make payment for such Notes as aforesaid to the Trustee in trust for the
holders.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company maintained for that purpose in accordance with
the terms of the Indenture, a new Note or Notes of authorized denominations for
an equal aggregate principal amount will be issued to the transferee in exchange
thereof; subject to the limitations provided in the Indenture, without charge
except for any tax, assessment or other governmental charge imposed in
connection therewith.
The Company, the Trustee, any authenticating agent, any paying agent,
any conversion agent and any Note registrar may deem and treat the registered
holder hereof as the absolute owner of this Note (whether or not this Note shall
be overdue and notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Note registrar) for the purpose of
receiving payment hereof, or on account hereof, for the conversion hereof and
for all other purposes, and neither the Company nor the Trustee nor any other
authenticating agent nor any paying agent nor other conversion agent nor any
Note registrar shall be affected by any notice to the contrary. All payments
made to or upon the order of such registered holder shall, to the extent of the
sum or sums paid, satisfy and discharge liability for monies payable on this
Note.
No recourse for the payment of the principal of or any premium or
interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any supplemental indenture or in any Note, or
because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, employee, agent, officer or director or
subsidiary, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or
A-8
<PAGE>
penalty or otherwise, all such liability being, by acceptance hereof and as part
of the consideration for the issue hereof, expressly waived and released.
This Note shall be deemed to be a contract made under the laws of New
York, and for all purposes shall be construed in accordance with the laws of New
York, without regard to principles of conflicts of laws.
Terms used in this Note and defined in the Indenture are used herein
as therein defined.
A-9
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face
of this Note, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common UNIF GIFT MIN ACT - _____ Custodian
_____ TEN ENT - as tenant by the entireties (Cust)
(Minor) JT TEN - as joint tenants with right of survivorship and not
as under Uniform Gifts to Minors Act tenants in common _____________(State)
Additional abbreviations may also be used though not in the above
list.
A-10
<PAGE>
CONVERSION NOTICE
TO: SEMTECH CORPORATION
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
The undersigned registered owner of this Note hereby irrevocably
exercises the option to convert this Note, or the portion thereof (which is
$1,000 or an integral multiple thereof) below designated, into shares of Common
Stock of Semtech Corporation in accordance with the terms of the Indenture
referred to in this Note, and directs that the shares issuable and deliverable
upon such conversion, together with any check in payment for fractional shares
and any Notes representing any unconverted principal amount hereof, be issued
and delivered to the registered holder hereof unless a different name has been
indicated below. If shares or any portion of this Note not converted are to be
issued in the name of a person other than the undersigned, the undersigned will
provide the appropriate information below and pay all transfer taxes payable
with respect thereto. Any amount required to be paid by the undersigned on
account of interest accompanies this Note.
Dated: _______________________
_____________________________
_____________________________
Signature(s)
Signature(s) must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Note registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.
_______________________________
Signature Guarantee
A-11
<PAGE>
Fill in the registration of shares of Common Stock if to be issued,
and Notes if to be delivered, other than to and in the name of the registered
holder:
_____________________________________
(Name)
_____________________________________
(Street Address)
_____________________________________
(City, State and Zip Code)
_____________________________________
Please print name and address
Principal amount to be converted
(if less than all):
$____________________________________
Social Security or Other Taxpayer
Identification Number:
_____________________________________
A-12
<PAGE>
OPTION TO ELECT REPAYMENT
UPON A FUNDAMENTAL CHANGE
TO: SEMTECH CORPORATION
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
The undersigned registered owner of this Note hereby irrevocably
acknowledges receipt of a notice from Semtech Corporation (the "Company") as to
the occurrence of a Fundamental Change with respect to the Company and requests
and instructs the Company to repay the entire principal amount of this Note, or
the portion thereof (which is $1,000 or an integral multiple thereof) below
designated, in accordance with the terms of the Indenture referred to in this
Note at the price of 100% of such entire principal amount or portion thereof,
together with accrued interest to, but excluding, such repayment date, to the
registered holder hereof.
Dated: _____________________
___________________________
___________________________
Signature(s)
NOTICE: The above signatures of the holder(s)
hereof must correspond with the name as written
upon the face of the Note in every particular
without alteration or enlargement or any change
whatever. Principal amount to be repaid (if less
than all):
$_________________________________
__________________________________
Social Security or Other Taxpayer Identification
Number
A-13
<PAGE>
ASSIGNMENT
For value received __________________________________________ hereby
sell(s) assign(s) and transfer(s) unto _____________________________________
(Please insert social security or other Taxpayer Identification Number of
assignee) the within Note, and hereby irrevocably constitutes and appoints
____________________________________ attorney to transfer said Note on the books
of the Company, with full power of substitution in the premises.
In connection with any transfer of the Note prior to the expiration of
the holding period applicable to sales thereof under Rule 144(k) under the
Securities Act (or any successor provision) (other than any transfer pursuant to
a registration statement that has been declared effective under the Securities
Act), the undersigned confirms that such Note is being transferred:
[ ] To Semtech Corporation or a subsidiary thereof; or
[ ] Inside the United States pursuant to and in compliance with Rule 144A
under the Securities Act of 1933, as amended; or
[ ] Inside the United States to an Institutional Accredited Investor
pursuant to and in compliance with the Securities Act of 1933, as
amended, in a minimum denomination of $100,000; or
[ ] Outside the Unites States in compliance with Rule 904 under the
Securities Act; or
[ ] Pursuant to and in compliance with Rule 144 under the Securities Act
of 1933, as amended;
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate").
[ ] The transferee is an Affiliate of the Company.
Dated: ___________________
__________________________________
__________________________________
Signature(s)
Signature(s) must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Note registrar, which requirements include
membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be
determined by the Note registrar in addition to,
or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as
amended.
___________________________________
Signature Guarantee
A-14
<PAGE>
NOTICE: The signature of the conversion notice, the option to elect repayment
upon a Fundamental Change or the assignment must correspond with the name as
written upon the face of the Note in every particular without alteration or
enlargement or any change whatever.
A-15
<PAGE>
EXHIBIT B
Semtech Corporation
652 Mitchell Road
Newbury Park, CA 91320-2289
State Street Bank and Trust Company of California, N.A.,
as Trustee
633 West 5th Street
12th Floor
Los Angeles, California 90071
Attention: Corporate Trust Administration
Ladies and Gentlemen:
In connection with our proposed purchase of __% Convertible
Subordinated Notes due 2007 (the "Notes") of Semtech Corporation, a Delaware
corporation (the "Company") we confirm that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1), (2) or (3) under the Securities Act of 1933, as amended (the
"Securities Act"), or an entity in which all of the equity owners are accredited
investors within the meaning of Rule 501(a)(1), (2) or (3) under the Securities
Act (an "Institutional Accredited Investor");
(ii) (A) any purchase of Notes by us will be for our own account or
for the account of one or more other Institutional Accredited Investors or as
fiduciary for the account of one or more trusts, each of which is an "accredited
investor" within the meaning of Rule 501(a)(7) under the Securities Act and for
each of which we exercise sole investment discretion or (B) we are a "bank,"
within the meaning of Section 3(a)(2) of the Securities Act, or a "savings and
loan association" or other institution described in Section 3(a)(5)(A) of the
Securities Act that is acquiring Notes as fiduciary for the account of one or
more institutions for which we exercise sole investment discretion;
(iii) the event that we purchase any Notes, we will acquire Notes
having a minimum purchase price of not less than $100,000 for our own account or
for any separate account for which we are acting;
(iv) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of purchasing
Notes; and
(v) we are not acquiring Notes with a view to distribution thereof
or with any present intention of offering or selling Notes or the Common Stock
of the Company issuable upon conversion thereof, except as permitted below;
provided that the disposition of our property and property of any accounts for
which we are acting as fiduciary shall remain at all times within our control.
<PAGE>
We understand that the Notes are being offered in a transaction not
involving any public offering within the United States within the meaning of the
Securities Act and that the Notes and the Common Stock of the Company issuable
upon conversion thereof have not been registered under the Securities Act, and
we agree, on our own behalf and on behalf of each account for which we acquire
any Notes, that if in the future we decide to resell or otherwise transfer such
Notes or the Common Stock of the Company issuable upon conversion thereof, such
Notes or Common Stock of the Company may be resold or otherwise transferred only
(i) to the Company or any subsidiary thereof, (ii) inside the United States to a
person who is a "qualified institutional buyer" (as defined in Rule 144A under
the Securities Act) in a transaction meeting the requirements of Rule 144A,
(iii) inside the United States to an Institutional Accredited Investor that,
prior to such transfer, furnishes to the Trustee for the Notes (or in the case
of Common Stock of the Company, the transfer agent therefor) a signed letter
containing certain representations and agreements relating to the restrictions
on transfer of such securities (the form of which letter can be obtained from
the Trustee or the transfer agent, as the case may be), (iv) outside the United
States in a transaction meeting the requirements of Rule 904 under the
Securities Act, (v)pursuant to the exemption from registration provided by Rule
144 under the Securities Act (if applicable), or (vi) pursuant to a registration
statement that has been declared effective under the Securities Act (and which
continues to be effective at the time of such transfer), and in each case, in
accordance with any applicable securities law of any state of the United States
and in accordance with the legends set forth on the Notes or the Common Stock of
the Company issuable upon conversion thereof. We further agree to provide any
person purchasing any of the Notes or the Common Stock of the Company issuable
upon conversion thereof (other than pursuant to clause (v) or (vi) above) from
us a notice advising such purchaser that resales of such securities are
restricted as stated herein. We understand that the Trustee and transfer agent
for the Notes and the Common Stock of the Company will not be required to accept
for registration of transfer any Notes or any Common Stock of the Company issued
upon conversion of the Notes, except upon presentation of evidence satisfactory
to the Company that the foregoing restrictions on transfer have been complied
with. We further understand that any Notes and any Common Stock of the Company
issued upon conversion of the Notes will be in the form of definitive physical
certificates and that such certificates will bear a legend reflecting the
substance of this paragraph other than certificates transferred pursuant to (v)
or (vi) above.
The Company and the Trustee and their respective counsel are entitled
to rely upon this letter and are irrevocably authorized to produce this letter
or a copy hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered hereby.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK.
(Name of Purchaser)
By:
--------------------------
Name:
------------------------
Title:
-----------------------
Address:
---------------------
-----------------------------
B-2
<PAGE>
EXHIBIT 4.2
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
("INSTITUTIONAL ACCREDITED INVESTOR"); (2) AGREES THAT IT WILL NOT, PRIOR TO
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE NOTE EVIDENCED
HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION),
RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK
ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO SEMTECH CORPORATION OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.,
AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH
TRUSTEE OR A SUCCESSOR TRUSTEE, AS APPLICABLE), (D) OUTSIDE THE UNITED STATES IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE)
OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF
SUCH TRANSFER); (3) PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO
CLAUSE (2)(F) ABOVE), IT WILL FURNISH TO STATE STREET BANK AND TRUST COMPANY OF
CALIFORNIA, N.A., AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE, SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE TRUSTEE MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT; AND (4) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE NOTE
EVIDENCED HEREBY PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO
SALES OF THE NOTE EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT
(OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET
FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT
THIS CERTIFICATE TO STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., AS
TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE). IF
<PAGE>
THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR IS A
PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., AS TRUSTEE
(OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS SUCH TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND
WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE NOTE EVIDENCED HEREBY
PURSUANT TO CLAUSE (2)(F) ABOVE OR UPON ANY TRANSFER OF THE NOTE EVIDENCED
HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION).
AS USED HEREIN, THE TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
<PAGE>
SEMTECH CORPORATION
4 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2007
CUSIP: ___________
No. ________ $_______________
Semtech Corporation, a corporation duly organized and validly existing
under the laws of the State of Delaware (herein called the "Company", which term
includes any successor corporation under the Indenture referred to on the
reverse hereof), for value received hereby, promises to pay to _________ or its
registered assigns, the principal sum _____________ ($_____) on February 1,
2007, at the office or agency of the Company maintained for that purpose in
accordance with the terms of the Indenture, in such coin or currency of the
United States of America as at the time of payment shall be legal tender for the
payment of public and private debts, and to pay interest, semi-annually on
February 1 and August 1 of each year, commencing August 1, 2000, on said
principal sum at said office or agency, in like coin or currency, at the rate
per annum of 4 1/2 %, from February 1 or August 1, as the case may be, next
preceding the date of this Note to which interest has been paid or duly provided
for, unless the date hereof is a date to which interest has been paid or duly
provided for, in which case from the date of this Note, or unless no interest
has been paid or duly provided for on the Notes, in which case from February 14,
2000, until payment of said principal sum has been made or duly provided for.
Notwithstanding the foregoing, if the date hereof is after any February 1 or
August 1, as the case may be, and before the following February 1 or August 1,
this Note shall bear interest from such February 1 or August 1; PROVIDED,
HOWEVER, that if the Company shall default in the payment of interest due on
such February 1 or August 1, then this Note shall bear interest from the next
preceding February 1 or August 1 to which interest has been paid or duly
provided for or, if no interest has been paid or duly provided for on such Note,
from February 14, 2000. Except as otherwise provided in the Indenture, the
interest payable on the Note pursuant to the Indenture on any February 1 or
August 1 will be paid to the Person entitled thereto as it appears in the Note
register at the close of business on the record date, which shall be the January
15 or July 15 (whether or not a Business Day) next preceding such February 1 or
August 1, as provided in the Indenture; provided, however, that any such
interest not punctually paid or duly provided for shall be payable as provided
in the Indenture. Interest may, at the option of the Company, be paid either
(i) by check mailed to the registered address of such Person (provided that the
holder of Notes with an aggregate principal amount in excess of $2,000,000
shall, at the written election of such holder, be paid by wire transfer of
immediately available funds) or (ii) by transfer to an account maintained by
such Person located in the United States; PROVIDED, HOWEVER, that payments to
the Depositary will be made by wire transfer of immediately available funds to
the account of the Depositary or its nominee.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, including, without limitation, provisions subordinating the
payment of principal of and premium, if any, and interest on the Notes to the
prior payment in full of all Senior Indebtedness, as defined in the Indenture,
and provisions giving the holder of this Note the right to convert this Note
into Common Stock of the Company on the terms and subject to the limitations
referred to
1
<PAGE>
on the reverse hereof and as more fully specified in the Indenture. Such further
provisions shall for all purposes have the same effect as though fully set forth
at this place.
This Note shall be deemed to be a contract made under the laws of the
State of New York, and for all purposes shall be construed in accordance with
and governed by the laws of the State of New York, without regard to principles
of conflicts of laws.
This Note shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been manually signed
by the Trustee or a duly authorized authenticating agent under the Indenture.
2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed.
SEMTECH CORPORATION
By:
---------------------------
Name:
-------------------------
Title:
------------------------
Attest:
--------------------
Name:
----------------------
Title:
---------------------
Dated:
---------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-named Indenture.
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Trustee
By:
---------------------------------
Name:
Title:
S-1
<PAGE>
FORM OF REVERSE OF NOTE
SEMTECH CORPORATION
4 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2007
This Note is one of a duly authorized issue of Notes of the Company,
designated as its 4 1/2% Convertible Subordinated Notes due 2007 (herein
called the "Notes"), limited to the aggregate principal amount of $400,000,000
all issued or to be issued under and pursuant to an Indenture dated as of
February 14, 2000 (herein called the "Indenture"), between the Company and State
Street Bank and Trust Company of California, N.A., as trustee (herein called the
"Trustee"), to which Indenture and all indentures supplemental thereto reference
is hereby made for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
the holders of the Notes.
In case an Event of Default (as defined in the Indenture) shall have
occurred and be continuing, the principal of, premium, if any, and accrued
interest (including Liquidated Damages (as defined in the Registration Rights
Agreement), if any) on all Notes may be declared by either the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then
outstanding, and upon said declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Notes at the time outstanding, to execute
supplemental indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any supplemental
indenture or modifying in any manner the rights of the holders of the Notes;
PROVIDED, HOWEVER, that no such supplemental indenture shall (i) extend the
fixed maturity of any Note, or reduce the rate or extend the time of payment of
interest thereon, or reduce the principal amount thereof or premium, if any,
thereon, or reduce any amount payable upon redemption thereof, or impair the
right of any Noteholder to institute suit for the payment thereof, or make the
principal thereof or interest or premium, if any, thereon payable in any coin or
currency other than that provided in the Notes, or modify the provisions of the
Indenture with respect to the subordination of the Notes in a manner adverse to
the Noteholders in any material respect, or change the obligation of the Company
to redeem any Note upon the happening of a Fundamental Change (as defined in the
Indenture) in a manner adverse to the holder of the Notes, or impair the right
to convert the Notes into Common Stock subject to the terms set forth in the
Indenture, including Section 15.6 thereof, without the consent of the holder of
each Note so affected or (ii) reduce the aforesaid percentage of Notes, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of all Notes then outstanding. Subject to
the provisions of the Indenture, the holders of a majority in aggregate
principal amount of the Notes at the time outstanding may on behalf of the
holders of all of the Notes waive any past default or Event of Default under the
Indenture and its consequences except a default in the payment of interest
(including Liquidated Damages, if any) or any premium on, or the principal of,
any of the Notes, or a failure by the Company to convert any Notes into Common
Stock of the Company, or a default in the payment of the redemption price
pursuant to Article Three of the Indenture, or a default in respect of a
covenant or provisions of the Indenture
4
<PAGE>
which under Article Eleven of the Indenture cannot be modified without the
consent of the holders of each or all Notes then outstanding or affected
thereby. Any such consent or waiver by the holder of this Note (unless revoked
as provided in the Indenture) shall be conclusive and binding upon such holder
and upon all future holders and owners of this Note and any Notes which may be
issued in exchange or substitution hereof, irrespective of whether or not any
notation thereof is made upon this Note or such other Notes.
The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, expressly subordinated and subject in right of
payment to the prior payment in full of all Senior Indebtedness of the Company,
whether outstanding at the date of the Indenture or thereafter incurred, and
this Note is issued subject to the provisions of the Indenture with respect to
such subordination. Each holder of this Note, by accepting the same, agrees to
and shall be bound by such provisions and authorizes the Trustee on its behalf
to take such action as may be necessary or appropriate to effectuate the
subordination so provided and appoints the Trustee his attorney-in-fact for such
purpose.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
(including Liquidated Damages, if any) on this Note at the place, at the
respective times, at the rate and in the coin or currency herein prescribed.
Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months.
The Notes are issuable in fully registered form, without coupons, in
denominations of $1,000 principal amount and any integral multiple of $1,000. At
the office or agency of the Company referred to on the face hereof, and in the
manner and subject to the limitations provided in the Indenture, without payment
of any service charge but with payment of a sum sufficient to cover any tax,
assessment or other governmental charge that may be imposed in connection with
any registration or exchange of Notes, Notes may be exchanged for a like
aggregate principal amount of Notes of any other authorized denominations.
The Notes will not be redeemable at the option of the Company prior to
February 6, 2003. At any time on or after February 6, 2003, and prior to
maturity, the Notes may be redeemed at the option of the Company, in whole or in
part, upon notice as set forth in Section 3.2, at the following redemption
prices (expressed as percentages of the principal amount), together in each case
with accrued and unpaid interest, if any (including Liquidated Damages, if any)
to, but excluding, the date fixed for redemption:
<TABLE>
<CAPTION>
Period Redemption Price
------ ----------------
<S> <C>
Beginning on February 6, 2003 and ending on January 31, 2004.......... 102.571%
Beginning on February 1, 2004 and ending on January 31, 2005.......... 101.929%
Beginning on February 1, 2005 and ending on January 31, 2006.......... 101.286%
Beginning on February 1, 2006 and ending on January 31, 2007.......... 100.643%
</TABLE>
5
<PAGE>
and 100% on February 1, 2007; provided, however, that if the date fixed for
redemption is on a February 1 or August 1, then the interest payable on such
date shall be paid to the holder of record on the preceding January 15 or July
15, respectively.
The Company may not give notice of any redemption of the Notes if a
default in the payment of interest or premium, if any, on the Notes has occurred
and is continuing.
The Notes are not subject to redemption through the operation of any
sinking fund.
If a Fundamental Change occurs at any time prior to maturity of the
Notes, the Notes will be redeemable on the 30th day after notice thereof (the
"Repurchase Date") at the option of the holder of the Notes at a redemption
price equal to 100% of the principal amount thereof, together with accrued
interest to (but excluding) the date of redemption; provided, however, that, if
such Repurchase Date is a February 1 or August 1, the interest payable on such
date shall be paid to the holder of record of the Notes on the preceding January
15 or July 15, respectively. The Notes will be redeemable in multiples of
$1,000 principal amount. The Company shall mail to all holders of record of the
Notes a notice of the occurrence of a Fundamental Change and of the redemption
right arising as a result thereof on or before the 10th day after the occurrence
of such Fundamental Change. For a Note to be so redeemed at the option of the
holder, the Company must receive at the office or agency of the Company
maintained for that purpose in accordance with the terms of the Indenture, such
Note with the form entitled "Option to Elect Repayment Upon a Fundamental
Change" on the reverse thereof duly completed, together with such Note, duly
endorsed for transfer, on or before the 30th day after the date of such notice
of a Fundamental Change (or if such 30th day is not a Business Day, the
immediately succeeding Business Day).
Subject to the provisions of the Indenture, the holder hereof has the
right, at its option, at any time after the original issuance of any Notes
through the close of business on the final maturity date of the Notes, or, as to
all or any portion hereof called for redemption, prior to the close of business
on the Business Day immediately preceding the date fixed for redemption (unless
the Company shall default in payment due upon redemption thereof), to convert
the principal hereof or any portion of such principal which is $1,000 or an
integral multiple thereof into that number of shares of the Company's Common
Stock (as such shares shall be constituted at the date of conversion) obtained
by dividing the principal amount of this Note or portion thereof to be converted
by the Conversion Price of $84.46, as may adjusted from time to time as provided
in the Indenture, upon surrender of this Note, together with a conversion notice
as provided in the Indenture (the form entitled "Conversion Notice" on the
reverse hereof), to the Company at the office or agency of the Company
maintained for that purpose in accordance with the terms of the Indenture, or at
the option of such holder, the Corporate Trust Office, and, unless the shares
issuable on conversion are to be issued in the same name as this Note, duly
endorsed by, or accompanied by instruments of transfer in form satisfactory to
the Company duly executed by, the holder or by his duly authorized attorney. No
adjustment in respect of interest on any Note converted or dividends on any
shares issued upon conversion of such Note will be made upon any conversion
except as set forth in the next sentence. If this Note (or portion hereof) is
surrendered for conversion during the period from the close of business on any
record date for the payment of interest to the close of business on the Business
Day preceding the following
6
<PAGE>
interest payment date and either (x) has not been called for redemption on a
redemption date that occurs during such period or (y) is not to be redeemed in
connection with a Fundamental Change on a Repurchase Date that occurs during
such period, this Note (or portion hereof being converted) must be accompanied
by an amount, in New York Clearing House funds or other funds acceptable to the
Company, equal to the interest payable on such interest payment date on the
principal amount being converted; provided, however, that no such payment shall
be required if there shall exist at the time of conversion a default in the
payment of interest on the Notes. No fractional shares will be issued upon any
conversion, but an adjustment and payment in cash will be made, as provided in
the Indenture, in respect of any fraction of a share which would otherwise be
issuable upon the surrender of any Note or Notes for conversion. A Note in
respect of which a holder is exercising its right to require redemption upon a
Fundamental Change may be converted only if such holder withdraws its election
to exercise such right in accordance with the terms of the Indenture. Any Notes
called for redemption, unless surrendered for conversion by the holders thereof
on or before the close of business on the Business Day preceding the date fixed
for redemption, may be deemed to be redeemed from the holders of such Notes for
an amount equal to the applicable redemption price, together with accrued but
unpaid interest (including Liquidated Damages, if any) to (but excluding) the
date fixed for redemption, by one or more investment banks or other purchasers
who may agree with the Company (i) to purchase such Notes from the holders
thereof and convert them into shares of the Company's Common Stock and (ii) to
make payment for such Notes as aforesaid to the Trustee in trust for the
holders.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company maintained for that purpose in accordance with
the terms of the Indenture, a new Note or Notes of authorized denominations for
an equal aggregate principal amount will be issued to the transferee in exchange
thereof; subject to the limitations provided in the Indenture, without charge
except for any tax, assessment or other governmental charge imposed in
connection therewith.
The Company, the Trustee, any authenticating agent, any paying agent,
any conversion agent and any Note registrar may deem and treat the registered
holder hereof as the absolute owner of this Note (whether or not this Note shall
be overdue and notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Note registrar) for the purpose of
receiving payment hereof, or on account hereof, for the conversion hereof and
for all other purposes, and neither the Company nor the Trustee nor any other
authenticating agent nor any paying agent nor other conversion agent nor any
Note registrar shall be affected by any notice to the contrary. All payments
made to or upon the order of such registered holder shall, to the extent of the
sum or sums paid, satisfy and discharge liability for monies payable on this
Note.
No recourse for the payment of the principal of or any premium or
interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any supplemental indenture or in any Note, or
because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, employee, agent, officer or director or
subsidiary, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or
7
<PAGE>
penalty or otherwise, all such liability being, by acceptance hereof and as part
of the consideration for the issue hereof, expressly waived and released.
This Note shall be deemed to be a contract made under the laws of New
York, and for all purposes shall be construed in accordance with the laws of New
York, without regard to principles of conflicts of laws.
Terms used in this Note and defined in the Indenture are used herein
as therein defined.
8
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face
of this Note, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM = tenants in common
UNIF GIFT MIN ACT = Uniform Gift to Minors Act
TEN ENJ = tenants by the entireties
CUST = custodian
JT TEN = joint tenants with right of survivorship and not as tenants
in common
Additional abbreviations may also be used though not in the above
list.
9
<PAGE>
CONVERSION NOTICE
TO: SEMTECH CORPORATION
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
The undersigned registered owner of this Note hereby irrevocably
exercises the option to convert this Note, or the portion thereof (which is
$1,000 or an integral multiple thereof) below designated, into shares of Common
Stock of Semtech Corporation in accordance with the terms of the Indenture
referred to in this Note, and directs that the shares issuable and deliverable
upon such conversion, together with any check in payment for fractional shares
and any Notes representing any unconverted principal amount hereof, be issued
and delivered to the registered holder hereof unless a different name has been
indicated below. If shares or any portion of this Note not converted are to be
issued in the name of a person other than the undersigned, the undersigned will
provide the appropriate information below and pay all transfer taxes payable
with respect thereto. Any amount required to be paid by the undersigned on
account of interest accompanies this Note.
Dated: ______________________
_____________________________
_____________________________
Signature(s)
Signature(s) must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note registrar, which requirements
include membership or participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Note registrar in addition to, or
in substitution for, STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.
_______________________________
Signature Guarantee
10
<PAGE>
Fill in the registration of shares of Common Stock if to be issued,
and Notes if to be delivered, other than to and in the name of the registered
holder:
_____________________________________
(Name)
_____________________________________
(Street Address)
_____________________________________
(City, State and Zip Code)
_____________________________________
Please print name and address
Principal amount to be converted
(if less than all):
$____________________________________
Social Security or Other Taxpayer
Identification Number:
_____________________________________
11
<PAGE>
OPTION TO ELECT REPAYMENT
UPON A FUNDAMENTAL CHANGE
TO: SEMTECH CORPORATION
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
The undersigned registered owner of this Note hereby irrevocably
acknowledges receipt of a notice from Semtech Corporation (the "Company") as to
the occurrence of a Fundamental Change with respect to the Company and requests
and instructs the Company to repay the entire principal amount of this Note, or
the portion thereof (which is $1,000 or an integral multiple thereof) below
designated, in accordance with the terms of the Indenture referred to in this
Note at the price of 100% of such entire principal amount or portion thereof,
together with accrued interest to, but excluding, such repayment date, to the
registered holder hereof.
Dated: ____________________
___________________________
___________________________
Signature(s)
NOTICE: The above signatures of the holder(s)
hereof must correspond with the name as written
upon the face of the Note in every particular
without alteration or enlargement or any change
whatever. Principal amount to be repaid (if less
than all):
$_________________________________
__________________________________
Social Security or Other Taxpayer Identification
Number
12
<PAGE>
ASSIGNMENT
For value received __________________________________________ hereby
sell(s) assign(s) and transfer(s) unto _____________________________________
(Please insert social security or other Taxpayer Identification Number of
assignee) the within Note, and hereby irrevocably constitutes and appoints
____________________________________ attorney to transfer said Note on the books
of the Company, with full power of substitution in the premises.
In connection with any transfer of the Note prior to the expiration of
the holding period applicable to sales thereof under Rule 144(k) under the
Securities Act (or any successor provision) (other than any transfer pursuant to
a registration statement that has been declared effective under the Securities
Act), the undersigned confirms that such Note is being transferred:
[ ] To Semtech Corporation or a subsidiary thereof; or
[ ] Inside the United States pursuant to and in compliance with Rule 144A
under the Securities Act of 1933, as amended; or
[ ] Inside the United States to an Institutional Accredited Investor
pursuant to and in compliance with the Securities Act of 1933, as
amended, in a minimum denomination of $100,000; or
[ ] Outside the Unites States in compliance with Rule 904 under the
Securities Act; or
[ ] Pursuant to and in compliance with Rule 144 under the Securities Act
of 1933, as amended;
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate").
[ ] The transferee is an Affiliate of the Company.
Dated: ___________________
__________________________________
__________________________________
Signature(s)
Signature(s) must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Note registrar, which requirements include
membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be
determined by the Note registrar in addition to,
or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as
amended.
___________________________________
Signature Guarantee
13
<PAGE>
NOTICE: The signature of the conversion notice, the option to elect repayment
upon a Fundamental Change or the assignment must correspond with the name as
written upon the face of the Note in every particular without alteration or
enlargement or any change whatever.
14
<PAGE>
EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
BY AND AMONG
SEMTECH CORPORATION
AS ISSUER,
AND
MORGAN STANLEY & CO. INCORPORATED
AND
BANC OF AMERICA SECURITIES LLC,
AS INITIAL PURCHASERS
DATED AS OF FEBRUARY 14, 2000
<PAGE>
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of February 14, 2000, by and among Semtech Corporation, a
Delaware corporation (the "COMPANY"), and Morgan Stanley & Co. Incorporated
("Morgan"), and Banc of America Securities LLC ("BofA") pursuant to that certain
Purchase Agreement, dated February 8, 2000 (the "PURCHASE AGREEMENT"), among the
Company, on the one hand, and Morgan and BofA, on the other hand (Morgan and
BofA are collectively referred to herein as the "Initial Purchasers").
In order to induce the Initial Purchasers to enter into the Purchase
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement. The execution of this Agreement is a condition to the
closing under the Purchase Agreement.
The Company agrees with the Initial Purchasers, (i) for their benefit
as Initial Purchasers and (ii) for the benefit of the beneficial owners
(including the Initial Purchasers) from time to time of the Notes (as defined
herein) and the beneficial owners from time to time of the Underlying Common
Stock (as defined herein) issued upon conversion of the Notes (each of the
foregoing a "HOLDER" and together the "HOLDERS"), as follows:
SECTION 1. DEFINITIONS. Capitalized terms used herein without
definition shall have their respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
"AFFILIATE" means with respect to any specified person, an
"affiliate," as defined in Rule 144, of such person.
"AMENDMENT EFFECTIVENESS DEADLINE DATE" has the meaning set forth in
Section 2(d) hereof.
"APPLICABLE CONVERSION PRICE" as of any date of determination means
the Conversion Price in effect as of such date of determination or, if no Notes
are then outstanding, the Conversion Price that would be in effect were Notes
then outstanding.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in The City of New York
are authorized or obligated by law or executive order to close.
"COMMON STOCK" means the shares of common stock, par value $.01 per
share, of the Company and any other shares of common stock as may constitute
"Common Stock" for purposes of the Indenture, including the Underlying Common
Stock.
"CONVERSION PRICE" has the meaning assigned such term in the
Indenture.
<PAGE>
"DAMAGES ACCRUAL PERIOD" has the meaning set forth in Section 2(e)
hereof.
"DAMAGES PAYMENT DATE" means each interest payment date under the
Indenture in the case of Notes, and each February 1 and August 1 in the case of
the Underlying Common Stock.
"DEFERRAL NOTICE" has the meaning set forth in Section 3(i) hereof.
"DEFERRAL PERIOD" has the meaning set forth in Section 3(i) hereof.
"EFFECTIVENESS DEADLINE DATE" has the meaning set forth in Section
2(a) hereof.
"EFFECTIVENESS PERIOD" means the period commencing on the date the
Initial Shelf Registration Statement is declared effective by the SEC and ending
on the date that all Registrable Securities have ceased to be Registrable
Securities.
"EVENT" has the meaning set forth in Section 2(e) hereof.
"EVENT DATE" has the meaning set forth in Section 2(e) hereof.
"EVENT TERMINATION DATE" has the meaning set forth in Section 2(e)
hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"FILING DEADLINE DATE" has the meaning set forth in Section 2(a)
hereof.
"HOLDER" has the meaning set forth in the third paragraph of this
Agreement.
"INDENTURE" means the Indenture, dated as of February 14, 2000,
between the Company and State Street Bank and Trust Company of California, N.A.,
as trustee, pursuant to which the Notes are being issued.
"INITIAL PURCHASERS" means Morgan Stanley & Co. Incorporated and Banc
of America Securities LLC.
"INITIAL SHELF REGISTRATION STATEMENT" has the meaning set forth in
Section 2(a) hereof.
"ISSUE DATE" means the first date of original issuance of the Notes.
"LIQUIDATED DAMAGES AMOUNT" has the meaning set forth in Section 2(e)
hereof.
2
<PAGE>
"LOSSES" has the meaning set forth in Section 6 hereof.
"MATERIAL EVENT" has the meaning set forth in Section 3(i) hereof.
"NOTES" means the 4 1/2% Convertible Subordinated Notes due 2007 of
the Company to be purchased pursuant to the Purchase Agreement.
"NOTICE AND QUESTIONNAIRE" means a written notice delivered to the
Company containing substantially the information called for by the Selling
Securityholder Notice and Questionnaire attached as Annex B to the Offering
Memorandum of the Company issued February 9, 2000 relating to the Notes.
"NOTICE HOLDER" means, on any date, any Holder that has delivered a
Notice and Questionnaire to the Company on or prior to such date.
"PURCHASE AGREEMENT" has the meaning set forth in the preamble hereof.
"PROSPECTUS" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any amendment or prospectus
supplement, including post-effective amendments, and all materials incorporated
by reference or explicitly deemed to be incorporated by reference in such
Prospectus.
"RECORD HOLDER" means (i) with respect to any Damages Payment Date
relating to any Notes as to which any such Liquidated Damages Amount has
accrued, the holder of record of such Note on the record date with respect to
the interest payment date under the Indenture on which such Damages Payment Date
shall occur and (ii) with respect to any Damages Payment Date relating to the
Underlying Common Stock as to which any such Liquidated Damages Amount has
accrued, the registered holder of such Underlying Common Stock fifteen (15) days
prior to such Damages Payment Date.
"REGISTRABLE SECURITIES" means the Notes until such Notes have been
converted into or exchanged for the Underlying Common Stock and, at all times
subsequent to any such conversion or exchange the Underlying Common Stock and
any securities into or for which such Underlying Common Stock has been converted
or exchanged, and any security issued with respect thereto upon any stock
dividend, split or similar event until, in the case of any such security, (A)
the earliest of (i) its effective registration under the Securities Act and
resale in accordance with the Registration Statement covering it, (ii)
expiration of the holding period that would be applicable thereto, under Rule
144(k) or (iii) its sale to the public pursuant to Rule 144 (or any similar
provision then in force, but not Rule 144A) under the Securities Act, and (B) as
a result of the event or circumstance described in any of the foregoing clauses
(i) through (iii), the legend with respect to transfer restrictions required
under the Indenture are
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removed or removable in accordance with the terms of the Indenture or such
legend, as the case may be.
"REGISTRATION EXPENSES" has the meaning set forth in Section 5 hereof.
"REGISTRATION STATEMENT" means any registration statement of the
Company that covers any of the Registrable Securities pursuant to the provisions
of this Agreement including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all materials incorporated by reference or explicitly deemed to be incorporated
by reference in such registration statement.
"RESTRICTED SECURITIES" means "Restricted Securities" as defined in
Rule 144.
"RULE 144" means Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
"RULE 144A" means Rule 144A under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
"SHELF REGISTRATION STATEMENT" has the meaning set forth in Section
2(a) hereof.
"SPECIAL COUNSEL" means Latham & Watkins or such other successor
counsel as shall be specified by the Holders of a majority of the Registrable
Securities, but which may, with the written consent of the Initial Purchasers
(which shall not be unreasonably withheld), be another nationally recognized law
firm experienced in securities law matters designated by the Company, the
reasonable fees and expenses of which will be paid by the Company pursuant to
Section 5 hereof.
"SUBSEQUENT SHELF REGISTRATION STATEMENT" has the meaning set forth in
Section 2(b) hereof.
"TIA" means the Trust Indenture Act of 1939, as amended.
"TRUSTEE" means State Street Bank and Trust Company of California,
N.A., the Trustee under the Indenture.
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"UNDERLYING COMMON STOCK" means the Common Stock into which the Notes
are convertible or issued upon any such conversion.
SECTION 2. SHELF REGISTRATION. (a) The Company shall use its best
efforts to prepare and file or cause to be prepared and filed with the SEC, as
soon as practicable but in any event by the date (the "FILING DEADLINE DATE")
ninety (90) days after the Issue Date, a Registration Statement for an offering
to be made on a delayed or continuous basis pursuant to Rule 415 of the
Securities Act (a "SHELF REGISTRATION STATEMENT") registering the resale from
time to time by Holders thereof of all of the Registrable Securities (the
"INITIAL SHELF REGISTRATION STATEMENT"). The Initial Shelf Registration
Statement shall be on Form S-3 or another appropriate form permitting
registration of such Registrable Securities for resale by such Holders in
accordance with the reasonable methods of distribution elected by the Holders,
approved by the Company, and set forth in the Initial Shelf Registration
Statement. The Company shall use its reasonable efforts to cause the Initial
Shelf Registration Statement to be declared effective under the Securities Act
as promptly as is practicable but in any event by the date (the "EFFECTIVENESS
DEADLINE DATE") that is one hundred eighty (180) days after the Issue Date, and
to keep the Initial Shelf Registration Statement (or any Subsequent Shelf
Registration Statement) continuously effective under the Securities Act until
the expiration of the Effectiveness Period. At the time the Initial Shelf
Registration Statement is declared effective, each Holder that became a Notice
Holder on or prior to the date ten (10) Business Days prior to such time of
effectiveness shall be named as a selling securityholder in the Initial Shelf
Registration Statement and the related Prospectus in such a manner as to permit
such Holder to deliver such Prospectus to purchasers of Registrable Securities
in accordance with applicable law. None of the Company's security holders (other
than the Holders of Registrable Securities) shall have the right to include any
of the Company's securities in the Shelf Registration Statement.
(b) If the Initial Shelf Registration Statement or any Subsequent
Shelf Registration Statement ceases to be effective for any reason at any time
during the Effectiveness Period (other than because all Registrable Securities
registered thereunder shall have been resold pursuant thereto or shall have
otherwise ceased to be Registrable Securities), the Company shall use its
reasonable efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within thirty (30) days of such
cessation of effectiveness amend the Shelf Registration Statement in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional Shelf Registration Statement
covering all of the securities that as of the date of such filing are
Registrable Securities (a "SUBSEQUENT SHELF REGISTRATION STATEMENT"). If a
Subsequent Shelf Registration Statement is filed, the Company shall use its
reasonable efforts to cause the Subsequent Shelf Registration Statement to
become effective as promptly as is practicable after such filing and to keep
such Registration Statement (or subsequent Shelf Registration Statement)
continuously effective until the end of the Effectiveness Period.
(c) The Company shall supplement and amend the Shelf Registration
Statement if required by the rules, regulations or instructions applicable to
the registration
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form used by the Company for such Shelf Registration Statement, if required by
the Securities Act or as reasonably requested by the Initial Purchasers or by
the Trustee on behalf of the Holders of the Registrable Securities covered by
such Shelf Registration Statement.
(d) Each Holder of Registrable Securities agrees that if such Holder
wishes to sell Registrable Securities pursuant to a Shelf Registration Statement
and related Prospectus, it will do so only in accordance with this Section 2(d)
and Section 3(i). Each Holder of Registrable Securities wishing to sell
Registrable Securities pursuant to a Shelf Registration Statement and related
Prospectus agrees to deliver a Notice and Questionnaire to the Company at least
three (3) Business Days prior to any intended distribution of Registrable
Securities under the Shelf Registration Statement. From and after the date the
Initial Shelf Registration Statement is declared effective, the Company shall,
as promptly as practicable after the date a Notice and Questionnaire is
delivered, and in any event upon the later of (x) five (5) Business Days after
such date or (y) five (5) Business Days after the expiration of any Deferral
Period in effect when the Notice and Questionnaire is delivered or put into
effect within five (5) Business Days of such delivery date, (i) if required by
applicable law, file with the SEC a post-effective amendment to the Shelf
Registration Statement or prepare and, if required by applicable law, file a
supplement to the related Prospectus or a supplement or amendment to any
document incorporated therein by reference or file any other required document
so that the Holder delivering such Notice and Questionnaire is named as a
selling securityholder in the Shelf Registration Statement and the related
Prospectus in such a manner as to permit such Holder to deliver such Prospectus
to purchasers of the Registrable Securities in accordance with applicable law
and, if the Company shall file a post-effective amendment to the Shelf
Registration Statement, use its reasonable efforts to cause such post-effective
amendment to be declared effective under the Securities Act as promptly as is
practicable, but in any event by the date (the "AMENDMENT EFFECTIVENESS DEADLINE
DATE") that is forty-five (45) days after the date such post-effective amendment
is required by this clause to be filed; (ii) provide such Holder copies of any
documents filed pursuant to Section 2(d)(i); and (iii) notify such Holder as
promptly as practicable after the effectiveness under the Securities Act of any
post-effective amendment filed pursuant to Section 2(d)(i); PROVIDED, that if
such Notice and Questionnaire is delivered during a Deferral Period, the Company
shall so inform the Holder delivering such Notice and Questionnaire and shall
take the actions set forth in clauses (i), (ii) and (iii) above within five (5)
Business Days after expiration of the Deferral Period in accordance with Section
3(i). Notwithstanding anything contained herein to the contrary, (i) the Company
shall be under no obligation to name any Holder that is not a Notice Holder as a
selling securityholder in any Registration Statement or related Prospectus and
(ii) the Amendment Effectiveness Deadline Date shall be extended by up to ten
(10) Business Days from the expiration of a Deferral Period (and the Company
shall incur no obligation to pay Liquidated Damages during such extension) if
such Deferral Period shall be in effect on the Amendment Effectiveness Deadline
Date.
(e) The parties hereto agree that the Holders of Registrable
Securities will suffer damages, and that it would not be feasible to ascertain
the extent of such damages with precision, if (i) the Initial Shelf Registration
Statement has not been filed
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on or prior to the Filing Deadline Date, (ii) the Initial Shelf Registration
Statement has not been declared effective under the Securities Act on or prior
to the Effectiveness Deadline Date, (iii) the Company has failed to perform its
obligations set forth in Section 2(d) within the time period required therein,
(iv) the aggregate duration of Deferral Periods in any period exceeds the number
of days permitted in respect of such period pursuant to Section 3(i) hereof or
(v) the number of Deferral Periods in any period exceeds the number permitted in
respect of such period pursuant to Section 3(i) hereof (each of the events of a
type described in any of the foregoing clauses (i) through (v) are individually
referred to herein as an "EVENT," and the Filing Deadline Date in the case of
clause (i), the Effectiveness Deadline Date in the case of clause (ii), the date
by which the Company is required to perform its obligations set forth in Section
2(d) in the case of clause (iii) (including the filing of any post-effective
amendment prior to the Amendment Effectiveness Deadline Date), the date on which
the aggregate duration of Deferral Periods in any period exceeds the number of
days permitted by Section 3(i) hereof in the case of clause (iv), and the date
of the commencement of a Deferral Period that causes the limit on the number of
Deferral Periods in any period under Section 3(i) hereof to be exceeded in the
case of clause (v), being referred to herein as an "EVENT DATE"). Events shall
be deemed to continue until the "EVENT TERMINATION DATE," which shall be the
following dates with respect to the respective types of Events: the date the
Initial Shelf Registration Statement is filed in the case of an Event of the
type described in clause (i), the date the Initial Shelf Registration Statement
is declared effective under the Securities Act in the case of an Event of the
type described in clause (ii), the date the Company performs its obligations set
forth in Section 2(d) in the case of an Event of the type described in clause
(iii) (including, without limitation, the date the relevant post-effective
amendment to the Shelf Registration Statement is declared effective under the
Securities Act), termination of the Deferral Period that caused the limit on the
aggregate duration of Deferral Periods in a period set forth in Section 3(i) to
be exceeded in the case of the commencement of an Event of the type described in
clause (iv), and termination of the Deferral Period the commencement of which
caused the number of Deferral Periods in a period permitted by Section 3(i) to
be exceeded in the case of an Event of the type described in clause (v).
Accordingly, commencing on (and including) any Event Date and ending
on (but excluding) the next date on which there are no Events that have occurred
and are continuing (a "DAMAGES ACCRUAL PERIOD"), the Company agrees to pay, as
liquidated damages and not as a penalty, an amount (the "LIQUIDATED DAMAGES
AMOUNT"), payable on the Damages Payment Dates to Record Holders of Notes that
are Registrable Securities and of shares of Underlying Common Stock issued upon
conversion of Notes that are Registrable Securities, as the case may be,
accruing, for each portion of such Damages Accrual Period beginning on and
including a Damages Payment Date (or, in respect of the first time that the
Liquidated Damages Amount is to be paid to Holders on a Damages Payment Date as
a result of the occurrence of any particular Event, from the Event Date) and
ending on but excluding the first to occur of (A) the date of the end of the
Damages Accrual Period or (B) the next Damages Payment Date, at a rate per annum
equal to one-half of one percent (0.5%) of the aggregate principal amount of
such Notes or, without duplication, in the case of Notes that have been
converted into or exchanged for Underlying Common Stock, the Applicable
Conversion Price of such
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shares of Underlying Common Stock, as the case may be, in each case determined
as of the Business Day immediately preceding the next Damages Payment Date;
PROVIDED, that in the case of a Damages Accrual Period that is in effect solely
as a result of an Event of the type described in clause (iii) of the immediately
preceding paragraph, such Liquidated Damages Amount shall be paid only to the
Holders that have delivered Notice and Questionnaires that caused the Company to
incur the obligations set forth in Section 2(d) the non-performance of which is
the basis of such Event, PROVIDED FURTHER, that any Liquidated Damages Amount
accrued with respect to any Note or portion thereof called for redemption on a
redemption date or converted into Underlying Common Stock on a conversion date
prior to the Damages Payment Date, shall, in any such event, be paid instead to
the Holder who submitted such Note or portion thereof for redemption or
conversion on the applicable redemption date or conversion date, as the case may
be, on such date (or promptly following the conversion date, in the case of
conversion). Notwithstanding the foregoing, no Liquidated Damages Amounts shall
accrue as to any Registrable Security from and after the earlier of (x) the date
such security is no longer a Registrable Security and (y) expiration of the
Effectiveness Period. The rate of accrual of the Liquidated Damages Amount with
respect to any period shall not exceed the rate provided for in this paragraph
notwithstanding the occurrence of multiple concurrent Events. Following the cure
of all Events requiring the payment by the Company of Liquidated Damages Amounts
to the Holders of Registrable Securities pursuant to this Section, the accrual
of Liquidated Damages Amounts will cease (without in any way limiting the effect
of any subsequent Event requiring the payment of Liquidated Damages Amount by
the Company).
The Trustee shall be entitled, on behalf of Holders of Notes or
Underlying Common Stock, to seek any available remedy for the enforcement of
this Agreement, including for the payment of any Liquidated Damages Amount.
Notwithstanding the foregoing, the parties agree that the sole damages payable
for a violation of the terms of this Agreement with respect to which liquidated
damages are expressly provided shall be such liquidated damages.
All of the Company's obligations set forth in this Section 2(e) that
are outstanding with respect to any Registrable Security at the time such
security ceases to be a Registrable Security shall survive until such time as
all such obligations with respect to such security have been satisfied in full
(notwithstanding termination of this Agreement pursuant to Section 8(k)).
The parties hereto agree that the liquidated damages provided for in
this Section 2(e) constitute a reasonable estimate of the damages that may be
incurred by Holders of Registrable Securities by reason of the failure of the
Shelf Registration Statement to be filed or declared effective or available for
effecting resales of Registrable Securities in accordance with the provisions
hereof.
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SECTION 3. REGISTRATION PROCEDURES. In connection with the
registration obligations of the Company under Section 2 hereof, the Company
shall:
(a) Prepare and file with the SEC a Registration Statement or
Registration Statements on any appropriate form under the Securities Act
available for the sale of the Registrable Securities by the Holders thereof in
accordance with the intended method or methods of distribution thereof, and use
its reasonable efforts to cause each such Registration Statement to become
effective and remain effective as provided herein; PROVIDED, that before filing
any Registration Statement or Prospectus or any amendments or supplements
thereto with the SEC, furnish to the Initial Purchasers and the Special Counsel
copies of all such documents proposed to be filed and use its best efforts to
reflect in each such document when so filed with the SEC such comments as the
Special Counsel reasonably shall propose within five (5) Business Days of the
delivery of such copies to the Initial Purchasers and the Special Counsel.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the applicable period
specified in Section 2(a); cause the related Prospectus to be supplemented by
any required Prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 (or any similar provisions then in force) under the Securities Act;
and use its best efforts to comply with the provisions of the Securities Act
applicable to it with respect to the disposition of all securities covered by
such Registration Statement during the Effectiveness Period in accordance with
the intended methods of disposition by the sellers thereof set forth in such
Registration Statement as so amended or such Prospectus as so supplemented.
(c) As promptly as practicable give notice to the Notice Holders, the
Initial Purchasers and the Special Counsel (i) when any Prospectus, Prospectus
supplement, Registration Statement or post-effective amendment to a Registration
Statement has been filed with the SEC and, with respect to a Registration
Statement or any post-effective amendment, when the same has been declared
effective, (ii) of any request, following the effectiveness of the Initial Shelf
Registration Statement under the Securities Act, by the SEC or any other federal
or state governmental authority for amendments or supplements to any
Registration Statement or related Prospectus or for additional information,
(iii) of the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of any Registration
Statement or the initiation or threatening of any proceedings for that purpose,
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (v) after the effective date of
any Registration Statement filed pursuant to this Agreement of the occurrence of
(but not the nature of or details concerning) a Material Event and (vi) of the
determination by the Company that a post-effective amendment to a Registration
Statement will be filed with the SEC, which notice may, at the discretion of the
Company (or as required pursuant to Section 3 (i)), state that it constitutes a
Deferral Notice, in which event the provisions of Section 3(i) shall apply.
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(d) Use reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction in which they have been
qualified for sale, in either case at the earliest possible moment, and provide
prompt notice to each Notice Holder and the Initial Purchasers of the withdrawal
of any such order.
(e) If reasonably requested by the Initial Purchasers or any Notice
Holder, as promptly as practicable incorporate in a Prospectus supplement or
post-effective amendment to a Registration Statement such information as the
Initial Purchasers, the Special Counsel or such Notice Holder shall, on the
basis of a written opinion of nationally-recognized counsel experienced in such
matters, determine to be required to be included therein by applicable law and
make any required filings of such Prospectus supplement or such post-effective
amendment.
(f) As promptly as practicable furnish to each Notice Holder, the
Special Counsel and the Initial Purchasers, without charge, at least one (1)
conformed copy of the Registration Statement and any amendment thereto,
including financial statements but excluding schedules, all documents
incorporated or deemed to be incorporated therein by reference and all exhibits
(unless requested in writing to the Company by such Notice Holder, Special
Counsel, counsel or Initial Purchasers).
(g) During the Effectiveness Period, deliver to each Notice Holder,
the Special Counsel and the Initial Purchasers, in connection with any sale of
Registrable Securities pursuant to a Registration Statement, without charge, as
many copies of the Prospectus or Prospectuses relating to such Registrable
Securities (including each preliminary prospectus) and any amendment or
supplement thereto as such Notice Holder may reasonably request; and the Company
hereby consents (except during such periods that a Deferral Notice is
outstanding and has not been revoked) to the use of such Prospectus or each
amendment or supplement thereto by each Notice Holder, in connection with any
offering and sale of the Registrable Securities covered by such Prospectus or
any amendment or supplement thereto in the manner set forth therein.
(h) Prior to any public offering of the Registrable Securities
pursuant to the Shelf Registration Statement, register or qualify or cooperate
with the Notice Holders in connection with the registration or qualification (or
exemption from such 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 Notice Holder reasonably requests
in writing (which request may be included in the Notice and Questionnaire);
prior to any public offering of the Registrable Securities pursuant to the Shelf
Registration Statement, keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period in connection
with such Notice Holder's offer and sale of Registrable Securities pursuant to
such registration or qualification (or exemption therefrom) and do any and all
other acts or things reasonably necessary or advisable to enable the disposition
in such jurisdictions of such Registrable Securities in the manner set forth in
the relevant Registration Statement and the related Prospectus; PROVIDED, that
the Company will not be required to (i) qualify as a foreign
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corporation or as a dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Agreement or (ii) take any action
that would subject it to general service of process in suits or to taxation in
any such jurisdiction where it is not then so subject.
(i) Upon (A) the issuance by the SEC of a stop order suspending the
effectiveness of the Shelf Registration Statement or the initiation of
proceedings with respect to the Shelf Registration Statement under Section 8(d)
or 8(e) of the Securities Act, (B) the occurrence of any event or the existence
of any fact (a "MATERIAL EVENT") as a result of which any Registration Statement
shall contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or any Prospectus shall contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or (C) the occurrence or existence
of any pending corporate development that, in the reasonable discretion of the
Company, makes it appropriate to suspend the availability of the Shelf
Registration Statement and the related Prospectus, (i) in the case of clause (B)
above, subject to the next sentence, as promptly as practicable prepare and
file, if necessary pursuant to applicable law, a post-effective amendment to
such Registration Statement or a supplement to the related Prospectus or any
document incorporated therein by reference or file any other required document
that would be incorporated by reference into such Registration Statement and
Prospectus so that such Registration Statement does not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and such Prospectus
does not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, as thereafter delivered to the purchasers of the Registrable
Securities being sold thereunder, and, in the case of a post-effective amendment
to a Registration Statement, subject to the next sentence, use its reasonable
efforts to cause it to be declared effective as promptly as is practicable, and
(ii) give notice to the Notice Holders and the Special Counsel that the
availability of the Shelf Registration Statement is suspended (a "DEFERRAL
NOTICE") and, upon receipt of any Deferral Notice, each Notice Holder agrees not
to sell any Registrable Securities pursuant to the Registration Statement until
such Notice Holder's receipt of copies of the supplemented or amended Prospectus
provided for in clause (i) above, or until it is advised in writing by the
Company that the Prospectus may be used, and has received copies of any
additional or supplemental filings that are incorporated or deemed incorporated
by reference in such Prospectus. The Company will use all reasonable efforts to
ensure that the use of the Prospectus may be resumed (x) in the case of clause
(A) above, as promptly as is practicable, (y) in the case of clause (B) above,
as soon as, in the sole judgment of the Company, public disclosure of such
Material Event would not be prejudicial to or contrary to the interests of the
Company or, if necessary to avoid unreasonable burden or expense, as soon as
practicable thereafter and (z) in the case of clause (C) above, as soon as, in
the discretion of the Company, such suspension is no longer appropriate. The
Company shall be entitled to exercise its right under this
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Section 3(i) to suspend the availability of the Shelf Registration Statement or
any Prospectus, without incurring or accruing any obligation to pay liquidated
damages pursuant to Section 2(e), no more than one (1) time in any three month
period or four (4) times in any twelve month period, and any such period during
which the availability of the Registration Statement and any Prospectus is
suspended (the "DEFERRAL PERIOD") shall, without incurring any obligation to pay
liquidated damages pursuant to Section 2(e), not exceed 30 days; PROVIDED, that
in the case of a Material Event relating to an acquisition or a probable
acquisition or financing, recapitalization, business combination or other
similar transaction, the Company may, without incurring any obligation to pay
liquidated damages pursuant to Section 2(e), deliver to Notice Holders a second
notice to the effect set forth above, which shall have the effect of extending
the Deferral Period by up to an additional 30 days, or such shorter period of
time as is specified in such second notice, PROVIDED, that the aggregate
duration of any Deferral Periods shall not, without incurring any obligation to
pay liquidated damages pursuant to Section 2(e), exceed 30 days in any three
month period (or 60 days in any three month period in the event of a Material
Event pursuant to which the Company has delivered a second notice as required
above) or 90 days in any twelve (12) month period.
(j) If reasonably requested in writing in connection with a
disposition of Registrable Securities pursuant to a Registration Statement, make
reasonably available for inspection during normal business hours by a
representative for the Notice Holders of such Registrable Securities, and any
broker-dealers, attorneys and accountants retained by such Notice Holders, all
relevant financial and other records and pertinent corporate documents and
properties of the Company and its subsidiaries, and cause the appropriate
officers, directors and employees of the Company and its subsidiaries to make
reasonably available for inspection during normal business hours on reasonable
notice all relevant information reasonably requested by such representative for
the Notice Holders, or any such broker-dealers, attorneys or accountants in
connection with such disposition, in each case as is customary for similar "DUE
DILIGENCE" examinations; PROVIDED, HOWEVER, that such persons shall first agree
in writing with the Company that any information that is reasonably and in good
faith designated by the Company in writing as confidential at the time of
delivery of such information shall be kept confidential by such persons and
shall be used solely for the purposes of exercising rights under this Agreement,
unless (i) disclosure of such information is required by court or administrative
order or is necessary to respond to inquiries of regulatory authorities, (ii)
disclosure of such information is required by law (including any disclosure
requirements pursuant to federal securities laws in connection with the filing
of any Registration Statement or the use of any Prospectus referred to in this
Agreement), (iii) such information becomes generally available to the public
other than as a result of a disclosure or failure to safeguard by any such
person or (iv) such information becomes available to any such person from a
source other than the Company and such source is not bound by a confidentiality
agreement, and PROVIDED, that the foregoing inspection and information gathering
shall, to the greatest extent possible, be coordinated on behalf of all the
Notice Holders and the other parties entitled thereto by the counsel referred to
in Section 5 and PROVIDED FURTHER, that the Company shall not be required to
disclose any information subject to the attorney-client or attorney work product
privilege if and to the extent such disclosure would constitute a waiver of such
privilege.
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(k) Use all reasonable efforts to comply with all applicable rules and
regulations of the SEC and make generally available to its securityholders
earning statements (which need not be audited) satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act) no later than 45 days after the end of any
3-month period (or 90 days after the end of any 12-month period if such period
is a fiscal year) commencing on the first day of the first fiscal quarter of the
Company commencing after the effective date of a Registration Statement, which
statements shall cover said periods.
(l) Cooperate with each Notice Holder to facilitate the timely
preparation and delivery of certificates representing Registrable Securities
sold pursuant to a Registration Statement, which certificates shall not bear any
restrictive legends, and cause such Registrable Securities to be in such
denominations as are permitted by the Indenture and registered in such names as
such Notice Holder may request in writing at least two (2) Business Days prior
to any sale of such Registrable Securities.
(m) Provide a CUSIP number for all Registrable Securities covered by
each Registration Statement not later than the effective date of such
Registration Statement and provide the Trustee and the transfer agent for the
Common Stock with printed certificates for the Registrable Securities that are
in a form eligible for deposit with The Depository Trust Company.
(n) Cooperate and assist in any filings required to be made with the
National Association of Securities Dealers, Inc.
(o) Upon (i) the filing of the Initial Registration Statement and (ii)
the effectiveness of the Initial Registration Statement, announce the same, in
each case by release to Reuters Economic Services and Bloomberg Business News.
SECTION 4. HOLDER'S OBLIGATIONS. Each Holder agrees, by acquisition
of the Registrable Securities, that no Holder of Registrable Securities shall be
entitled to sell any of such Registrable Securities pursuant to a Registration
Statement or to receive a Prospectus relating thereto, unless such Holder has
furnished the Company with a Notice and Questionnaire as required pursuant to
Section 2(d) hereof (including the information required to be included in such
Notice and Questionnaire) and the information set forth in the next sentence.
Each Notice Holder agrees promptly to furnish to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Notice Holder not misleading and any other information
regarding such Notice Holder and the distribution of such Registrable Securities
as the Company may from time to time reasonably request. Any sale of any
Registrable Securities by any Holder shall constitute a representation and
warranty by such Holder that the information relating to such Holder and its
plan of distribution is as set forth in the Prospectus delivered by such Holder
in connection with such disposition, that such Prospectus does not as of the
time of such sale contain any untrue statement of a material fact relating to or
provided by such Holder or its plan of distribution and that such Prospectus
does not as of the time of such sale omit to state any material fact relating to
or provided by such Holder or its plan of distribution necessary to make the
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<PAGE>
statements in such Prospectus, in the light of the circumstances under which
they were made, not misleading.
SECTION 5. REGISTRATION EXPENSES. The Company shall bear all fees and
expenses incurred in connection with the performance by the Company of its
obligations under Sections 2 and 3 of this Agreement whether or not any of the
Registration Statements are declared effective. Such fees and expenses shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (x) with respect to filings required to be
made with the National Association of Securities Dealers, Inc. and (y) of
compliance with federal and state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of the Special Counsel in
connection with Blue Sky qualifications of the Registrable Securities under the
laws of such jurisdictions as the Notice Holders of a majority of the
Registrable Securities being sold pursuant to a Registration Statement may
designate), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities in a form eligible for deposit
with The Depository Trust Company, (iii) duplication expenses relating to copies
of any Registration Statement or Prospectus delivered to any Holders hereunder,
(iv) reasonable fees and disbursements of counsel for the Company and the
Special Counsel in connection with the Shelf Registration Statement (provided
that the Company shall not be liable for the fees and expenses of more than one
separate firm for all parties participating in any transaction hereunder), (v)
reasonable fees and disbursements of the Trustee and its counsel and of the
registrar and transfer agent for the Common Stock and (vi) Securities Act
liability insurance obtained by the Company in its sole discretion. In addition,
the Company shall pay the internal expenses of the Company (including, without
limitation, all salaries and expenses of officers and employees performing legal
or accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing by the Company of the Registrable
Securities on any securities exchange on which similar securities of the Company
are then listed and the fees and expenses of any person, including special
experts, retained by the Company. Notwithstanding the provisions of this Section
5, each seller of Registrable Securities shall pay selling expenses (including
any brokerage fees and expenses or underwriting discounts and commissions, if
any) and all registration expenses to the extent required by applicable law.
SECTION 6. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company shall indemnify and
hold harmless each Notice Holder and each person, if any, who controls any
Notice Holder (within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act) from and against any losses, liabilities,
claims, damages and expenses (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) (collectively, "LOSSES"), arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or based upon any omission
or alleged omission to state therein a material fact
14
<PAGE>
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, PROVIDED,
HOWEVER, that the Company shall not be liable in any such case to the extent
that any such Losses arise out of or are based upon an untrue statement or
alleged untrue statement contained in or omission or alleged omission from any
of such documents in reliance upon and conformity with any of the information
relating to the Holders furnished to the Company in writing by a Holder
expressly for use therein; PROVIDED FURTHER, that the indemnification contained
in this paragraph shall not inure to the benefit of any Holder of Registrable
Securities (or to the benefit of any person controlling such Holder) on account
of any such Losses arising out of or based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any preliminary
prospectus provided in each case the Company has performed its obligations under
Section 3(a) hereof if either (A) (i) such Holder failed to send or deliver a
copy of the Prospectus with or prior to the delivery of written confirmation of
the sale by such Holder to the person asserting the claim from which such Losses
arise and (ii) the Prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged omission, or (B) (x) such
untrue statement or alleged untrue statement, omission or alleged omission is
corrected in an amendment or supplement to the Prospectus and (y) having
previously been furnished by or on behalf of the Company with copies of the
Prospectus as so amended or supplemented, such Holder thereafter fails to
deliver such Prospectus as so amended or supplemented, with or prior to the
delivery of written confirmation of the sale of a Registrable Security to the
person asserting the claim from which such Losses arise.
(b) INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. Each Holder
agrees severally and not jointly to indemnify and hold harmless the Company and
its respective directors and officers, 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) or any other Holder, from and against all Losses
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any Registration Statement or Prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, 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 information furnished to the Company by
such Holder expressly for use in such Registration Statement or Prospectus or
amendment or supplement thereto. In no event shall the liability of any selling
Holder of Registrable Securities hereunder be greater in amount than the dollar
amount of the proceeds received by such Holder upon the sale of the Registrable
Securities pursuant to the Registration Statement giving rise to such
indemnification obligation.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to either of the two
preceding paragraphs, such person (the "INDEMNIFIED PARTY") shall promptly
notify
15
<PAGE>
the person against whom such indemnity may be sought (the "INDEMNIFYING PARTY")
in writing and the indemnifying party, upon request of the indemnified party,
shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any other parties entitled to
indemnification hereunder which the indemnifying party may designate in such
proceeding and shall pay the reasonable fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all
indemnified parties, and that all such fees and expenses shall be reimbursed as
they are incurred. Such separate firm shall be designated in writing by, in the
case of parties indemnified pursuant to Section 6(a), the Holders of a majority
(with Holders of Notes deemed to be the Holders, for purposes of determining
such majority, of the number of shares of Underlying Common Stock into which
such Notes are or would be convertible or exchangeable as of the date on which
such designation is made) of the Registrable Securities covered by the
Registration Statement held by Holders that are indemnified parties pursuant to
Section 6(a) and, in the case of parties indemnified pursuant to Section 6(b),
the Company. The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) CONTRIBUTION. To the extent that the indemnification provided for
in this Section 6 is unavailable to an indemnified party under Section 6(a) or
6(b) hereof in respect of any Losses or is insufficient to hold such indemnified
party harmless, then each applicable indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying party
or parties on the one hand and the indemnified party or parties on the other
hand or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the indemnifying party or parties on the one hand and of the indemnified party
or parties on the other hand in connection with the statements or omissions that
resulted in such
16
<PAGE>
Losses, as well as any other relevant equitable considerations. Benefits
received by the Company shall be deemed to be equal to the total net proceeds
from the initial placement pursuant to the Purchase Agreement (before deducting
expenses) of the Registrable Securities to which such Losses relate. Benefits
received by any Holder shall be deemed to be equal to the value of Registrable
Securities that are registered under the Securities Act. The relative fault of
the Holders on the one hand and the Company on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Holders or by the
Company, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Holders'
respective obligations to contribute pursuant to this paragraph are several in
proportion to the respective number of Registrable Securities they have sold
pursuant to a Registration Statement, and not joint.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by PRO RATA
allocation or by any other method or allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the Losses
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding this Section 6(d), an
indemnifying party that is a selling Holder of Registrable Securities shall not
be required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities sold by such indemnifying party and
distributed to the public were offered to the public exceeds the amount of any
damages that such indemnifying party has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(e) The indemnity, contribution and expense reimbursement obligations
of the parties hereunder shall be in addition to any liability any indemnified
party may otherwise have hereunder, under the Purchase Agreement or otherwise.
(f) The indemnity and contribution provisions contained in this
Section 6 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Holder or any person controlling any Holder, or the Company, or the
Company's officers or directors or any person controlling the Company and (iii)
the sale of any Registrable Securities by any Holder.
SECTION 7. INFORMATION REQUIREMENTS. (a) The Company covenants that,
if at any time before the end of the Effectiveness Period the Company is not
subject to the reporting requirements of the Exchange Act, it will cooperate
with any Holder of Registrable Securities and take such further reasonable
action as any Holder of
17
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Registrable Securities may reasonably request in writing (including, without
limitation, making such reasonable representations as any such Holder may
reasonably request), all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144 and Rule 144A
under the Securities Act and customarily taken in connection with sales pursuant
to such exemptions. Upon the written request of any Holder of Registrable
Securities, the Company shall deliver to such Holder a written statement as to
whether it has complied with such filing requirements, unless such a statement
has been included in the Company's most recent report filed pursuant to Section
13 or Section 15(d) of Exchange Act. Notwithstanding the foregoing, nothing in
this Section 7 shall be deemed to require the Company to register any of its
securities (other than the Common Stock) under any section of the Exchange Act.
(b) The Company shall file the reports required to be filed by it
under the Exchange Act and shall comply with all other requirements set forth in
the instructions to Form S-3 in order to allow the Company to be eligible to
file registration statements on Form S-3.
SECTION 8. MISCELLANEOUS.
(a) NO CONFLICTING AGREEMENTS. The Company is not, as of the date
hereof, a party to, nor shall it, on or after the date of this Agreement, enter
into, any agreement with respect to its securities that conflicts with the
rights granted to the Holders of Registrable Securities in this Agreement. The
Company represents and warrants that the rights granted to the Holders of
Registrable Securities hereunder do not in any way conflict with the rights
granted to the holders of the Company's securities under any other agreements.
Nothwithstanding the foregoing, the Initial Purchaser acknowledges that the
Company is obligated, and may obligate itself from time to time in the future,
to register its securities for other holders pursuant to separate registration
statements.
(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, 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 Holders
of a majority of the then outstanding Underlying Common Stock constituting
Registrable Securities (with Holders of Notes deemed to be the Holders, for
purposes of this Section, of the number of outstanding shares of Underlying
Common Stock into which such Notes are or would be convertible or exchangeable
as of the date on which such consent is requested). Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders of Registrable
Securities whose securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect the rights of other Holders of
Registrable Securities may be given by Holders of at least a majority of the
Registrable Securities being sold by such Holders pursuant to such Registration
Statement; PROVIDED, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence. Each Holder of Registrable
18
<PAGE>
Securities outstanding at the time of any such amendment, modification,
supplement, waiver or consent or thereafter shall be bound by any such
amendment, modification, supplement, waiver or consent effected pursuant to this
Section 8(b), whether or not any notice, writing or marking indicating such
amendment, modification, supplement, waiver or consent appears on the
Registrable Securities or is delivered to such Holder.
(c) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, by telecopier, by
courier guaranteeing overnight delivery or by first-class mail, return receipt
requested, and shall be deemed given (i) when made, if made by hand delivery,
(ii) upon confirmation, if made by telecopier, (iii) one (1) Business Day after
being deposited with such courier, if made by overnight courier or (iv) on the
date indicated on the notice of receipt, if made by first-class mail, to the
parties as follows:
(w) if to a Holder of Registrable Securities, at the most current
address given by such Holder to the Company in a Notice and Questionnaire or any
amendment thereto;
(x) if to the Company, to: Semtech Corporation
652 Mitchell Road
Newberry Park, CA 91320-2289
Attention: Chief Financial Officer
Telecopy No.: (805) 498-3804
and
Paul, Hasting, Janofsky & Walker LLP
555 South Flower Street, 23rd Floor
Los Angeles, CA 90071-2371
Attention: Robert A. Miller, Jr., Esq.
Telecopy No.: (213) 627-0705
(y) if to the Initial Purchasers, to:
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York
Attention: Equity Capital Markets
Telecopy No.: (212) 761-0538
and
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071
Attention: Bryant B. Edwards, Esq.
Telecopy No.: (213) 891-8763
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or to such other address as such person may have furnished to the other persons
identified in this Section 8(c) in writing in accordance herewith.
(d) APPROVAL OF HOLDERS. Whenever the consent or approval of Holders
of a specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or its affiliates (as such term is
defined in Rule 405 under the Securities Act) (other than the Initial Purchasers
or subsequent Holders of Registrable Securities if such subsequent Holders are
deemed to be such affiliates solely by reason of their holdings of such
Registrable Securities) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage.
(e) SUCCESSORS AND ASSIGNS. Any person who purchases any Registrable
Securities from the Initial Purchasers shall be deemed, for purposes of this
Agreement, to be an assignee of the Initial Purchasers. This Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties and shall inure to the benefit of and be binding upon each Holder
of any Registrable Securities.
(f) 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 original and all of which taken together
shall constitute one and the same agreement.
(g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES THEREOF.
(i) SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated thereby, and the parties hereto shall use their best efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction, it being intended that all of the rights and privileges of the
parties shall be enforceable to the fullest extent permitted by law.
(j) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and the registration rights
granted by the Company with respect to the Registrable Securities. Except as
provided in the Purchase Agreement, there are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the
20
<PAGE>
Company with respect to the Registrable Securities. This Agreement supersedes
all prior agreements and undertakings among the parties with respect to such
registration rights. No party hereto shall have any rights, duties or
obligations other than those specifically set forth in this Agreement. In no
event will such methods of distribution take the form of an underwritten
offering of the Registrable Securities without the prior agreement of the
Company.
(k) TERMINATION. This Agreement and the obligations of the parties
hereunder shall terminate upon the end of the Effectiveness Period, except for
any liabilities or obligations under Section 4, 5 or 6 hereof and the
obligations to make payments of and provide for liquidated damages under Section
2(e) hereof to the extent such damages accrue prior to the end of the
Effectiveness Period, each of which shall remain in effect in accordance with
its terms.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
SEMTECH CORPORATION
By:
---------------------------------
Name: John D. "Jack" Poe
Title: Chief Executive Officer and
Chairman of the Board
Confirmed and accepted as of
the date first above written:
MORGAN STANLEY & CO. INCORPORATED
BANC OF AMERICA SECURITIES LLC
By:
----------------------------
Name: Seksom Suriyapa
Title: Vice President
S-1
<PAGE>
EXHIBIT 10.10
SEMTECH CORPORATION
Non-Director and Non-Executive Officer
--------------------------------------
Long-Term Stock Incentive Plan
------------------------------
1. The Plan
(a) Purpose. The purpose of this Non-Director and Non-Executive Officer Long-
Term Stock Incentive Plan (the "Plan") is to promote the longer-term financial
success of Semtech Corporation (the "Company") by providing a means to attract,
retain and award individuals who can and do contribute to such success. By
using stock-based compensation, the recipients of awards under the Plan will
further identify their interests with those of the Company's stockholders.
(b) Effective Date. To serve this purpose, the Plan will become effective upon
its approval by the Board of Directors of the Company (the "Board").
2. Administration
(a) Committee. The Plan shall be administered by a Committee, appointed by the
Board. Notwithstanding the foregoing, the Board may assume, at its sole
discretion, administration of the Plan. The administrator of the Plan, whether
a committee of the Board or the full Board, is referred to herein as the "Plan
Administrator."
(b) Powers and Authority. The Plan Administrator's powers and authority
include, but are not limited to, selecting individuals who are (1) employees of
the Company or any subsidiary of the Company or other entity in which the
Company has a significant equity or other interest as determined by the Plan
Administrator, and (2) not executive officers or directors of the Company
("Eligible Participants"); determining the types and terms and conditions of all
awards granted, including performance and other earnout and/or vesting
contingencies; permitting transferability of awards to third parties;
interpreting the Plan's provisions; and administering the Plan in a manner that
is consistent with its purpose.
(c) Award Prices. For Plan purposes, all stock options, warrants and stock
appreciation rights shall have an exercise price which shall reflect the average
traded price of a share of the Company's common stock, par value $.01 per share
("Common Stock"), on the date as determined by the Plan Administrator, or if the
Common Stock is not traded on such date, the average price on the next preceding
day on which such Common Stock is traded. The applicable date shall be the date
on which the award is granted.
<PAGE>
3. Shares Subject to the Plan
(a) Maximum Shares Available for Delivery. Subject to Section 3(c), the maximum
number of shares of Common Stock that may be delivered to participants and their
beneficiaries under the Plan shall be equal to 1,000,000 shares of Common Stock.
Collectively the shares of Common Stock subject to this Plan are referred to
herein as "Shares." In addition, any Shares granted under the Plan which are
forfeited back to the Company because of the failure to meet an award
contingency or condition shall again be available for delivery pursuant to new
awards granted under the Plan. Any Shares covered by an award (or portion of an
award) granted under the Plan, which is forfeited or canceled, expires or is
settled in cash, shall be deemed not to have been delivered for purposes of
determining the maximum number of Shares available for delivery under the Plan.
Likewise, if any stock option is exercised by tendering Shares, either actually
or by attestation, to the Company as full or partial payment in connection with
the exercise of a stock option under this Plan or any prior plan of the Company,
only the number of Shares issued net of the Shares tendered shall be deemed
delivered for purposes of determining the maximum number of Shares available for
delivery under the Plan. Further, Shares issued under the Plan through the
settlement, assumption or substitution of outstanding awards or obligations to
grant future awards as a condition of the Company acquiring another entity shall
not reduce the maximum number of Shares available for delivery under the Plan.
(b) Other Plan Limits. Subject to Section 3(c), the following additional
maximums are imposed under the Plan. No Shares may be covered by stock options
intended to comply with Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), ("Incentive Stock Options"). The maximum number of Shares
that may be issued in conjunction with awards granted pursuant to Section 4(d)
shall be 150,000. The maximum number of Shares that may be covered by awards
granted to any one individual pursuant to Sections 4(b) and 4(c) shall be
100,000 during any consecutive three calendar years. The maximum payment that
can be made for awards granted to any one individual pursuant to Sections 4(d)
and 4(e) shall be $2,500,000 for any single or combined performance goals
established for a specified performance period. If a payment under Sections
4(d) or 4(e) is made in Shares, the value of such Shares for determining this
maximum individual payment amount will be the closing price of a Share on the
first day of the applicable performance period. A specified performance period
for purposes of this performance goal payment limit shall not exceed a sixty
(60) consecutive month period.
(c) Payment Shares. Subject to the overall limitation on the number of Shares
that may be delivered under the Plan, the categories of Eligible Participants
and the other limitations set forth in Section 3(b), the Plan Administrator may
use available Shares as
-2-
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the form of payment for compensation, grants or rights earned or due under any
other compensation plans or arrangements of the Company, including the plan of
any entity acquired by the Company.
(d) Adjustments for Corporate Transactions. The Plan Administrator may
determine that:
(i) In the event that the outstanding shares of Common Stock of the
Company are changed into or exchanged for a different number or kind of shares
or other securities of the Company by reason of any recapitalization,
reclassification, stock split, stock dividend, combination or subdivision,
appropriate adjustment shall be made in the number of shares available under the
Plan and under any stock awards granted under the Plan. Such adjustment to
outstanding stock awards shall be made without change in the total price
applicable to the unexercised portion of such awards, and a corresponding
adjustment in the applicable exercise price per share shall be made. No such
adjustment shall be made which would, within the meaning of any applicable
provisions of the Code, constitute a modification, extension or renewal of any
award or a grant of additional benefits to the holder of an award.
(ii) In case (A) the Company is merged or consolidated with another
corporation or other entity and the Company is not the surviving corporation,
(B) all or substantially all of the assets or more than 50% of the outstanding
voting stock of the Company is acquired by any other corporation or other entity
or (C) of a reorganization or liquidation of the Company, the Plan Administrator
or the governing body of any entity assuming the obligations of the Company,
shall, as to outstanding awards, either (x) make appropriate provision for the
protection of any such outstanding awards by the substitution on an equitable
basis of appropriate stock of the Company, or of the merged, consolidated or
otherwise reorganized corporation which will be issuable in respect of the
shares of Common Stock of the Company, provided that no additional benefits
shall be conferred upon participants as a result of such substitution, and the
excess of the aggregate fair market value of the shares subject to the awards
immediately after such substitution over the purchase price thereof is not more
than the excess of the aggregate fair market value of the shares subject to the
award immediately before such substitution over the purchase price thereof, or
(y) upon written notice to the participants, provide that all unexercised awards
must be exercised within a specified number of days of the date of such notice
or they will be terminated. In any such case, the Plan Administrator may, in
its discretion, accelerate the exercise dates of outstanding awards; provided,
--------
however, that subsection (iii) of this paragraph (d) shall govern acceleration
of awards with respect to the events described in clauses (A), (B) and (C) of
such paragraph.
-3-
<PAGE>
(iii) In case of (A) any consolidation or merger involving the
Company if the shareholders of the Company immediately before such merger or
consolidation do not own, directly or indirectly, immediately following such
merger or consolidation, more than fifty percent (50%) of the combined voting
power of the outstanding voting securities or interests of the corporation (or
its parent corporation) or other entity resulting from such merger or
consolidation in substantially the same proportion as their ownership of the
shares of Common Stock immediately before such merger or consolidation; (B) any
sale, lease, license, exchange or other transfer (in one transaction or a series
of related transactions) of all, or substantially all, of the business and/or
assets of the Company or assets representing over 50% of the operating revenue
of the Company; or (C) any person (as such term is used in Sections 13(d) and
14(d) of the Exchange Act who is not, on September 30, 1999, a "controlling
person" (as defined in Rule 405 promulgated under the Securities Act of 1933, as
amended) (a "Controlling Person") of the Company shall become (x) the beneficial
owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
over 50% of the Company's outstanding Common Stock or the combined voting power
of the Company's then outstanding voting securities entitled to vote generally
or (y) a Controlling Person of the Company, all outstanding awards, regardless
of the date of grant of such awards, shall immediately become exercisable with
respect to 100% of the Shares subject to such awards.
4. Types of Awards
(a) General. An award may be granted singularly, in combination with another
award(s) or in tandem whereby exercise or vesting of one award held by a
participant cancels another award held by the participant. Any award granted
under the Plan shall be evidenced by a written agreement in form and substance
satisfactory to the Plan Administrator. These agreements must conform to the
Plan. The Plan Administrator may include such terms, consistent with the Plan,
as it determines in its discretion. Subject to Section 2(c), an award may be
granted as an alternative to or replacement of an existing award under the Plan
or under any other compensation plans or arrangements of the Company, including
the plan of any entity acquired by the Company. The types of awards that may be
granted under the Plan include:
(b) Stock Option. A stock option represents a right to purchase a specified
number of Shares during a specified period at a price per Share which is no less
than that required by Section 2(c). A stock option may not be in the form of an
Incentive Stock Option and therefore will not qualify for favorable federal tax
treatment. The Shares covered by a stock option may be purchased by means of a
cash payment or such other means as the Plan Administrator may from time to time
permit, including without limitation (i) tendering (either actually or by
attestation) Shares valued using the market price at the time of exercise, (ii)
authorizing a third party to sell Shares (or a sufficient portion
-4-
<PAGE>
thereof) acquired upon exercise of a stock option and to remit to the Company a
sufficient portion of the sale proceeds to pay for all the Shares acquired
through such exercise and any tax withholding obligations resulting from such
exercise; (iii) crediting toward the purchase price amounts from individuals'
deferred compensation account balances, including accrued dividend equivalent
balances; or (iv) any combination of the above.
(c) Stock Appreciation Right. A stock appreciation right is a right to receive
a payment in cash, Shares or a combination, equal to the excess of the aggregate
market price at time of exercise of a specified number of Shares over the
aggregate exercise price of the stock appreciation rights being exercised.
(d) Stock Award. A stock award is a grant of Shares or of a right to receive
Shares (or their cash equivalent or a combination of both) in the future. Each
stock award shall be subject to such conditions, restrictions and contingencies
as the Plan Administrator shall determine. These may include continuous service
and/or the achievement of performance goals. The performance goals that may be
used by the Plan Administrator for such awards shall consist of cash generation
targets, profit, revenue and market share targets, profitability targets as
measured by return ratios, and shareholder returns. The Plan Administrator may
designate a single goal criterion or multiple goal criteria for performance
measurement purposes with the measurement based on absolute Company or business
unit performances and/or on performance as compared with that of other publicly-
traded companies.
(e) Cash Award. A cash award is a right denominated in cash or cash units to
receive a payment, which may be in the form of cash, Shares or a combination,
based on the attainment of pre-established performance goals and such other
conditions, restrictions and contingencies as the Plan Administrator shall
determine. The performance goals that may be used by the Plan Administrator for
such awards shall consist of cash generation targets, profits, revenue and
market share targets, profitability targets as measured by return ratios and
shareholder returns. The Plan Administrator may designate a single goal
criterion or multiple goal criteria for performance measurement purposes with
the measurement based on absolute Company or business unit performance and/or on
performance as compared with that of other publicly-traded companies.
(f) Warrants. A warrant represents a right to purchase a specified number of
Shares during a specified period at a price per Share which is no less than that
required by Section 2(c). A warrant may be in the form of warrant that will
qualify for favorable tax treatment in a foreign jurisdiction. The Shares
covered by a warrant may be purchased by means of a cash payment or such other
means as the Plan Administrator may from time to time permit, including without
limitation (i) tendering (either actually or by attestation) Shares valued using
the market price at the time of exercise, (ii) authorizing a third party
-5-
<PAGE>
to sell Shares (or a sufficient portion thereof) acquired upon exercise of a
warrant and to remit to the Company a sufficient portion of the sale proceeds to
pay for all the Shares acquired through such exercise and any tax withholding
obligations resulting from such exercise; (iii) crediting toward the purchase
price amounts from individuals' deferred compensation account balances,
including accrued dividend equivalent balances; or (iv) any combination of the
above.
5. Award Settlement and Payments
(a) Dividends and Dividend Equivalents. An award may contain the right to
receive dividends or dividend equivalent payments which may be paid currently or
credited to a participant's account. Any such crediting of dividends or
dividend equivalents or reinvestment in Shares may be subject to such
conditions, restrictions and contingencies as the Plan Administrator shall
establish, including the reinvestment of such credited amounts in Share
equivalents.
(b) Payments. Awards may be settled through cash payments, the delivery of
Shares, the granting of awards or combination thereof as the Plan Administrator
shall determine. Any award settlement, including payment deferrals, may be
subject to such conditions, restrictions and contingencies as the Plan
Administrator shall determine. The Plan Administrator may permit or require the
deferral of any award payment, subject to such rules and procedures as it may
establish, which may include provisions for the payment or crediting of
interest, or dividend equivalents, including converting such credits into
deferred Share equivalents.
6. Plan Amendment and Termination
(a) Amendments. The Board may amend this Plan as it deems necessary and
appropriate to better achieve the Plan's purpose; provided however, that any
amendment to the Plan which would require approval of the Company's stockholders
under applicable law, or under the rules or guidelines of any exchange or
automatic quotation system on which the Shares are traded or included, then, in
any of such events, such stockholder approval of any such amendment shall also
be obtained.
(b) Plan Suspensions and Termination. The Board may suspend or terminate this
Plan at any time. Any such suspension or termination shall not of itself impair
any outstanding award granted under the Plan or the applicable participant's
rights regarding such award. If not earlier terminated, this Plan shall
terminate upon the tenth anniversary of the effective date of the Plan. Unless
an earlier termination is specified, awards granted under the Plan shall
terminate upon the tenth anniversary of their date of grant.
-6-
<PAGE>
7. Miscellaneous
(a) No Individual Rights. No person shall have any claim or right to be granted
an award under the Plan. Neither the Plan nor any action taken hereunder shall
be construed as giving any employee or other person any right to continue to be
employed by or to perform services for the Company, any subsidiary or related
entity. The right to terminate the employment of or performance of services by
any Plan participant at any time and for any reason is specifically reserved to
the employing entity.
(b) Binding Arbitration. Any dispute or disagreement regarding participation
and/or an award recipient's rights under the Plan shall be settled solely by
binding arbitration in accordance with the applicable rules of the American
Arbitration Association.
(c) Unfunded Plan. The Plan shall be unfunded and shall not create (or be
construed to create) a trust or a separate fund or funds. The Plan shall not
establish any fiduciary relationship between the Company and any participant or
beneficiary of a participant. To the extent any person holds any obligation of
the Company by virtue of an award granted under the Plan, such obligation shall
merely constitute a general unsecured liability of the Company and accordingly
shall not confer upon such person any right, title or interest in any assets of
the Company.
(d) Other Benefit and Compensation Programs. Unless otherwise specifically
determined by the Plan Administrator, settlements of awards received by
participants under the Plan shall not be deemed a part of a participant's
regular, recurring compensation for purposes of calculating payments or benefits
from any Company benefit plan or severance program. Further, the Company may
adopt other compensation programs, plans or arrangements as it deems
appropriate.
(e) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any award, and the Plan Administrator shall determine
whether cash shall be paid or transferred in lieu of any fractional Shares, or
whether such fractional Shares or any rights thereto shall be canceled.
-7-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Semtech
Corporation Form 10-K for the period ended January 30, 2000 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-30-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> JAN-30-2000
<CASH> 45,225
<SECURITIES> 18,066
<RECEIVABLES> 25,223
<ALLOWANCES> 0
<INVENTORY> 26,581
<CURRENT-ASSETS> 120,424
<PP&E> 24,397
<DEPRECIATION> 0
<TOTAL-ASSETS> 149,350
<CURRENT-LIABILITIES> 23,737
<BONDS> 0
320
0
<COMMON> 0
<OTHER-SE> 125,162
<TOTAL-LIABILITY-AND-EQUITY> 149,350
<SALES> 173,768
<TOTAL-REVENUES> 173,768
<CGS> 82,731
<TOTAL-COSTS> 82,731
<OTHER-EXPENSES> 48,079
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57
<INCOME-PRETAX> 44,104
<INCOME-TAX> 14,709
<INCOME-CONTINUING> 29,395
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,395
<EPS-BASIC> 0.95
<EPS-DILUTED> 0.83
</TABLE>
