<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 4, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
CREDENCE SYSTEMS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 94-2878499
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
215 FOURIER AVENUE, FREMONT, CALIFORNIA 94539
(510) 657-7400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
DR. WILMER R. BOTTOMS
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
CREDENCE SYSTEMS CORPORATION
215 FOURIER AVENUE, FREMONT, CALIFORNIA 94539
(510) 657-7400
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------
COPIES TO:
WARREN T. LAZAROW, ESQ.
BROBECK, PHLEGER & HARRISON LLP
TWO EMBARCADERO PLACE
2200 GENG ROAD, PALO ALTO, CALIFORNIA 94303
(650) 424-0160
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
---------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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AMOUNT
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM OF
TITLE OF SECURITIES TO BE AGGREGATE PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(3)
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<S> <C> <C> <C> <C>
5 1/4% Convertible Notes due
2002........................... $115,000,000 100% $115,000,000 $34,848
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Common Stock, $0.001 par value
per share ("Common Stock")..... 1,663,051(2) -- -- --
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Plus such additional indeterminate number of shares as may become issuable
upon conversion of the Notes being registered hereunder as a result of
adjustments to the conversion price.
(3) Pursuant to Rule 457(i) there is no filing fee with respect to shares of
Common Stock issuable on conversion of the Notes because no additional
consideration will be received in connection with the exercise of the
conversion privilege.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED NOVEMBER 4, 1997
PRELIMINARY PROSPECTUS
$115,000,000
CREDENCE SYSTEMS CORPORATION
5 1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2002
INTEREST PAYABLE MARCH 15 AND SEPTEMBER 15
1,663,051 SHARES OF COMMON STOCK
----------
This prospectus (the "Prospectus") relates to $115,000,000 aggregate
principal amount of 5 1/4% Convertible Subordinated Notes due 2002 (the
"Notes") of Credence Systems Corporation, a Delaware corporation (together with
its subsidiaries, "Credence" or the "Company"), and 1,633,051 shares of common
stock, par value of $.001 per share, of the Company (the "Common Stock") which
are initially issuable upon conversion of the Notes plus such additional
indeterminate number of shares of Common Stock as may become issuable upon
conversion of the Notes as a result of adjustment to the conversion price (the
"Shares"). The Notes and the Shares that are being registered hereby are to be
offered for the account of the holders thereof (the "Selling Securityholders").
The Notes were issued and sold in September 1997 in transactions exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), to persons believed by Smith Barney Inc. (the "Initial
Purchaser") to be "qualified institutional buyers" (as defined in Rule 144A
under the Securities Act) or outside the United States to certain persons in
offshore transactions in reliance on Regulation S under the Securities Act. See
"Plan of Distribution."
The Notes are convertible into Common Stock at any time at or before
maturity, unless previously redeemed, at a conversion price of $69.15 per
share, subject to adjustment in certain events. The Common Stock is traded on
the Nasdaq National Market under the symbol CMOS. On November 3, 1997 the last
sale price as reported on the Nasdaq National Market was $29.50 per share.
The Notes do not provide for a sinking fund. The Notes are redeemable at the
option of the Company, in whole or in part, at any time on or after September
20, 2000 at the redemption prices set forth in this Prospectus, together with
accrued interest. The Notes are redeemable at the option of the holder upon a
Repurchase Event (as defined herein) at a price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest. See "Description of Notes."
The Notes are unsecured obligations of the Company and are subordinated to
all present and future Senior Indebtedness (as defined herein) of the Company
and will be effectively subordinated to all indebtedness and other liabilities
of subsidiaries of the Company. The Indenture (as defined herein) does not
restrict the incurrence of any other indebtedness or liabilities by the Company
or its subsidiaries. See "Description of Notes--Subordination."
For a description of certain tax consequences to holders of the Notes and the
Shares, see "Certain United States Federal Tax Consequences."
The Notes and the Shares are being registered to permit public secondary
trading of the Notes and, upon conversion, the underlying Common Stock, by the
holders thereof from time to time after the date of this Prospectus. The
Company has agreed, among other things, to bear all expenses (other than
underwriting discounts and selling commissions) in connection with the
registration and sale of the Notes and the underlying Common Stock covered by
this Prospectus.
Upon their original issuance, the Notes became eligible for trading in the
Private Offerings, Resales, and Trading through Automatic Linkages ("PORTAL")
Market. However, the Notes sold pursuant to this Prospectus will no longer be
eligible for trading on the PORTAL Market. No assurance can be given that an
active market for the Notes will develop or as to the liquidity or
sustainability of any such market. See "Risk Factors--Absence of Existing
Active Public Market."
The Company will not receive any of the proceeds from the sale of the Notes
or the Shares by the Selling Securityholders. The Notes and the Shares may be
offered in negotiated transactions or otherwise, at market prices prevailing at
the time of sale or at negotiated prices. In addition, the Shares may be
offered from time to time through ordinary brokerage transactions on the Nasdaq
National Market. See "Plan of Distribution." The Selling Securityholders may be
deemed to be "Underwriters" as defined in the Securities Act. If any broker-
dealers are used by the Selling Securityholders, any commissions paid to
broker-dealers and, if broker-dealers purchase any Notes or Shares as
principals, any profits received by such broker-dealers on the resale of the
Notes or Shares, may be deemed to be underwriting discounts or commissions
under the Securities Act. In addition, any profits realized by the Selling
Securityholders may be deemed to be underwriting commissions.
----------
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1997
<PAGE>
Some of the information set forth or incorporated by reference in this
Prospectus constitutes forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. All such forward-looking
statements are necessarily only estimates of future results, and there can be
no assurances that actual results will not materially differ from
expectations. Specific reference is made to the risks and uncertainties
described under "Risk Factors."
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements, information statements, and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy and information statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, or at its regional offices located at Suite 1400, Citicorp Center,
500 West Madison Street, Chicago, Illinois 60661 and at Seven World Trade
Center, Suite 1300, New York, New York 10048. Copies of such materials may
also be obtained from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, DC 20549, at prescribed rates. In addition,
the Commission maintains a World Wide Web site that contains reports, proxy
and information statements and other information regarding issuers, including
the Company, that file electronically with the Commission. Such Web site can
be found at http://www.sec.gov. The materials described above may also be
inspected at the offices of Nasdaq Operations, 1735 K Street, N.W.,
Washington, DC 20006.
This Prospectus, which constitutes a part of a Registration Statement on
Form S-3 (the "Registration Statement") filed by the Company with the
Commission under the Securities Act, omits certain of the information set
forth in the Registration Statement and the exhibits and schedules thereto.
For further information with respect to the Company and the Notes and the
Shares offered hereby, reference is made to the Registration Statement and the
exhibits and schedules filed as a part thereof. Statements contained in this
Prospectus concerning the contents of any contract or any other document
referred to are not necessarily complete; reference is made in each instance
to the copy of such contract or document filed as an exhibit to or
incorporated by reference in the Registration Statement. Each such statement
is qualified in all respects by such reference to such exhibit. The
Registration Statement, including all exhibits and schedules thereto, may be
inspected without charge at the Commission's principal office in Washington,
D.C., and copies of all or any part thereof may be obtained from such office
after payment of fees prescribed by the Commission.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission (File No.
0-22366) pursuant to the Exchange Act are incorporated by reference in this
Prospectus:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1996, Quarterly Reports on Form 10-Q for the fiscal quarters
ended January 31, 1997, April 30, 1997 and July 31, 1997 and its Current
Reports on Form 8-K filed with the Commission on September 4, 1997,
September 9, 1997 and September 12, 1997.
2. The Company's definitive Proxy Statement dated February 12, 1997 filed
in connection with the Company's 1997 Annual Meeting of Stockholders.
3. The Company's Form 8-A Registration Statement filed with the
Commission on September 10, 1993, as amended on October 21, 1993.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus but prior
to the termination of the offering to which this Prospectus relates shall be
deemed to be incorporated by reference in this Prospectus and to be part
hereof from the date of
2
<PAGE>
filing of such documents. Any statement contained in a document incorporated
by reference herein shall be deemed to be modified or superseded for purposes
of this Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is incorporated herein modifies
or supersedes such statement. Any statement so modified or superseded shall
not be deemed, in its unmodified form, to constitute a part of this
Prospectus.
Upon written or oral request, the Company will provide without charge to
each person to whom a copy of the Prospectus is delivered a copy of the
documents incorporated by reference herein (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference
therein). Requests should be submitted in writing or by telephone at (510)
647-7400 to Director of Investor Relations, Credence Systems Corporation, at
the principal executive offices of the Company, 215 Fourier Avenue, Fremont,
California 94539.
3
<PAGE>
RISK FACTORS
An investment in the securities offered hereby is speculative in nature,
involves a high degree of risk and should not be made by an investor who
cannot afford the loss of his entire investment. The following risk factors
should be considered carefully in addition to the other information contained
or incorporated by reference in this Prospectus before purchasing the Notes or
the Shares offered hereby. In addition to the historical information contained
herein, the discussion in this Prospectus contains certain forward-looking
statements, within the meaning of Section 27A of the Securities Act and
Section 27E of the Exchange Act, that involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations and intentions.
The cautionary statements made in this Prospectus should be read as being
applicable to all related forward-looking statements wherever they appear in
this Prospectus. The Company's actual results could differ materially from
those discussed herein. Factors that could cause or contribute to such
differences include those discussed below as well as those cautionary
statements and other factors set forth elsewhere or incorporated by reference
herein.
FLUCTUATIONS IN OPERATING RESULTS
The Company's operating results have in the past fluctuated significantly
and will in the future fluctuate significantly, due to a variety of factors.
The Company's operating performance from the first quarter of fiscal 1993
through the third quarter of fiscal 1996 produced sequential quarter-to-
quarter growth in both net sales and net income. In the fourth quarter of
fiscal 1996, however, net sales decreased 34% from the third quarter of fiscal
1996 and 17% from the fourth quarter of fiscal 1995. Net income for the fourth
quarter of fiscal 1996 decreased 63% from the third quarter of fiscal 1996 and
55% from the fourth quarter of fiscal 1995. In the first quarter of fiscal
1997, net sales decreased 9% from the fourth quarter of fiscal 1996 and
decreased 34% from the first quarter of fiscal 1996. Net income for the first
quarter of fiscal 1997 decreased 75% from the fourth quarter of fiscal 1996
and decreased 90% from the first quarter of fiscal 1996. In the second quarter
of fiscal 1997, net sales increased 8% from the first quarter of fiscal 1997
and decreased 35% from the second quarter of fiscal 1996. Net income for the
second quarter of fiscal 1997 increased 212% from the first quarter of fiscal
1997 and decreased 71% from the second quarter of fiscal 1996. The Company's
third quarter results reflected similar trends. The decreases year-to-year
were due primarily to a significant weakness in the ATE market which
materially adversely affected the Company and several other companies in the
semiconductor equipment industry. The factors that have caused and will
continue to cause the Company's results to fluctuate include the timing of new
product announcements and releases by the Company or its competitors, market
acceptance of new products and enhanced versions of the Company's products,
manufacturing inefficiencies associated with the start up of new products,
changes in pricing by the Company, its competitors, customers or suppliers,
manufacturing capacity, the ability to volume produce systems and meet
customer requirements, inventory obsolescence, patterns of capital spending by
customers, delays, cancellations or reschedulings of orders due to customer
financial difficulties or otherwise, changes in overhead absorption levels due
to changes in the number of systems manufactured, the timing and shipment of
orders, availability of components, subassemblies and services, expenses
associated with acquisitions and alliances, product discounts, customization
and reconfiguration of systems, product reliability, the proportion of direct
sales and sales through third parties, including distributors and original
equipment manufacturers, the mix of products sold, the length of manufacturing
and sales cycles, cyclicality or downturns in the semiconductor market and the
markets served by the Company's customers, natural disasters, political and
economic instability, regulatory changes and outbreaks of hostilities. The
Company presently intends to introduce many new products and product
enhancements in this current fiscal year, which will affect its operating
results, financial condition and business. The Company's gross margins on
system sales have varied significantly, especially in the last fourteen
months, and will continue to vary significantly based on a variety of factors,
including manufacturing efficiencies, pricing by competitors or suppliers,
product sales mix, reserves, production volume, new product introductions,
product reliability, customization and reconfiguration of systems,
international and domestic sales mix and field service margins. In addition,
new and enhanced products typically have lower gross margins in the early
stages of commercial introduction and production. While the Company has
recorded and continues to record allowances for estimated sales returns and
uncollectible accounts, there can be no assurance that such estimates
regarding allowances will be adequate.
4
<PAGE>
LIMITED SYSTEMS SALES; BACKLOG
The Company derives a substantial portion of its net sales from the sale of
a relatively small number of systems that typically range in price from
$350,000 to $2.0 million, excluding the current memory products, for which the
price range is typically below $100,000. As a result, the timing of
recognition of revenue from a single transaction could have a significant
impact on the Company's net sales and operating results for a particular
period. The Company's net sales and operating results for a particular period
could be materially adversely affected if an anticipated order for even one
system is not received in time to permit shipment during that period. The
Company's backlog at the beginning of a quarter typically does not include all
tester orders needed to achieve the Company's sales objectives for that
quarter. In addition, orders in backlog are subject to cancellation, delay,
deferral or rescheduling by a customer with limited or no penalties.
Consequently, the Company's net sales and operating results for a quarter have
in the past and will in the future depend upon the Company obtaining orders
for systems to be shipped in the same quarter that the order is received.
Furthermore, products generating most of the Company's net sales continue to
be shipped near the end of each quarter. Accordingly, the failure to receive
an anticipated order or a delay or rescheduling in a shipment near the end of
a particular period due, for example, to an order cancellation, a delay by a
customer, manufacturing, technical, reliability or other difficulties,
including difficulties relating to customization and reconfiguration of
systems, a delay in the supply of components, subassemblies or services or a
delay due to competitive or economic factors, may cause net sales in a
particular period to fall significantly below the Company's expectations,
which could have a material adverse effect upon the Company's business,
financial condition or results of operations. The relatively long
manufacturing cycle of many of its testers has caused and could continue to
cause future shipments of such products to be delayed from one quarter to the
next, which could materially adversely affect the Company's business,
financial condition or results of operations. Furthermore, announcements by
the Company or its competitors of new products and technologies could cause
customers to defer or cancel purchases of the Company's existing systems,
which could also have a material adverse effect on the Company's business,
financial condition or results of operations. The impact of these and other
factors on the Company's sales and operating results in any future period
cannot be forecasted with certainty. In addition, the need for continued
significant expenditures for research and development, marketing and other
expenses for new products, capital equipment purchases and worldwide training
and customer service and support, among other factors, will make it difficult
for the Company to reduce its significant fixed expenses in a particular
period if the Company's net sales goals for such period are not met.
Accordingly, there can be no assurance that the Company will be able to be
profitable or that it will not again sustain losses in future periods. Due to
all of the foregoing factors, it is likely that in some future quarter the
Company's operating results will be below the expectations of public market
analysts and investors, as they were in the first, second and third quarters
of 1997. In such event, the price of the Company's Common Stock may be
materially adversely affected.
CYCLICALITY OF SEMICONDUCTOR INDUSTRY
The Company's business and results of operations depend in significant part
upon the capital expenditures of manufacturers of semiconductors and companies
which specialize in contract packaging and/or testing of semiconductors,
including manufacturers and contractors that are opening new or expanding
existing fabrication facilities, or upgrading existing equipment, which in
turn depend upon the current and anticipated market demand for semiconductors
and products incorporating semiconductors. Historically and recently, the
semiconductor industry has been highly cyclical with recurring periods of
oversupply, which often have had a severe effect on the semiconductor
industry's demand for test equipment, including the systems manufactured and
marketed by the Company. The Company believes that the markets for newer
generations of semiconductors will also be subject to similar fluctuations.
The Company has in the past, and during the last fourteen months in
particular, experienced shipment delays, delays in commitments and purchase
order restructurings by several of its customers and anticipates that this may
continue to occur in the future. Accordingly, the Company can give no
assurance that it will be able to achieve or maintain its current or prior
level of sales or rate of growth. During the last four quarters, including the
third quarter of 1997, the Company's net sales, gross margins and net income
have been significantly below the net sales, gross margins and net income,
respectively, of the comparable prior year's quarterly results. The Company
anticipates that a significant portion of new orders may depend upon
5
<PAGE>
demand from semiconductor device manufacturers building or expanding
fabrication facilities and new device testing requirements that are not
addressable by currently installed test equipment, and there can be no
assurance that such demand will develop to a significant degree, or at all. In
addition, any factor adversely affecting the semiconductor industry or
particular segments within the semiconductor industry may adversely affect the
Company's business, financial condition or results of operations. Therefore,
there can be no assurance that the Company's operating results will not
continue to be materially adversely affected if downturns or slowdowns in the
semiconductor industry continue or occur again in the future.
MANAGEMENT OF FLUCTUATIONS IN OPERATING RESULTS
The Company has over the last several years experienced significant
fluctuations in its operating results. Since 1993, the Company has overall
significantly increased the scale of its operations to support increased sales
levels and has expanded its operations to address critical infrastructure and
other requirements, including the hiring of additional personnel, significant
investments in research and development to support product development, the
March 1995 acquisition of EPRO, the Company's establishment of a joint venture
with Innotech, Inc., the Company's acquisition in July 1997 of the assets and
certain liabilities of Test Systems Strategies, Inc. ("TSSI") and the
Company's acquisition in August of 1997 of a software product line from Zycad
Corporation ("Zycad"). However, the Company has during certain historical
periods, particularly over the past fourteen months, experienced revenue
declines and reductions in its operations.
Fluctuations in the Company's sales and operations have placed a
considerable strain on its management, financial, manufacturing and other
resources. In order to effectively deal with the changes brought on by the
cyclical nature of the industry, the Company has been required to implement
and improve a variety of highly flexible operating, financial and other
systems, procedures and controls capable of expanding or contracting
consistent with the Company's business. There can be no assurance that any
existing or new systems, procedures or controls will be adequate to support
fluctuations in the Company's operations or that its systems, procedures and
controls will be designed, implemented or improved in a cost effective and
timely manner. Any failure to implement, improve and expand or contract such
systems, procedures and controls in an efficient manner at a pace consistent
with the Company's business could have a material adverse effect on the
Company's business, financial condition or results of operations.
EXPANSION OF OPERATIONS
Currently, the Company is devoting significant resources to the development
of new products and technologies. During 1997, the Company will conduct
evaluations of these products and will continue to invest significant
additional resources in plant and equipment, inventory, personnel and other
costs, to begin production of these products and to provide the marketing,
administration and after-sales service and support, if any, required to
service and support these new products. Accordingly, there can be no assurance
that gross profit margin and inventory levels will not be adversely impacted
in the future by start-up costs associated with the initial production and
installation of these new product lines. These start-up costs include, but are
not limited to, additional manufacturing overhead, additional inventory and
warranty reserve requirements and the creation of after-sales service and
support organizations. Additionally, there can be no assurance that operating
expenses will not increase, relative to sales, as a result of adding
additional marketing and administrative personnel, among other costs, to
support the Company's additional products. If the Company is unable to achieve
significantly increased net sales or its sales fall below expectations, the
Company's operating results will be materially adversely affected. There can
be no assurance that net sales will increase or remain at recent levels or
that such products will be successfully commercialized.
LIMITED SOURCES OF SUPPLY; RELIANCE ON SUBCONTRACTORS
Certain components, subassemblies and services necessary for the manufacture
of the Company's testers are obtained from a limited group of suppliers. The
Company does not maintain any long-term supply agreements with any of its
vendors and purchases its components and subassemblies through individual
purchase orders. The
6
<PAGE>
manufacture of certain of the Company's components and subassemblies is an
extremely complex process. The Company also relies on outside vendors to
manufacture certain components and subassemblies and to provide certain
services. In addition, the Company and certain of its subcontractors
periodically experience significant shortages and delays in delivery of
various components and subassemblies. There can be no assurance that these or
other problems will not continue to occur in the future with these or the
Company's other suppliers or outside subcontractors. The Company's reliance on
a limited group of suppliers and the Company's reliance on outside
subcontractors involve several risks, including an inability to obtain an
adequate supply of required components, subassemblies and services and reduced
control over the price, timely delivery, reliability and quality of
components, subassemblies and services. Shortages, delays, disruptions or
terminations of the sources for these components and subassemblies has delayed
and could continue to delay shipments of the Company's systems and could have
a material adverse effect on the Company's business, financial condition or
results of operations. Any continuing inability to obtain adequate yields or
timely deliveries or any other circumstance that would require the Company to
seek alternative sources of supply or to manufacture such components
internally could have a material adverse effect on the Company's business,
financial condition or results of operations. Such delays, shortages and
disruptions would also damage relationships with current and prospective
customers and could allow competitors to penetrate such customer accounts.
There can be no assurance that the Company's internal manufacturing capacity
and that of its suppliers and subcontractors will be sufficient to meet
customer requirements.
HIGHLY COMPETITIVE INDUSTRY
The automatic test equipment ("ATE") industry is intensely competitive.
Because of the substantial investment required to develop test application
software and interfaces, the Company believes that once a semiconductor
manufacturer has selected a particular ATE vendor's tester, the semiconductor
manufacturer is likely to use that tester for a majority of its testing
requirements for the market life of that semiconductor and, to the extent
possible, subsequent generations of similar products. As a result, once an ATE
customer chooses a system for the testing of a particular device, it is
difficult for competing vendors to achieve significant ATE sales to such
customer for similar use. The inability of the Company to achieve significant
sales to any ATE customer could have a material adverse effect on the
Company's business, financial condition or results of operations.
The Company faces substantial competition throughout the world, primarily
from ATE manufacturers located in the United States, Europe and Japan, as well
as several of the Company's customers. Many of the Company's competitors have
substantially greater financial and other resources with which to pursue
engineering, manufacturing, marketing and distribution of their products.
Certain of the Company's competitors have recently introduced or announced new
products with certain performance or price characteristics equal or superior
to certain products currently offered by the Company. The Company believes
that if the ATE industry continues to consolidate through strategic alliances
or acquisitions, the Company will continue to face significant additional
competition from larger competitors that may offer more complete product lines
and services than the Company. The Company's competitors are continuing to
improve the performance of their current products and to introduce new
products, enhancements and new technologies that provide improved cost of
ownership and performance characteristics. New product introductions by the
Company's competitors could continue to cause a decline in sales or loss of
market acceptance of the Company's existing products. Moreover, increased
competitive pressure could continue to lead to intensified price-based
competition, which could materially adversely affect the Company's business,
financial condition or results of operations. The Company has experienced and
continues to experience significant price competition in the sale of all of
its testers. In addition, at the end of a product life cycle and as
competitors introduce more technologically advanced products, pricing
pressures typically become more intense. The Company believes that to be
competitive, it will continue to require significant financial resources in
order to, among other items, invest in new product development and
enhancements and to maintain customer service and support centers worldwide.
There can be no assurance that the Company will be able to compete
successfully in the future.
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RAPID TECHNOLOGICAL CHANGE; IMPORTANCE OF TIMELY PRODUCT INTRODUCTION
The ATE market is subject to rapid technological change and new product
introductions and enhancements and related software tools. The Company's
ability to be competitive in this market will depend in significant part upon
its ability to successfully develop and introduce new products and
enhancements and related software tools with greater features on a timely and
cost-effective basis, including the products under development acquired in the
EPRO merger and the TSSI and Zycad product line acquisitions. The Company's
customers require testers with additional features and higher performance and
other capabilities. The Company is therefore required to enhance the
performance and other capabilities of its existing systems and related
software tools. Any success by the Company in developing new and enhanced
systems and related software tools and new features to its existing systems
depends upon a variety of factors, including product selection, timely and
efficient completion of product design, timely and efficient implementation of
manufacturing and assembly processes, product performance and reliability in
the field and effective sales and marketing. Because new product development
commitments must be made well in advance of sales, new product decisions must
anticipate both future demand and the availability of technology to satisfy
that demand. There can be no assurance that the Company will be successful in
selecting, developing, manufacturing and marketing new products or
enhancements and related software tools. The inability of the Company to
introduce new products and related software tools that contribute
significantly to net sales, gross margins and net income would have a material
adverse effect on the Company's business, financial condition or results of
operations. New product or technology introductions by the Company's
competitors could cause a decline in sales or loss of market acceptance of the
Company's existing products. In addition, new product introductions by the
Company may cause confusion among the Company's customers if they transition
to such new products, and may delay product purchases.
Significant delays can occur between a system's introduction and the
commencement by the Company of volume production of such system. The Company
has been and is experiencing significant delays in the introduction, volume
production and sales of its systems and related feature enhancements,
including new models within the digital, mixed-signal and non-volatile memory
product lines, due to technical, manufacturing, parts shortages, component
reliability and other difficulties and may continue to experience similar
delays in the future. As a result, certain of the Company's significant
customers have experienced significant delays in receiving and using certain
of the Company's testers in production. There can be no assurance that these
or additional difficulties will not continue to arise in the future with
respect to the Company's systems or that such delays will not materially
adversely affect customer relationships and future sales. Moreover, there can
be no assurance that the Company will not encounter these or other
difficulties that could delay future introductions or volume production or
sales of its systems or enhancements and related software tools. The Company
has incurred and may continue to incur substantial unanticipated costs to
ensure the functionality and reliability of its testers and to increase
feature sets. If the Company's systems continue to have reliability, quality
or other problems, or the market perceives certain of the Company's products
to be feature deficient, reduced orders, higher manufacturing costs, delays in
collecting accounts receivable and higher service, support and warranty
expenses, or inventory write-offs, among other items, could result. The
Company's failure to have a competitive tester and related software tools
available when required by a semiconductor manufacturer could make it
substantially more difficult for the Company to sell testers to that
manufacturer for a number of years. The Company believes that the continued
acceptance, volume production, timely delivery and customer satisfaction of
its newer digital, mixed signal and non-volatile memory testers are of
critical importance to its future financial results. As a result, an inability
to correct any technical, reliability, parts shortages or other difficulties
associated with the Company's systems or to manufacture and ship the Company's
systems on a timely basis to meet customer requirements could damage
relationships with current and prospective customers and would materially
adversely affect the Company's business, financial condition or results of
operations.
CUSTOMER CONCENTRATION; LENGTHY SALES CYCLE
During the nine months ended July 31, 1997, three customers accounted for
approximately 22%, 12% and 9%, respectively, of the Company's net sales. One
customer (a distributor) accounted for 25%, 17% and 13% of the Company's net
sales in fiscal 1996, 1995 and 1994, respectively. The loss of or any
reduction in orders by a
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<PAGE>
significant customer, including losses or reductions due to continuing or
other technical, manufacturing, reliability or other difficulties associated
with the Company's products or market, economic or competitive conditions in
the semiconductor industry or in other industries that manufacture products
utilizing semiconductors could materially adversely affect the Company's
business, financial condition or results of operations. The Company's ability
to maintain or increase its sales levels in the future will depend in
significant part upon its ability to obtain orders from existing and new
customers and to manufacture systems on a timely and cost-effective basis, the
financial condition and success of its customers, general economic conditions,
and the Company's ability to meet increasingly stringent customer performance
and other requirements and shipment delivery dates. There can be no assurance
that the Company will be able to maintain or increase the level of its net
sales in the future or that the Company will be able to retain existing
customers or attract new ones.
Sales of the Company's systems depend in significant part upon the decision
of a semiconductor manufacturer to develop and manufacture new semiconductor
devices or to increase manufacturing capacity. As a result, sales of the
Company's testers are subject to a variety of factors outside of the Company's
control. In addition, the decision to purchase a tester generally involves a
significant commitment of capital, with the attendant delays frequently
associated with significant capital expenditures. For these and other reasons,
the Company's systems have lengthy sales cycles during which the Company may
expend substantial funds and management effort to secure a sale and subject
the Company to a number of significant risks.
ACQUISITIONS
The Company has developed in significant part through mergers and
acquisitions of other companies and businesses. Prior to its initial public
offering in 1993, the Company acquired two companies and the semiconductor
test systems division of Tektronix, Inc. In 1995, the Company acquired EPRO, a
memory tester company. In July 1997, the Company acquired the assets of TSSI
and, in August 1997, acquired the fault simulation and test program
development products from Zycad. The Company intends in the future to pursue
additional acquisitions of complementary product lines, technologies and
businesses. Any future acquisitions by the Company, if any, could result in
potentially dilutive issuances of equity securities, the incurrence of debt
and contingent liabilities, expenditures and reserves, and amortization
expenses related to goodwill and other intangible assets, which could
materially adversely affect the Company's business, financial condition or
results of operations. The Company's one-time charge for in-process research
and development for the TSSI asset acquisition accounted for the Company's net
loss for the third quarter of 1997. In addition, acquisitions involve numerous
other risks, including difficulties in the assimilation of the operations,
technologies and products of the acquired companies, the diversion of
management's attention from other business concerns, risks of entering markets
in which the Company has no or limited direct prior experience, and the
potential loss of key employees of the acquired company. From time to time,
the Company has engaged in and will continue to engage in discussions with
third parties concerning potential acquisitions of product lines, technologies
and businesses. In the event that such an acquisition does occur, however,
there can be no assurance as to the effect thereof on the Company's business,
financial condition or results of operations.
DEPENDENCE ON KEY PERSONNEL
The Company's future operating results depend in significant part upon the
continued service of its key personnel, none of whom are bound by an
employment or non-competition agreement. The Company's future operating
results also depend in significant part upon its ability to attract and retain
qualified management, manufacturing, technical, engineering and marketing and
sales and support personnel. Competition for such personnel is intense, and
there can be no assurance that the Company will be successful in attracting or
retaining such personnel. There may be only a limited number of persons with
the requisite skills to serve in these positions and it may be increasingly
difficult for the Company to hire such personnel over time. The loss of any
key employee, the failure of any key employee to perform in his or her current
position, or the Company's inability to attract and retain skilled employees,
as needed, could materially adversely affect the Company's business, financial
condition or results of operations.
9
<PAGE>
Recently, the Company has experienced an increased level of employee
turnover. The Company believes that this increase is due to several factors,
including the recent semiconductor industry slowdown; an expanding economy
within the geographic area where the Company maintains its principal business
offices, making it more difficult for the Company to retain its employees; and
the declining value of stock options granted to employees, relative to their
total compensation, as a result of full vesting of options granted prior to
the Company's initial public offering. Due to these and other factors, the
Company may continue to experience high levels of employee turnover, which
could materially adversely impact the Company's business, financial condition
and results of operations.
INTERNATIONAL SALES
International sales accounted for approximately 70%, 67% and 55% of total
net sales for the first nine months of fiscal 1997, and for fiscal years 1996
and 1995, respectively. The Company is also attempting to increase its sales
to non-U.S.-based customers. As a result, the Company anticipates that
international sales will continue to account for a significant portion of
total net sales in the foreseeable future. These international sales will
continue to be subject to certain risks, including changes in regulatory
requirements, tariffs and other barriers, political and economic instability,
an outbreak of hostilities, integration of foreign operations of acquired
businesses, foreign currency exchange rate fluctuations, difficulties with
distributors, joint venture partners, original equipment manufacturers,
foreign subsidiaries and branch operations, potentially adverse tax
consequences and the possibility of difficulty in accounts receivable
collection. The Company is also subject to the risks associated with the
imposition of legislation and regulations relating to the import or export of
semiconductor equipment. The Company cannot predict whether quotas, duties,
taxes or other charges or restrictions will be implemented by the United
States or any other country upon the importation or exportation of the
Company's products in the future. Any of these factors or the adoption of
restrictive policies could have a material adverse effect on the Company's
business, financial condition or results of operations.
PROPRIETARY RIGHTS
The Company attempts to protect its intellectual property rights through
patents, copyrights, trade secrets and other measures, including
confidentiality agreements. There can be no assurance that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to the Company's trade secrets and other
intellectual property rights or disclose such technology or that the Company
can meaningfully protect its trade secrets or other intellectual property
rights. There can be no assurance that patents owned by the Company will not
be invalidated, deemed unenforceable, circumvented or challenged, or that the
rights granted thereunder will provide competitive advantages to the Company
or that any of the Company's pending or future patent applications will be
issued with claims of the scope sought by the Company, if at all. Furthermore,
there can be no assurance that others will not develop similar products,
duplicate the Company's products or design around the patents owned by the
Company. In addition, there can be no assurance that foreign intellectual
property laws or the Company's agreements will protect the Company's
intellectual property rights. Failure to protect the Company's intellectual
property rights could have a material adverse effect upon the Company's
business, financial condition or results of operations. The Company has been
involved in extensive, expensive and time-consuming reviews of, and litigation
concerning, patent infringement claims. In addition, the Company has at times
been notified of other claims that it may be infringing intellectual property
rights possessed by third parties and expects to continue to receive notice of
such claims in the future.
The European patent application relating to one of the proprietary
complementary metal oxide semiconductor ("CMOS") stabilization methods owned
by the Company was abandoned by the prior owner after the European patent
examiner cited prior art. This prior art was not referenced in the
corresponding United States patent application. Based upon its review to date
of the cited prior art and the European examiner's objections, and in part
upon the advice of Smith-Hill and Bedell, P.C., outside patent counsel to the
Company ("SHB"), the Company believes that such prior art is unlikely to
affect the validity or scope of the claims of the United States issued patent.
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<PAGE>
This prior art may, however, render invalid or significantly narrow the
scope of certain claims set forth in the United States patent covering the
Company's other proprietary CMOS stabilization method. The European examiner
referred to this prior art in the corresponding European patent application.
The European application was approved, but with narrower claims than the
United States patent. This prior art was not referenced in the corresponding
United States patent. Based in part upon the advice of SHB, and on the
Company's review of its current products, the Company believes that this
patent will continue to be valuable to the Company in preventing imitation of
the Company's products covered by this patent. Additionally, in mid-1992, a
third party suggested that certain claims set forth in this patent might be
invalid as a result of other alleged prior art. The Company believes, based in
part upon the advice of SHB, that the prior art alleged by the third party is
less relevant than the prior art referenced by the European examiner. However,
there can be no assurance that any of the aforementioned prior art or other
prior art will not be successfully asserted and used to invalidate or narrow
the scope of any claim of the United States patents or any other patents or
other patent applications of the Company.
Certain of the Company's customers have received notices of infringement
from Jerome Lemelson alleging that the manufacture of semiconductor products
and/or the equipment used to manufacture semiconductor products infringes
certain patents issued to such person. The Company was notified by a customer
in 1990 and a different customer in late 1994 that the Company may be
obligated to defend or settle claims that the Company's products infringe such
person's patents, and, in the event it is subsequently determined that the
customer infringes such person's patents, such customer intends to seek
reimbursement from the Company for damages and other related expenses. There
can be no assurance that the Company will be successful in defending current
or future patent infringement claims or claims for indemnification resulting
from infringement claims. An award of damages, injunctive relief or
expenditures by the Company of significant amounts in defending any such
action could materially adversely affect the Company's business, financial
condition or results of operations, regardless of the outcome of any
litigation. With respect to any claims, the Company may seek to obtain a
license under the third party's intellectual property rights. There can be no
assurance, however, that a license will be available on reasonable terms or at
all. The Company could decide, in the alternative, to continue to resort to
litigation to challenge such claims. Such challenges have been and could
continue to be extremely expensive and time consuming, and could materially
adversely affect the Company's business, financial condition or results of
operations, regardless of the outcome of any litigation.
LEVERAGE; SUBORDINATION OF NOTES; ABSENCE OF FINANCIAL COVENANTS
In connection with the sale of the Notes, the Company incurred $115 million
of indebtedness which will result in a ratio of long-term debt to total
capitalization at July 31, 1997 of approximately 37% on an as-adjusted basis.
As a result of this indebtedness, the Company's principal and interest
obligations will increase substantially. The degree to which the Company is
leveraged could materially adversely affect the Company's ability to obtain
financing for working capital, acquisitions or other purposes and could make
it more vulnerable to industry downturns and competitive pressures. The
Company's ability to meet its debt service obligations will be dependent upon
the Company's future performance, which will be subject to financial, business
and other factors affecting the operations of the Company, many of which are
beyond its control.
The Notes are subordinate in right of payment to all future Senior
Indebtedness (as defined herein) of the Company. Senior Indebtedness could
include any secured indebtedness of the Company that is not made subordinate
to or pari passu with the Notes by the instrument creating the indebtedness.
As of the date hereof, the Company had no Senior Indebtedness. The Indenture
does not limit the amount of additional indebtedness, including Senior
Indebtedness, which the Company or its subsidiaries can create, incur, assume
or guarantee. The Company is currently entitled to borrow up to $20.0 million
under its existing line of credit. By reason of such subordination of the
Notes, in the event of insolvency, bankruptcy, liquidation, reorganization,
dissolution or winding up of the business of the Company or upon default in
payment with respect to any Senior Indebtedness of the Company or an event of
default with respect to such indebtedness resulting in the acceleration
thereof, the assets of the Company will be available to pay the amounts due on
the Notes only after
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all Senior Indebtedness of the Company has been paid in full. Moreover,
holders of Common Stock would only receive the assets remaining after payment
of all indebtedness and preferred stock, if any. See "Description of Notes."
The Indenture (as defined herein) does not contain any financial covenants
or restrictions on the payment of dividends, the incurrence of indebtedness,
including Senior Indebtedness, by the Company or the issuance or repurchase of
securities by the Company. The Indenture contains no covenants or other
provisions to afford protection to holders of the Notes in the event of a
highly leveraged transaction or a change in control of the Company except to
the extent described under "Description of Notes--Certain Rights to Require
Repurchase of Notes."
LIMITATIONS ON REPURCHASE UPON A REPURCHASE EVENT
In the event of a Repurchase Event, which includes a Change in Control and a
Termination of Trading (each as defined herein), each holder of Notes will
have the right, at the holder's option, to require the Company to repurchase
all or a portion of such holder's Notes at a purchase price equal to 100% of
the principal amount thereof plus accrued interest thereon to the repurchase
date. The Company's ability to repurchase the Notes upon a Repurchase Event
may be limited by the terms of the Company's Senior Indebtedness and the
subordination provisions of the Indenture. Further, the ability of the Company
to repurchase the Notes upon a Repurchase Event will be dependent on the
availability of sufficient funds and compliance with applicable securities and
corporate laws. Accordingly, there can be no assurance that the Company will
be able to repurchase the Notes upon a Repurchase Event. The term "Repurchase
Event" is limited to certain specified transactions and may not include other
events that might adversely affect the financial condition of the Company or
result in a downgrade of the credit rating (if any) of the Notes nor would the
requirement that the Company offer to repurchase the Notes upon a Repurchase
Event necessarily afford holders of the Notes protection in the event of a
highly leveraged reorganization, merger or similar transaction involving the
Company. See "Description of Notes."
ABSENCE OF EXISTING ACTIVE PUBLIC MARKET
Upon their original issuance, the Notes became eligible for trading on the
PORTAL Market. The Notes sold pursuant to this Prospectus, however, will no
longer be eligible for trading on the PORTAL Market. There can be no assurance
that an active trading market for the Notes will develop or as to the
liquidity or sustainability of any such market, the ability of the holders to
sell their Notes or the price at which holders of the Notes will be able to
sell their Notes. Future trading prices of the Notes will depend on many
factors, including, among other things, prevailing interest rates, the
Company's operating results, the price of the Company's Common Stock and the
market for similar securities. The Company does not intend to apply for
listing of the Notes on any securities exchange or quotation system.
FUTURE CAPITAL NEEDS
The development and manufacture of new ATE systems and enhancements are
highly capital intensive. In order to be competitive, the Company must make
significant investments in capital equipment, expansion of operations,
systems, procedures and controls, research and development and worldwide
training, customer service and support, among many items. The Company expects
that cash on hand and cash equivalents, including restricted cash, proceeds
from the $115 million private placement of the Notes, short-term investments,
funds available under its bank line of credit, anticipated cash flow from
operations and equipment lease arrangements will satisfy its financing
requirements for at least the next 12 months.
VOLATILITY OF STOCK PRICE
The Company believes that factors such as announcements of developments
related to the Company's business, fluctuations in the Company's financial
results, general conditions or developments in the semiconductor and capital
equipment industry and the general economy, sales of the Company's Common
Stock
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into the marketplace, an outbreak of hostilities, natural disasters,
announcements of technological innovations or new products or enhancements by
the Company or its competitors, developments in patents or other intellectual
property rights, developments in the Company's relationships with its
customers and suppliers, or a shortfall or changes in revenue, gross margins
or earnings or other financial results from analysts' expectations could cause
the price of the Company's Common Stock to fluctuate, perhaps substantially.
In recent years the stock market in general, and the market for shares of
small capitalization stocks in particular, including the Company, have
experienced extreme price fluctuations, which have often been unrelated to the
operating performance of affected companies. There can be no assurance that
the market price of the Company's Common Stock will not continue to experience
significant fluctuations in the future, including fluctuations that are
unrelated to the Company's performance.
EFFECTS OF CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Certificate of Incorporation, equity
incentive plans, Bylaws and Delaware law may discourage certain transactions
involving a change in control of the Company. In addition to the foregoing,
the Company's classified board of directors, the shareholdings of the
Company's officers, directors and persons or entities that may be deemed
affiliates and the ability of the Board of Directors to issue "blank check"
preferred stock without further stockholder approval could have the effect of
delaying, deferring or preventing a change in control of the Company and may
adversely affect the voting and other rights of holders of Common Stock. See
"Description of Capital Stock--Delaware Anti-Takeover Law and Certain Charter
Provisions."
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USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the Notes
or the Shares by the Selling Securityholders. See "Selling Securityholders"
for a list of those persons and entities receiving proceeds from sales of
Notes or Shares.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common Stock.
The Company's current bank line of credit precludes it from paying dividends
to stockholders. The Company currently intends to retain any earnings for use
in its business and therefore does not anticipate paying any dividends in the
future.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for each of the periods
indicated is as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED OCTOBER 31, ENDED JULY 31,
--------------------------- ---------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ----- ----- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C>
n/a 7.3x 30.7x 60.4x 42.0x 40.3x 8.0x
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before taxes plus fixed charges. Fixed charges consist of
interest expense incurred, including capital leases, amortization of interest
costs and the portion of rental expense under operating leases deemed by the
Company to be representative of the interest factor. Earnings were not
sufficient to cover fixed charges for fiscal 1992 by approximately $8.0
million.
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DESCRIPTION OF NOTES
The Notes were issued under an indenture dated as of September 10, 1997 (the
"Indenture") between the Company and State Street Bank and Trust Company of
California, N.A., as trustee (the "Trustee"). The following summaries of
certain provisions of the Indenture do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all of the
provisions of the Indenture, including the definition therein of certain
terms. Wherever particular sections or defined terms of the Indenture are
referred to, such sections or defined terms are incorporated herein by
reference. Copies of the Indenture are available from the Company or the
Initial Purchaser upon request.
GENERAL
The Notes are unsecured obligations of the Company, are limited to $115
million in aggregate principal amount and will mature on September 15, 2002.
The Notes will bear interest at 5 1/4% per annum from the date of original
issuance of Notes pursuant to the Indenture, or from the most recent Interest
Payment Date to which interest has been paid or provided for, payable semi-
annually on March 15 and September 15 of each year, commencing March 15, 1998,
to the Person in whose name the Note (or any predecessor Note) is registered
at the close of business on the preceding March 1 or September 1, as the case
may be. Interest on the Notes will be paid on the basis of a 360-day year of
twelve 30-day months.
Principal of, and premium, if any, and interest on, the Notes will be
payable (i) in respect of Notes held of record by the Depository Trust Company
("DTC") or its nominee in same day funds on or prior to the payment dates with
respect to such amounts and (ii) in respect of Notes held of record by holders
other than DTC or its nominee at the corporate trust office of the Trustee,
and the Notes may be surrendered for transfer, exchange or conversion at the
corporate trust office of the Trustee. In addition, with respect to Notes held
of record by holders other than DTC or its nominee, payment of interest may be
made at the option of the Company by check mailed to the address of the
persons entitled thereto as it appears in the Register for the Notes on the
Regular Record Date for such interest.
The Notes have been issued only in registered form, without coupons and in
denominations of $1,000 or any integral multiple thereof. No service charge
will be made for any transfer or exchange of the Notes, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge and any other expenses (including the fees and expenses of the Trustee)
payable in connection therewith. The Company is not required (i) to issue,
register the transfer of or exchange any Notes during a period beginning at
the opening of business 15 days before the day of the mailing of a notice of
redemption and ending at the close of business on the day of such mailing, or
(ii) to register the transfer of or exchange any Note selected for redemption
in whole or in part, except the unredeemed portion of Notes being redeemed in
part.
All monies paid by the Company to the Trustee or any Paying Agent for the
payment of principal of and premium and interest on any Note which remain
unclaimed for two years after such principal, premium or interest become due
and payable may be repaid to the Company. Thereafter, the Holder of such Note
may, as an unsecured general creditor, look only to the Company for payment
thereof.
The Indenture does not contain any provisions that would provide protection
to Holders of the Notes against a sudden and dramatic decline in credit
quality of the Company resulting from any takeover, recapitalization or
similar restructuring, except as described below under "Certain Rights to
Require Repurchase of Notes."
CONVERSION RIGHTS
The Notes are convertible into Common Stock at any time prior to redemption
or final maturity, initially at the conversion price of $69.15 per share. The
right to convert Notes which have been called for redemption will terminate at
the close of business on the second business day preceding the Redemption
Date, unless the Company defaults in making the payment due on that
redemption. See "Optional Redemption" below.
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The conversion price is subject to adjustment upon the occurrence of any of
the following events: (i) the subdivision, combination or reclassification of
outstanding shares of Common Stock; (ii) the payment in shares of Common Stock
of a dividend or distribution on any class of capital stock of the Company;
(iii) the issuance of rights or warrants to all holders of Common Stock
entitling them to acquire shares of Common Stock at a price per share less
than the Current Market Price; (iv) the distribution to holders of Common
Stock or shares of capital stock other than Common Stock, evidences of
indebtedness, cash or assets (including securities, but excluding dividends or
distributions paid exclusively in cash and dividends, distributions, rights
and warrants referred to above); (v) a distribution consisting exclusively of
cash (excluding any cash distributions referred to in (iv) above) to all
holders of Common Stock in an aggregate amount that, together with (A) all
other cash distributions (excluding any cash distributions referred to in (iv)
above) made within the 12 months preceding such distribution and (B) any cash
and the fair market value of other consideration payable in respect of any
tender offer by the Company or a Significant Subsidiary (as defined under
Regulation S-X of the Securities Act) of the Company for Common Stock
consummated within the 12 months preceding such distribution, exceeds 12.5% of
the Company's market capitalization (determined as provided in the Indenture)
on the date fixed for determining the stockholders entitled to such
distribution; and (vi) the consummation of a tender offer made by the Company
or a Significant Subsidiary of the Company for Common Stock which involves an
aggregate consideration that, together with (X) any cash and other
consideration payable in respect of any tender offer by the Company or a
Significant Subsidiary of the Company for Common Stock consummated within the
12 months preceding the consummation of such tender offer and (Y) the
aggregate amount of all cash distributions (excluding any cash distributions
referred to in (iv) above) to all holders of the Common Stock within the
12 months preceding the consummation of such tender offer, exceeds 12.5% of
the Company's market capitalization at the date of consummation of such tender
offer. No adjustment of the conversion price will be required to be made until
cumulative adjustments amount to at least one percent of the conversion price,
as last adjusted. Any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent adjustment.
In addition to the foregoing adjustments, the Company from time to time may,
to the extent permitted by law, reduce the conversion price of the Notes by
any amount for any period of at least 20 days, in which case the Company shall
give at least 15 days' notice of such decrease. The Company is also permitted
to reduce the conversion price as it considers to be advisable in order that
any event treated for federal income tax purposes as a dividend of stock or
stock rights will not be taxable to the holders of the Common Stock or, if
that is not possible, to diminish any income taxes that are otherwise payable
because of such event. In the case of any consolidation or merger of the
Company with any other corporation (other than one in which no change is made
in the Common Stock), or any sale or transfer of all or substantially all of
the assets of the Company, the Holder of any Note then outstanding will, with
certain exceptions, have the right thereafter to convert such Note only into
the kind and amount of securities, cash and other property receivable upon
such consolidation, merger, sale or transfer by a holder of the number of
shares of Common Stock into which such Note might have been converted
immediately prior to such consolidation, merger, sale or transfer; and
adjustments will be provided for events subsequent thereto that are as nearly
equivalent as practical to the conversion price adjustments described above.
Fractional shares of Common Stock will not be issued upon conversion, but,
in lieu thereof, the Company will pay a cash adjustment based upon the then
Closing Price at the close of business on the day of conversion. If any Notes
are surrendered for conversion during the period from the close of business on
any Regular Record Date through and including the next succeeding Interest
Payment Date (except any such Notes called for redemption), such Notes when
surrendered for conversion must be accompanied by payment in next day funds of
an amount equal to the interest thereon which the registered Holder on such
Regular Record Date is to receive. Except as described in the preceding
sentence, no interest will be payable by the Company on converted Notes with
respect to any Interest Payment Date subsequent to the date of conversion. No
other payment or adjustment for interest or dividends is to be made upon
conversion.
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SUBORDINATION
The payment of the principal of and premium, if any, and interest on the
Notes is, to the extent set forth in the Indenture, subordinated in right of
payment to the prior payment in full of all Senior Indebtedness. If there is a
payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshalling of assets or any bankruptcy, insolvency or similar
proceedings of the Company, the holders of all Senior Indebtedness will be
entitled to receive payment in full of all amounts due or to become due
thereon or provision for such payment in money or money's worth before the
Holders of the Notes will be entitled to receive any payment in respect of the
principal of or premium, if any, or interest on the Notes. In the event of the
acceleration of the maturity of the Notes, the holders of all Senior
Indebtedness are first entitled to receive payment in full in cash of all
amounts due thereon or provision for such payment in money or money's worth
before the Holders of the Notes will be entitled to receive any payment for
the principal of or premium, if any, or interest on the Notes. No payments on
account of principal of or premium, if any, or interest on the Notes or on
account of the purchase or acquisition of Notes may be made if there has
occurred and is continuing a default in any payment with respect to Senior
Indebtedness, any acceleration of the maturity of any Senior Indebtedness or
if any judicial proceeding is pending with respect to any such default.
Senior Indebtedness with respect to the Company is defined in the Indenture
as (a) all secured indebtedness of the Company for money borrowed under any
Company revolving credit facility and any predecessor or successor credit
facilities thereto, whether outstanding on the date of execution of the
Indenture or thereafter created, incurred or assumed, (b) all other secured
indebtedness of the Company for money borrowed, whether outstanding on the
date of execution of the Indenture or thereafter created, incurred or assumed,
except any indebtedness that by the terms of the instrument or instruments by
which such indebtedness was created or incurred expressly provides that it (i)
is junior in right of payment to the Notes or (ii) ranks pari passu in right
of payment with the Notes, and (c) any amendments, renewals, extensions,
modifications, refinancings and refundings of any of the foregoing. The term
"indebtedness for money borrowed" when used with respect to the Company is
defined to mean (i) any obligation of, or any obligation guaranteed by, the
Company for the repayment of borrowed money (including without limitation
interest, fees, penalties and other obligations in respect thereof), whether
or not evidenced by bonds, debentures, notes or other written instruments,
(ii) any deferred payment obligation of, or any such obligation guaranteed by,
the Company for the payment of the purchase price of property or assets
evidenced by a note or similar instrument, (iii) any obligation of, or any
such obligation guaranteed by, the Company for the payment of rent or other
amounts under a lease of property or assets which obligation is required to be
classified and accounted for as a capitalized lease on the balance sheet of
the Company under generally accepted accounting principles, (iv) any
obligation of, or any such obligation which is guaranteed by, the Company for
the reimbursement of any obligor of any letter of credit, banker's acceptance
or similar credit transaction, (v) any obligation of, or any such obligation
which is guaranteed by, the Company under interest rate swaps, caps, collars,
options and similar arrangements and (vi) any obligation of the Company under
any foreign exchange contract, currency swap agreement, futures contract,
currency option contract or other foreign currency hedge.
The Indenture does not limit or prohibit the incurrence of Senior
Indebtedness. As of the date hereof, the Company had no outstanding Senior
Indebtedness. The Company expects to incur additional indebtedness, including
Senior Indebtedness from time to time in the future.
OPTIONAL REDEMPTION
The Notes are redeemable, at the Company's option, in whole or from time to
time in part, at any time on or after September 20, 2000, upon not less than
15 nor more than 60 days' notice mailed to each Holder of Notes to be redeemed
at its address appearing in the Security Register and prior to Maturity at the
following Redemption Prices (expressed as percentages of the principal amount)
plus accrued interest to the Redemption Date (subject to the right of Holders
of record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date).
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If redeemed during the 12-month period beginning September 15 in the year
indicated (September 20, in the case of 2000), the redemption price shall be:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2000.................................................... 102.10%
2001.................................................... 101.05
</TABLE>
No sinking fund is provided for the Notes.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that the Company will not consolidate with or merge
into any other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, or permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties substantially as an entirety to the Company, unless (a) if
applicable, the Person formed by such consolidation or into which the Company
is merged or the Person or corporation which acquires the properties and
assets of the Company substantially as an entirety is a corporation, limited
liability company, partnership or trust organized and validly existing under
the laws of the United States or any state thereof or the District of Columbia
and expressly assumes payment of the principal of and premium, if any, and
interest on the Notes and performance and observance of each obligation of the
Company under the Indenture, (b) after consummating such consolidation,
merger, transfer or lease, no Default or Event of Default will occur and be
continuing, (c) such consolidation, merger or acquisition does not adversely
affect the validity or enforceability of the Notes and (d) the Company has
delivered to the Trustee an Officer's Certificate and an Opinion of Counsel,
each stating that such consolidation, merger, conveyance, transfer or lease
complies with the provisions of the Indenture.
CERTAIN RIGHTS TO REQUIRE REPURCHASE OF NOTES
In the event of any Repurchase Event (as defined below) occurring after the
date of issuance of the Notes and on or prior to Maturity, each Holder of
Notes has the right, at the Holder's option, to require the Company to
repurchase all or any part of the Holder's Notes on the date (the "Repurchase
Date") that is 30 days after the date the Company gives notice of the
Repurchase Event as described below at a price (the "Repurchase Price") equal
to 100% of the principal amount thereof, together with accrued and unpaid
interest to the Repurchase Date. On or prior to the Repurchase Date, the
Company shall deposit with the Trustee or a Paying Agent an amount of money
sufficient to pay the Repurchase Price of the Notes which are to be repaid on
or promptly following the Repurchase Date.
Failure by the Company to provide timely notice of a Repurchase Event, as
provided for below, or to repurchase the Notes when required under the
preceding paragraph will result in an Event of Default under the Indenture
whether or not such repurchase is permitted by the subordination provisions of
the Indenture.
On or before the 15th day after the occurrence of a Repurchase Event, the
Company is obligated to mail to all Holders of Notes a notice of the
occurrence of such Repurchase Event and identifying the Repurchase Date, the
date by which the repurchase right must be exercised, the Repurchase Price for
Notes and the procedures which the Holder must follow to exercise this right.
To exercise the repurchase right, the Holder of a Note must deliver, on or
before the close of business on the Repurchase Date, written notice to the
Company (or an agent designated by the Company for such purpose) and to the
Trustee of the Holder's exercise of such right, together with the certificates
evidencing the Notes with respect to which the right is being exercised, duly
endorsed for transfer.
A "Repurchase Event" shall have occurred upon the occurrence of a Change in
Control or a Termination of Trading (each as defined below).
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A "Change in Control" shall occur when: (i) all or substantially all of the
Company's assets are sold as an entirety to any person or related group of
persons; (ii) there shall be consummated any consolidation or merger of the
Company (A) in which the Company is not the continuing or surviving
corporation (other than a consolidation or merger with a wholly owned
subsidiary of the Company in which all shares of Common Stock outstanding
immediately prior to the effectiveness thereof are changed into or exchanged
for the same consideration) or (B) pursuant to which the Common Stock would be
converted into cash, securities or other property, in each case other than a
consolidation or merger of the Company in which the holders of the Common
Stock immediately prior to the consolidation or merger have, directly or
indirectly, at least a majority of the total voting power of all classes of
capital stock entitled to vote generally in the election of directors of the
continuing or surviving corporation immediately after such consolidation or
merger in substantially the same proportion as their ownership of Common Stock
immediately before such transaction; (iii) any person, or any persons acting
together which would constitute a "group" for purposes of Section 13(d) of the
Exchange Act, together with any affiliates thereof, shall beneficially own (as
defined in Rule 13d-3 under the Exchange Act) at least 50% of the total voting
power of all classes of capital stock of the Company entitled to vote
generally in the election of directors of the Company; (iv) at any time during
any consecutive two-year period, individuals who at the beginning of such
period constituted the Board of Directors of the Company (together with any
new directors whose election by such Board of Directors or whose nomination
for election by the stockholders of the Company was approved by a vote of 66
2/3% of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office; or (v) the Company is
liquidated or dissolved or adopts a plan of liquidation or dissolution.
A "Termination of Trading" shall occur if the Common Stock is neither listed
for trading on a U.S. national securities exchange nor approved for trading on
an established automated over-the-counter trading market in the United States.
The right to require the Company to repurchase Notes as a result of the
occurrence of a Repurchase Event could create an event of default under Senior
Indebtedness of the Company, as a result of which any repurchase could, absent
a waiver, be blocked by the subordination provisions of the Notes. See
"Subordination." Failure by the Company to repurchase the Notes when required
will result in an Event of Default with respect to the Notes whether or not
such repurchase is permitted by the subordination provisions. The Company's
ability to pay cash to the Holders of Notes upon a repurchase may be limited
by certain financial covenants contained in the Company's Senior Indebtedness.
In the event a Repurchase Event occurs and the Holders exercise their rights
to require the Company to repurchase Notes, the Company intends to comply with
applicable tender offer rules under the Exchange Act, including Rules 13e-4
and 14e-1, as then in effect, with respect to any such purchase.
The foregoing provisions do not necessarily afford Holders of the Notes
protection in the event of highly leveraged or other transactions involving
the Company that may adversely affect Holders. In addition, the foregoing
provisions may discourage open market purchases of the Common Stock or a non-
negotiated tender or exchange offer for such stock and, accordingly, may limit
a stockholder's ability to realize a premium over the market price of the
Common Stock in connection with any such transaction.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to the
Notes: (a) default in the payment of principal of or any premium on any Note
when due (even if such payment is prohibited by the subordination provisions
of the Indenture), whether at maturity, upon redemption, upon acceleration or
otherwise; (b) default in the payment of any interest on any Note when due,
which default continues for 30 days (even if such payment is prohibited by the
subordination provisions of the Indenture); (c) failure to provide timely
notice of a Repurchase Event as required by the Indenture; (d) default in the
payment of the Repurchase Price in respect of any Note on the Repurchase Date
therefor (even if such payment is prohibited by the
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subordination provisions of the Indenture); (e) default in the performance of
any other covenant of the Company in the Indenture which continues for 60 days
after written notice as provided in the Indenture; (f) default under one or
more bonds, debentures, notes or other evidences of indebtedness for money
borrowed by the Company or any Significant Subsidiary of the Company or under
one or more mortgages, indentures or instruments under which there may be
issued or by which there may be secured or evidenced any indebtedness for
money borrowed by the Company or any Significant Subsidiary of the Company,
whether such indebtedness now exists or shall hereafter be created, which
default individually or in the aggregate shall constitute a failure to pay the
principal of indebtedness in excess of $10,000,000 when due and payable after
the expiration of any applicable grace period with respect thereto or shall
have resulted in indebtedness in excess of $10,000,000 becoming or being
declared due and payable prior to the date on which it would otherwise have
become due and payable, without such indebtedness having been discharged, or
such acceleration having been rescinded or annulled, in each case within a
period of 30 days after there shall have been given to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Outstanding Notes a written notice
specifying such default and requiring the Company to cause such indebtedness
to be discharged or cause such acceleration to be rescinded or annulled; and
(g) certain events in bankruptcy, insolvency or reorganization of the Company
or any Significant Subsidiary of the Company.
If an Event of Default with respect to the Notes shall occur and be
continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Outstanding Notes may declare the principal of and
premium, if any, on all such Notes to be due and payable immediately, but if
the Company cures all Events of Default (except the nonpayment of interest on,
premium, if any, and principal of any Notes) and certain other conditions are
met, such declaration may be canceled and past defaults may be waived by the
holders of a majority in principal amount of Outstanding Notes. If an Event of
Default shall occur as a result of an event of bankruptcy, insolvency or
reorganization of the Company or any Significant Subsidiary of the Company,
the aggregate principal amount of the Notes shall automatically become due and
payable. The Company is required to furnish to the Trustee annually a
statement as to the performance by the Company of certain of its obligations
under the Indenture and as to any default in such performance. The Indenture
provides that the Trustee may withhold notice to the Holders of the Notes of
any continuing default (except in the payment of the principal of or premium,
if any, or interest on any Notes) if the Trustee considers it in the interest
of Holders of the Notes to do so.
MODIFICATION, AMENDMENTS AND WAIVERS
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority of the aggregate
principal amount of the Outstanding Notes, to execute a supplemental indenture
to add provisions to, or change in any manner or eliminate any provisions of,
the Indenture or modify in any manner the rights of Holders of the Notes,
provided that without the consent of each holder of Outstanding Notes, no
supplemental indenture may (i) change the stated maturity of the principal of,
or any installment of interest on, any Note, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the place of payment where, or the coin or
currency in which, any Note or any premium or interest thereon is payable, or
impair the right to institute suit for enforcement of any such payment on or
after the stated maturity thereof (or, in the case of redemption, on or after
the redemption date), (ii) adversely affect the right to convert the Notes as
provided in the Indenture, (iii) modify the provisions of the Indenture with
respect to the subordination of the Notes in a manner adverse to the Holders
of Notes, (iv) impair the right of Holders of Notes to require the Company to
repurchase Notes upon the occurrence of a Repurchase Event or (v) reduce the
percentage in principal amount of Outstanding Notes, the consent of whose
Holders is required for any waiver of compliance with certain provisions of
the Indenture or certain defaults thereunder.
Modifications and amendments of the Indenture may be made by the Company and
the Trustee without the consent of the Holders to: (a) cause the Indenture to
be qualified under the Trust Indenture Act; (b) evidence the succession of
another Person to the Company and the assumption by any such successor of the
covenants of the Company herein and in the Notes; (c) add to the covenants of
the Company for the benefit of the Holders or an
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<PAGE>
additional Event of Default, or surrender any right or power conferred upon
the Company; (d) secure the Notes; (e) make provision with respect to the
conversion rights of Holders in the event of a consolidation, merger or sale
of assets involving the Company, as required by the Indenture; (f) evidence
and provide for the acceptance of appointment by a successor Trustee with
respect to the Notes; or (g) cure any ambiguity, correct or supplement any
provision which may be defective or inconsistent with any other provision, or
make any other provisions with respect to matters or questions arising under
the Indenture which shall not be inconsistent with the provisions of the
Indenture, provided, however, that no such modifications or amendment may
adversely affect the interest of Holders in any material respect.
SATISFACTION AND DISCHARGE
The Company may discharge its obligations under the Indenture while Notes
remain Outstanding if (a) all Outstanding Notes will become due and payable at
their scheduled maturity within one year or (b) all Outstanding Notes are
scheduled for redemption within one year, and in either case the Company has
deposited with the Trustee an amount sufficient to pay and discharge all
Outstanding Notes on the date of their scheduled maturity or the scheduled
date of redemption.
FORM, DENOMINATION AND REGISTRATION
The Notes have been issued in fully registered form, without coupons, in
denominations of $1,000 in principal amount and integral multiples thereof.
Notes currently held by "Qualified Institutional Buyers" as defined in Rule
144A under the Securities Act or by persons who are not U.S. persons who
acquired such Notes in "offshore transactions" in reliance on Regulation S
under the Securities Act are currently evidenced by restricted global notes,
which were deposited with or on behalf of DTC and were registered in the name
of Cede & Co. ("Cede"), as DTC's nominee.
Any purchaser (each, a "Public Holder") of Notes pursuant to this Prospectus
will receive a beneficial interest in an unrestricted global note (the "Public
Global Note") which will be deposited with or on behalf of DTC and registered
in the name of Cede, as DTC's nominee. Except as set forth below, the record
ownership of the Public Global Note may be transferred in whole or in part,
only to another nominee of DTC or to a successor of DTC or its nominee.
A Public Holder may hold its interest in the Public Global Note directly
through DTC if such Public Holder is a participant in DTC, or indirectly
through organizations which are participants in DTC (a "Participant" or
"Participants"). Transfers between Participants are effected in the ordinary
way in accordance with DTC rules and will be settled in same day funds. The
laws of some states require that certain persons take physical delivery of
securities in definitive form. Consequently, the ability to transfer
beneficial interests in the Public Global Note to such persons may be limited.
Public Holders who are not Participants may beneficially own interests in
the Public Global Note held by DTC only through Participants or certain banks,
brokers, dealers, trust companies and other parties that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants"). So long as Cede, as the nominee of DTC,
is the registered owner of the Public Global Note, Cede for all purposes will
be considered the sole holder of the Public Global Note.
Payment of interest on and the redemption price or repurchase price (upon
redemption at the option of the Company or repurchase at the option of the
Holder upon a Repurchase Event) of the Public Global Note will be made to
Cede, the nominee for DTC, as the registered owner of the Public Global Note,
by wire transfer of immediately available funds. Neither the Company, the
Trustee nor any paying agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Public Global Note or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests.
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With respect to any payment of interest on and the redemption price or
repurchase price (upon redemption at the option of the Company or repurchase
at the option of the Holder upon a Repurchase Event) of the Public Global
Note, DTC's practice is to credit Participants' accounts on the payment date
therefor with payments in amounts proportionate to their respective beneficial
interests represented by the Public Global Note as shown on the records of
DTC, unless DTC has reason to believe that it will not receive payment on such
payment date. Payments by Participants to owners of beneficial interests
represented by the Public Global Note held through such Participants will be
the responsibility of such Participants, as is now the case with securities
held for the accounts of customers registered in "street name."
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest represented by the Public Global Note to pledge
such interest to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interest, may be affected
by the lack of a physical certificate evidencing such interest.
Neither the Company nor the Trustee (or any registrar, paying agent or
conversion agent under the Indenture) will have any responsibility for the
performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations.
If DTC is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by the Company within 90 days, the
Company will cause Notes to be issued in definitive form in exchange for the
Public Global Note.
PAYMENTS OF PRINCIPAL AND INTEREST
The Indenture requires that payments in respect of the Notes (including
principal, premium, if any, and interest) held of record by DTC (including
Notes evidenced by the Public Global Note) be made in same day funds. Payments
in respect of the Notes held of record by holders other than DTC may, at the
option of the Company, be made by check and mailed to such holders of record
as shown on the Register for the Notes.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company and the Initial Purchaser have entered into a registration
rights agreement dated September 4, 1997 (the "RRA"). In the RRA, the Company
agreed to file with the Commission within 60 days after September 10, 1997
(the "Closing Date") a registration statement (the "Shelf") on Form S-3, of
which this Prospectus is a part, to cover resales of Transfer Restricted
Securities (as defined below) by the holders thereof who satisfy the
conditions referred to below. Notwithstanding the foregoing, the Company is
permitted to prohibit offers and sales of Transfer Restricted Securities
pursuant to the Shelf under certain circumstances and subject to certain
conditions (any period during which offers and sales are prohibited being a
"Suspension Period"). "Transfer Restricted Securities" means each Note and
each Share until such Note or Share, as the case may be, (i) has been
transferred pursuant to the Shelf or another registration statement covering
it which has been filed with the Commission pursuant to the Securities Act, in
either case after such registration statement has become effective under the
Securities Act, (ii) has been transferred pursuant to Rule 144 under the
Securities Act or (iii) may be sold or transferred pursuant to Rule 144(k)
under the Securities Act (or any similar provisions then in force).
Holders of Transfer Restricted Securities not already included under
"Selling Securityholders" below will be required to deliver information to be
used in connection with and to be named as selling securityholders in the
Shelf and to provide any comments they may wish to make on the Shelf in order
to have their Transfer Restricted Securities included in the Shelf. The
Transfer Restricted Securities of any Holder who elects not to include those
securities in the Shelf could be deemed to be less liquid than if those
securities were so included. No assurance can be given that the Company will
be able to maintain an effective and current registration statement as
required. The absence of such a registration statement may limit the ability
to sell such Transfer Restricted Securities or adversely affect the price at
which such Transfer Restricted Securities can be sold.
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If the Shelf is filed and declared effective but thereafter ceases to be
effective (without being succeeded immediately by a replacement shelf
registration statement filed and declared effective) or useable for the offer
and sale of Transfer Restricted Securities for period of time (including any
Suspension Period) which shall exceed 60 days in the aggregate in any 12-month
period ending on or prior to the second anniversary of the Closing Date (each
such event referred to in clauses (i) and (ii), a "Registration Default"), the
Company will pay liquidated damages to each Holder of Transfer Restricted
Securities which has complied with its obligations under the RRA. The amount
of liquidated damages payable during any period in which a Registration
Default shall have occurred and be continuing is that amount which is equal to
one-quarter of one percent (25 basis points) per annum per $1,000 principal
amount or $2.50 per annum per 14.4613 shares of Common Stock (subject to
adjustment in the event of a stock split, stock recombination, stock dividend
and the like) constituting Transfer Restricted Securities for the first 90
days during which a Registration Default has occurred and is continuing and 50
basis points per annum per $1,000 principal amount of Notes or $5.00 per annum
per 14.4613 shares of Common Stock (subject to adjustment as set forth above)
constituting Transfer Restricted Securities for any additional days during
which a Registration Default has occurred and is continuing. The Company has
agreed to pay all accrued liquidated damages by wire transfer of immediately
available funds or by federal funds check on each Damages Payment Date (as
defined in the RRA). Following the cure of a Registration Default, liquidated
damages will cease to accrue with respect to such Registration Default.
The Company has agreed to maintain the Shelf until the first to occur of (i)
the second anniversary of the Closing Date or (ii) the date on which no
security covered by the Shelf remains a Transfer Restricted Security.
The foregoing summary of certain provisions of the RRA does not purport to
be complete and is subject to, and is qualified in its entirety by reference
to, the provisions of the RRA. Copies of the RRA are available from the
Company or the Initial Purchaser on request.
GOVERNING LAW
The Indenture and, except as may otherwise be required by law, the Notes
will be governed by and construed in accordance with the laws of the State of
New York, without giving effect to such state's conflicts of laws principles.
INFORMATION CONCERNING THE TRUSTEE
The Company maintains deposit accounts and conducts other banking
transactions with the Trustee in the ordinary course of business. An affiliate
of the Trustee also serves as transfer agent with respect to the Common Stock.
ABSENCE OF PUBLIC MARKET
Upon their original issuance, the Notes became eligible for trading on the
PORTAL Market. The Notes sold pursuant to this Prospectus, however, will no
longer be eligible for trading on the PORTAL Market. There can be no assurance
that an active trading market for the Notes will develop or as to the
liquidity or sustainability of any such market, the ability of the holders to
sell their Notes or at what price holders of the Notes will be able to sell
their Notes. Future trading prices of the Notes will depend upon many factors
including, among other things, prevailing interest rates, the Company's
operating results, the price of the Common Stock and the market for similar
securities. The Company does not intend to apply for listing of the Notes on
any securities exchange or quotation system.
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DESCRIPTION OF CAPITAL STOCK
The Company's Certificate of Incorporation authorizes capital stock
consisting of 40,000,000 shares of Common Stock, $0.001 par value per share,
of which 21,970,476 shares were outstanding as of September 30, 1997, and
1,000,000 shares of preferred stock, $0.001 par value per share, none of which
is outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders, including the election of
directors, and are entitled to receive ratably such dividends, if any, as may
be declared from time to time by the Board of Directors out of funds legally
available therefor. The Company's Certificate of Incorporation does not
provide for cumulative voting with respect to the election of directors. As a
result, the holders of a majority of the shares voting in the election of
directors can elect all of the directors then standing for election. In the
event of liquidation or dissolution of the Company, the holders of Common
Stock are entitled to receive all assets available for distribution to the
stockholders, subject to any preferential rights of any preferred stock then
outstanding. The holders of Common Stock have no preemptive or other
subscription rights, and there are no conversion rights or redemption or
sinking fund provisions with respect to the Common Stock. All outstanding
shares of Common Stock are, and the shares to be issued upon conversion of the
Notes in accordance with the terms thereof will be, fully paid and
nonassessable.
PREFERRED STOCK
The Company is authorized to issue 1,000,000 shares of "blank check"
preferred stock that may be issued from time to time in one or more series
upon authorization by the Company's Board of Directors. The Board of
Directors, without further approval of the stockholders, is authorized to fix
the dividend rights and terms, conversion rights, voting rights, redemption
rights and terms, liquidation preferences, and any other rights, preferences,
privileges and restrictions applicable to each series of preferred stock. The
issuance of preferred stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes could, among other things,
adversely affect the voting power of the holders of Common Stock and, under
certain circumstances, make it more difficult for a third party to gain
control of the Company, discourage bids for the Company's Common Stock at a
premium or otherwise adversely affect the market price of the Common Stock.
The Company has no current plans to issue any preferred stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that
directors of a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except for liability (i)
for any breach of their duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit.
The Company's Bylaws provide that the Company shall indemnify its directors
and may indemnify its officers and employees and other agents to the fullest
extent permitted by law. The Company believes that indemnification under its
Bylaws covers at least negligence and gross negligence on the part of
indemnified parties. The Company's Bylaws also permit it to secure insurance
on behalf of any officer, director, employee or other agent for any liability
arising out of his actions in such capacity, regardless of whether the Bylaws
would permit indemnification.
The Company has entered into agreements to indemnify its directors and
executive officers, in addition to indemnification provided for in the
Company's Bylaws and Certificate of Incorporation. These agreements, among
other things, indemnify the Company's directors and executive officers for
certain expenses (including
24
<PAGE>
attorneys' fees), judgments, fines and settlement amounts incurred by any such
person in any action or proceeding, including any action by or in the right of
the Company, arising out of such person's services as a director or executive
officer of the Company, any subsidiary of the Company or any other company or
enterprise to which the person provides services at the request of the
Company. The Company believes that these provisions and agreements are
necessary to attract and retain qualified persons as directors and executive
officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened
litigation or proceeding that might result in a claim for such
indemnification.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, Section 203 prohibits a publicly held
Delaware corporation from engaging in a "business combination" transaction
with any "interested stockholder" for a period of three years after the date
of the transaction in which the person became an "interested stockholder,"
unless the business combination is approved in a prescribed manner. For
purposes of Section 203, a "business combination" includes a merger, asset
sale or other transaction resulting in a financial benefit to the interested
stockholder, and an "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years, did own) 15% or more
of a corporation's voting stock. By virtue of the Company's decision not to
elect out of the statute's provisions, the statute applies to the Company. The
statute could prohibit or delay the accomplishment of mergers or other
takeover or change in control attempts with respect to the Company and,
accordingly, may discourage attempts to acquire the Company.
Stockholders who are officers and directors or their affiliates may be able
to significantly influence the election of the Company's directors and the
determination of the outcome of corporate actions requiring stockholder
approval, such as mergers and acquisitions. This may have a significant effect
in delaying, deferring or preventing a change in control of the Company and
may adversely affect the voting and other rights of other holders of Common
Stock. Certain provisions of the Company's Certificate of Incorporation,
Bylaws and equity compensation plans and Delaware law may also discourage
certain transactions involving a change in control of the Company. This may,
when combined with the Company's classified Board of Directors and the ability
of the Board of Directors to issue blank check Preferred Stock without further
stockholder approval, have the effect of delaying, deferring or preventing a
change in control of the Company and may adversely affect the voting and other
rights of other holders of Common Stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Boston Equiserve,
LLP. Its telephone number is (617) 575-2000.
25
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain United States federal
income tax considerations to holders of the Notes and the Shares. This
discussion is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Regulations, Internal Revenue Service ("IRS") rulings, and
judicial decisions now in effect, all of which are subject to change (possibly
with retroactive effect) or different interpretations.
This discussion does not deal with all aspects of United States federal
income taxation that may be important to holders of the Notes or Shares and
does not deal with tax consequences arising under the laws of any foreign,
state or local jurisdiction. This discussion is for general information only,
and does not purport to address all tax consequences that may be important to
particular purchasers in light of their personal circumstances, or to certain
types of purchasers (such as certain financial institutions, insurance
companies, tax-exempt entities, dealers in securities or persons who hold the
Notes or Shares in connection with a straddle) that may be subject to special
rules. This discussion assumes that each holder holds the Notes and the Shares
as capital assets.
For the purpose of this discussion, a "Non-U.S. Holder" refers to any holder
who is not a United States person. The term "United States person" means a
citizen or resident of the United States, a corporation or other entity
taxable as a corporation created or organized under the laws of the United
States or any state thereof or a person or other entity otherwise subject to
United States federal income taxation on a net income basis in respect of
income derived from the Notes or the Common Stock.
PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING
THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THEIR PARTICIPATION
IN THIS OFFERING, OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING CONVERSION
OF THE NOTES, AND THE EFFECT THAT THEIR PARTICULAR CIRCUMSTANCES MAY HAVE ON
SUCH TAX CONSEQUENCES.
OWNERSHIP OF THE NOTES AND THE SHARES
Interest on Notes. Interest paid on Notes will be taxable to a holder as
ordinary interest income in accordance with the holder's methods of tax
accounting at the time that such interest is accrued or (actually or
constructively) received. The Company expects that the Notes will not be
issued with original issue discount ("OID") within the meaning of the code.
Constructive Dividend. Certain corporate transactions, such as distributions
of assets to holders of Common Stock, may cause a deemed distribution to the
holders of the Notes if the conversion price or conversion ratio of the Notes
is adjusted to reflect such corporate transaction. Such deemed distributions
will be taxable as a dividend, return of capital, or capital gain in
accordance with the earnings and profits rules discussed under "Dividends on
Shares of Common Stock."
Sale or Exchange of Notes or Shares of Common Stock. In general, subject to
the market discount rules discussed below, a holder of Notes will recognize
capital gain or loss upon the sale, redemption, retirement or other
disposition of the Notes measured by the difference between the amount of cash
and the fair market value of any property received (except to the extent
attributable to the payment of accrued interest, which will be taxable as
interest income) and the holder's adjusted tax basis in the Notes. A holder's
tax basis in Notes generally will equal the cost of the Notes to the holder
increased by the amount of market discount, if any, previously taken into
income by the holder or decreased by any premium theretofore amortized by the
holder with respect to the Notes. In general, subject to the market discount
rules discussed below, each holder of Common Stock into which the Notes have
been converted will recognize capital gain or loss upon the sale, exchange,
redemption, or other disposition of the Common Stock. However, special rules
may apply to redemptions of the Common Stock which may result in the amount
paid being treated as a dividend. With respect to U.S. Holders who are
individuals, trusts or estates, the Taxpayer Relief Act of 1997 (the "Act")
reduces the maximum tax rate on net capital gains derived from securities held
for more than 18 months to 20% and provides a maximum tax rate on net capital
gains derived from securities held for more than one year and for not more
26
<PAGE>
than 18 months ("mid-term gains") of 28%. Net gain recognized by such U.S.
Holders on securities held for one year or less in excess of net long-term
capital loss continues to be short-term capital gain subject to tax at
ordinary income rates. The Act generally does not affect the taxation of
capital gains to corporations. (For the basis and holding period of shares of
Common Stock, see "Conversion of Notes.")
Conversion of Notes. A holder of Notes will not recognize gain or loss on
the conversion of the Notes into shares of Common Stock. The holder's tax
basis in the shares of Common Stock received upon conversion of the Notes will
be equal to the holder's aggregate basis in the Notes exchanged therefor (less
any portion thereof allocable to cash received in lieu of a fractional share).
The holding period of the shares of Common Stock received by the holder upon
conversion of Notes will generally include the period during which the holder
held the Notes prior to the conversion.
Cash received in lieu of a fractional share of Common Stock should be
treated as a payment in exchange for such fractional share rather than as a
dividend. Gain or loss recognized on the receipt of cash paid in lieu of such
fractional shares generally will equal the difference between the amount of
cash received and the amount of tax basis allocable to the fractional shares.
Market Discount. The resale of Notes may be affected by the "market
discount" provisions of the Code. For this purpose, the market discount on a
Note will generally be equal to the amount, if any, by which the stated
redemption price at maturity of the Note immediately after its acquisition
exceeds the holder's tax basis in the Note. Subject to a de minimis exception,
these provisions generally require a holder of a Note acquired at a market
discount to treat as ordinary income any gain recognized on the disposition of
such Note to the extent of the "accrued market discount" on such Note at the
time of disposition, unless the holder elects to include accrued market
discount in income currently. In general, market discount on a Note will be
treated as accruing on a straight-line basis over the term of such Note, or,
at the election of the holder, under a constant yield method. A holder of a
Note acquired at a market discount who does not elect to include accrued
market discount in income currently may be required to defer the deduction of
a portion of the interest on any indebtedness incurred or maintained to
purchase or carry the Note until the Note is disposed of in a taxable
transaction. If a holder acquires a Note at a market discount and receives
Common Stock upon conversion of the Note, the amount of accrued market
discount not previously included in income with respect to the converted Note
through the date of conversion will be treated as ordinary income upon the
disposition of the Common Stock.
Dividends on Shares of Common Stock. Distributions on shares of Common Stock
will constitute dividends for United States federal income tax purposes to the
extent of current or accumulated earnings and profits of the Company as
determined under United States federal income tax principles. Dividends paid
to holders that are United States corporations may qualify for the dividends-
received deduction.
To the extent, if any, that a holder receives distributions on shares of
Common Stock that would otherwise constitute dividends for United States
federal income tax purposes but that exceed current and accumulated earnings
and profits of the Company, such distributions will be treated first as a non-
taxable return of capital reducing the holder's basis in the shares of Common
Stock. Any such distributions in excess of the holder's basis in the shares of
Common Stock will be treated as capital gain.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE TO NON-U.S. HOLDERS
Interest on Notes. Generally, interest paid on the Notes to a Non-U.S.
Holder will not be subject to United States federal income tax if: (i) such
interest is not effectively connected with the conduct of a trade or business
within the United States by such Non-U.S. Holder; (ii) the Non-U.S. Holder
does not actually or constructively own 10% or more of the total voting power
of all classes of stock of the Company entitled to vote and is not a
controlled foreign corporation with respect to which the Company is a "related
person" within the meaning of the Code; and (iii) the beneficial owner, under
penalty of perjury, certifies that the owner is not a United States person and
provides the owner's name and address. If certain requirements are satisfied,
the certification described in clause (iii) above may be provided by a
securities clearing organization, a bank, or other financial
27
<PAGE>
institution that holds customers' securities in the ordinary course of its
trade or business. For this purpose, the holder of Notes would be deemed to
own constructively the Common Stock into which it could be converted. A holder
that is not exempt from tax under these rules will be subject to United States
federal income tax withholding at a rate of 30% (or lower treaty rate) unless
the interest is effectively connected with the conduct of a United States
trade or business, in which case the interest will be subject to the United
States federal income tax on net income that applies to United States persons
generally. Non-U.S. Holders should consult applicable income tax treaties,
which may provide different rules.
Sales or Exchange of Notes or Shares of Common Stock. A Non-U.S. Holder
generally will not be subject to United States federal income tax on gain
recognized upon the sale or other disposition of the Notes or shares of Common
Stock unless (i) the gain is effectively connected with the conduct of a trade
or business within the United States by the Non-U.S. Holder, or (ii) in the
case of a Non-U.S. Holder who is a nonresident alien individual and holds the
Common Stock as a capital asset, such holder is present in the United States
for 183 or more days in the taxable year and certain other circumstances are
present. If the Company is a "United States real property holding
corporation," a Non-U.S. Holder may be subject to federal income tax with
respect to gain realized on the disposition of such Notes or shares of Common
Stock as if it were effectively connected with a United States trade or
business and the amount realized will be subject to withholding at the rate of
10%. The amount withheld pursuant to these rules will be creditable against
such Non-U.S. Holder's United States federal income tax liability and may
entitle such Non-U.S. Holder to a refund upon furnishing the required
information to the IRS. Non-U.S. Holders should consult applicable income tax
treaties, which may provide different rules.
Conversion of Notes. A Non-U.S. Holder generally will not be subject to
United States federal income tax on the conversion of a Note into shares of
Common Stock. To the extent a Non-U.S. Holder receives cash in lieu of a
fractional share on conversion, such cash may give rise to gain that would be
subject to the rules described above with respect to the sale or exchange of a
Notes or Common Stock.
Dividends on Shares of Common Stock. Generally, any distribution on shares
of Common Stock to a Non-U.S. Holder will be subject to United States federal
income tax withholding at a rate of 30% unless the dividend is effectively
connected with the conduct of trade or business within the United States by
the Non-U.S. Holder, in which case the dividend will be subject to the United
States federal income tax on net income that applies to United States persons
generally (and, with respect to corporate holders and under certain
circumstances, the branch profits tax). Non-U.S. Holders should consult any
applicable income tax treaties, which may provide for a lower rate of
withholding or other rules different from those described above. A Non-U.S.
Holder may be required to satisfy certain certification requirements in order
to claim a reduction of or exemption from withholding under the foregoing
rules.
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. Holders. Information reporting and backup withholding may apply to
payments of interest or dividends on or the proceeds of the sale or other
disposition of the Notes or shares of Common Stock made by the Company with
respect to certain non-corporate U.S. holders. Such U.S. holders generally
will be subject to backup withholding at a rate of 31% unless the recipient of
such payment supplies a taxpayer identification number, certified under
penalties of perjury, as well as certain other information, or otherwise
establishes, in the manner prescribed by law, an exemption from backup
withholding. Any amount withheld under backup withholding is allowable as a
credit against the U.S. holder's federal income tax, upon furnishing the
required information.
Non-U.S. Holders. Generally, information reporting and backup withholding of
United States federal income tax at a rate of 31% may apply to payments of
principal, interest and premium (if any) on the Notes to Non-U.S. Holders if
the payee fails to certify that the holder is a Non-U.S. person or if the
Company or its paying agent has actual knowledge that the payee is a United
States person. The 31% backup withholding tax generally will not apply to
dividends paid to foreign holders outside the United States that are subject
to 30% withholding as discussed above or that are subject to a tax treaty that
reduces such withholding.
28
<PAGE>
The payment of the proceeds on the disposition of Notes or shares of Common
Stock to or through the United States office of a United States or foreign
broker will be subject to information reporting and backup withholding unless
the owner provides the certification described above or otherwise establishes
an exemption.
SELLING SECURITYHOLDERS
The Notes were originally issued by the Company and sold by the Initial
Purchaser in a transaction exempt from the registration requirements of the
Securities Act to persons reasonably believed by such Initial Purchaser to be
"qualified institutional buyers" (as defined by Rule 144A under the Securities
Act) or in transactions complying with the provisions of Regulation S under
the Securities Act. The Selling Securityholders (which term includes their
transferees, pledges, donees or successors) may from time to time offer and
sell pursuant to this Prospectus any and all of the Notes and Shares.
Set forth below, to the Company's knowledge, are the names of each Selling
Securityholder, the principal amount of Notes that may be offered by such
Selling Securityholder pursuant to this Prospectus, the percentage of Notes
held by such Selling Securityholder and the number of Shares into which such
Notes are convertible. Unless set forth below, none of the Selling
Securityholders has had a material relationship with the Company or any of its
predecessors or affiliates within the past three years.
The following table sets forth certain information as of September 30, 1997.
However, any or all of the Notes or Shares listed below may be offered for
sale pursuant to this Prospectus by the Selling Securityholders from time to
time. Accordingly, no estimate can be given as to the amounts of Notes or
Shares that will be held by the Selling Securityholders upon consummation of
any such sales. In addition, the Selling Securityholders identified below may
have sold, transferred, or otherwise disposed of all or a portion of their
Notes since the date on which the information regarding their Notes was
provided, in transactions exempt from the registration requirements of the
Securities Act.
<TABLE>
<CAPTION>
NUMBER OF SHARES
AGGREGATE PRINCIPAL AMOUNT PERCENTAGE OF OF COMMON STOCK
NAME OF NOTES THAT MAY BE SOLD NOTES OUTSTANDING THAT MAY BE SOLD(1)
---- -------------------------- ----------------- -------------------
<S> <C> <C> <C>
BancAmerica Robertson
Stephens............... $ 800,000 * 11,569
Bank of New York........ 3,965,000 3.4 57,339
Bankers Trust Company... 8,165,000 7.1 118,076
Bear, Stearns Securities
Corp. ................. 6,325,000 5.5 91,467
Boston Safe Deposit and
Trust Company.......... 10,560,000 9.2 152,711
Brown Brothers Harriman
& Co................... 6,300,000 5.5 91,106
Chase Manhattan Bank.... 1,025,000 * 14,822
Chase Manhattan
Bank/Chemical.......... 2,615,000 2.3 37,816
Citibank, N.A........... 1,750,000 1.5 25,307
Custodial Trust Co...... 2,000,000 1.7 28,922
Deutsche Morgan
Grenfell, Inc.......... 4,100,000 3.6 59,291
Goldman, Sachs & Co..... 200,000 * 2,892
Lehman Brothers, Inc.... 2,340,000 2.0 33,839
Lehman Brothers Int'l,
(Europe) Equity
Division............... 1,500,000 1.3 21,691
Lehman Brothers Int'l,
(Europe) Prime Broker.. 500,000 * 7,230
Mercantile Safe Deposit
& Trust................ 885,000 * 12,798
Merrill Lynch, Pierce,
Fenner & Smith, Inc.... 1,000,000 * 14,461
Merrill Lynch
Professional Clearing
Corp................... 2,900,000 2.5 41,937
Merrill Lynch, Pierce,
Fenner & Smith
Safekeeping............ 3,625,000 3.2 52,422
</TABLE>
(Table continued on following page)
29
<PAGE>
(Continued from previous page)
<TABLE>
<CAPTION>
NUMBER OF SHARES
AGGREGATE PRINCIPAL AMOUNT PERCENTAGE OF OF COMMON STOCK
NAME OF NOTES THAT MAY BE SOLD NOTES OUTSTANDING THAT MAY BE SOLD(1)
---- -------------------------- ----------------- -------------------
<S> <C> <C> <C>
Merrill Lynch, Pierce,
Fenner & Smith Debt
Sec.................... $ 16,200,000 14.1 234,273
Morgan (J.P.)
Securities, Inc........ 5,000,000 4.3 72,306
Morgan Stanley & Co.
Incorporated........... 1,500,000 1.3 21,691
Morgan Stanley & Co.
Inc./Prime Dealer
Services............... 3,000,000 2.6 43,383
Norwest Bank Minnesota,
N.A.................... 335,000 * 4,844
Northern Trust Company.. 1,350,000 1.2 19,522
PNC Bank, National
Association............ 140,000 * 2,024
Prudential Securities,
Inc. Custodial Account. 750,000 * 10,845
Republic New York
Securities Corporation. 1,710,000 1.5 24,728
Smith Barney Inc........ 205,000 * 2,964
SBC Warburg Dillon Read,
Inc.................... 1,000,000 * 14,461
Societe General
Securities Corp. ...... 6,000,000 5.2 86,767
SSB-Custodian........... 16,205,000 14.1 234,345
U.S. Clearing Corp...... 500,000 * 7,230
Wachovia Bank of North
Carolina, N.A.......... 550,000 * 7,953
------------ ----- ---------
Total................. $115,000,000 100.0% 1,663,032(2)
============ ===== =========
</TABLE>
- --------
* Less than 1%.
(1) Assumes a conversion price of $69.15 per share and a cash payment in lieu
of any fractional share interest.
(2) Total differs from the amount to be registered due to the rounding down of
fractional shares.
The preceding table has been prepared based upon information furnished to
the Company by DTC. From time to time, additional information concerning
ownership of the Notes and Shares may rest with certain holders thereof not
named in the preceding table, with whom the Company believes it has no
affiliation.
PLAN OF DISTRIBUTION
The Notes and the Shares are being registered to permit public secondary
trading of such securities by the holders thereof from time to time after the
date of this Prospectus. The Company has agreed, among other things, to bear
all expenses (other than underwriting discounts and selling commissions) in
connection with the registration and sale of the Notes and the Shares covered
by this Prospectus.
The Company will not receive any of the proceeds from the offering of Notes
or the Shares by the Selling Securityholders. The Company has been advised by
the Selling Securityholders that the Selling Securityholders may sell all or a
portion of the Notes and Shares beneficially owned by them and offered hereby
from time to time on any exchange on which the securities are listed on terms
to be determined at the times of such sales. The Selling Securityholders may
also make private sales directly or through a broker or brokers.
Alternatively, any of the Selling Securityholders may from time to time offer
the Notes or the Shares beneficially owned by them through underwriters,
dealers or agents, who may receive compensation in the form of underwriting
discounts, commissions or concessions from the Selling Securityholders and the
purchasers of the Notes or Shares for whom they may act as agent. The
aggregate proceeds to the Selling Securityholders from the sale of the Notes
or Shares offered by them hereby will be the purchase price of such Notes or
Shares less discounts and commissions, if any.
The Notes and the Shares may be sold from time to time in one or more
transactions at fixed offering prices, which may be changed, or at varying
prices determined at the time of sale or at negotiated prices. Such prices
will be determined by the holders of such securities or by agreement between
such holders and underwriters or dealers who may receive fees or commissions
in connection therewith.
30
<PAGE>
The outstanding Common Stock is listed for trading on the Nasdaq National
Market, and the Shares have been approved for listing on the Nasdaq National
Market.
The Selling Securityholders and any broker and any broker-dealers, agents or
underwriters that participate with the Selling Securityholders in the
distribution of the Notes or the Shares may be deemed to be "underwriters"
within the meaning of the Securities Act, in which event any commissions
received by such broker-dealers, agents or underwriters and any profit on the
resale of the Notes or the Shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
In addition, any securities covered by this Prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this Prospectus. There is no
assurance that any Selling Securityholder will sell any or all of the Notes or
Shares described herein, and any Selling Securityholder may transfer, devise
or gift such securities by other means not described herein.
The Notes were issued and sold in September 1997 in transactions exempt from
the registration requirements of the Securities Act to persons reasonably
believed by the Initial Purchaser to be "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act) or outside the United States to
certain persons in offshore transactions in reliance on Regulation S under the
Securities Act. Pursuant to the RRA, the Company has agreed to indemnify the
Initial Purchaser and each Selling Securityholder, and each Selling
Securityholder has agreed to indemnify the Company, the Initial Purchaser and
each other Selling Stockholder against certain liabilities arising under the
Securities Act.
The Company will use its best efforts to keep the registration statement of
which this Prospectus is a part effective for a period of two years from the
Closing Date, or until the Shelf Registration is no longer required for
transfer of the Notes or the Shares. The Company may prohibit offers and sales
of Notes and Shares pursuant to the registration statement to which this
Prospectus relates at any time if (A)(i) it is in possession of material non-
public information, (ii) the Board of Directors of the Company or the
Executive Committee thereof determines (based on advice of counsel) that such
prohibition is necessary in order to avoid a requirement to disclose such
material non-public information and (iii) the Board of Directors of the
Company or the Executive Committee thereof determines in good faith that
disclosure of such material non-public information would not be in the best
interests of the Company and its stockholders or (B) the Company has made a
public announcement relating to an acquisition or business combination
transaction including the Company and/or one or more of its subsidiaries (i)
that is material to the Company and its subsidiaries taken as a whole and (ii)
the Board of Directors of the Company or the Executive Committee thereof
determines in good faith that offers and sales of Notes and Shares pursuant to
the registration statement to which this Prospectus relates prior to the
consummation of such transaction (or such earlier date as the Board of
Directors or the Executive Committee thereof shall determine) is not in the
best interests of the Company and its stockholders. Expenses of preparing and
filing the registration statement to which this Prospectus relates and all
post-effective amendments thereto will be borne by the Company.
31
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the legality of the Notes and the
validity of the Shares offered hereby are being passed upon for the Company by
Brobeck, Phleger & Harrison LLP, Palo Alto, California.
EXPERTS
The consolidated financial statements of the Company incorporated by
reference in its Annual Report on Form 10-K for the year ended October 31,
1996 have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon incorporated by reference therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The statements made in the second and third paragraphs of "Risk Factors--
Proprietary Rights" are included in part in reliance upon the advice of Smith-
Hill and Bedell, P.C., general patent counsel to the Company, and upon the
authority of such firm as experts in such matters.
32
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE DE-
LIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OF-
FER TO SELL OR A SOLICITATION FOR AN OFFER TO BUY ANY SECURITIES OFFERED
HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
----------------
TABLE OF CONTENTS
----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Information
by Reference.............................................................. 2
Risk Factors............................................................... 4
Use of Proceeds............................................................ 14
Dividend Policy............................................................ 14
Ratio of Earnings to Fixed Charges ........................................ 14
Description of Notes....................................................... 15
Description of Capital Stock............................................... 24
Certain United States Federal Income Tax
Consequences ............................................................. 26
Selling Securityholders ................................................... 29
Plan of Distribution ...................................................... 31
Legal Matters.............................................................. 32
Experts.................................................................... 32
</TABLE>
----------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$115,000,000
CREDENCE SYSTEMS CORPORATION
5 1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2002
1,663,051 SHARES COMMON STOCK
----------------
PROSPECTUS
----------------
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
All expenses incurred in connection with the issuance and distribution of
the securities being registered will be paid by the Registrant. The following
is an itemized statement of these expenses. All amounts are estimates except
the Securities and Exchange Commission registration fee and the Nasdaq listing
fee.
<TABLE>
<S> <C>
SEC registration fee............................................. $ 34,848
Nasdaq listing fee............................................... 17,500
Printing and engraving........................................... 10,000
Legal fees and expenses of the Registrant........................ 10,000
Accounting fees and expenses..................................... 15,000
Trustee's fees and expenses...................................... 1,000
Miscellaneous.................................................... 12,000
--------
Total.......................................................... $100,348
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("Section 145")
authorizes a court to award or a corporation's Board of Directors to grant
indemnification to directors and officers in terms sufficiently broad to
permit such indemnification under certain circumstances for liabilities
(including reimbursement for expenses incurred) arising under the Securities
Act. The Registrant's Certificate of Incorporation and Bylaws provide for
mandatory indemnification by the Registrant of all persons the Registrant may
indemnify under Section 145 to the maximum extent permitted by the Delaware
General Corporation Law. The Registrant's Certificate of Incorporation further
provides that the liability of its directors is eliminated to the fullest
extent permitted by the Delaware General Corporation Law. These provisions in
the Certificate of Incorporation do not eliminate the directors' fiduciary
duty, and in appropriate circumstances equitable remedies such as injunctive
or other forms of non-monetary relief will remain available under Delaware
law. In addition, each director will continue to be subject to liability for
breach of the director's duty of loyalty to the Registrant for acts or
omissions not in good faith or involving intentional misconduct, for knowing
violations of law, for actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws. The Registrant has
entered into indemnification agreements with all of its officers and
directors.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 Purchase Agreement, dated September 4, 1997, between the Registrant
and Smith Barney Inc.
4.1 Indenture, dated as of September 10, 1997, between the Registrant
and State Street Bank and Trust Company of California, N.A., as
Trustee.
Form of 5 1/4% Convertible Subordinated Note due 2002 (included in
4.2 Exhibit 4.1).
4.3 Registration Rights Agreement, dated as of September 4, 1997,
between the Registrant and Smith Barney Inc.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
12.1 Calculation of Ratio of Earnings to Fixed Charges.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
23.1 Consent of Ernst & Young LLP.
Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit
23.2 5.1).
23.3 Consent of Smith-Hill and Bedell, P.C.
Powers of Attorney (included in the signature page of this
24.1 Registration Statement).
25.1 Statement of Eligibility of Trustee (Form T-1).
</TABLE>
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining liability under the Securities
Act, each post-effective amendment shall be deemed to be a new registration
statement of the securities offered, and the offering of such securities at
that time to be the initial bona fide offering.
(3) To file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Delaware General Corporation Law, the Certificate
of Incorporation or the Bylaws of the Registrant, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and authorized this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Fremont, State of California, on
this 31st day of October, 1997.
CREDENCE SYSTEMS CORPORATION
By: /s/ Dr. Wilmer R. Bottoms
___________________________________
Dr. Wilmer R. Bottoms
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints, jointly and severally, Wilmer R. Bottoms and
Richard Y. Okumoto, and each one of them, his true and lawful attorneys-in-
fact and agents, each with full power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to sign any registration statement for the same offering
covered by this Registration Statement that is to be effective upon filing
pursuant to Rule 462(b) promulgated under the Securities Act of 1933, and all
post-effective amendments thereto, and to file the same, with all exhibits
thereto and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming that each of said attorneys-in-fact and agents or any
of them, or his or their substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the persons whose signatures appear
below, which persons have signed such Registration Statement in the capacities
and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Dr. Wilmer R. Bottoms Chairman of the Board of October 31, 1997
_______________________________________ Directors and Chief
Dr. Wilmer R. Bottoms Executive Officer
(Principal Executive
Officer)
/s/ Richard Y. Okumoto Executive Vice President, October 31, 1997
_______________________________________ Chief Financial Officer and
Richard Y. Okumoto Secretary (Principal
Financial and Accounting
Officer)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Henk J. Evenhuis Director October 31, 1997
_______________________________________
Henk J. Evenhuis
/s/ Jos C. Henkens Director October 31, 1997
_______________________________________
Jos C. Henkens
/s/ William G. Howard, Jr. Director October 31, 1997
_______________________________________
William G. Howard, Jr.
/s/ Bernard V. Vonderschmitt Director October 31, 1997
_______________________________________
Bernard V. Vonderschmitt
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NUMBER
------- ----------- ------
<C> <S> <C>
1.1 Purchase Agreement, dated September 4, 1997, between the
Registrant and Smith Barney Inc.
4.1 Indenture, dated as of September 10, 1997, between the
Registrant and State Street Bank and Trust Company of
California, N.A., as Trustee.
4.2 Form of 5 1/4% Convertible Subordinated Note due 2002
(included in Exhibit 4.1).
4.3 Registration Rights Agreement, dated as of September 4, 1997,
between the Registrant and Smith Barney Inc.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
12.1 Calculation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in
Exhibit 5.1).
23.3 Consent of Smith-Hill and Bedell, P.C.
24.1 Powers of Attorney (included in the signature page of this
Registration Statement).
25.1 Statement of Eligibility of Trustee (Form T-1).
</TABLE>
<PAGE>
EXHIBIT 1.1
$100,000,000
CREDENCE SYSTEMS CORPORATION
5 1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2002
PURCHASE AGREEMENT
------------------
September 4, 1997
Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
Credence Systems Corporation, a Delaware corporation (the "Company"),
proposes, upon the terms and conditions set forth herein, to issue and sell to
you, as the initial purchaser (the "Initial Purchaser"), $100,000,000 aggregate
principal amount of its 5 1/4% Convertible Subordinated Notes due 2002 (the
"Firm Notes"). The Company also proposes, upon the terms and conditions set
forth herein, to issue and sell to the Initial Purchaser up to an additional
$15,000,000 aggregate principal amount of its 5 1/4% Convertible Subordinated
Notes due 2002 (the "Additional Notes"). The Firm Notes and the Additional
Notes are hereinafter collectively referred to as the "Notes". The Notes will
(i) have the terms and provisions which are summarized in the Offering Circular
(ii) be in the forms specified and (iii) be issued pursuant to the provisions of
an Indenture, to be dated as of September 10, 1997 (the "Indenture"), between
the Company and State Street Bank and Trust Company of California N.A., as
trustee (the "Trustee"). As used herein, the term "Common Stock" refers to the
common stock, par value $0.001 per share, of the Company.
The Company wishes to confirm as follows its agreement with the
Initial Purchaser in connection with the purchase and resale of the Notes.
1. Preliminary Offering Memorandum and Offering Memorandum. The
-------------------------------------------------------
Notes will be offered and sold to the Initial Purchaser without registration
under the Securities Act of 1933, as amended (the "Act"), in reliance on an
exemption pursuant to Section 4(2) under the Act. The Company has prepared a
preliminary offering memorandum, dated September 2, 1997 (the "Preliminary
Offering Memorandum"), and an offering memorandum, dated September 4, 1997
(the "Offering Memorandum"), setting forth information regarding the Company
and the Notes. Any references herein to the Preliminary Offering Memorandum
and the Offering Memorandum shall be deemed to include all amendments and
supplements thereto and any documents filed under the Securities Exchange Act
of 1934, as amended, and the rules and regulations of the Securities and
Exchange Commission (the "Commission") thereunder (collectively, the "Exchange
Act") which are incorporated by reference therein. As used herein, the term
"Incorporated Documents"
<PAGE>
means the documents which at the time they are incorporated by reference in the
Preliminary Offering Memorandum, the Offering Memorandum or any amendment or
supplement thereto. The Company hereby confirms that it has authorized the use
of the Preliminary Offering Memorandum and the Offering Memorandum in connection
with the offering and resale of the Notes by the Initial Purchaser.
The Company understands that the Initial Purchaser proposes to make
offers and sales (the "Exempt Resales") of the Notes purchased by the Initial
Purchaser hereunder only on the terms and in the manner set forth in the
Offering Memorandum and Section 2 hereof, as soon as the Initial Purchaser deems
advisable after this Agreement has been executed and delivered, (i) to persons
in the United States whom the Initial Purchaser reasonably believes to be
qualified institutional buyers ("Qualified Institutional Buyers") as defined in
Rule 144A under the Act, as such rule may be amended from time to time ("Rule
144A"), in transactions under Rule 144A, and (ii) outside the United States to
persons other than U.S. persons in reliance upon Regulation S ("Regulation S")
under the Act (such persons specified in clauses (i) and (ii) being referred to
herein as the "Eligible Purchasers"). As used herein the terms "United States"
and "U.S. persons" have the meaning given them in Regulation S.
It is understood and acknowledged that upon original issuance thereof,
and until such time as the same is no longer required under the applicable
requirements of the Act, the Notes shall bear the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATED PERSON OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) UNLESS SUCH OFFER, SALE OR OTHER TRANSFER IS (A)
TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON THE HOLDER REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE
2
<PAGE>
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(A)(1), (A)(2), (A)(3) OR (A)(7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE COMPANY'S AND STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.'S
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E)
OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING
CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE THEN HOLDER OF THIS SECURITY AFTER THE RESALE RESTRICTION TERMINATION
DATE.
It is also understood and acknowledged that holders (including
subsequent transferees) of the Notes and, if such Notes are subsequently
converted into Common Stock, the Common Stock will have the registration rights
agreement (the "Registration Right Agreement"), to be dated the date hereof, in
substantially the form of Exhibit B hereto, for so long as such Notes and Common
---------
Stock constitute "Transfer Restricted Securities" (as defined in the
Registration Rights Agreement). Pursuant to the Registration Rights Agreement,
the Company will agree (i) to file with the Commission under the circumstances
set forth therein, a registration statement on the appropriate form under the
Act relating to the resale of the Notes and the Common Stock by certain holders
thereof from time to time in accordance with the methods of distribution set
forth in such registration statement and Rule 415 under the Act (the "Shelf
Registration Statement") and (ii) to use its best efforts to cause such Shelf
Registration Statement to be declared effective. This Agreement, the Indenture
and the Registration Rights Agreement are hereinafter referred to collectively a
the "Operative Documents."
Capitalized terms used herein without definition have the respective
meanings specified therefor in the Indenture or the Offering Memorandum.
2. Agreements to Sell, Purchase and Resell. (a) The Company hereby
---------------------------------------
agrees, subject to all the terms and conditions set forth herein, to issue and
sell to the Initial Purchaser and, upon the basis of the representations,
warranties and agreements of the Company herein contained and subject to all
the terms and conditions set forth herein, the Initial Purchaser agrees to
purchase from the Company, at a purchase price of 97.5% of the principal
amount thereof, the principal amount of Firm Notes set forth opposite the name
of the Initial Purchaser in Schedule I hereto.
3
<PAGE>
(b) The Company also agrees, subject to all the terms and
conditions set forth herein, to sell to the Initial Purchaser, and, upon
the basis of the representations, warranties and agreements of the
Company herein contained and subject to all the terms and conditions set
forth herein, the Initial Purchaser shall have the right to purchase from
the Company pursuant to an option (the "over-allotment option") which may
be exercised at any time and from time to time prior to 9:00 P.M., New
York City time, on the 30th day after the date of the Offering Memorandum
(or, if such 30th day shall be a Saturday or Sunday or a holiday, on the
next business day thereafter when the New York Stock Exchange is open for
trading), up to $15,000,000 principal amount of Additional Notes at the
same purchase price as the Firm Notes, plus accrued interest, if any,
from the date of issuance of the Firm Notes to the date of delivery and
payment.
(c) The Initial Purchaser has advised the Company that it proposes
to offer the Notes for sale upon the terms and conditions set forth in
this Agreement and in the Offering Memorandum. The Initial Purchaser
hereby represents and warrants to the Company that the Initial Purchaser
(i) is purchasing the Notes pursuant to a private sale exempt from
registration under the Act, (ii) will not solicit offers for, or offer or
sell, the Notes by means of any form of general solicitation or general
advertising or in any manner involving a public offering within the
meaning of Section 4(2) of the Act, and (iii) will solicit offers for the
Notes only from, and will offer, sell or deliver the Notes as part of its
initial offering, only to (A) persons in the United States whom the
Initial Purchaser reasonably believes to be Qualified Institutional
Buyers, or if any such person is buying for one or more institutional
accounts for which such person is acting as fiduciary or agent, only when
such person has represented to the Initial Purchaser that each such
account is a Qualified Institutional Buyer, to whom notice has been given
that such sale or delivery is being made in reliance on Rule 144A, in
each case, in transactions under Rule 144A, and (B) outside the United
States to persons other than U.S. persons in reliance on Regulation S.
The Initial Purchaser has advised the Company that it will offer the
Notes to Eligible Purchasers at a price initially equal to 100% of the
principal amount thereof, plus accrued interest, if any, from the date of
issuance of the Firm Notes. Such price may be changed by the Initial
Purchaser at any time thereafter without notice.
(d) The Initial Purchaser represents and warrants to the Company
that it (i) has not offered or sold and prior to the date that is six
months after the Closing Date (as defined in Section 3 hereof) with
respect to the Offering will not offer or sell any Notes to persons in
the United kingdom except to persons whose ordinary activities involve
them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which will not involve an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations
1995 (the "Regulations"); (ii) has complied with and will comply with all
applicable provisions of the Financial Services Act of 1986 and the
Regulations with respect to anything done by it in relation to the Notes
in, from, or otherwise involving the United Kingdom; and (iii) has only
issued or passed on and will only issue or pass on to any person in the
United Kingdom any document received by it in connection with the offer
of the Notes if that person is of a kind described in Article 11(3) of
the Financial Services Act of 1986 (Investment Advertisement)
(Exemptions) Order 1996 or is a person to whom such document may
otherwise lawfully be issued or passed on.
4
<PAGE>
(e) The Initial Purchaser represents and warrants to the Company
that it has offered and sold the Notes and agrees that it will offer and
sell the Notes (i) as part of its distribution at any time, and (ii)
otherwise until 40 days after the later of the commencement of the
offering of the Notes and the Closing Date, only in accordance with Rule
903 of Regulation S or as otherwise permitted pursuant to paragraph (c)
above. Accordingly, the Initial Purchaser represents and agrees that
neither such Initial Purchaser, its affiliates nor any persons acting on
its or their behalf has engaged or will engage in any directed selling
efforts with respect to the Notes, and it and they have complied and will
comply with the offering restrictions requirement of Regulation S. Such
Initial Purchaser agrees that, at or prior to confirmation of the sale of
Notes other than a sale pursuant to Rule 144A, it will have sent to each
distributor, dealer or person receiving a selling concession, fee or
other remuneration that purchases Notes from such Initial Purchaser
during the restricted period a confirmation or notice to substantially
the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and may not
be offered and sold within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of their distribution at any
time or (ii) otherwise until 40 days after the later of the
commencement of the offering and the closing date, except in either
case in accordance with Regulation S (or Rule 144A) under the
Securities Act. Terms used above have the meaning given to them by
Regulation S."
The Initial Purchaser understands that the Company and, for purposes
of the opinions to be delivered to the Initial Purchaser pursuant to Sections
7(c) and 7(d) hereof, counsel to the Company and counsel to the Initial
Purchaser, will rely upon the accuracy and truth of the foregoing
representations and agreements and the Initial Purchaser hereby consents to
such reliance.
3. Delivery of the Notes and Payment Therefor. Delivery to the
------------------------------------------
Initial Purchaser of and payment for the Firm Notes shall be made at the
office of Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, at
10:00 A.M., New York City time, on September 10, 1997 (the "Closing Date").
The place of closing for the Firm Notes and the Closing Date may be varied by
agreement between the Initial Purchaser and the Company.
Delivery to the Initial Purchaser of and payment for any Additional
Notes to be purchased by the Initial Purchaser shall be made at the
aforementioned office of Smith Barney Inc. at such time on such date (the
"Option Closing Date"), which may be the same as the Closing Date but shall in
no event be earlier than the Closing Date nor earlier than two nor later than
ten business days after the giving of the notice hereinafter referred to, as
shall be specified in a written notice from the Initial Purchaser to the Company
of the Initial Purchaser's determination to purchase the principal amount of
Additional Notes specified in such notice. The place of closing for any
Additional Notes and the Option Closing Date for such Additional Notes may be
varied by agreement between the Initial Purchaser and the Company.
5
<PAGE>
The Firm Notes and any Additional Notes which the Initial Purchaser
may elect to purchase will be delivered to the Initial Purchaser against payment
of the purchase price therefor in immediately available funds. The Notes will
be evidenced by a single global security in definitive form (the "Global
Debenture") and/or by additional definitive securities, and will be registered,
in the case of the Global Debenture, in the name of Cede & Co. as nominee of The
Depository Trust Company ("DTC"), and in the other cases, in such names and in
such denominations as the Initial Purchaser shall request prior to 9:30 A. M.,
New York City time, on the second business day preceding the Closing Date or any
Option Closing Date, as the case may be. The Notes to be delivered to the
Initial Purchaser shall be made available to the Initial Purchaser in New York
City for inspection and packaging not later than 9:30 A.M., New York City time,
on the business day next preceding the Closing Date or the Option Closing Date,
as the case may be.
4. Agreements of the Company. The Company agrees with the Initial
-------------------------
Purchaser as follows:
(a) The Company will advise the Initial Purchaser promptly and, if
requested by it, will confirm such advice in writing, within the period
of time referred to in paragraph (e) below, of any material change in
the Company's condition (financial or other), business, properties, net
worth or results of operations, or of the happening of any material
event which makes any statement made in the Offering Memorandum (as then
amended or supplemented) untrue or which requires the making of any
additions to or changes in the Offering Memorandum (as then amended or
supplemented) in order to make the statements therein not misleading, or
of the necessity to amend or supplement the Offering Memorandum (as then
amended or supplemented) to comply in all material respects with any
law.
(b) The Company will furnish to the Initial Purchaser, without
charge, as of the date of the Offering Memorandum, such number of copies
of the Offering Memorandum (as then amended or supplemented) as it may
reasonably request.
(c) The Company will not make any amendment or supplement to the
Preliminary Offering Memorandum or to the Offering Memorandum of which
the Initial Purchaser shall not previously have been advised or to which
it shall reasonably object after being so advised.
(d) Prior to the execution and delivery of this Agreement, the
Company has delivered or will deliver to the Initial Purchaser, without
charge, in such quantities as the Initial Purchaser shall have requested
or may hereafter reasonably request, copies of the Preliminary Offering
Memorandum. The Company consents to the use, in accordance with the
securities or Blue Sky laws of the jurisdictions in which the Notes are
offered by the Initial Purchaser and by dealers, prior to the date of the
Offering Memorandum, of each Preliminary Offering Memorandum so furnished
by the Company. The Company consents to the use of the Offering
Memorandum (and of any amendment or supplement thereto) in accordance
with the securities or Blue Sky laws of the jurisdictions in which the
Notes are offered by the Initial Purchaser and by all dealers to whom
Notes may be sold, in connection with the offering and sale of the Notes.
6
<PAGE>
(e) If, at any time prior to completion of the distribution of the
Notes by the Initial Purchaser to Eligible Purchasers, any event shall
occur that in the judgment of the Company or in the opinion of counsel
for the Initial Purchaser should be set forth in the Offering Memorandum
(as then amended or supplemented) in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, or if it is necessary to supplement or amend the Offering
Memorandum in order to comply with any law, the Company will forthwith
prepare an appropriate supplement or amendment thereto or such document,
and will expeditiously furnish to the Initial Purchaser and dealers a
reasonable number of copies thereof. In the event that the Company and
the Initial Purchaser agree that the Offering Memorandum should be
amended or supplemented, the Company, if requested by the Initial
Purchaser, will promptly issue a press release announcing or disclosing
the matters to be covered by the proposed amendment or supplement or such
document.
(f) The Company will cooperate with the Initial Purchaser and with
its counsel in connection with the qualification of the Notes for
offering and sale by the Initial Purchaser and by dealers under the
securities or Blue Sky laws of such jurisdictions as the Initial
Purchaser may designate and will file such consents to service of process
or other documents necessary or appropriate in order to effect such
qualification; provided that in no event shall the Company be obligated
to qualify to do business in any jurisdiction where it is not now so
qualified or to take any action which would subject it to service of
process in suits, other than those arising out of the offering or sale of
the Notes, in any jurisdiction where it is not now so subject.
(g) So long as at least 25% of the aggregate principal amount of
the Notes is outstanding, the Company will furnish to the Initial
Purchaser upon its request (i) as soon as available, a copy of each
report of the Company mailed to stockholders or filed with any stock
exchange or regulatory body and (ii) from time to time such other
information concerning the Company as the Initial Purchaser may
reasonably request.
(h) If this Agreement shall terminate or shall be terminated after
execution and delivery pursuant to any provisions hereof (otherwise than
pursuant to Section 10 hereof or by notice given by the Initial Purchaser
terminating this Agreement pursuant to Section 9 or Section 11 hereof) or
if this Agreement shall be terminated by the Initial Purchaser because of
any failure or refusal on the part of the Company to comply with the
terms or fulfill any of the conditions of this Agreement, the Company
agrees to reimburse the Initial Purchaser for all reasonable out-of-
pocket expenses (including reasonable fees and expenses of its counsel)
incurred by it in connection herewith.
(i) The Company will apply the net proceeds from the sale of the
Notes to be sold by it hereunder substantially in accordance with the
description set forth in the Offering Memorandum.
(j) Except as provided in this Agreement or the Registration Rights
Agreement or as set forth in the Offering Memorandum or pursuant to the
Company's employee stock purchase plan or upon exercise of currently
outstanding options, the Company will not sell, contract to sell or
otherwise dispose of any Common Stock or any securities convertible into
or exercisable
7
<PAGE>
or exchangeable for Common Stock, or grant any options (except under the
Company's stock option plans) or warrants to purchase Common Stock, for a
period of ninety (90) days after the date of the Offering Memorandum,
without the prior written consent of the Initial Purchaser. The Company
has caused or will cause each of its current directors and executive
officers to furnish a letter or letters, in form and substance
satisfactory to the Initial Purchaser, pursuant to which each such person
shall agree not to offer, sell, contract to sell or otherwise dispose of
any Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock for a period of 90 days after the date of
the Offering Memorandum without the prior written consent of the Initial
Purchaser.
(k) Except as stated in this Agreement and in the Preliminary
Offering Memorandum and Offering Memorandum, the Company has not taken,
nor will it take, directly or indirectly, any action designed to or that
might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Notes to facilitate the sale or resale
of the Notes.
(l) The Company will use its best efforts to cause the Notes to be
designated for trading in the PORTAL Market.
(m) From and after the Closing Date, so long as any of the Notes are
outstanding and are "Restricted Securities" within the meaning of the Rule
144(a)(3) under the Act or, if earlier, until two years after the Closing
Date, and during any period in which the Company is not subject to Section
13 or 15(d) of the Exchange Act, the Company will furnish to holders of the
Notes and prospective purchasers of Notes designated by such holders, upon
request of such holders or such prospective purchasers, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Act to
permit compliance with Rule 144A in connection with resale of the Notes.
(n) The Company has complied and will comply with all provisions of
Florida Statutes Section 517.075 relating to issuers doing business with
Cuba.
(o) The Company agrees not to sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as
defined in the Act ) that would be integrated with the sale of the Notes
in a manner that would require the registration under the Act of the sale
to the Initial Purchaser or the Eligible Purchasers of the Notes.
(p) The Company agrees to comply with all of the terms of the
Registration Rights Agreement and all agreements set forth in the
representation letters of the Company to DTC relating to the approval of
the Notes by DTC for "book entry" transfer.
(q) The Company agrees that prior to any registration of the Notes
pursuant to the Registration Rights Agreement, or at such earlier time as
may be so required, the Indenture shall be qualified under the Trust
Indenture Act of 1939, as amended (the "1939 Act"), and will cause to be
entered into any necessary supplemental indentures or such other
agreements as may be necessary in connection therewith.
5. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to the Initial Purchaser that:
8
<PAGE>
(a) The Preliminary Offering Memorandum and Offering Memorandum
with respect to the Notes have been prepared by the Company for use by
the Initial Purchaser in connection with the Exempt Resales. No order or
decree preventing the use of the Preliminary Offering Memorandum or the
Offering Memorandum or any amendment or supplement thereto, or any order
asserting that the transactions contemplated by this Agreement are
subject to the registration requirements of the Act has been issued and
no proceeding for that purpose has commenced or is pending or, to the
knowledge of the Company, is contemplated.
(b) The Preliminary Offering Memorandum and the Offering Memorandum
as of their respective dates and the Offering Memorandum as of the
Closing Date, did not or will not at such times contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading, except that this representation and warranty does not apply
to statements in or omissions from the Preliminary Offering Memorandum
and Offering Memorandum made in reliance upon and in conformity with
information relating to the Initial Purchaser furnished to the Company in
writing by or on behalf of the Initial Purchaser expressly for use
therein.
(c) The Incorporated Documents heretofore filed were filed in a
timely manner and, when they were filed (or, if any amendment with
respect to any such document was filed, when such document was filed),
conformed in all material respects to the requirements of the Exchange
Act and did not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading; and any further Incorporated
Documents will, when so filed, be filed in a timely manner and conform in
all material respects to the requirements of the Exchange Act and will
not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
(d) The Indenture has been duly and validly authorized by the
Company and, upon its execution, delivery and performance by the Company
and assuming due authorization, execution, delivery and performance by
the Trustee, will be a valid and binding agreement of the Company,
enforceable in accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and by general equitable principles and as
enforceability of rights to indemnity and contribution thereunder may be
limited by Federal or State securities laws or principles of public
policy, and the Indenture conforms in all material respects to the
description thereof in the Offering Memorandum; and no qualification of
the Indenture under the 1939 Act is required in connection with the offer
and sale of the Notes contemplated hereby or in connection with the
Exempt Resales.
(e) The Notes have been duly authorized by the Company and, when
executed by the Company and authenticated by the Trustee in accordance
with the Indenture and delivered to the Initial Purchaser against payment
therefor in accordance with the terms hereof, will have been validly
issued and delivered, and will constitute valid and binding obligations
of the Company entitled to the benefits of the Indenture and enforceable
in accordance with their terms, except as enforcement thereof may be
limited by bankruptcy, fraudulent conveyance, insolvency,
9
<PAGE>
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles, and the Notes will conform in all material respects to the
description thereof in the Offering Memorandum.
(f) All the outstanding shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and
nonassessable, are free of any preemptive or similar rights and were
issued and sold in compliance with all applicable federal and state
securities laws; the shares of Common Stock issuable upon conversion of
the Notes have been duly authorized and reserved for issuance and, when
delivered upon conversion of the Notes, will be validly issued, fully
paid and nonassessable and free of any preemptive or similar rights; and
the authorized capital stock of the Company conforms to the description
thereof in the Offering Memorandum and the authorized and outstanding
capital stock of the Company is as set forth under the caption
"Capitalization" in the Offering Memorandum.
(g) The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware with
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Offering Memorandum, and
is duly registered and qualified to conduct its business and is in good
standing in each jurisdiction or place where the nature of its properties
or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify does
not have a material adverse effect on the condition (financial or other),
business, properties, net worth or results of operations of the Company
and the Subsidiaries (as hereinafter defined) taken as a whole (a
"Material Adverse Effect").
(h) Each wholly-owned subsidiary of the Company (collectively, the
"Subsidiaries") is a corporation duly organized, validly existing and in
good standing in the jurisdiction of its incorporation, with corporate
power and authority to own, lease and operate its properties and to conduct
its business as described in the Offering Memorandum, and is duly
registered and qualified to conduct its business and is in good standing in
each jurisdiction or place where the nature of its properties or the
conduct of its business requires such registration or qualification, except
where the failure so to register or qualify or be in good standing does not
have a Material Adverse Effect. All the outstanding shares of capital
stock of each of such Subsidiaries have been duly authorized and validly
issued, are fully paid and nonassessable, and are owned by the Company
directly or indirectly through one of the other such Subsidiaries, free and
clear of any lien, adverse claim, security interest, equity or other
encumbrance, except as described in the Offering Memorandum or for
directors' qualifying shares.
(i) There are no legal or governmental proceedings pending or, to
the knowledge of the Company, threatened, against the Company or any of
the Subsidiaries or to which the Company or any of the Subsidiaries, or
to which any of their respective properties, is subject, that are not
disclosed in the Offering Memorandum and which, if adversely decided,
could have a Material Adverse Effect, or materially affect the issuance
of the Notes or the consummation of the transactions contemplated by this
Agreement. There are no agreements, contracts, indentures, leases or
other instruments that would be required to be described in the Offering
Memorandum if it were a prospectus included in a registration statement
on Form S-3 under the Act but are not
10
<PAGE>
described as would be required, or that are required to be filed as an
exhibit to any Incorporated Document that are not so filed as required.
Neither the Company nor any Subsidiary is involved in any strike, job
action or labor dispute with any group of employees, and, to the
Company's best knowledge, no such action or dispute is threatened.
(j) Neither the Company nor any of the Subsidiaries is in violation
of its certificate or articles of incorporation or by-laws or other
organizational documents or, in any material respect, of any material
law, ordinance, administrative or governmental rule or regulation
applicable to the Company or any of the Subsidiaries, except where such
violation would not have a Material Adverse Effect, or of any material
decree of any court or governmental agency or body having jurisdiction
over the Company or any of the Subsidiaries, except where such violation
would not have a Material Adverse Effect, or in default in the
performance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or in any
agreement, indenture, lease or other instrument to which the Company or
any of the Subsidiaries is a party or by which any of them or any of
their respective properties may be bound, except where such default would
not have a Material Adverse Effect .
(k) None of the issuance, offer, sale or delivery of the Notes, the
issuance of Common Stock upon conversion of the Notes, the execution,
delivery or performance of this Agreement, the Indenture or the
Registration Rights Agreement by the Company or the consummation by the
Company of the transactions contemplated hereby or thereby (i) requires
any consent, approval, authorization or other order of, or registration
or filing with, any court, regulatory body, administrative agency or
other governmental body, agency or official (except such as may be
required in connection with the registration under the Act of the Notes
or the Common Stock in accordance with the Registration Rights Agreement
or the qualification of the Indenture under the 1939 Act and except for
compliance with the securities or Blue Sky laws of various jurisdictions
or any filing required by the National Association of Securities Dealers,
Inc. (the "NASD") or the Commission), or conflicts or will conflict with
or constitutes or will constitute a breach of, or a default under, the
certificate or articles of incorporation or bylaws, or other
organizational documents, of the Company or any of the Subsidiaries or
(ii) conflicts or will conflict with or constitutes or will constitute a
breach of, or a default under any material agreement, indenture, lease or
other material instrument to which the Company or any of the Subsidiaries
is a party or by which any of them or any of their respective properties
may be bound which is material to the Company and its Subsidiaries taken
as a whole, except for any such conflict, breach or default that has been
waived, or violates or will violate any statute, law, regulation or
filing or judgment, injunction, order or decree applicable to the Company
or any of the Subsidiaries or any of their respective properties, or will
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of the Subsidiaries
pursuant to the terms of any agreement or instrument to which any of them
is a party or by which any of them may be bound or to which any of the
property or assets of any of them is subject.
(l) The accountants, Ernst & Young LLP, who have certified or shall
certify the financial statements included as part of the Offering
Memorandum (or any amendment or supplement thereto), each are independent
public accountants under Rule 101 of the AICPA'a Code of Professional
Conduct, and its interpretation and rulings.
11
<PAGE>
(m) The financial statements, together with related schedules and
notes forming part of the Offering Memorandum, present fairly the
consolidated financial position, results of operations and changes in the
financial position of the Company and the Subsidiaries on the basis
stated in the Offering Memorandum at the respective dates or for the
respective periods to which they apply; such statements and related
schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the
periods involved, except as disclosed therein; and the other financial
and statistical information and data set forth in the Offering
memorandum, are accurately presented in all material respects and
prepared on a basis consistent with such financial statements and the
books and records of the Company and the Subsidiaries.
(n) The Company has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement and the
Registration Rights Agreement; the execution and delivery of, and the
performance by the Company of its obligations under, this Agreement and
the Registration Rights Agreement have been duly and validly authorized
by the Company, and this Agreement has been duly executed and delivered
by the Company and constitute the valid and legally binding agreement of
the Company, enforceable against the Company in accordance with their
terms, except as the enforcement hereof and thereof may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors' rights
generally and subject to the applicability of general equitable
principles, and except as rights to indemnity and contribution hereunder
and thereunder may be limited by Federal or state securities laws.
(o) Except as disclosed in the Offering Memorandum (or any
amendment or supplement thereto), subsequent to the date as of which such
information is given in the Offering Memorandum (or any amendment or
supplement thereto), neither the Company nor any of the Subsidiaries has
incurred any liability or obligation, direct or contingent, or entered
into any transaction, not in the ordinary course of business, that is
material to the Company and the Subsidiaries taken as a whole, and there
has not been any change in the capital stock, or material increase in the
short-term or long-term debt, of the Company or any of the Subsidiaries
or any material adverse change, in the condition (financial or other),
business, or results of operations of the Company and the Subsidiaries
taken as a whole.
(p) Each of the Company and the Subsidiaries has good title to all
property (real and personal) described in the Offering Memorandum as
being owned by it, free and clear of all liens, claims, security
interests or other encumbrances except such as are described in the
Offering Memorandum or in a document filed as an exhibit to an
Incorporated Document, subject to such exceptions as are not material to
its respective business or do not materially interfere with the use made
of such property by the Company and the Subsidiaries taken as whole, and
all the property described in the Offering Memorandum as being held under
lease by the Company or any of the Subsidiaries is held by it under
valid, subsisting and enforceable leases, except where the failure to do
so would not have a Material Adverse Effect.
(q) The Company has not distributed and, prior to the later to
occur of the Closing Date and completion of the distribution of the
Notes, will not distribute any offering
12
<PAGE>
material in connection with the offering and sale of the Notes other than
the Preliminary Offering Memorandum and Offering Memorandum.
(r) Each of the Company and the Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("Permits") as are necessary to own its properties and to
conduct its business in the manner described in the Offering Memorandum
or in an Incorporated Document, subject to such qualifications as may be
set forth in the Offering Memorandum, except where the failure to obtain
such permits, licenses, franchises and authorizations would not have a
Material Adverse Effect, each of the Company and the Subsidiaries has
fulfilled and performed all its material obligations with respect to the
Permits, and no event has occurred which allows, or after notice or lapse
of time would allow, revocation or termination thereof or results in any
other material impairment of the rights of the holder of any Permit,
subject in each case to such qualification as may be set forth in the
Offering Memorandum. Except as described in the Offering Memorandum, none
of the Permits contains any restriction that is materially burdensome to
the Company or the Subsidiaries.
(s) The Company and the Subsidiaries have in effect insurance with
respect to their properties and business against loss or damage of the
kind and in the amounts which the Company believes is reasonably adequate
in light of the business conducted by the Company and the Subsidiaries
and the properties covered thereby.
(t) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability
for assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(u) Neither the Company nor any of the Subsidiaries nor, to the
Company's knowledge, any employee of the Company or any Subsidiary has
made any payment of funds of the Company or any Subsidiary or received or
retained any funds in violation of any law, rule or regulation, which
payment, receipt or retention of funds is of a character that would be
required to be disclosed in the Offering Memorandum if it were a
prospectus included in a registration statement.
(v) The property, assets and operations of the Company and the
Subsidiaries comply in all material respects with all applicable Federal,
state and local laws, rules, orders, decrees, judgments, injunctions,
licenses, permits and regulations relating to environmental maters (the
"Environmental Laws"), except to the extent that the lack of compliance
with such Environmental Laws would not, singularly or in the aggregate,
have a Material Adverse Effect. To the Company's best knowledge, none of
the Company's or any Subsidiary's property, assets or operations is the
subject of any federal, state or local investigation evaluating whether
any remedial action is needed to respond to a release of any substance
into the environment regulated by or
13
<PAGE>
forming the basis of liability under any Environmental Laws (a "Hazardous
Material"). Neither the Company nor any Subsidiary has received any
notice or claim, nor are there any pending or, to the Company's best
knowledge, threatened or reasonably anticipated lawsuits against it with
respect to violations of an Environmental Law or in connection with the
release of any Hazardous Material into the environment. Neither the
Company nor any Subsidiary has any material contingent liability in
connection with any release of Hazardous Material into the environment.
(w) No holder of any security of the Company (other than holders of
the Notes and holders of shares of Common Stock received upon conversion
thereof) has any right which has not been waived to have any Common stock
or other securities of the Company included in the Shelf Registration
Statement or to request or demand registration of shares of Common Stock
or any other security of the Company because of the consummation of the
transactions contemplated by this Agreement or the Registration Rights
Agreement. Except as described in the Offering Memorandum, no person has
the right, contractual or otherwise, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale of, any
of the Notes. Except as described in or contemplated by the Offering
Memorandum, there are no outstanding options, warrants or other rights
calling for the issuance of, and, there are no commitments, plans or
arrangements to issue, any shares of capital stock of the Company or any
security convertible into or exchangeable or exercisable for capital
stock of the Company, except (i) pursuant to offers of employment made in
the ordinary course of business or (ii) options granted, or which the
Company has committed to grant, since April 30, 1997.
(x) Except as disclosed in the Offering Memorandum, the Company and
the Subsidiaries own or possess all patents, trademarks, trademark
registrations, service marks, service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights described in
the Offering Memorandum as being owned by any of them or necessary for
the conduct of their respective businesses, and the Company is not aware
of any material claim to the contrary or any material challenge by any
other person to the material rights of the Company and the Subsidiaries
with respect to the foregoing.
(y) The Company is not now, and after sale of the Notes to be sold
by it hereunder and application of the net proceeds from such sale as
described in the Offering Memorandum under the caption "Use of Proceeds"
will not be, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(z) Based upon the assumptions and subject to the qualifications
set forth therein, the statements made in the Offering Memorandum under
the caption "Certain United States Federal Income Tax Consequences"
accurately summarize the material United States federal income tax
consequences of the ownership, conversion and disposition of the Notes
for United States holders who acquire Notes on original issue and who
hold Notes as "capital assets" within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended.
(aa) The Company and the Subsidiaries have filed all federal, state,
local and foreign tax returns and tax forms required to be filed; such
returns and forms are complete and correct in all material respects; and
all taxes shown by such returns or otherwise assessed that are
14
<PAGE>
due or payable have been paid, except such taxes as are being contested
in good faith and as to which adequate reserves have been provided.
(bb) When the Notes are issued and delivered pursuant to this
Agreement, such Notes will not be of the same class (within the meaning
of Rule 144A(d)(3) under the Act) as any security of the Company that is
listed on a national securities exchange registered under Section 6 of
the Exchange Act or that is quoted in a United States automated
interdealer quotation system.
(cc) After giving effect to the intended use of proceeds from the
offering of the Notes as described in the Offering Memorandum under the
caption "Use of Proceeds" the Notes do not constitute "corporate
acquisition indebtedness" within the meaning of Section 279 of the
Internal Revenue Code.
(dd) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D ("Regulation D") under the Act) of the Company has
directly, or through any agent (provided that no representation is made
as to the Initial Purchaser or any person acting on its behalf), (i)
sold, offered for sale, solicited offers to buy or otherwise negotiated
in respect of, any security (as defined in the Act) which is or will be
integrated with the offering and sale of the Notes in a manner that would
require the registration of the Notes under the Act or (ii) engaged in
any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with the offering of the Notes.
(ee) The Company is not required to deliver the information
specified in Rule 144A(d)(4) in connection with the offering and resale
of the Notes by the Initial Purchaser.
(ff) Assuming (i) that the representations and warranties in Section
2 hereof are true, (ii) the Initial Purchaser complies with the covenants
set forth in Section 2 hereof and (iii) that each person to whom the
Initial Purchaser offers, sells or delivers the Notes is a Qualified
Institutional Buyer or a person other than a U.S. person outside the
United States in reliance on Regulation S under the Act, the purchase and
sale of the Notes pursuant hereto (including the Initial Purchaser's
proposed offering of the Notes on the terms and in the manner set forth
in the Offering Memorandum and Section 2 hereof) is exempt from the
registration requirements of the Act. None of the Company, its
Subsidiaries or affiliates or any person acting on its or their behalf
(provided that no representation is made as to the Initial Purchaser or
any person acting on its behalf) has engaged in any directed selling
efforts (as that term is defined in Regulation S) with respect to the
Notes and the Company, its Subsidiaries and each person acting on their
behalf (provided that no representation is made as to the Initial
Purchaser or any person acting on its behalf) have complied with the
offering restrictions requirement of Regulation S.
(gg) The execution and delivery of this Agreement, the other
Operative Documents and the sale of the Notes to the Initial Purchaser or
by the Initial Purchaser to Eligible Purchasers will not involve any
prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Code. The representation made by the Company in the
preceding sentence is made in reliance upon and subject to the accuracy
of, and compliance with, the representations and covenants made or deemed
made by the Eligible Purchasers as set forth in the Offering Memorandum
under the section entitled "Notice to Investors."
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<PAGE>
(hh) The Company is not required to obtain stockholder consent or
approval pursuant to the rules of the Nasdaq National Market or any
securities exchange or trading facility in connection with the offering
and sale of the Notes.
6. Indemnification and Contribution. (a) The Company agrees to
--------------------------------
indemnify and hold harmless the Initial Purchaser and each person, if any, who
controls the Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and expenses (including reasonable costs of
investigation) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in the Preliminary Offering
Memorandum or Offering Memorandum or in any amendment or supplement thereto,
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, except insofar as such losses, claims,
damages, liabilities or expenses arise out of or are based upon any untrue
statement or omission or alleged untrue statement or omission which has been
made therein or omitted therefrom in reliance upon and in conformity with the
information relating to the Initial Purchaser furnished in writing to the
Company by or on behalf of the Initial Purchaser expressly for use in
connection therewith ; provided, however, that the indemnification contained
-------- -------
in this paragraph (a) with respect to the Preliminary Offering Memorandum
shall not inure to the benefit of the Initial Purchaser (or to the benefit of
any person controlling the Initial Purchaser) on account of any such loss,
claim, damage, liability or expense arising from the sale of the Notes by the
Initial Purchaser to any person if the untrue statement or alleged untrue
statement or omission or alleged omission of a material fact contained in the
Preliminary Offering Memorandum was corrected in the Offering Memorandum and
the Initial Purchaser sold Notes to that person without sending or giving at
or prior to the written confirmation of such sale, a copy of the Offering
Memorandum (as then amended or supplemented) if the Company has previously
furnished sufficient copies thereof to the Initial Purchaser on a timely basis
to permit such sending or giving. The foregoing indemnity agreement shall be
in addition to any liability which the Company may otherwise have.
(b) If any action, suit or proceeding shall be brought against the
Initial Purchaser or any person controlling the Initial Purchaser in
respect of which indemnity may be sought against the Company, the Initial
Purchaser or such controlling person shall promptly notify the parties
against whom indemnification is being sought (the "indemnifying
parties"), and such indemnifying parties shall assume the defense
thereof, including the employment of counsel and payment of all fees and
expenses. The Initial Purchaser or any such controlling person shall have
the right to employ separate counsel in any such action, suit or
proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of the Initial Purchaser
or such controlling person unless (i) the indemnifying parties have
agreed in writing to pay such fees and expenses, (ii) the indemnifying
parties have failed to assume the defense and employ counsel, or (iii)
the named parties to any such action, suit or proceeding (including any
impleaded parties) include both the Initial Purchaser or such controlling
person and the indemnifying parties and the Initial Purchaser or such
controlling person shall have been advised by its counsel that
representation of such indemnified party and any indemnifying party by
the same counsel would be inappropriate under applicable standards of
professional conduct (whether or not such representation by the same
counsel has been proposed) due to actual or potential differing interests
between them (in which case the indemnifying party shall not have the
right to assume the defense of such action, suit or proceeding on behalf
of the Initial Purchaser or such controlling person). It is understood,
however, that the indemnifying parties shall, in connection with any one
such action, suit or proceeding or separate but substantially similar or
related actions, suits or proceedings in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of only one separate firm of attorneys (in
addition to any local counsel) at any time for the Initial Purchaser and
controlling persons not having actual or potential differing
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<PAGE>
interests with the Initial Purchaser or among themselves, which firm
shall be designated in writing by Smith Barney Inc., and that all such
fees and expenses shall be reimbursed on a monthly basis as provided in
paragraph (a) hereof. The indemnifying parties shall not be liable for
any settlement of any such action, suit or proceeding effected without
their written consent, but if settled with such written consent, or if
there be a final judgment for the plaintiff in any such action, suit or
proceeding, the indemnifying parties agree to indemnify and hold harmless
the Initial Purchaser, to the extent provided in paragraph (a), and any
such controlling person from and against any loss, claim, damage,
liability or expense by reason of such settlement or judgment.
(c) The Initial Purchaser agrees to indemnify and hold harmless the
Company, and its directors and officers, and any person who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act to the same extent as the indemnity from the Company to the
Initial Purchaser set forth in paragraph (a) hereof, but only with
respect to information relating to the Initial Purchaser furnished in
writing by or on behalf of the Initial Purchaser expressly for use in the
Preliminary Offering Memorandum or Offering Memorandum or any amendment
or supplement thereto. If any action, suit or proceeding shall be brought
against the Company, any of its directors or officers, or any such
controlling person based on the Preliminary Offering Memorandum or
Offering Memorandum, or any amendment or supplement thereto, and in
respect of which indemnity may be sought against the Initial Purchaser
pursuant to this paragraph (c), the Initial Purchaser shall have the
rights and duties given to the Company by paragraph (b) above (except
that if the Company shall have assumed the defense thereof the Initial
Purchaser shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the Initial Purchaser's expense), and the
Company, its directors and officers, and any such controlling person
shall have the rights and duties given to the Initial Purchaser by
paragraph (b) above. The foregoing indemnity agreement shall be in
addition to any liability which the Initial Purchaser may otherwise have.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred
to therein, then an 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, claims, damages,
liabilities or expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and
the Initial Purchaser on the other hand from the offering of the Notes,
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 Company on the one hand and the Initial Purchaser
on the other in connection with the statements or omissions that resulted
in
17
<PAGE>
such losses, claims, damages, liabilities or expenses, as well as any
other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Initial Purchaser on the other
shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company
bear to the total underwriting discounts and commissions received by the
Initial Purchaser, in each case as set forth in the table on the cover
page of the Offering Memorandum; provided that, in the event that the
Initial Purchaser shall have purchased any Additional Notes hereunder,
any determination of the relative benefits received by the Company or the
Initial Purchaser from the offering of the Notes shall include the net
proceeds (before deducting expenses) received by the Company, and the
underwriting discounts and commissions received by the Initial Purchaser,
from the sale of such Additional Notes, in each case computed on the
basis of the respective amounts set forth in the notes to the table on
the cover page of the Offering Memorandum. The relative fault of the
Company on the one hand and the Initial Purchaser 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
Company on the one hand or by the Initial Purchaser on the other hand and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(e) The Company and the Initial Purchaser agree that it would not
be just and equitable if contribution pursuant to this Section 6 were
determined by a pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in
paragraph (d) above. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, liabilities and expenses
referred to in paragraph (d) above shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating any
claim or defending any such action, suit or proceeding. Notwithstanding
the provisions of this Section 6, the Initial Purchaser shall not be
required to contribute any amount in excess of the amount by which the
total price of the Notes underwritten by it and distributed to the public
exceeds the amount of any damages which the Initial Purchaser 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 Act) shall
be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 6 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 6 and the
representations and warranties of the Company set forth in this Agreement
shall remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of the Initial Purchaser or any person
controlling the Initial Purchaser, the Company, its directors or officers
or any person controlling the Company, (ii) acceptance of any Notes and
payment therefor hereunder, and (iii) any termination of this Agreement. A
successor to the Initial Purchaser or any person controlling the Initial
Purchaser, or to the Company, its directors or officers or any person
controlling the Company, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this
Section 6.
18
<PAGE>
(g) No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or
threatened action, suit or 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 action, suit or proceeding.
7. Conditions of the Initial Purchaser's Obligations. The
-------------------------------------------------
obligations of the Initial Purchaser to purchase the Firm Notes hereunder are
subject to the following conditions:
(a) At the time of execution of this Agreement and on the Closing
Date, no order or decree preventing the use of the Offering Memorandum or
any amendment or supplement thereto, or any order asserting that the
transactions contemplated by this Agreement are subject to the
registration requirements of the Act shall have been issued and no
proceedings for that purpose shall have been commenced or shall be
pending or, to the knowledge of the Company, be contemplated. No stop
order suspending the sale of the Notes in any jurisdiction designated by
the Initial Purchaser shall have been issued and no proceedings for that
purpose shall have been commenced or shall be pending or, to the
knowledge of the Company, shall be contemplated.
(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change in or affecting the condition (financial
or other), business, properties, net worth, or results of operations of
the Company and the Subsidiaries (taken as a whole) not contemplated by
the Offering Memorandum, which in the opinion of the Initial Purchaser,
would materially adversely affect the market for the Notes, or (ii) any
event or development relating to or involving the Company or any officer
or a key employee named in the Offering Memorandum, or any director of
the Company which makes any statement made in the Offering Memorandum
untrue or which, in the opinion of the Company and its counsel or the
Initial Purchaser and its counsel, requires the making of any addition to
or change in the Offering Memorandum in order to state a material fact
required by any law to be stated therein or necessary in order to make
the statements therein not misleading, if amending or supplementing the
Offering Memorandum to reflect such event or development would, in the
opinion of the Initial Purchaser, materially adversely affect the market
for the Notes.
(c) The Initial Purchaser shall have received on the Closing Date
an opinion of Brobeck, Phleger & Harrison LLP, counsel for the Company,
dated the Closing Date and addressed to the Initial Purchaser, to the
effect that:
(i) The Company is a corporation duly incorporated and validly
existing in good standing under the laws of the State of Delaware with
full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering
Memorandum and, to such counsel's knowledge, is duly registered and
qualified to conduct its business and is in good standing in each
jurisdiction where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the
failure so to register or qualify would not have a Material Adverse
Effect;
19
<PAGE>
(ii) EPRO is a corporation duly organized and validly
existing in good standing under the laws of the jurisdiction of its
organization, with corporate power and authority to own, lease, and
operate its properties and to conduct its business as described in the
Offering Memorandum; and all the outstanding shares of capital stock of
EPRO have been duly authorized and validly issued, are fully paid and
nonassessable, and, except as set forth in the Offering Memorandum, are
owned by the Company free and clear of any perfected security interest,
or, to the knowledge of such counsel after reasonable inquiry, any other
security interest, lien, adverse claim, equity or other encumbrances;
(iii) The authorized capital stock of the Company conforms in
all material respects as to legal matters to the description thereof
contained in the Offering Memorandum under the caption "Description of
Capital Stock";
(iv) All the shares of capital stock of the Company
outstanding prior to the issuance of the Notes have been duly authorized
and validly issued, are fully paid and nonassessable;
(v) The Company has corporate power and authority to enter
into this Agreement and the Registration Rights Agreement and to issue,
sell and deliver the Notes to be sold by it to the Initial Purchaser as
provided herein, and this Agreement and the Registration Rights Agreement
has been duly authorized, executed and delivered by the Company and is
the valid, legal and binding agreement of the Company, except as
enforcement of rights to indemnity and contribution hereunder and
thereunder may be limited by Federal or state securities laws or
principles of public policy and subject to the qualification that the
enforceability of the Company's obligations hereunder and thereunder may
be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium, and other laws relating to or affecting
creditors' rights generally and by general equitable principles;
(vi) The Indenture has been duly and validly authorized,
executed and delivered by the Company and, assuming due authorization,
execution and delivery by the Trustee, is a valid and binding agreement
of the Company, enforceable in accordance with its terms, subject to the
qualification that the enforceability of the Company's obligations
thereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, and other laws relating to or
affecting creditors' rights generally and by general equitable principles
and as enforceability of rights to indemnity and contribution thereunder
may be limited by Federal or State securities laws or principles of
public policy; no qualification of the Indenture under the 1939 Act is
required in connection with the offer and sale of the Notes contemplated
hereby or in connection with the Exempt Resales;
(vii) The Notes have been duly and validly authorized by the
Company and when executed by the Company in accordance with the Indenture
and, assuming due authentication of the Notes by the Trustee, upon
delivery to the Initial Purchaser against payment therefor in accordance
with the terms hereof, will have been validly issued and delivered, and
will constitute valid and binding obligations of the Company entitled to
the benefits of the Indenture, subject to the qualification that the
enforceability of the Company's obligations thereunder may be
20
<PAGE>
limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium, and other laws relating to or affecting creditors' rights
generally and by general equitable principles;
(viii) The shares of Common Stock issuable upon conversion of
the Notes have been duly authorized and reserved for issuance and, when
issued and delivered upon conversion of the Notes, in accordance with the
terms thereof, will be validly issued, fully paid and nonassessable and
to the best knowledge of such counsel, will be free of preemptive or
similar rights;
(ix) Neither the offer, sale or delivery of the Notes, the
execution, delivery or performance by the Company of this Agreement and
the Indenture, compliance by the Company with the provisions hereof or
thereof nor consummation by the Company of the transactions contemplated
hereby or thereby conflicts with or constitutes a breach of, or a default
under, in any material respect, the certificate of incorporation or
bylaws of the Company or any material agreement, indenture, lease or
other instrument to which the Company is a party or by which its
properties is bound and which have been filed as exhibits to any
Incorporated Document, or will result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the
Company pursuant to the terms of any material agreement or instrument to
which the Company is a party or by which it may be bound or to which any
of the property or assets of the Company is subject, nor to such
counsel's knowledge will any such action result in any violation in any
material respect of any existing law, or any regulation, ruling (assuming
compliance with all applicable state securities and Blue Sky laws),
judgment, injunction, order or decree, applicable to the Company;
(x) No consent, approval, authorization or other order of,
or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency, or official is
required on the part of the Company for the valid issuance and sale of
the Notes to the Initial Purchaser as contemplated by this Agreement
except as may be required under state securities or blue sky laws or
applicable rules and regulations of the NASD or in connection with
qualifying the Indenture under the 1939 Act;
(xi) To the knowledge of such counsel, (A) other than as
described or contemplated in the Offering Memorandum, there are no legal
or governmental proceedings pending or threatened against the Company or
any of the Subsidiaries or to which the Company or any of its properties
is subject, which are not disclosed in the Offering Memorandum and which,
if adversely decided, are reasonably likely to cause a Material Adverse
Effect or materially affects the issuance of the Notes or the
consummation of the transactions contemplated by this Agreement and (B)
there are no material agreements, contracts, indentures, leases or other
instruments, that are not described in the Offering Memorandum or filed
as exhibits to any of the Incorporated Documents;
(xii) The statements in the Offering Memorandum, insofar as
they are descriptions of contracts, agreements or other legal documents, or
refer to statements of law or legal conclusions, are accurate in all material
respects and present fairly the information required to be shown;
21
<PAGE>
(xiii) Except as described in the Offering Memorandum, such
counsel does not know of any person who has the right, contractual or
otherwise, as a result of the consummation of the transactions contemplated by
this Agreement, to require registration under the Act of any shares of Common
Stock or other securities of the Company;
(xiv) No registration of the Notes under the Act is required
for the sale of the Notes to the Initial Purchaser as contemplated in this
Agreement or for the Exempt Resales (assuming (A) that any Eligible Purchaser
who buys the Notes in the Exempt Resales is a Qualified Institutional Buyer or
a person other than a U.S. person outside the United States in reliance on
Regulation S and (B) the accuracy of the Initial Purchaser's representations
and those of the Company in this Agreement; and
(xv) Although such counsel have not undertaken to determine
independently, and do not assume any responsibility for, the accuracy,
completeness or fairness of the statements in the Offering Memorandum,
such counsel have participated in the preparation of the Offering
Memorandum, including review and discussion of the contents thereof, and
nothing has come to the attention of such counsel that has caused them to
believe that the Offering Memorandum, as of its date and as of the
Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading or that any amendment or supplement to the Offering
Memorandum, as of its respective date, and as of the Closing Date or the
Option Closing Date, as the case may be, contained any untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading (it
being understood that such counsel need express no opinion with respect
to the financial statements and the notes thereto and the schedules and
other financial and statistical data included or incorporated by
reference in the Offering Memorandum and information furnished by or on
behalf of the Initial Purchaser).
(d) The Initial Purchaser shall have received on the Closing Date
an opinion of Morrison & Foerster LLP, counsel for the Initial Purchaser,
dated the Closing Date, and addressed to the Initial Purchaser, with
respect to matters as the Initial Purchaser may request.
(e) The Initial Purchaser shall have received letters addressed to
the Initial Purchaser, and dated the date hereof and the Closing Date
from Ernst & Young LLP, independent certified public accountants,
substantially in the forms heretofore approved by the Initial Purchaser.
(f) (i) There shall not have been any change in the capital stock
of the Company nor any material increase in the short-term or long-term
debt of the Company (other than in the ordinary course of business or
pursuant to the Indenture) from that set forth or contemplated in the
Offering Memorandum (or any amendment or supplement thereto); (ii) there
shall not have been, since the respective dates as of which information
is given in the Offering Memorandum (or any amendment or supplement
thereto), except as may otherwise be stated in the Offering Memorandum
(or any amendment or supplement thereto), any material adverse change in
the condition (financial or other), business, properties, net worth or
results of operations of the
22
<PAGE>
Company and the Subsidiaries taken as a whole; (iii) the Company and the
Subsidiaries shall not have any liabilities or obligations, direct or
contingent (whether or not in the ordinary course of business), that are
material to the Company and the Subsidiaries, taken as a whole, other
than those reflected in the Offering Memorandum (or any amendment or
supplement thereto); and (iv) all the representations and warranties of
the Company contained in this Agreement shall be true and correct in all
material respects on and as of the date hereof and on and as of the
Closing Date as if made on and as of the Closing Date, and the Initial
Purchaser shall have received a certificate, dated the Closing Date and
signed by the chief executive officer and the chief accounting officer of
the Company (or such other officers as are acceptable to the Initial
Purchaser), to the effect set forth in this Section 7(f) and in Section
7(g) hereof.
(g) The Company shall not have failed at or prior to the Closing
Date to have performed or complied with any of its agreements herein
contained and required to be performed or complied with by it hereunder
at or prior to the Closing Date.
(h) There shall not have been any announcement by any "nationally
recognized statistical rating organization," as defined for purposes of
Rule 436(g) under the Act, that (i) it is downgrading its rating assigned
to any class of securities of the Company, or (ii) it is reviewing its
ratings assigned to any class of securities of the Company with a view to
possible downgrading, or with negative implications, or direction not
determined.
(i) The Notes have been designated for trading in the PORTAL Market.
(j) The Company shall have furnished or caused to be furnished to
the Initial Purchaser such further certificates and documents as the
Initial Purchaser shall have requested.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Initial Purchaser and counsel for the
Initial Purchaser.
Any certificate or document signed by any officer of the Company and
delivered to the Initial Purchaser, or to counsel for the Initial Purchaser,
shall be deemed a representation and warranty by the Company to the Initial
Purchaser as to the statements made therein.
The obligations of the Initial Purchaser to purchase any Additional
Notes hereunder are subject to the satisfaction on and as of any Option Closing
Date of the conditions set forth in this Section 7, except that, if any Option
Closing Date is other than the Closing Date, the certificates, opinions and
letters referred to in paragraphs (c) through (g) and paragraphs (i) and (l)
shall be dated the Option Closing Date in question and the opinions called for
by paragraphs (c), (d) and (e) shall be revised to reflect the sale of
Additional Notes.
8. Expenses. The Company agrees to pay the following costs and
--------
expenses and all other costs and expenses incident to the performance by it of
its obligations hereunder: (i) the preparation, printing or reproduction of
the Offering Memorandum (including financial statements thereto), and each
amendment or supplement to any of them, this Agreement and the Indenture; (ii)
the printing (or reproduction) and delivery (including postage, air freight
charges and
23
<PAGE>
charges for counting and packaging) of such copies of the Offering Memorandum,
the Preliminary Offering Memorandum, and all amendments or supplements to any
of them as may be reasonably requested for use in connection with the offering
and sale of the Notes; (iii) the preparation, printing, authentication,
issuance and delivery of certificates for the Notes, including any stamp taxes
in connection with the original issuance and sale of the Notes; (iv) the
printing (or reproduction) and delivery of this Agreement, the Blue Sky
Memorandum and all other agreements or documents printed (or reproduced) and
delivered in connection with the offering of the Notes; (v) the application to
designate the Notes for trading in the PORTAL Market; (vi) the qualification
of the Notes for offer and sale under the securities or Blue Sky laws of the
several states as provided in Section 4(f) hereof (including the reasonable
fees, expenses and disbursements of counsel for the Initial Purchaser relating
to the preparation, printing or reproduction, and delivery of the Blue Sky
Memorandum and such qualification); (vii) the fees and expenses of the
Company's accountants and the fees and expenses of counsel (including local
and special counsel) for the Company. The Company hereby agrees that it will
pay in full as soon as practicable after the Closing Date the fees and
expenses referred to in clause (vi) of this Section 8 by delivering to counsel
for the Initial Purchaser on such date a check payable to such counsel in the
requisite amount.
9. Effective Date of Agreement. This Agreement shall become
---------------------------
effective upon the execution and delivery hereof by all the parties hereto.
10. Termination of Agreement. This Agreement shall be subject to
------------------------
termination in the absolute discretion of the Initial Purchaser, without
liability on the part of the Initial Purchaser to the Company, by notice to
the Company, if prior to the Closing Date or any Option Closing Date (if
different from the Closing Date and then only as to the Additional Notes), as
the case may be, (i) trading in securities generally on the New York Stock
Exchange or The Nasdaq Stock Market shall have been suspended or materially
limited, (ii) a general moratorium on commercial banking activities in New
York shall have been declared, or (iii) there shall have occurred any outbreak
or escalation of hostilities or other international or domestic calamity,
crisis or change in political, financial or economic conditions, the effect of
which on the financial markets of the United States is such as to make it, in
the judgment of the Initial Purchaser, impracticable or inadvisable to
commence or continue the offering of the Notes on the terms set forth on the
cover page of the Offering Memorandum or to enforce contracts for the resale
of the Notes by the Initial Purchaser. Notice of such termination may be given
to the Company by telegram, telecopy or telephone and shall be subsequently
confirmed by letter.
11. Information Furnished by the Initial Purchaser. The statements
----------------------------------------------
set forth in the stabilization legend on the inside front cover, the last
paragraph on the cover page and the statements in the fourth and ninth
paragraphs under the caption "Plan of Distribution" in the Preliminary
Offering Memorandum and Offering Memorandum, constitute the only information
furnished by or on behalf of the Initial Purchaser as such information is
referred to in Sections 5(b) and 6 hereof.
12. Miscellaneous. Except as otherwise provided in Sections 4, 9
-------------
and 10 hereof, notice given pursuant to any provision of this Agreement shall
be in writing and shall be delivered (i) if to the Company, at the office of
the Company at 215 Fourier Avenue, Fremont, California
24
<PAGE>
94539, Attention: Chief Financial Officer with a copy to Warren T. Lazarow at
Brobeck, Phleger & Harrison LLP, 2200 Geng Road, Palo Alto, California 94303,
or (ii) if to the Initial Purchaser, to Smith Barney Inc., 388 Greenwich
Street, New York, NY 10013, Attention: Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
Initial Purchaser, the Company, its directors, its officers and the controlling
persons referred to in Section 6 hereof and their respective successors and
assigns, to the extent provided herein, and no other person shall acquire or
have any right under or by virtue of this Agreement. Neither the term
"successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from the Initial Purchaser of any of the Notes in his
status as such purchaser.
13. Applicable Law; Counterparts. This Agreement shall be governed
-----------------------------
by and construed in accordance with the laws of the State of California
applicable to contracts made and to be performed within the State of
California and without regard to the conflicts of law principles thereof.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
25
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Initial Purchaser.
Very truly yours,
CREDENCE SYSTEMS CORPORATION
By:
_____________________________________
Title:
Confirmed as of the date first
above mentioned.
SMITH BARNEY INC.
By:
__________________________________
Managing Director
26
<PAGE>
SCHEDULE I
NAME OF COMPANY
Principal Amount
Initial Purchaser of Firm Notes
- ----------------- ----------------
Smith Barney Inc........................................ $ 100,000,000
Total................................................. $ 100,000,000
================
<PAGE>
EXHIBIT 4.1
================================================================================
CREDENCE SYSTEMS CORPORATION
and
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
------------------------
INDENTURE
Dated as of September 10, 1997
------------------------
$115,000,000
5 1/4% Convertible Subordinated Notes due 2002
================================================================================
<PAGE>
Certain Sections of this Indenture relating to
Sections 3.10 through 3.18 of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
<S> <C>
(S) 3.10(a)(1)............................. 6.9
(a)(2)................................ 6.9
(a)(3)................................ Not Applicable
(a)(4)................................ Not Applicable
(a)(5)................................ 6.9
(b)................................... 6.8
(S) 3.11(a)................................ 6.13
(b)................................... 6.13
(S) 3.12(a)................................ 7.1 7.2(a)
(b)................................... 7.2(b)
(c)................................... 7.2(c)
(S) 3.13(a)................................ 7.3(a)
(b)................................... 7.3(a)
(c)................................... 7.3(a)
(d)................................... 7.3(b)
(S) 3.14(a)................................ 7.4
(a)(4)................................ 10.4
(b)................................... Not Applicable
(c)(1)................................ 1.2
(c)(2)................................ 1.2
(c)(3)................................ Not Applicable
(d)................................... Not Applicable
(e)................................... 1.2
(S) 3.15(a)................................ 6.1
(b)................................... 6.2
(c)................................... 6.1
(d)................................... 6.1
(e)................................... 5.14
(S) 3.16(a)(1)............................. 5.2
(a)(1)(A)............................. 5.12
(a)(1)(B)............................. 5.13
(a)(2)................................ Not Applicable
(b)................................... 5.8
(c)................................... 1.4(c)
(S) 3.17(a)(1)............................. 5.3
(a)(2)................................ 5.4
(b)................................... 10.3
(S) 3.18(a)................................ 1.7
- ------------------------
</TABLE>
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Parties......................................................................... 1
Recitals of the Company......................................................... 1
ARTICLE ONE
Definitions and Other Provisions of General Application
SECTION 1.1. Definitions...................................................... 1
SECTION 1.2. Compliance Certificates and Opinions............................. 8
SECTION 1.3. Form of Documents Delivered to Trustee........................... 9
SECTION 1.4. Acts of Holders; Record Dates.................................... 9
SECTION 1.5. Notices, Etc., to Trustee and Company............................ 10
SECTION 1.6. Notice to Holders; Waiver........................................ 11
SECTION 1.7. Conflict with Trust Indenture Act................................ 11
SECTION 1.8. Effect of Headings and Table of Contents......................... 11
SECTION 1.9. Successors and Assigns........................................... 11
SECTION 1.10. Separability Clause.............................................. 12
SECTION 1.11. Benefits of Indenture............................................ 12
SECTION 1.12. Governing Law.................................................... 12
SECTION 1.13. Legal Holidays................................................... 12
SECTION 1.14. No Security Interest Created..................................... 12
SECTION 1.15. Limitation on Individual Liability............................... 12
ARTICLE TWO
Security Forms
SECTION 2.1. Forms Generally.................................................... 13
SECTION 2.2. Form of Face of Security........................................... 14
SECTION 2.3. Form of Reverse of Global Securities and Definitive Security....... 18
SECTION 2.4. Form of Trustee's Certificate of Authentication.................... 26
</TABLE>
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*Note: This table of contents shall not, for any purposes, be deemed to be a
part of the Indenture.
i
<PAGE>
ARTICLE THREE
The Securities
<TABLE>
<CAPTION>
<S> <C>
SECTION 3.1. Title and Terms.................................................. 27
SECTION 3.2. Denominations.................................................... 28
SECTION 3.3. Execution, Authentication, Delivery and Dating................... 28
SECTION 3.4. Temporary Securities............................................. 28
SECTION 3.5. Registration, Registration of Transfer and Exchange.............. 29
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities................. 37
SECTION 3.7. Payment of Interest; Interest Rights Preserved................... 38
SECTION 3.8. Persons Deemed Owners............................................ 40
SECTION 3.9. Cancellation..................................................... 40
SECTION 3.10. Computation of Interest.......................................... 40
ARTICLE FOUR
Satisfaction and Discharge
SECTION 4.1. Satisfaction and Discharge of Indenture.......................... 40
SECTION 4.2. Application of Trust Money....................................... 42
SECTION 4.3. Reinstatement.................................................... 42
ARTICLE FIVE
Remedies
SECTION 5.1. Events of Default................................................ 42
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment............... 44
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee.. 46
SECTION 5.4. Trustee May File Proofs of Claim................................. 47
SECTION 5.5. Trustee May Enforce Claims Without Possession of Securities...... 47
SECTION 5.6. Application of Money Collected................................... 47
SECTION 5.7. Limitation on Suits.............................................. 48
SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium and
Interest and to Convert.......................................... 48
SECTION 5.9. Restoration of Rights and Remedies............................... 49
SECTION 5.10. Rights and Remedies Cumulative................................... 49
SECTION 5.11. Delay or Omission Not Waiver..................................... 49
SECTION 5.12. Control by Holders............................................... 50
SECTION 5.13. Waiver of Past Defaults.......................................... 50
SECTION 5.14. Undertaking for Costs............................................ 50
</TABLE>
ii
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ARTICLE SIX
The Trustee
<TABLE>
<CAPTION>
<S> <C>
SECTION 6.1. Certain Duties and Responsibilities.............................. 51
SECTION 6.2. Notice of Defaults............................................... 52
SECTION 6.3. Certain Rights of Trustee........................................ 52
SECTION 6.4. Not Responsible for Recitals or Issuance of Securities........... 53
SECTION 6.5. May Hold Securities.............................................. 53
SECTION 6.6. Money Held in Trust.............................................. 53
SECTION 6.7. Compensation and Reimbursement................................... 54
SECTION 6.8. Disqualification; Conflicting Interests.......................... 55
SECTION 6.9. Corporate Trustee Required; Eligibility.......................... 55
SECTION 6.10. Resignation and Removal; Appointment of Successor................ 55
SECTION 6.11. Acceptance of Appointment by Successor........................... 57
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business...... 57
SECTION 6.13. Preferential Collection of Claims Against Company................ 57
SECTION 6.14. Appointment of Authenticating Agent.............................. 57
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 7.1. Company to Furnish Trustee Names and Addresses of Holders........ 59
SECTION 7.2. Preservation of Information; Communication to Holders............ 60
SECTION 7.3. Reports by Trustee............................................... 60
SECTION 7.4. Reports by Company............................................... 60
SECTION 7.5. Rule 144A Information Requirement................................ 61
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 8.1. Company May Consolidate, Etc., Only on Certain Terms............. 61
SECTION 8.2. Successor Substituted............................................ 62
ARTICLE NINE
Supplemental Indentures
SECTION 9.1. Supplemental Indentures Without Consent of Holders............... 62
SECTION 9.2. Supplemental Indentures with Consent of Holders.................. 63
SECTION 9.3. Execution of Supplemental Indentures............................. 64
SECTION 9.4. Effect of Supplemental Indentures................................ 64
SECTION 9.5. Conformity with Trust Indenture Act.............................. 64
SECTION 9.6. Reference in Securities to Supplemental Indentures............... 64
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 9.7. Notice of Supplemental Indenture................................ 64
ARTICLE TEN
Covenants
SECTION 10.1. Payment of Principal, Premium and Interest....................... 64
SECTION 10.2. Maintenance of Office or Agency.................................. 65
SECTION 10.3. Money for Security Payments to Be Held in Trust.................. 65
SECTION 10.4. Statement by Officers as to Default.............................. 66
SECTION 10.5. Existence........................................................ 66
SECTION 10.6. Waiver of Certain Covenants...................................... 67
ARTICLE ELEVEN
Redemption of Securities
SECTION 11.1. Right of Redemption.............................................. 67
SECTION 11.2. Applicability of Article......................................... 67
SECTION 11.3. Election to Redeem; Notice to Trustee............................ 67
SECTION 11.4. Selection by Trustee of Securities to be Redeemed................ 67
SECTION 11.5. Notice of Redemption............................................. 68
SECTION 11.6. Deposit of Redemption Price...................................... 69
SECTION 11.7. Securities Payable on Redemption Date............................ 69
SECTION 11.8. Securities Redeemed in Part...................................... 69
ARTICLE TWELVE
Subordination of Securities
SECTION 12.1. Securities Subordinated to Senior Indebtedness................... 70
SECTION 12.2. Payment Over of Proceeds Upon Dissolution, Etc................... 70
SECTION 12.3. Prior Payment to Senior Indebtedness upon Acceleration of
Securities....................................................... 71
SECTION 12.4. No Payment When Senior Indebtedness in Default................... 71
SECTION 12.5. Payment Permitted If No Default.................................. 72
SECTION 12.6. Subrogation to Rights of Holders of Senior Indebtedness.......... 72
SECTION 12.7. Provisions Solely to Define Relative Rights...................... 73
SECTION 12.8. Trustee to Effectuate Subordination.............................. 73
SECTION 12.9. No Waiver of Subordination Provisions............................ 73
SECTION 12.10. Notice to Trustee................................................ 74
SECTION 12.11. Reliance on Judicial Order or Certificate of Liquidating Agent... 74
SECTION 12.12. Trustee Not Fiduciary for Holders of Senior Indebtedness......... 75
SECTION 12.13. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights................................. 75
SECTION 12.14. Article Applicable to Paying Agents.............................. 75
SECTION 12.15. Certain Conversions Deemed Payment............................... 75
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 12.16. No Suspension of Remedies........................................ 76
ARTICLE THIRTEEN
Conversion of Securities
SECTION 13.1. Conversion Privilege and Conversion Price........................ 76
SECTION 13.2. Exercise of Conversion Privilege................................. 76
SECTION 13.3. Fractions of Shares.............................................. 77
SECTION 13.4. Adjustment of Conversion Price................................... 78
SECTION 13.5. Notice of Adjustments of Conversion Price........................ 83
SECTION 13.6. Notice of Certain Corporate Action............................... 84
SECTION 13.7. Company to Reserve Common Stock.................................. 85
SECTION 13.8. Taxes on Conversions............................................. 85
SECTION 13.9. Covenant as to Common Stock...................................... 85
SECTION 13.10. Cancellation of Converted Securities............................. 86
SECTION 13.11. Provisions of Consolidation, Merger or Sale of Assets............ 86
SECTION 13.12. Trustee's Disclaimer............................................. 86
ARTICLE FOURTEEN
Right to Require Repurchase
SECTION 14.1. Right to Require Repurchase...................................... 87
SECTION 14.2. Notice; Method of Exercising Repurchase Right.................... 87
SECTION 14.3. Deposit of Repurchase Price...................................... 88
SECTION 14.4. Securities Not Repurchased on Repurchase Date.................... 88
SECTION 14.5. Securities Repurchased in Part................................... 88
SECTION 14.6. Certain Definitions.............................................. 89
</TABLE>
v
<PAGE>
INDENTURE, dated as of September 10, 1997 between CREDENCE SYSTEMS
CORPORATION, a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its principal executive
offices at 215 Fourier Avenue, Fremont, California 94539, and State Street Bank
and Trust Company of California, N.A., a national banking association, as
trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its 5 1/4%
Convertible Subordinated Notes due 2002 (herein called the "Securities") of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 1.1. Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required and permitted hereunder shall mean such accounting principles as
are generally accepted and accepted and adopted by the Company at the date
of this Indenture; and
<PAGE>
(4) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms used in Articles Twelve, Thirteen and Fourteen are
defined in such Articles.
"Act," when used with respect to any Holder, has the meaning specified
in Section 1.4.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the possession,
directly or indirectly, of the power to direct the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate
Securities.
"Authorized Denomination" has the meaning specified in Section 3.2.
The term "Beneficial Owner" is determined in accordance with Rule 13d-
3, promulgated by the Commission under the Exchange Act.
"Board of Directors" means either the Board of Directors of the
Company or any duly authorized committee of that Board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors or a duly authorized committee thereof and to be in full
force and effect on the date of such certification and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in Los Angeles,
California or New York, New York are authorized or obligated to close by law or
executive order.
"Cedel" means Cedel Bank societe anonyme.
"Change in Control" has the meaning specified in Section 14.6.
"Closing Date" means September 10, 1997.
"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
2
<PAGE>
instrument 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" includes 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, including,
without limitation, the Common Stock $0.001 par value of the Company. However,
subject to the provisions of Section 13.11, shares issuable on conversion of
Securities shall include only shares of the class designated as Common Stock
$0.001 par value of the Company at the date of this Indenture or shares of any
class or classes resulting from any reclassification or reclassifications
thereof and which have no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution or
winding-up of the Company and which are not subject to redemption by the
Company; provided, that if at any time there shall be more than one such
--------
resulting class, the shares of each such class then so issuable shall be
substantially in the proportion which the total number of shares of such class
resulting from all such reclassifications bears to the total number of shares of
all such classes resulting from all such reclassifications.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its President or
a Vice President, and by its Chief Financial Officer, Controller, Treasurer, its
Secretary or an Assistant Secretary, and delivered to the Trustee.
"Corporate Trust Office" means the office of the Trustee in Los
Angeles, California, which initially shall be 725 So. Figueroa Street, Suite
3100, Los Angeles, California 90017, Attn: Corporate Trust Department, at which
at any particular time its corporate trust business shall principally be
administered.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Current Market Price" has the meaning specified in Section 13.4.
"DTC" has the meaning specified in Section 3.5.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Definitive Security" means a Security or Securities that are in the
form of the Security set forth in Sections 2.2 and 2.3 hereof, containing the
legend specified for a Definitive Security and not including the additional
language referred to in footnote 1 or the additional schedule referred to in
footnote 2.
3
<PAGE>
"Depositary" has the meaning specified in Section 3.5.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear System.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Global Security" means a Security or Securities in the form of the
Security set forth in Sections 2.2, 2.3 and 2.4 hereof containing the legend
specified for a Global Security, the additional language referred to in footnote
1 and the additional schedule referred to in footnote 2.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Initial Purchaser" means Smith Barney Inc.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities, which is March 15 and September 15 of each year,
commencing March 15, 1998.
"Maturity," when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity thereof or by declaration of
acceleration, redemption or otherwise.
"Officers' Certificate" means a certificate, in form reasonably
satisfactory to the Trustee, signed by the Chairman of the Board, the Chief
Executive Officer, the President or a Vice President, and by the Chief Financial
Officer, Controller, Treasurer, the Secretary or an Assistant Secretary, of the
Company, and delivered to the Trustee. One of the officers signing an Officers'
Certificate given pursuant to Section 10.4 shall be the principal executive,
financial or accounting officer of the Company.
"144A Global Security" has the meaning specified in Section 2.1.
"Opinion of Counsel" means a written opinion, in form reasonably
satisfactory to the Trustee, of counsel, who may be counsel for or an employee
of the Company, and who shall be reasonably acceptable to the Trustee.
"Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
4
<PAGE>
(i) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Securities, or portions thereof, for the payment or redemption of
which moneys in the necessary amount have been theretofore deposited with
the Trustee or any Paying Agent (other than the Company) in trust or set
aside and segregated in trust by the Company (if the Company shall act as
its own Paying Agent) for the Holders of such Securities; provided, that if
such Securities, or portions thereof, are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made; and
(iii) Securities which have been paid pursuant to Section 3.6 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any Affiliate of the Company shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Securities which the Trustee knows to be so
owned shall be so disregarded. Securities so owned which have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of and premium, if any, or interest on any Securities on behalf of the
Company.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization or government or
any agency or political subdivision thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 3.6 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Purchase Agreement" means that certain Purchase Agreement dated
September 4, 1997 between the Company and the Initial Purchaser.
"Record Date" means either a Regular Record Date or a Special Record
Date, as applicable.
5
<PAGE>
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture on the applicable Redemption Date.
"Registration Rights Agreement" means that certain Registration Rights
Agreement dated as of September 4, 1997 between the Company and the Initial
Purchaser.
"Regular Record Date," for the interest payable on any Interest
Payment Date means the March 1 or September 1 (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act of 1933, as
amended.
"Regulation S Global Security" has the meaning specified in Section
2.1.
"Repurchase Date" has the meaning specified in Section 14.1.
"Repurchase Event" has the meaning specified in Section 14.6.
"Repurchase Price" has the meaning specified in Section 14.1.
"Resale Restriction Termination Date" means, with respect to any
Security, the date which is two years after the later of (i) the original issue
date of such Security and (ii) the last date on which the Company or any
Affiliate of the Company was the owner of such Security (or any Predecessor
Security).
"Responsible Officer" means, when used with respect to the Trustee,
the chairman of the Board of Directors, any vice chairman of the Board of
Directors, the chairman of the trust committee, the chairman of the executive
committee, any vice chairman of the executive committee, the president, any vice
president (whether or not designated by numbers or words added before or after
the title "vice president"), the cashier, the secretary, the treasurer, any
trust officer, any assistant trust officer, any assistant cashier, any assistant
secretary, any assistant treasurer, or any other officer or assistant officer of
the Trustee customarily performing functions similar to those performed by the
Persons who at the time shall be such officers, respectively, or to whom any
corporate trust matter is referred because of his or her knowledge of and
familiarity with the particular subject.
"Securities" means the Notes.
"Securities Custodian" means the Trustee, as custodian with respect to
the Securities in global form, or any successor entity thereto.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
6
<PAGE>
"Senior Indebtedness" means (a) all secured indebtedness of the
Company for money borrowed under any Company revolving credit facility and any
predecessor or successor credit facilities thereto, whether outstanding on the
date of execution of the Indenture or thereafter created, incurred or assumed,
(b) all other secured indebtedness of the Company for money borrowed, whether
outstanding on the date of the execution of the Indenture or thereafter created,
incurred or assumed, except any indebtedness that by the terms of the instrument
or instruments by which such indebtedness was created or incurred expressly
provides that it (i) is junior in right of payment to the Notes or (ii) ranks
pari passu in right of payment with the Notes, and (c) any amendments, renewals,
extensions, modifications, refinancings and refundings of the foregoing. For the
purposes of this definition, "indebtedness for money borrowed" when used with
respect to the Company means (i) any obligation of, or any obligation guaranteed
by, the Company for the repayment of borrowed money (including, without
limitation, interest, fees, penalties or other obligations in respect thereof),
whether or not evidenced by bonds, debentures, notes or other written
instruments, (ii) any deferred payment obligation of, or any such obligation
guaranteed by, the Company for the payment of the purchase price of property or
assets evidenced by a note or similar instrument, (iii) any obligation of, or
any such obligation guaranteed by, the Company for the payment of rent or other
amounts under a lease of property or assets which obligation is required to be
classified and accounted for as a capitalized lease on the balance sheet of the
Company under generally accepted accounting principles, (iv) any obligation of,
or any such obligation which is guaranteed by, the Company for the reimbursement
of any obligor of any letter of credit, banker's acceptance or similar credit
transaction, (v) any obligation of, or any such obligation which is guaranteed
by, the Company under interest rate swaps, caps, collars, options and similar
arrangements and (vi) any obligation of the Company under any foreign exchange
contract, currency swap agreement, futures contract, currency option contract or
other foreign currency hedge.
"Shelf Registration Statement" means the Registration Statement with
respect to the Notes and the Common Stock the Issuer is required to file
pursuant to the Registration Rights Agreement.
The term "Significant Subsidiary" is determined in accordance with
Regulation S-X promulgated by the Commission under the Securities Act of 1933,
as amended.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity," when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries or by the Company and one or more other Subsidiaries.
For the purposes of this definition, "voting stock" means stock which ordinarily
has voting power for the election of directors,
7
<PAGE>
whether at all times or only so long as no senior class of stock has such voting
power by reason of any contingency.
"Termination of Trading" has the meaning specified in Section 14.6.
"Transfer Restricted Securities" means Securities that bear or are
required to bear the legend set forth in Section 3.5 hereof.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
-------- -------
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Vice President," when used with respect to the Company means any vice
president, whether or not designated by a number or a word or words added before
or after the title "vice president".
"Wholly-owned Subsidiary" means a Subsidiary all the capital stock of
which (other than director's qualifying shares) is owned directly by the
Company.
SECTION 1.2. Compliance Certificates and Opinions .
------------------------------------
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of
an Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirement set forth in
this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual or firm signing such certificate
or opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual or such
firm, he has or they have made such examination or investigation as is
necessary to enable him or them to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
8
<PAGE>
(4) a statement as to whether, in the opinion of each such individual
or such firm, such condition or covenant has been complied with.
SECTION 1.3. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any Person may certify to
give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certification or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate of public officials or upon a
certificate or opinion of, or representations by, an officer or officers of the
Company stating that the information with respect to such factual matters is in
the possession of the Company, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4. Acts of Holders; Record Dates.
-----------------------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents
duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such ins trument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as
the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to
Section 6.1) conclusive in favor of the Trustee and the Company, if made in
the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof.
9
<PAGE>
Where such execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of
determining the Holders entitled to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action, or to
vote on any action, authorized or permitted to be given or taken by
Holders. If not set by the Company prior to the first solicitation of a
Holder made by any Person in respect of any such action, or, in the case of
any such vote, prior to such vote, the record date for any such action or
vote shall be the 30th day (or, if later, the date of the most recent list
of Holders required to be provided pursuant to Section 7.1) prior to such
first solicitation or vote, as the case may be. With regard to any record
date, only the Holders on such date (or their duly designated proxies)
shall be entitled to give or take, or vote on, the relevant action.
Notwithstanding the foregoing, the Company shall not set a record date for,
and the provisions of this paragraph shall not apply with respect to, any
Act by the Holders pursuant to Section 5.1, 5.2 or 5.12.
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any Act of the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon
the registration of transfer therefor or in exchange therefor or in lieu
thereof in respect of anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not notation of such
action is made upon such Security.
(f) Without limiting the foregoing, a Holder entitled hereunder to give
or take any action hereunder with regard to any particular Security may do
so with regard to all or any part of the principal amount of such Security
or by one or more duly appointed agents each of which may do so pursuant to
such appointment with regard to all or any different part of such principal
amount.
SECTION 1.5. Notices, Etc., to Trustee and Company.
-------------------------------------
Any Act of Holders or other documents provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing to or
with the Trustee at its Corporate Trust Office, Attention: Corporate Trust
Department, or at any other address previously furnished in writing to the
Holders and the Company by the Trustee; or
(2) the Company by the Trustee or by any Holder shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, registered or certified with postage prepaid, to the
Company, addressed to it at the address of its principal executive offices
specified in the first paragraph of this instrument or at any other address
previously furnished in writing to the Trustee by the Company.
10
<PAGE>
All such notices and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; five Business Days after
being deposited in the mail, registered or certified with postage prepaid, if
mailed; when answered back if telexed; when receipt acknowledged, if telecopied;
and the next Business Day after timely delivery to the courier, if sent by
nationally recognized overnight air courier guaranteeing next day delivery.
SECTION 1.6. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if made, given, furnished or filed in writing to each Holder affected by such
event, at his address as it appears in the Security Register, not later than the
latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. Where this Indenture provides for
notice in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver. All
such notices and communications shall be deemed to have been duly given: at the
time delivered by hand, if personally delivered; five Business Days after being
deposited in the mail, registered or certified with postage prepaid, if mailed;
when answered back if telexed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by nationally
recognized overnight air courier guaranteeing next day delivery.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 1.7. Conflict with Trust Indenture Act.
---------------------------------
(a) If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act or another provision that would be
required or deemed under such Act to be a part of and govern this Indenture
if this Indenture were subject thereto, the latter provision shall control.
If any provision of this Indenture modifies or excludes any provision of
the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or to
be excluded, as the case may be.
SECTION 1.8. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 1.9. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company and the
Trustee shall bind each of their respective successors and assigns, whether so
expressed or not.
11
<PAGE>
SECTION 1.10. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1.11. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the Holders of Securities and, with respect to Article Twelve, the
holders of Senior Indebtedness, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
SECTION 1.12. Governing Law.
-------------
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York, but without regard to the
principles of conflicts of laws thereof.
SECTION 1.13. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security or the last date on which a Holder has the right to
convert his Securities shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of interest or
principal and premium if any, or conversion of the Securities 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 Interest Payment Date or Redemption Date, or
at the Stated Maturity, or on such last day for conversion; provided, that no
--------
interest shall accrue for the period from and after such Interest Payment Date,
Redemption Date or Stated Maturity, as the case may be, to the next succeeding
Business Day.
SECTION 1.14. No Security Interest Created.
----------------------------
Nothing in this Indenture or in the Securities, express or implied,
shall be construed as having granted to the Trustee or any Holder any security
interest in any property or assets of the Company or any of its Subsidiaries
under the Uniform Commercial Code or similar legislation, as now or hereafter
enacted and in effect in any jurisdiction where property of the Company or its
Subsidiaries is or may be located.
SECTION 1.15. Limitation on Individual Liability.
----------------------------------
No recourse under or upon any obligation, covenant or agreement
contained in this Indenture or in any Security, or for any claim based thereon
or otherwise in respect thereof, shall be had against any incorporator,
shareholder, officer or director, as such, past, present or future, of the
Company or of any successor Person, either directly or through the Company,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any
12
<PAGE>
assessment or penalty or otherwise; it being expressly understood that this
Indenture and the obligations issued hereunder are solely corporate obligations,
and that no such personal liability whatever shall attach to, or is or shall be
incurred by, the incorporators, shareholders, officers or directors, as such, of
the Company or of any successor Person, or any of them, because of the creation
of the indebtedness hereby authorized, or under or by reason of the obligations,
covenants or agreements contained in this Indenture or in any Security or
implied therefrom; and that any and all such personal liability of every name
and nature, either at common law or in equity or by constitution or statute, of,
and any and all such rights and claims against, every such incorporator,
shareholder, officer or director, as such, because of the creation of the
indebtedness hereby authorized, or under or by reason of the obligations,
covenants or agreements contained in this Indenture or in any Security or
implied therefrom, are hereby expressly waived and released as a condition of,
and as a consideration for, the execution of this Indenture and the issuance of
such Security.
ARTICLE TWO
Security Forms
SECTION 2.1. Forms Generally.
---------------
The Securities and the Trustee's certificate of authentication shall
be in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with any organizational document, any applicable law or with
the rules of any securities exchange on which the Securities are listed or as
may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the Securities.
The Securities issued in definitive form shall be substantially in the
form set forth in Section 2.2 hereof.
Unless issued in definitive form, Securities issued and sold in
reliance on Rule 144A shall be issued in the form of one or more global
securities (the "144A Global Security"), the face of which shall be
substantially in the form set forth in Section 2.2 hereof and the reverse of
which shall be substantially in the form set forth in Section 2.3 hereof, which
144A Global Security shall be deposited on behalf of the holders of the
Securities represented thereby with the Trustee, as custodian for the
Depositary, and registered in the name of the nominee of the Depositary, duly
executed by the Company and authenticated as provided for herein.
Securities offered and sold outside the United States in reliance on
Regulation S shall be issued in the form of one or more global securities (the
"Regulation S Global Security"), the face of which shall be substantially in the
form set forth in Section 2.2 hereof and the reverse of which shall be
substantially in the form set forth in Section 2.3 hereof, which Regulation S
Global Security shall be deposited on behalf of the holders of the Securities
represented thereby with the Trustee, as custodian for the Depositary, and
registered in the name of a nominee of the
13
<PAGE>
Depositary, duly executed by the Company and authenticated as provided herein,
for credit to the accounts of the respective depositaries for Euroclear and
Cedel (or such other accounts as they may direct). Prior to or on the 40th day
after the later of the commencement of the offering of the Securities and the
Closing Date (the "Restricted Period"), beneficial interests in the Regulation S
Global Security may only be held through Chase Manhattan Bank or Citibank, N.A.,
as operators of Euroclear or Cedel, respectively, or an agent acting for and on
behalf of them, unless delivery is made though the 144A Global Security in
accordance with the certification requirements hereof. During the Restricted
Period, interests in the Regulation S Global Security may be exchanged for
interests in the Rule 144A Global Security or for Definitive Securities only in
accordance with the certification requirements described in Section 3.5 below.
Each Global Security shall represent such of the Outstanding
Securities as shall be specified therein and each shall provide that it shall
represent the aggregate amount of Outstanding Securities from time to time
endorsed thereon and that the aggregate amount of Outstanding Securities
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Security to reflect the amount of any increase or decrease in the amount of
Outstanding Securities represented thereby shall be made by the Trustee or the
Securities Custodian, at the direction of the Trustee, in accordance with
instructions given by the Holder thereof.
The Definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Securities
may be listed or by the Depositary, all as determined by the officers executing
such Securities, as evidenced by their execution of such Securities.
SECTION 2.2. Form of Face of Security.
------------------------
LEGENDS FOR GLOBAL SECURITY:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE 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. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"),
TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS REQUESTED BY AN AUTHORIZED
14
<PAGE>
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION UNDER SUCH LAWS.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATED PERSON OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) UNLESS SUCH OFFER, SALE OR OTHER TRANSFER IS (A)
TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON THE HOLDER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
SUBJECT TO THE COMPANY'S AND STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA,
N.A.'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (C),
(D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE
FOREGOING CASES PROVIDED THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON
THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO STATE STREET BANK
AND TRUST COMPANY OF CALIFORNIA, N.A. AND SUBJECT TO ANY APPLICABLE SECURITIES
LAWS. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE THEN HOLDER OF THIS
SECURITY AFTER THE RESALE RESTRICTION TERMINATION DATE.
15
<PAGE>
LEGENDS FOR DEFINITIVE SECURITY:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION UNDER SUCH LAWS.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATED PERSON OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) UNLESS SUCH OFFER, SALE OR OTHER TRANSFER IS (A)
TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON THE HOLDER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
SUBJECT TO THE COMPANY'S AND STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA,
N.A.'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (C),
(D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE
FOREGOING CASES PROVIDED THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON
THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO STATE STREET BANK
AND TRUST COMPANY OF CALIFORNIA, N.A. AND SUBJECT TO ANY APPLICABLE SECURITIES
LAWS. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE THEN HOLDER OF THIS
SECURITY AFTER THE RESALE RESTRICTION TERMINATION DATE.
16
<PAGE>
CREDENCE SYSTEMS CORPORATION
5 1/4% Convertible Subordinated Notes due 2002
No. ________ $___________
Credence Systems Corporation, a corporation duly organized and
existing under the laws of the State of Delaware (herein called the "Company,"
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to
__________________________, or registered assigns, the principal sum of
________________ Dollars [or such greater or lesser amount as indicated on the
Schedule of Exchanges of Securities on the reverse hereof] on September 15,
2002, and to pay interest thereon from the date of original issuance of
Securities pursuant to the Indenture or from and including the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semi-annually on March 15 and September 15 in each year, commencing March 15,
1998 at the rate of 5 1/4% per annum, until the principal hereof is paid or made
available for payment and promises to pay any liquidated damages which may be
payable pursuant to Section 4 of the Registration Rights Agreement on the
Interest Payment Dates. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the March 1 or September 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee or be paid at
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities may be listed and upon such
notice as may be required by such exchange, all as more fully provided in said
Indenture. Notice of a Special Record Date shall be given to Holders of
Securities not less than 10 days prior to such Special Record Date. Payment of
the principal of and premium, if any, and interest on this Security will be made
(i) in respect of Securities held of record by the Depositary or its nominee in
same day funds on or prior to the respective payment dates and (ii) in respect
of Securities held of record by Holders other than the Depositary or its nominee
at the office or agency of the Company maintained for that purpose pursuant to
Section 10.2 of the Indenture, in each case in such coin or currency of the
United States of America as of the time of payment is legal tender for payment
of public and private debts; provided, however, that at the option of the
-------- -------
Company payment of interest in respect of Securities held of record by Holders
other than the Depositary or its nominee may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register.
- --------------------------------
1 This phrase should be included only if the Security is issued in
global form.
17
<PAGE>
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: _________________ CREDENCE SYSTEMS CORPORATION
By:
----------------------------
Attest:
- ---------------------------------------
SECTION 2.3. Form of Reverse of Global Securities and Definitive Security.
------------------------------------------------------------
This Security is one of a duly authorized issue of Securities of the
Company designated as its 5 1/4% Convertible Subordinated Notes due 2002 (herein
called the "Securities"), limited in aggregate principal amount to $115,000,000
(including Securities issuable pursuant to the Initial Purchaser's over-
allotment option, as provided for in the Purchase Agreement dated September 4,
1997 between the Company and the Initial Purchaser), issued and to be issued
under an Indenture, dated as of September 10, 1997 (herein called the
"Indenture"), between the Company and State Street Bank and Trust Company of
California, N.A., as Trustee (herein called the "Trustee," which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee, the holders of Senior Indebtedness and the Holders of
the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered.
Subject to and upon compliance with the provisions of the Indenture,
the Holder of this Security is entitled, at his option, at any time pursuant to
the Indenture and on or before the close of business on September 15, 2002 or in
case this Security or a portion hereof is called for redemption, then in respect
of this Security or such portion hereof until and including, but (unless the
Company defaults in making the payment due upon redemption) not after, the close
of business on the second business day preceding the Redemption Date, to convert
this Security (or any portion of the principal amount hereof which is $1,000 or
an integral multiple thereof), at the
18
<PAGE>
principal amount hereof, or of such portion, into fully paid and nonassessable
shares (calculated as to each conversion to the nearest 1/100 of a share) of
Common Stock at a conversion price equal to $69.15 principal amount for each
share of Common Stock (or at the current adjusted conversion price if an
adjustment has been made as provided in the Indenture) by surrender of this
Security, duly endorsed or assigned to the Company or in blank, to the Company
at its office or agency maintained for that purpose pursuant to Section 10.2 of
the Indenture, accompanied by written notice to the Company and the Trustee in
the form provided in this Security (or such other notice as is acceptable to the
Company) that the Holder hereof elects to convert this Security, or if less than
the entire principal amount hereof is to be converted, the portion hereof to be
converted, and, in case such surrender shall be made during the period from the
opening of business on any Regular Record Date next preceding any Interest
Payment Date to the close of business on such Interest Payment Date (unless this
Security or the portion thereof being converted has been called for redemption),
also accompanied by payment in New York Clearing House funds, or other funds
acceptable to the Company of an amount equal to the interest payable on such
Interest Payment Date on the principal amount of this Security then being
converted. Subject to the aforesaid requirement for payment and, in the case of
a conversion after the Regular Record Date next preceding any Interest Payment
Date and on or before such Interest Payment Date, to the right of the Holder of
this Security (or any Predecessor Security) of record at such Regular Record
Date to receive an installment of interest (with certain exceptions provided in
the Indenture), no payment or adjustment is to be made upon conversion on
account of any interest accrued hereon or on account of any dividends on the
Common Stock issued upon conversion. No fractional shares or scrip representing
fractions of shares will be issued on conversion, but instead of any fractional
share the Company shall pay a cash adjustment as provided in the Indenture. The
conversion price is subject to adjustment as provided in the Indenture. In
addition, the Indenture provides that in case of certain consolidations or
mergers to which the Company is a party or the sale or transfer of all or
substantially all of the assets of the Company, the Indenture shall be amended,
without the consent of any Holders of Securities, so that this Security, if then
outstanding, will be convertible thereafter, during the period this Security
shall be convertible as specified above, only into the kind and amount of
securities, cash and other property receivable upon the consolidation, merger,
sale or transfer by a holder of the number of shares of Common Stock into which
this Security might have been converted immediately prior to such consolidation,
merger, sale or transfer (assuming such holder of Common Stock failed to
exercise any rights of election and received per share the kind and amount
received per share by a plurality of non-electing shares).
The Securities are subject to redemption upon not less than 15 and not
more than 60 days' notice by mail, at any time on or after September 20, 2000,
as a whole or in part, at the election of the Company, at the Redemption Prices
set forth below (expressed as percentages of the principal amount), plus accrued
and unpaid interest to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date).
If redeemed during the 12-month period beginning September 15, in the
year indicated (September 20, in the case of 2000), the redemption price shall
be:
19
<PAGE>
<TABLE>
<CAPTION>
Redemption
Year Price
-------------- ----------------------
<S> <C>
2000.......... 102.10%
2001.......... 101.05%
</TABLE>
In certain circumstances involving the occurrence of a Repurchase
Event (as defined in the Indenture), the Holder hereof shall have the right to
require the Company to repurchase this Security at 100% of the principal amount
hereof, together with accrued interest to the Repurchase Date, but interest
installments whose Stated Maturity is on or prior to such Repurchase Date will
be payable to the Holders of such Securities, or one or more Predecessor
Securities, of record at the close of business on the relevant Record Dates
referred to on the face hereof, all as provided in the Indenture. In the event
of redemption or conversion of this Security in part only, a new Security or
Securities for the unredeemed or unconverted portion hereof will be issued in
the name of the Holder hereof upon the cancellation hereof.
The indebtedness evidenced by this Security is, in all respects,
subordinate and subject in right of payment to the prior payment in full of all
Senior Indebtedness, and this Security is issued subject to the provisions of
the Indenture with respect thereto. Each Holder of this Security, by accepting
the same, (a) agrees to and shall be bound by such provisions, (b) authorizes
and directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided, and (c) appoints the
Trustee his attorney-in-fact for any and all such purposes.
If an Event of Default shall occur and be continuing, the principal of
all the Securities may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of not
less than a majority in aggregate principal amount of the Securities at the time
Outstanding, and, under certain limited circumstances, by the Company and the
Trustee without the consent of the Holders. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Securities at the time Outstanding, on behalf of the
Holders of all the Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and premium, if any, and
interest on this Security at the
20
<PAGE>
times, place and rate, and in the coin or currency, herein prescribed or to
convert this Security as provided in the Indenture.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities,
of Authorized Denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities are issuable only in fully registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities are exchangeable for a like aggregate principal amount of Securities
of a different Authorized Denomination, as requested by the Holder surrendering
the same.
No service charge shall be made for any such registration of transfer
or exchange except as provided in the Indenture, and the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, except as provided in this Security, whether or not
this Security be overdue, and neither the Company, the Trustee nor any such
agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture. The Company will
furnish to any Holder upon written request and without charge a copy of the
Indenture and/or the Registration Rights Agreement.
21
<PAGE>
[FORM OF CONVERSION NOTICE]
TO CREDENCE SYSTEMS CORPORATION
The undersigned registered owner of this Security hereby irrevocably
exercises the option to convert this Security, or the portion hereof (which is
$1,000 or a multiple thereof) designated below, into shares of Common Stock in
accordance with the terms of the Indenture referred to in this Security, and
directs that the shares issuable and deliverable upon the conversion, together
with any check in payment for a fractional share and any Security representing
any unconverted principal amount hereof, be issued and delivered to the
registered owner hereof unless a different name has been provided below. If
this Notice is being delivered on a date after the close of business on a
Regular Record Date and prior to the close of business on the related Interest
Payment Date, this Notice is accompanied by payment in New York Clearing House
funds, or other funds acceptable to the Company, of an amount equal to the
interest payable on such Interest Payment Date on the principal of this Security
to be converted (unless this Security has been called for redemption). If
shares or any portion of this Security not converted are to be issued in the
name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto. Any amount required to be paid by
the undersigned on account of interest accompanies this Security.
Dated:
-------------------------------------
-------------------------------------
Signature(s)
Signature(s) must be guaranteed by an "eligible
guarantor institution" that is a bank,
stockbroker, savings and loan association or
credit union meeting the requirements of the
Trustee or agent responsible for conversion,
which requirements include the membership or
participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such "signature
guarantee program" as may be determined by the
Trustee in addition to, or in substitution for,
STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended, if shares of
Common Stock are to be delivered, or Securities
are to be issued, other than to and in the name
of the registered owner.
______________________________
Signature Guarantee
22
<PAGE>
Fill in for registration of shares of Common Stock
if they are to be delivered, or Securities if
they are to be issued, other than to and in the
name of the registered owner:
______________________________
(Name)
______________________________
(Street Address)
______________________________
(City, State and zip code)
(Please print name and address)
Register: _____ Common Stock
_____ Securities
(Check appropriate line(s)).
Principal amount to be converted (if
less than all):
$__________.000
___________________________
Social Security or other Taxpayer
Identification Number of owner
23
<PAGE>
[ASSIGNMENT FORM]
If you the holder want to assign this Security, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Security to
- -------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably appoint
- -------------------------------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
- -------------------------------------------------------------------------------
Date: ________________________ Your signature: -----------------------------
(Sign exactly as your name
appears on the face of this
Security)
Signature Guarantee:
-----------------------------------------------------------
Signature must be guaranteed by an "eligible guarantor
institution" that is a bank, stockbroker, savings and loan
association or credit union meeting the requirements of the
Trustee, which requirements include the membership or
participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such "signature guarantee program" as
may be determined by the Trustee in addition to, or in
substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
24
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you wish to have this Security purchased by the Company pursuant to
Section 14.1 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Security (which is $1,000 or an
integral multiple thereof) purchased by the Company pursuant to Section 14.1 of
the Indenture, state the amount you wish to have purchased:
$____________________
Date: ___________________ Your Signature(s): _______________________________
Tax Identification No.:___________________________
(Sign exactly as your name appears on the face of this Security)
Signature Guarantee:__________________________________________________________
Signature must be guaranteed by an "eligible guarantor
institution" that is a bank, stockbroker, savings and loan
association or credit union meeting the requirements of the
Trustee, which requirements include the membership or
participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such "signature guarantee program" as
may be determined by the Trustee in addition to, or in
substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
25
<PAGE>
[FORM OF SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITIES]
The following exchanges of a part of this Global Security for
Definitive Securities have been made:
<TABLE>
<CAPTION> Principal Amount Signature of
Date of Amount of Amount of of this Global authorized
Exchange decrease in increase in Security signatory of
-------- Principal Amount Principal Amount following such Trustee or
of this Global of this Global decrease (or Securities
Security Security increase) Custodian
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
1.
2.
3.
4.
5.
</TABLE>
SECTION 2.4. Form of Trustee's Certificate of Authentication.
-----------------------------------------------
The Trustee's certificate of authentication shall be in substantially
the following form:
This is one of the Securities referred to in the within-mentioned
Indenture.
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A.,
as Trustee
By:
---------------------------------------
Authorized Signatory
- ----------------------
2 This Schedule should be included only if the Security is issued in
global form.
26
<PAGE>
ARTICLE THREE
The Securities
SECTION 3.1. Title and Terms.
---------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $115,000,000
(including $15,000,000 aggregate principal amount of Securities that may be sold
to the Initial Purchaser by the Company upon exercise of the over-allotment
option granted pursuant to the Purchase Agreement), except for Securities
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Securities pursuant to Section 3.4, 3.5, 3.6, 9.6,
11.8, 13.2 or 14.5.
The Securities shall be known and designated as the "5 1/4%
Convertible Subordinated Notes due 2002" of the Company. Their Stated Maturity
shall be September 15, 2002 and they shall bear interest at the rate of 5 1/4%
per annum, from the date of original issuance of Securities pursuant to this
Indenture or from the most recent Interest Payment Date to which interest has
been paid or duly provided for, as the case may be, payable semi-annually on
March 15 and September 15, commencing March 15, 1998, until the principal
thereof is paid or made available for payment.
The principal of and premium, if any, and interest on the Securities
shall be payable (i) in respect of Securities held of record by the Depositary
or its nominee in same day funds on or prior to the respective payment dates and
(ii) in respect of Securities held of record by Holders other than the
Depositary or its nominee at the Corporate Trust Office at the Trustee or at
such other office or agency of the Company maintained for such purpose pursuant
to Section 10.2; provided, however, that, at the option of the Company, payment
-------- -------
of interest to Holders of record other than the Depositary or its nominee may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register.
The Securities shall be subject to the transfer restrictions set forth
in Section 3.5.
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article Twelve.
The Securities shall be convertible as provided in Article Thirteen.
The Securities shall be subject to repurchase at the option of the
Holder as provided in Article Fourteen.
27
<PAGE>
SECTION 3.2. Denominations.
-------------
The Securities shall be issuable only in fully registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof
("Authorized Denominations").
SECTION 3.3. Execution, Authentication, Delivery and Dating.
----------------------------------------------
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Chief Executive Officer, its President, its Chief
Financial Officer or one of its Vice Presidents, under its corporate seal or a
facsimile thereof reproduced thereon attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Securities
may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall either at one time or from time to time pursuant
to such instructions as may be described therein authenticate and deliver such
Securities as in this Indenture provided and not otherwise. Such Company Order
shall specify the amount of Securities to be authenticated and the date on which
the original issue of Securities is to be authenticated, and shall certify that
all conditions precedent to the issuance of such Securities contained in this
Indenture have been complied with. The aggregate principal amount of Securities
Outstanding at any time may not exceed the amount set forth above except as
provided in Section 3.6.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder and is entitled to the
benefits of the Indenture. The Trustee may appoint an Authenticating Agent
pursuant to the terms of Section 6.14.
SECTION 3.4. Temporary Securities.
--------------------
Pending the preparation of Definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any Authorized
28
<PAGE>
Denomination, substantially of the tenor of the Definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities. Every such
temporary Security shall be executed by the Company and shall be authenticated
and delivered by the Trustee upon the same conditions and in substantially the
same manner, and with the same effect, as the Definitive Security or Securities
in lieu of which it is issued.
If temporary Securities are issued, the Company will cause Definitive
Securities to be prepared without unreasonable delay. After the preparation of
Definitive Securities, the temporary Securities shall be exchangeable for
Definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 10.2, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor one or more Definitive Securities of a like
principal amount of Authorized Denominations. Until so exchanged the temporary
Securities shall in all respects be entitled to the same benefits under this
Indenture as Definitive Securities.
SECTION 3.5. Registration, Registration of Transfer and Exchange.
---------------------------------------------------
(a) The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any
other office or agency designated pursuant to Section 10.2 being herein
sometimes collectively referred to as the "Security Register") in which,
subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Securities and of transfers of
Securities. The Trustee is hereby appointed "Security Registrar" for the
purpose of registering Securities and transfers of Securities as herein
provided. At all reasonable times the Security Register shall be open for
inspection by the Company.
The Company initially appoints The Depository Trust Company ("DTC") to
act as depositary (the "Depositary") with respect to the Global
Security(ies).
The Company initially appoints the Trustee to act as Securities
Custodian with respect to the Global Security(ies).
(b) With respect to the transfer and exchange of Definitive Securities,
when Definitive Securities are presented to the Security Registrar with the
request (x) to register the transfer of the Definitive Securities or (y) to
exchange such Definitive Securities for an equal principal amount of
Definitive Securities of other Authorized Denominations, the Security
Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
-------- -------
Definitive Securities presented or surrendered for register of transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Security Registrar
duly executed by the Holder thereof or by its attorney, duly authorized
in writing; and
29
<PAGE>
(ii) shall, in the case of Transfer Restricted Securities that
are Definitive Securities, be accompanied by the following additional
information and documents, as applicable:
(A) if such Transfer Restricted Security is being
delivered to the Security Registrar by a Holder for
registration in the name of such Holder, without
transfer, a certification from such Holder to that
effect (in substantially the form of Exhibit A
hereto); or
(B) if such Transfer Restricted Security is being
transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act)
in reliance on Rule 144A under the Securities Act
or pursuant to an exemption from registration in
accordance with Rule 144 or Regulation S under the
Securities Act or pursuant to an effective
registration statement under the Securities Act, a
certification to that effect (in substantially the
form of Exhibit A hereto) and, in the case of a
transfer in accordance with Rule 144A, Rule 144 or
Regulation S under the Securities Act, an Opinion
of Counsel reasonably acceptable to the Company and
to the Security Registrar to the effect that such
transfer is in compliance with the Securities Act;
or
(C) if such Transfer Restricted Security is being
transferred in reliance on another exemption from
the registration requirements of the Securities
Act, a certification to that effect (in
substantially the form of Exhibit A hereto) and an
Opinion of Counsel reasonably acceptable to the
Company and to the Security Registrar to the effect
that such transfer is in compliance with the
Securities Act.
(c) The following restrictions apply to any transfer of a
Definitive Security for a beneficial interest in a 144A Global Security. A
Definitive Security may not be exchanged for a beneficial interest in a 144A
Global Security except until and upon satisfaction of the requirements set forth
below. Upon receipt by the Trustee of a Definitive Security, duly endorsed or
accompanied by appropriate instruments of transfer, in form satisfactory to the
Trustee, together with:
(i) if such Definitive Security is a Transfer Restricted
Security, certification, substantially in the form of Exhibit A hereto,
that such Definitive Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act)
in accordance with Rule 144A and an Opinion of Counsel reasonably
acceptable to the Company and to the Security Registrar to the effect
that such transfer is in compliance with the Securities Act; and
(ii) whether or not such Definitive Security is a Transfer
Restricted Security, written instructions directing the Trustee to make,
or to direct the Securities Custodian to
30
<PAGE>
make, an endorsement on the 144A Global Security to reflect an increase
in the aggregate principal amount of the Securities represented by the
144A Global Security,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of Securities represented by the 144A Global Security
to be increased accordingly. If no 144A Global Securities are then outstanding,
the Company shall execute and, upon receipt of an authentication order in the
form of a Company Order in accordance with Section 3.3, the Trustee shall
authenticate a new 144A Global Security in the appropriate principal amount.
(d) The following restrictions apply to any transfer of a Definitive
Security for a beneficial interest in a Regulation S Global Security. A
Definitive Security may not be exchanged for a beneficial interest in a
Regulation S Global Security except until and upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive
Security, duly endorsed or accompanied by appropriate instruments of transfer,
in form satisfactory to the Trustee, together with:
(i) if such Definitive Security is a Transfer Restricted
Security, certification, substantially in the form of Exhibit A hereto,
that such Definitive Security is being transferred in accordance with
Regulation S and an Opinion of Counsel reasonably acceptable to the
Company and to the Security Registrar to the effect that such transfer
is in compliance with the Securities Act; and
(ii) whether or not such Definitive Security is a Transfer
Restricted Security, written instructions directing the Trustee to make,
or to direct the Securities Custodian to make, an endorsement on the
Regulation S Global Security to reflect an increase in the aggregate
principal amount of the Securities represented by the Regulation S
Global Security,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of Securities represented by the Regulation S Global
Security to be increased accordingly. If no Regulation S Global Securities are
then outstanding, the Company shall execute and, upon receipt of an
authentication order in the form of a Company Order in accordance with Section
3.3, the Trustee shall authenticate a new Regulation S Global Security in the
appropriate principal amount.
(e) The transfer and exchange of Global Securities or beneficial
interests therein shall be effected through the Depositary, in accordance with
this Indenture (including the restrictions on transfer set forth herein) and the
procedures of the Depositary therefor.
(f) With respect to the transfer of a beneficial interest in a 144A
Global Security or a Regulation S Global Security for a Definitive Security:
31
<PAGE>
(i) Any person having a beneficial interest in a 144A Global
Security or a Regulation S Global Security may upon request exchange
such beneficial interest for a Definitive Security. Upon receipt by the
Trustee of written instructions or such other form of instructions as is
customary for the Depositary or its nominee on behalf of any person
having a beneficial interest in a 144A Global Security or a Regulation S
Global Security constituting a Transfer Restricted Security only, and
receipt by the Trustee of the following additional information and
documents (all of which may be submitted by facsimile):
(A) if such beneficial interest is being
transferred to the person designated by the
Depositary as being the beneficial owner, a
certification from such person to that
effect (in substantially the form of
Exhibit A hereto); or
(B) if such beneficial interest is being
transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule
144A under the Securities Act or pursuant
to an exemption from registration in
accordance with Rule 144 or Regulation S
under the Securities Act or pursuant to an
effective registration statement under the
Securities Act, a certification to that
effect from the transferor (in
substantially the form of Exhibit A hereto)
and, in the case of a transfer in
accordance with Rule 144A, Rule 144 or
Regulation S under the Securities Act, an
Opinion of Counsel reasonably acceptable to
the Company and to the Security Registrar
to the effect that such transfer is in
compliance with the Securities Act; or
(C) if such beneficial interest is being
transferred in reliance on another
exemption from the registration
requirements of the Securities Act, a
certification to that effect from the
transferee or transferor (in substantially
the form of Exhibit A hereto) and an
Opinion of Counsel from the transferee or
transferor reasonably acceptable to the
Company and to the Security Registrar to
the effect that such transfer is in
compliance with the Securities Act,
then the Trustee or the Securities Custodian, at the direction of the Trustee,
will cause, in accordance with the standing instructions and procedures existing
between the Depositary and the Securities Custodian, the aggregate principal
amount of the Global Security to be reduced and, following such reduction, the
Company will execute and, upon receipt of an authentication order in the form of
a Company Order in accordance with Section 3.3, the Trustee will authenticate
and deliver to the transferee a Definitive Security.
(ii) Definitive Securities issued in exchange for a beneficial
interest in a 144A Global Security or a Regulation S Global Security
pursuant to this Section 3.5 shall be registered in such names and in
such Authorized Denominations as the Depositary,
32
<PAGE>
pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee. The Trustee shall deliver such
Definitive Securities to the persons in whose names such Securities are
so registered.
(g) With respect to the transfer of a beneficial interest in a
Regulation S Global Security for a beneficial interest in a 144A Global
Security, any person having a beneficial interest in a Regulation S Global
Security may upon request exchange such beneficial interest for an interest in a
144A Global Security. Upon receipt by the Trustee of written instructions or
such other form of instructions as is customary for the Depositary or its
nominee on behalf of any person having a beneficial interest in a Regulation S
Global Security constituting a Transfer Restricted Security only, and receipt by
the Trustee of the following additional information and documents (all of which
may be submitted by facsimile):
(i) instructions given in accordance with the procedures of
Euroclear or Cedel, the Depositary and the Securities Custodian, as the
case may be, from or on behalf of a beneficial owner of an interest in
the Regulations S Global Security directing the Trustee, as transfer
agent, to credit or cause to be credited a beneficial interest in the
144A Global Security in an amount equal to the beneficial interest in
the Regulation S Global Security to be exchanged or transferred,
(ii) a written order given in accordance with the procedures
of Euroclear or Cedel, the Depositary and the Securities Custodian, as
the case may be, containing information regarding the account with the
Depositary to be credited with such increase and the name of such
account, and
(iii) a certification from the transferor (in substantially the
form of Exhibit A hereto) to the effect that such beneficial interest is
being transferred to a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act) in accordance with Rule 144A under
the Securities Act and an Opinion of Counsel reasonably acceptable to
the Company and to the Security Registrar to the effect that such
transfer is in compliance with the Securities Act,
then the Trustee, as transfer agent, shall promptly deliver appropriate
instructions to the Depositary, its nominee, or the custodian for the
Depositary, as the case may be, to reduce or reflect on its records a reduction
of the Regulation S Global Security by the aggregate principal amount of the
beneficial interest in such Regulation S Global Security to be exchanged or
transferred, and the Trustee, as transfer agent, shall promptly deliver
appropriate instructions to the Depositary, its nominee, or the custodian for
the Depositary, as the case may be, concurrently with such reduction, increase
or reflect on its records an increase of the principal amount of the 144A Global
Security by the aggregate principal amount of the beneficial interest in the
Regulation S Global Security to be so exchanged or transferred, and to credit or
cause to be credited to the account of the person specified in such instructions
a beneficial interest in the 144A Global Security equal to the reduction in the
principal amount of the Regulation S Global Security.
33
<PAGE>
(h) With respect to the transfer of a beneficial interest in a 144A
Global Security for a beneficial interest in a Regulation S Global Security, any
person having a beneficial interest in a 144A Global Security may upon request
exchange such beneficial interest for an interest in a Regulation S Global
Security. Upon receipt by the Trustee of written instructions or such other form
of instructions as is customary for the Depositary or its nominee on behalf of
any person having a beneficial interest in a 144A Global Security constituting a
Transfer Restricted Security only, and receipt by the Trustee of the following
additional information and documents (all of which may be submitted by
facsimile):
(i) instructions given in accordance with the procedures of
the Depositary and the Securities Custodian, as the case may be, from or
on behalf of a holder of a beneficial interest in the 144A Global
Security, directing the Trustee, as transfer agent, to credit or cause
to be credited a beneficial interest in the Regulation S Global Security
in an amount equal to the beneficial interest in the 144A Global
Security to be exchanged or transferred,
(ii) a written order given in accordance with the procedures
of the Depositary and the Securities Custodian, as the case may be,
containing information regarding the Euroclear or Cedel account to be
credited with such increase and the name of such account, and
(iii) a certification from the transferor (in substantially the
form of Exhibit A hereto) to the effect that such beneficial interest is
being transferred in accordance with Regulation S and an Opinion of
Counsel reasonably acceptable to the Company and to the Security
Registrar to the effect that such transfer is in compliance with the
Securities Act,
then the Trustee, as transfer agent, shall promptly deliver appropriate
instructions to the Depositary, its nominee, or the custodian for the
Depositary, as the case may be, to reduce or reflect on its records a reduction
of the 144A Global Security by the aggregate principal amount of the beneficial
interest in such 144A Global Security to be so exchanged or transferred from the
relevant participant, and the Trustee, as transfer agent, shall promptly deliver
appropriate instructions to the Depositary, its nominee, or the custodian for
the Depositary, as the case may be, concurrently with such reduction, to
increase or reflect on its records an increase of the principal amount of such
Regulation S Global Security by the aggregate principal amount of the beneficial
interest in such 144A Global Security to be so exchanged or transferred, and to
credit or cause to be credited to the account of the person specified in such
instructions (who shall be Euroclear or Cedel or an agent acting for and on
behalf of them) a beneficial interest in such Regulation S Global Security equal
to the reduction in the principal amount of such 144A Global Security.
(i) Notwithstanding any other provisions of this Indenture (other than
the provisions set forth in subsection (j) of this Section 3.5), a Global
Security may not be transferred as a whole 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.
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<PAGE>
(j) The following relates to the authentication of Definitive
Securities in absence of the Depositary. If at any time: (i) the Depositary for
the Securities notifies the Company that the Depositary is unwilling or unable
to continue as Depositary for the Global Securities and a successor Depositary
for the Global Securities is not appointed by the Company within 90 days after
delivery of such notice; or (ii) the Company, at its sole discretion, notifies
the Trustee in writing that it elects to cause the issuance of Definitive
Securities under this Indenture, then the Company will execute, and the Trustee,
upon receipt of a Company Order in accordance with Section 3.3 requesting the
authentication and delivery of Definitive Securities, will authenticate and
deliver Definitive Securities, in an aggregate principal amount equal to the
principal amount of the Global Securities, in exchange for such Global
Securities.
(k) (iii) Except as permitted by the following paragraph (ii), each
Security certificate evidencing the Global Securities and the Definitive
Securities (and all Securities issued in exchange therefor or substitution
thereof) shall bear a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, REGISTRATION UNDER SUCH LAWS.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATED PERSON OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) UNLESS SUCH OFFER, SALE OR OTHER TRANSFER IS
(A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON THE HOLDER REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE
35
<PAGE>
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT SUBJECT
TO THE COMPANY'S AND STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA,
N.A.'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES
(C), (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN
EACH OF THE FOREGOING CASES PROVIDED THAT A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A. AND
SUBJECT TO ANY APPLICABLE SECURITIES LAWS. THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF THE THEN HOLDER OF THIS SECURITY AFTER THE RESALE
RESTRICTION TERMINATION DATE.
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act or an effective
registration statement under the Securities Act (including the Shelf
Registration Statement):
(A) in the case of any Transfer Restricted Security
that is a Definitive Security, the Security
Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a
Definitive Security that does not bear the legend
set forth above and rescind any restriction on the
transfer of such Transfer Restricted Security;
provided, however, that with respect to a transfer
-------- -------
made in reliance upon Rule 144 or an effective
registration statement, the Holders thereof shall
certify in writing to the Security Registrar that
such request is being made pursuant to Rule 144 or
an effective registration statement (such
Certification to be substantially in the form of
Exhibit A hereto) and, in the case of a transfer
made in reliance upon Rule 144, shall be
accompanied by an Opinion of Counsel reasonably
acceptable to the Company and to the Security
Registrar to the effect that such transfer is in
compliance with the Securities Act; and
(B) any such Transfer Restricted Security represented
by a Global Security shall not be subject to the
provisions set forth in (i) above (such sales or
transfers being subject only to the provisions of
Section 3.5(e) hereof); provided, however, that
-------- -------
with respect to any request for an exchange of a
Transfer Restricted Security that is represented by
a Global Security for a Definitive Security that
does not bear a legend, which request is made in
reliance upon Rule 144 or an effective registration
36
<PAGE>
statement, the Holder thereof shall certify in
writing to the Security Registrar that such request
is being made pursuant to Rule 144 or an effective
registration statement (such certification to be
substantially in the form of Exhibit A hereto) and,
in the case of a transfer made in reliance upon
Rule 144, shall be accompanied by an Opinion of
Counsel reasonably acceptable to the Company and to
the Security Registrar to the effect that such
transfer is in compliance with the Securities Act.
(l) At such time as all beneficial interests in a Global Security have
either been exchanged for Definitive Securities, redeemed, repurchased or
canceled, such Global Security shall be returned to or retained and canceled by
the Trustee. At any time prior to such cancellation, if any beneficial interest
in a Global Security is exchanged for Definitive Securities, redeemed,
repurchased or canceled, the principal amount of Securities represented by such
Global Security shall be reduced and an endorsement shall be made on such Global
Security, by the Trustee or the Securities Custodian, at the direction of the
Trustee, to reflect such reduction.
(m) All Definitive Securities and Global Securities issued upon any
registration of transfer or exchange of Definitive Securities or Global
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Definitive
Securities or Global Securities surrendered upon such registration of transfer
or exchange.
To permit registrations of transfer and exchanges, the Company shall
execute and the Trustee shall authenticate Definitive Securities and Global
Securities at the Security Registrar's request.
No service charge to a Holder shall be made for any registration of
transfer or exchange of Securities except as provided in Section 3.6. The
Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Securities, other than exchanges pursuant to Section
3.4, 9.6, 11.8 or 13.2 not involving any transfer.
The Company or the Security Registrar shall not be required (i) to
issue, register the transfer of or exchange any Security during a period
beginning at the opening of business 15 days before the day of the mailing of a
notice of redemption of Securities selected for redemption under Section 11.4
and ending at the close of business on the day of such mailing, (ii) to register
the transfer of or exchange any Definitive Security or beneficial interest in
any Global Security so selected for redemption in whole or in part, except the
unredeemed portion of any Definitive Security being redeemed in part or (iii) to
register the transfer or exchange of any Definitive Security or beneficial
interest in any Global Security surrendered for conversion pursuant to Article
Thirteen or repurchase pursuant to Article Fourteen.
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
37
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If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding. The Trustee may charge the Company for the Trustee's expenses in
replacing such Security.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.7. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest. Payment
of interest will be made (i) in respect of Securities held by the Depositary or
its nominee, in same day funds on or prior to the respective Interest Payment
Dates and (ii) in respect of Securities held of record by Holders other than the
Depositary or its nominee, at the Corporate Trust Office of the Trustee or at
such other office or agency of the Company as it shall maintain for that purpose
pursuant to Section 10.2; provided, however, that, at the option of the Company,
-------- -------
interest on any Security held of record by Holders other than the Depositary or
its nominee may be paid by mailing checks to the addresses of the Holders
thereof as such addresses appear in the Securities Register.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been
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<PAGE>
such Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Security and the
date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as in this
Clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder at his address as it appears in the Security Register, not
less than 10 days prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor
having been so mailed, such Defaulted Interest shall be paid to the Persons
in whose names the Securities (or their respective Predecessor Securities)
are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may
be required by such exchange, if, after notice given by the Company to the
Trustee of the proposed payment pursuant to this Clause, such manner of
payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
In the case of any Security which is converted after any Regular
Record Date and on or prior to the next succeeding Interest Payment Date (other
than any Security whose Maturity is prior to such Interest Payment Date),
interest whose Stated Maturity is on such Interest Payment Date shall be payable
on such Interest Payment Date notwithstanding such conversion, and such interest
(whether or not punctually paid or duly provided for) shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on such Regular Record Date; provided,
--------
however, that Securities so surrendered for
- -------
39
<PAGE>
conversion shall (except in the case of Securities or portions thereof called
for redemption) be accompanied by payment in New York Clearing House funds or
other funds acceptable to the Company of an amount equal to the interest payable
on such Interest Payment Date on the principal amount being surrendered for
conversion. Except as otherwise expressly provided in the immediately preceding
sentence, in the case of any Security which is converted, interest whose Stated
Maturity is after the date of conversion of such Security shall not be payable.
SECTION 3.8. Persons Deemed Owners.
---------------------
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and premium, if
any, and (subject to Section 3.7) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 3.9. Cancellation.
------------
All Securities surrendered for payment, redemption, registration of
transfer, exchange or conversion shall, if surrendered to any Person other than
the Trustee, be delivered to the Trustee and shall be promptly canceled by it.
The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly canceled by the Trustee. No Securities shall be authenticated
in lieu of or in exchange for any Securities canceled as provided in this
Section, except as expressly permitted by this Indenture. All canceled
Securities held by the Trustee shall be disposed of as directed by a Company
Order.
SECTION 3.10. Computation of Interest.
-----------------------
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
ARTICLE FOUR
Satisfaction and Discharge
SECTION 4.1. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall upon Company Request cease to be of further
effect (except as expressly provided for in this Article Four), and the Trustee,
at the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
40
<PAGE>
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost
or stolen and which have been replaced or paid as provided
in Section 3.6 and (ii) Securities for whose payment money
has theretofore been deposited in trust or segregated and
held in trust by the Company and thereafter repaid to the
Company or discharged from such trust, as provided in
Section 10.3) have been delivered to the Trustee for
cancellation; or
(B) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name,
and at the expense, of the Company, or
(iv) are delivered to the Trustee for Conversion in
accordance with Article Thirteen,
and the Company, in the case of (i), (ii), (iii) or (iv) above, has
irrevocably deposited or caused to be deposited with the Trustee as trust
funds in trust for the purpose an amount in cash sufficient (without
consideration of any investment of such cash) to pay and discharge the
entire indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation for principal and premium, if any, and interest to
the date of such deposit (in the case of Securities which have become due
and payable) or to the Stated Maturity or Redemption Date, as the case may
be; provided that the Trustee shall have been irrevocably instructed to
--------
apply such amount to said payments with respect to the Securities;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the following
rights or obligations under the Securities and this Indenture shall survive
until otherwise terminated or
41
<PAGE>
discharged hereunder: (a) Article Thirteen, Article Fourteen and the Company's
obligations under Sections 3.4, 3.5, 3.6, 10.2 and 10.3, in each case with
respect to any Securities described in subclause (B) of Clause (1) of this
Section, (b) this Article Four, (c) the rights, powers, trusts, duties and
immunities of the Trustee hereunder, including the obligations of the Company to
the Trustee under Section 6.7, and the obligations of the Trustee to any
Authenticating Agent under Section 6.14 and (d) if money shall have been
deposited with the Trustee pursuant to subclause (B) of Clause (1) of this
Section, the rights of Holders of any Securities described in subclause (B) of
Clause (1) of this Section to receive, solely from the trust fund described in
such subclause (B), payments in respect of the principal of, and premium (if
any) and interest on, such Securities when such payment are due.
SECTION 4.2. Application of Trust Money.
--------------------------
Subject to the provisions of Section 5.6 and the last paragraph of
Section 10.3, all money deposited with the Trustee pursuant to Section 4.1 shall
be held in trust and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal and
premium, if any, and interest for whose payment such money has been deposited
with the Trustee. All moneys deposited with the Trustee pursuant to Section 4.1
(and held by it or any Paying Agent) for the payment of Securities subsequently
converted shall be returned to the Company upon Company Request.
SECTION 4.3. Reinstatement.
-------------
If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article Four by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article Four until such time as the Trustee or Paying Agent is
permitted to apply all money held in trust with respect to the Securities;
provided, however, that if the Company makes any payment of principal of or any
- -------- -------
premium or interest on any Security following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of the
Securities to receive such payment from the money so held in trust.
ARTICLE FIVE
Remedies
SECTION 5.1. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article Twelve or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body);
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<PAGE>
(1) default in the payment of the principal of or premium, if any, on
any Security at its Maturity, whether or not such payment is prohibited by
the provisions of Article Twelve; or
(2) default in the payment of any interest upon any Security when it
becomes due and payable, whether or not such payment is prohibited by the
provisions of Article Twelve, and continuance of such default for a period
of 30 days; or
(3) failure to provide timely notice of a Repurchase Event as required
in accordance with the provisions of Article Fourteen; or
(4) default in the payment of the Repurchase Price in respect of any
Security on the Repurchase Date therefor in accordance with the provisions
of Article Fourteen, whether or not such payment is prohibited by the
provisions of Article Twelve; or
(5) default in the performance, or breach, of any covenant or material
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with), and continuance of such default or
breach for a period of 60 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(6) default under one or more bonds, debentures, notes or other
evidences of indebtedness for money borrowed by the Company or any
Significant Subsidiary of the Company or under one or more mortgages,
indentures or instruments under which there may be issued or by which there
may be secured or evidenced any indebtedness for money borrowed by the
Company or any Significant Subsidiary of the Company, whether such
indebtedness now exists or shall hereafter be created, which default
individually or in the aggregate shall constitute a failure to pay the
principal of indebtedness in excess of $10,000,000 when due and payable
after the expiration of any applicable grace period with respect thereto or
shall have resulted in indebtedness in excess of $10,000,000 becoming or
being declared due and payable prior to the date on which it would
otherwise have become due and payable, without such indebtedness having
been discharged or such acceleration having been rescinded or annulled, in
each case within a period of 30 days after there shall have been given to
the Company by the Trustee or to the Company and the Trustee by the Holders
of at least 25% in principal amount of the Outstanding Securities a written
notice specifying such default and requiring the Company to cause such
indebtedness to be discharged or cause such acceleration to be rescinded or
annulled and stating that such notice is a "Notice of Default" hereunder;
or
(7) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company or any Significant
Subsidiary of the Company an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or other
similar law or (B) a decree or order adjudging the
43
<PAGE>
Company or any Significant Subsidiary of the Company a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of
the Company or any Significant Subsidiary of the Company under any
applicable Federal or State law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of
the Company or any Significant Subsidiary of the Company or of any
substantial part of its property, or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree or order for relief
or any such other decree or order unstayed and in effect for a period of 90
consecutive days; or
(8) the commencement by the Company or any Significant Subsidiary of
the Company of a voluntary case or proceeding under any applicable Federal
or State bankruptcy, insolvency, reorganization or other similar law or of
any other case or proceeding to be adjudicated a bankrupt or insolvent, or
the consent by it to the entry of a decree or order for relief in respect
of the Company or any Significant Subsidiary of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against it,
or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or State law, or the
consent by it to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Significant
Subsidiary of the Company or of any substantial part of its property, or
the making by it of a general assignment for the benefit of creditors, or
the admission by it in writing of its inability to pay its debts generally
as they become due, or the taking of corporate action by the Company or any
Significant Subsidiary of the Company in furtherance of any such action.
Upon receipt by the Trustee of any Notice of Default pursuant to this
Section 5.1, a record date shall automatically and without any other action by
any Person be set for the purpose of determining the Holders of Outstanding
Securities entitled to join in such Notice of Default, which record date shall
be the close of business on the Business Day the Trustee receives such Notice of
Default. The Holders of Outstanding Securities on such record date (or their
duly appointed agents), and only such Persons, shall be entitled to join in such
Notice of Default, whether or not such Holders remain Holders after such record
date; provided, that unless such Notice of Default shall have become effective
--------
by virtue of the Holders of the requisite principal amount of Outstanding
Securities on such record date (or their duly appointed agents) having joined
therein on or prior to the 90th day after such record date, such Notice of
Default shall automatically and without any action by any Person be canceled and
of no further force or effect.
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default (other than as specified in subparagraph (8) or
(9) of Section 5.1) occurs and is continuing, then and in every such case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities may declare the principal of
44
<PAGE>
all the Securities to be due and payable immediately, by a notice in writing to
the Company (and to the Trustee if given by Holders), and upon any such
declaration such principal plus any interest accrued on the securities to the
date of declaration shall become immediately due and payable. If an Event of
Default specified in subparagraph (8) or (9) of Section 5.1 occurs and is
continuing, then the principal of, premium, if any, and accrued and unpaid
interest, if any, on all of the Securities shall ipso facto become and be
---- -----
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder of Securities.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Outstanding Securities, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum sufficient
to pay
(A) all overdue interest on all Securities,
(B) the principal of and premium, if any, on any Securities
which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the
Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the
Securities, and
(D) all sums paid or advanced by the Trustee and each
predecessor Trustee, their respective agents and counsel
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee and each
predecessor Trustee, their respective agents and counsel;
and
(2) all Events of Default, other than the nonpayment of the principal
of, premium, if any, and interest on the Securities that has become due
solely by such declaration of acceleration, have been cured or waived as
provided in Section 5.13.
No such rescission and waiver shall affect any subsequent default or
impair any right consequent thereon.
Upon receipt by the Trustee of any declaration of acceleration, or any
rescission and annulment of any such declaration, pursuant to this Section 5.2,
a record date shall automatically and without any other action by any Person be
set for the purpose of determining the Holders of Outstanding Securities
entitled to join in such declaration, or rescission and annulment, as the case
may be, which record date shall be the close of business on the Business
45
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Day the Trustee receives such declaration, or rescission and annulment, as the
case may be. The Holders of Outstanding Securities on such record date (or their
duly appointed agents), and only such Persons, shall be entitled to join in such
declaration, or rescission and annulment, as the case may be, whether or not
such Holders remain Holders after such record date; provided, that unless such
--------
declaration, or rescission and annulment, as the case may be, shall have become
effective by virtue of Holders of the requisite principal amount of Outstanding
Securities on such record date (or their duly appointed agents) having joined
therein on or prior to the 90th day after such record date, such declaration, or
rescission and annulment, as the case may be, shall automatically and without
any action by any Person be canceled and of no further force or effect.
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee.
---------------------------------------------------------------
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of or premium, if
any, on any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and premium, if any, and interest, and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal and premium, if any, and on any overdue interest, at the rate
borne by the Securities, and, in addition thereto, such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee and
each predecessor Trustee, their respective agents and counsel, and any other
amounts due the Trustee or any predecessor Trustee under Section 6.7.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid and may
prosecute any such proceeding to judgment or final decree, and may enforce the
same against the Company (or any other obligor upon the Securities) and collect
the moneys adjudged or decreed to be payable in the manner provided by law out
of the property of the Company (or any other obligor upon the Securities),
wherever situated.
If an Event of Default occurs and is continuing, the Trustee may, in
its discretion, proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
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SECTION 5.4. Trustee May File Proofs of Claim.
--------------------------------
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have the claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it and
each predecessor Trustee for the reasonable compensation, expenses,
disbursements and advances of the Trustee and each predecessor Trustee and their
respective agents and counsel, and any other amounts due the Trustee under
Section 6.7.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; provided,
--------
however, that the Trustee may, on behalf of the Holders, vote for the election
- -------
of a trustee in bankruptcy or similar official and may be a member of the
Creditors' Committee.
SECTION 5.5. Trustee May Enforce Claims Without Possession of Securities.
-----------------------------------------------------------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee and each predecessor Trustee and their
respective agents and counsel, be for the ratable benefit of the Holders of the
Securities in respect of which such judgment has been recovered.
SECTION 5.6. Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or premium, if
any, or interest, upon presentation of the Securities and the notation thereon
of the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: Subject to Article Twelve, to the holders of Senior
Indebtedness;
SECOND: To payment of all amounts due the Trustee under Section 6.7;
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THIRD: To the payment of the amounts then due and unpaid for principal
of and premium, if any, and interest on the Securities in
respect of which or for the benefit of which such money has
been collected, ratably, without preference or priority of any
kind, according to the amounts due and payable on such
Securities for principal and premium, if any, and interest,
respectively; and
FOURTH: The balance, if any, to the Company for the benefit of the
Company or any other Person or Persons determined to be
entitled thereto.
SECTION 5.7. Limitation on Suits.
-------------------
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity satisfactory to it against the costs, expenses and liabilities to
be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Securities;
it being understood and intended that no one or more holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium and
----------------------------------------------------------------
Interest and to Convert.
-----------------------
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and premium, if any, and (subject to Section
3.7) interest on such Security on the respective
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Stated Maturities expressed in such Security (or, in the case of redemption, on
the Redemption Date or, in the case of a repurchase pursuant to Article
Fourteen, on the Repurchase Date) and to convert such Security in accordance
with Article Thirteen and to institute suit for the enforcement of any such
payment and right to convert, and such rights shall not be impaired without the
consent of such Holder.
SECTION 5.9. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in Section 3.6, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 5.12. Control by Holders.
------------------
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee; provided, that
--------
(1) such direction shall not be in conflict with any rule of law or
with this Indenture; and
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(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction; and
(3) subject to the provisions of Section 6.1, the Trustee shall have
the right to decline to follow any such direction if the Trustee in good
faith shall determine that the action so directed would involve the Trustee
in personal liability or would be unduly prejudicial to Holders not joining
in such direction.
Upon receipt by the Trustee of any such direction, a record date shall
automatically and without any other action by any Person be set for the purpose
of determining the Holders of Outstanding Securities entitled to join in such
direction, which record date shall be the close of business on the day the
Trustee receives such direction. The Holders of Outstanding Securities on such
record date (or their duly appointed agents), and only such Persons, shall be
entitled to join in such direction, whether or not such Holders remain Holders
after such record date; provided, that unless such direction shall have become
--------
effective by virtue of Holders of the requisite principal amount of Outstanding
Securities on such record date (or their duly appointed agents) having joined
therein on or prior to the 90th day after such record date, such direction shall
automatically and without any action by any Person be canceled and of no further
force or effect.
SECTION 5.13. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default
(1) in the payment of the principal of or premium, if any, or
interest on any Security, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 5.14. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; provided, that neither this Section nor the Trust Indenture Act
--------
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in
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any suit instituted by the Trustee, a suit by a Holder pursuant to Section 5.8,
or a suit by a Holder or Holders of more than 10% in principal amount of the
outstanding Securities.
ARTICLE SIX
The Trustee
SECTION 6.1. Certain Duties and Responsibilities.
-----------------------------------
The duties and responsibilities of the Trustee shall be as provided by
this Indenture and the Trust Indenture Act for securities issued pursuant to
indentures qualified thereunder. Except as otherwise provided herein,
notwithstanding the foregoing, no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability or risk in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity satisfactory to it
against such risk or liability is not reasonably assured to it. Whether or not
therein expressly so provided, every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Section. The Trustee shall not be
liable (x) for any error of judgment made in good faith by a Responsible Officer
or Responsible Officers of the Trustee, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts or (y) with respect to
any action taken or omitted to be taken by it in good faith in accordance with
the direction of the holders of not less than a majority in aggregate principal
amount of the Securities at the time Outstanding relating to the time, method
and place of conducting any proceeding or any remedy available to the Trustee,
or exercising any trust or power conferred upon the Trustee, under this
Indenture. Prior to the occurrence of an Event of Default and after the curing
or waiving of all Events of Default which may have occurred: (i) the duties and
obligations of the Trustee shall be determined solely by the express provisions
of this Indenture and in 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 in the Trust Indenture Act, and no
implied covenants or obligations shall be read in to this Indenture against the
Trustee; and (ii) in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions therein, upon any statements, certificates or
opinions furnished to the Trustee and conforming to the requirements of this
Indenture and believed by the Trustee to be genuine and to have been signed or
presented by the proper party or parties; but in the case of any such
statements, 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 on their
face to the requirements of this Indenture. If a default or an Event of Default
has occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in its
exercise thereof as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs.
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SECTION 6.2. Notice of Defaults.
------------------
The Trustee shall give the Holders notice of any default hereunder
known to it as and to the extent provided by the Trust Indenture Act; provided,
--------
however, that in the case of any default of the character specified in Section
- -------
5.1(6), no such notice to Holders shall be given until at least 30 days after
the occurrence thereof; and provided, further, that, except in the case of a
-------- -------
default in payment of principal of, premium, if any, or interest on any
Securities, the Trustee may withhold notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of the Holders of Securities. For the purpose of this Section,
the term "default" means any event which is, or after notice or lapse of time or
both would become, an Event of Default.
SECTION 6.3. Certain Rights of Trustee.
-------------------------
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity satisfactory to it
against the costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction;
(f) before the Trustee acts or refrains from acting with respect to
any matter contemplated by this Indenture, it may require an Officers'
Certificate or an Opinion of Counsel, which shall conform to the provisions of
Section 1.2, and the Trustee shall be protected and shall
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not be liable for any action it takes or omits to take in good faith and without
gross negligence in reliance on such certificate or opinion;
(g) the Trustee shall not be required to give any bond or surety in
respect of the performance of its power and duties hereunder;
(h) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney;
and
(i) 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 with due care by it
hereunder.
SECTION 6.4. Not Responsible for Recitals or Issuance of Securities.
------------------------------------------------------
The statements and recitals contained herein and in the Securities and
in any other document in connection with the sale of the Securities, except the
Trustee's certificate of authentication, shall be taken as the statements of the
Company, and the Trustee and any Authenticating Agent assume no responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Securities. The Trustee and any
Authenticating Agent shall not be accountable for the use or application by the
Company of Securities or the proceeds thereof.
SECTION 6.5. May Hold Securities.
-------------------
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
6.8 and 6.13, may otherwise deal with the Company or any Affiliate of the
Company with the same rights it would have if it were not Trustee,
Authenticating Agent, Paying Agent, Security Registrar or such other agent.
SECTION 6.6. Money Held in Trust.
-------------------
Money held by the Trustee or any Paying Agent in trust hereunder need
not be segregated from other funds except to the extent required by law. The
Trustee or any Paying Agent shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with the Company.
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SECTION 6.7. Compensation and Reimbursement.
------------------------------
The Company agrees:
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (including its services as
Security Registrar or Paying Agent, if so appointed by the Company) as may
be mutually agreed upon in writing by the Company and the Trustee (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee and each predecessor Trustee promptly upon its request for all
reasonable expenses, disbursements and advances incurred or made by or on
behalf of it in connection with the performance of its duties under any
provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel and all other persons
not regularly in its employ) except to the extent any such expense,
disbursement or advance may be attributable to its negligence or willful
misconduct; and
(3) to indemnify the Trustee and each predecessor Trustee (each an
"indemnitee") for, and to hold it harmless against, any loss, liability or
expense incurred without negligence or willful misconduct on its part,
arising out of or in connection with the acceptance or administration of
this Indenture or the trusts hereunder and its duties hereunder (including
its services as Security Registrar or Paying Agent, if so appointed by the
Company), including enforcement of this Indenture (including Section 6.7)
and including the costs and expenses of defending itself against or
investigating any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The Company shall
defend any claim or threatened claim asserted against an indemnitee for
which it may seek indemnity, and the indemnitee shall cooperate in the
defense unless, in the reasonable opinion of the indemnitee's counsel, the
indemnitee has an interest adverse to the Company or a potential conflict
of interest exists between the indemnitee and the Company, in which case
the indemnitee may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel; provided that the Company
--------
shall only be responsible for the reasonable fees and expenses of one law
firm (in addition to local counsel) in any one action or separate
substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, such law firm to be designated
by the indemnitee. The officers, directors, agents and employees of the
Trustee shall also be indemnified under this Section 6.7 to the same extent
as the Trustee.
As security for the performance of the obligations of the Company
under this Section 6.7, the Trustee shall have a lien prior to the Securities
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 Securities, and
the Securities are hereby subordinated to such prior lien. The obligations of
the Company under this Section to compensate and indemnify the Trustee and any
predecessor Trustee and to pay or reimburse the Trustee and any predecessor
Trustee for
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expenses, disbursements and advances, and any other amounts due the Trustee or
any predecessor Trustee under Section 6.7, shall constitute an additional
obligation hereunder and shall survive the satisfaction and discharge of this
Indenture.
When the Trustee or any predecessor Trustee incurs expenses or renders
services in connection with the performance of its obligations hereunder
(including its services as Security Registrar or Paying Agent, if so appointed
by the Company) after an Event of Default specified in Section 5.1(8) or (9)
occurs, the expenses and the compensation for the services are intended to
constitute expenses of administration under any applicable bankruptcy,
insolvency or other similar federal or state law to the extent provided in
Section 5.3(b)(5) of Title 11 of the United States Code, as now or hereafter in
effect.
SECTION 6.8. Disqualification; Conflicting Interests.
---------------------------------------
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 6.9. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be a
Person that (i) is eligible pursuant to the Trust Indenture Act to act as such
and (ii) has (or, in the case of a corporation included in a bank holding
company system, whose related bank holding company has) a combined capital and
surplus of at least $50,000,000. If such Person publishes reports of conditions
at least annually, pursuant to law or to the requirements of a Federal or state
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, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
SECTION 6.10. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.11.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
required by Section 6.11 shall not have been delivered to the resigning Trustee
within 30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
55
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(c) The Trustee may be removed at any time by an Act of the Holders
of a majority in principal amount of the Outstanding Securities delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after
written request therefor by the Company or by any Holder who
has been a bona fide Holder of a Security for the last six
months, or
(2) the Trustee shall cease to be eligible under Section 6.9 and
shall fail to resign after written request therefor by the
Company or by any such Holder, 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, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 5.14, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee and
such successor Trustee shall comply with the applicable requirements of Section
6.11. If, within one year after such resignation, removal or incapability, or
the occurrence of such vacancy, a successor Trustee shall be appointed by Act of
the Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 6.11 become the successor Trustee
and supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders and accepted
appointment in the manner required by Section 6.11, the Trustee or any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 1.6. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
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SECTION 6.11. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee,
the Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business.
-----------------------------------------------------------
Any corporation into which the Trustee may be merged or converted or
with 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 the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 6.13. Preferential Collection of Claims Against Company.
-------------------------------------------------
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
SECTION 6.14. Appointment of Authenticating Agent.
-----------------------------------
The Trustee may appoint an Authenticating Agent or Agents acceptable
to and at the expense of the Company which shall be authorized to act on behalf
of the Trustee to authenticate Securities issued upon original issue and upon
exchange, registration of transfer, partial conversion or partial redemption or
pursuant to Section 3.6, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery
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on behalf of the Trustee by an Authenticating Agent and a certificate of
authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and shall at all
times be a Person organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $50,000,000 and subject to supervision or examination
by Federal or State authority. If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Authenticating Agent shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, such Authenticating
Agent shall resign immediately in the manner and with the effect specified in
this Section.
Any Person into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which such Authenticating Agent shall be
a party, or any Person succeeding to the corporate agency or corporate trust
business of an Authenticating Agent, shall continue to be an Authenticating
Agent, provided such Person shall be otherwise eligible under this Section,
without the execution or filing of any paper or any further act on the part of
the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail notice of such
appointment by first-class mail, postage prepaid, to all Holders as their names
and addresses appear in the Security Register. Any successor Authenticating
Agent upon acceptance of its appointment under this Section shall become vested
with all the rights, powers and duties of its predecessor hereunder, with like
effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible to act as such under the
provisions of this Section.
Any Authenticating Agent by the acceptance of its appointment shall be
deemed to have represented to the Trustee that it is eligible for appointment as
Authenticating Agent under this Section and to have agreed with the Trustee
that: it will perform and carry out the duties of an Authenticating Agent as
herein set forth, including among other things the duties to authenticate
Securities when presented to it in connection with the original issuance and
with exchanges, registrations of transfer or redemptions or conversions thereof
or pursuant to Section 3.6; it will keep and maintain, and furnish to the
Trustee from time to time as requested by the Trustee, appropriate records of
all transactions carried out by it as Authenticating Agent and will furnish the
Trustee such other information and reports as the Trustee may reasonably
require; and it will notify the Trustee promptly if it shall cease to be
eligible to act as
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Authenticating Agent in accordance with the provisions of this Section. Any
Authenticating Agent by the acceptance of its appointment shall be deemed to
have agreed with the Trustee to indemnify the Trustee against any loss,
liability or expense incurred by the Trustee and to defend any claim asserted
against the Trustee by reason of any acts or failures to act of such
Authenticating Agent, but such Authenticating Agent shall have no liability for
any action taken by it in accordance with the specific written direction of the
Trustee.
The Trustee shall not be liable for any act or any failure of the
Authenticating Agent to perform any duty either required herein or authorized
herein to be performed by such person in accordance with this Indenture.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment is made pursuant to this Section, the Securities may
have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
This is one of the Securities described in the within-mentioned
Indenture.
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A.
________________________________
As Trustee
By _____________________________
As Authenticating Agent
By _____________________________
Authorized Officer
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 7.1. Company to Furnish Trustee Names and Addresses of Holders.
---------------------------------------------------------
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders as of such Regular Record Date, and
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(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished.
Notwithstanding the foregoing, so long as the Trustee is the Security
Registrar, no such list shall be required to be furnished.
SECTION 7.2. Preservation of Information; Communication to Holders.
-----------------------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act or otherwise in accordance with this Indenture.
SECTION 7.3. Reports by Trustee.
------------------
(a) Not later than 60 days following each May 15, the Trustee shall
transmit to Holders such reports 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 each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 7.4. Reports by Company.
------------------
The Company shall file with the Trustee and the Commission, and
transmit to Holders, 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; provided, 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 15 days after the same is so required to be filed with the
Commission.
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SECTION 7.5. Rule 144A Information Requirement.
---------------------------------
If at any time prior to the Resale Restriction Termination Date the
Company is no longer subject to Section 13 or 15(d) of the Exchange Act, the
Company will furnish to the Holders or beneficial holders of the Securities and
prospective purchasers of the Securities designated by the Holders of the
Securities, upon their request, information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act until the earlier of (i) the date on
which the Securities and the underlying Common Stock are registered under the
Securities Act or (ii) the Resale Restriction Termination Date.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 8.1. Company May Consolidate, Etc., Only on Certain Terms.
----------------------------------------------------
The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, or permit any Person to consolidate with or merge into
the Company or convey, transfer or lease its properties substantially as an
entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into another
Person or convey or transfer all or substantially all of its properties and
assets to any Person, the Person formed by such consolidation or into which
the Company is merged or the Person which acquires by conveyance or
transfer, or which leases, all or substantially all of the properties and
assets of the Company shall be a corporation, limited liability company,
partnership or trust, shall be organized and validly existing under the
laws of the United States of America, any State thereof or the District of
Columbia and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form reasonably satisfactory to
the Trustee, the due and punctual payment of the principal of and premium,
if any, and interest on all the Securities and the performance or
observance of every covenant of this Indenture on the part of the Company
to be performed or observed and shall have provided for conversion rights
in accordance with Section 13.11;
(2) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing;
(3) such consolidation, merger, conveyance or transfer does not
adversely affect the validity or enforceability of the Securities; and
(4) the Company or the successor Person has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance or transfer and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture comply with this Article and that all
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conditions precedent herein provided for relating to such transaction have
been complied with.
SECTION 8.2. Successor Substituted.
---------------------
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of all or
substantially all of the properties and assets of the Company in accordance with
Section 8.1, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein, and thereafter, except in the case
of a transfer by lease, the predecessor Person shall be relieved of all
obligations and covenants under this Indenture and the Securities.
ARTICLE NINE
Supplemental Indentures
SECTION 9.1. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without the consent of the Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to cause this Indenture to be qualified under the Trust Indenture
Act; or
(2) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
(3) to add to the covenants of the Company for the benefit of the
Holders or add an additional Event of Default, or to surrender any right or
power conferred herein or in the Securities upon the Company; or
(4) to secure the Securities; or
(5) to make provision with respect to the conversion rights of
Holders pursuant to the requirements of Section 13.11; or
(6) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities; or
(7) to cure any ambiguity, to correct or supplement any provision
herein or in the Securities which may be defective or inconsistent with any
other provision herein or in the Securities, or to make any other
provisions with respect to matters or questions
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arising under this Indenture which shall not be inconsistent with the
provisions of this Indenture; provided, that such action pursuant to this
--------
Clause (7) shall not adversely affect the interests of the Holders in any
material respect and the Trustee may rely upon an Opinion of Counsel to
that effect.
SECTION 9.2. Supplemental Indentures with Consent of Holders.
-----------------------------------------------
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
- -------- -------
consent of the Holder of each Outstanding Security,
(1) change the Stated Maturity of the principal of, or any installment
of interest on, any Security, or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption
thereof, or change the place of payment where, or the coin or currency in
which, any Security or any premium or interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of redemption, on
or after the Redemption Date), or adversely affect the right to convert any
Security as provided in Article Thirteen (except as permitted by Section
9.1(5)), or modify the provisions of Article Fourteen, or the provisions of
this Indenture with respect to the subordination of the Securities, in a
manner adverse to the Holders, or impair the right of Holders to require
the Company to repurchase Securities upon the occurrence of a Repurchase
Event, or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture,
or
(3) modify any of the provisions of this Section, Section 5.13 or
Section 10.6, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby; provided, however, that this Clause shall not be deemed to require
-------- -------
the consent of any Holder with respect to changes in the references to "the
Trustee" and concomitant changes in this Section and Section 10.6, or the
deletion of this proviso, in accordance with the requirements of Section
9.1(6).
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
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SECTION 9.3. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.1) shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which adversely affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise.
SECTION 9.4. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 9.5. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 9.6. Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and (at the specific direction of the Company) authenticated and
delivered by the Trustee in exchange for Outstanding Securities.
SECTION 9.7. Notice of Supplemental Indenture.
--------------------------------
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to Section 9.2, the Company shall transmit to
the Holders a notice setting forth the substance of such supplemental indenture.
ARTICLE TEN
Covenants
SECTION 10.1. Payment of Principal, Premium and Interest.
------------------------------------------
The Company will duly and punctually pay the principal of and premium,
if any, and interest on the Securities in accordance with the terms of the
Securities and this Indenture.
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SECTION 10.2. Maintenance of Office or Agency.
-------------------------------
The Company will maintain an office or agency where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer, where Securities may be surrendered for exchange or
conversion and where notices and demands to or upon the Company in respect of
the Securities and this Indenture may be served, which office shall initially be
the office of the Trustee's affiliate, State Street Bank and Trust Company,
N.A., located in New York City. The Company will give prompt written notice to
the Trustee of the location, and any change in the location, of any such office
or agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
SECTION 10.3. Money for Security Payments to Be Held in Trust.
-----------------------------------------------
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of and premium, if any, or interest
on any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal and premium, if
any, or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and will promptly notify the Trustee
of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will, on
or prior to 9:00 a.m. (New York City time) on the Business Day prior to each due
date of the principal of and premium, if any, or interest on any Securities,
deposit with a Paying Agent a sum in same day funds sufficient to pay the
principal and any premium and interest so becoming due, such sum to be held as
provided by the Trust Indenture Act, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its action or failure
so to act.
The Company will cause each Paying Agent other than the Trustee or the
Company to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this Section,
that such Paying Agent will (i) comply with the provisions of the Trust
Indenture Act and this Indenture applicable to it as a Paying Agent and hold all
sums held by it for the payment of principal of or any premium or interest on
the Securities in trust for the benefit of the Persons entitled thereto until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided; (ii) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment in respect of
the Securities; and (iii) at any time during the continuance of any
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default by the Company (or any other obligor upon the Securities) in the making
of any payment in respect of the Securities, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent for payment in respect of the Securities, and account for any funds
disbursed.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of and premium, if
any, or interest on any Security and remaining unclaimed for two years after
such principal and premium, if any, or interest has become due and payable shall
be paid to the Company, or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Security shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
-------- -------
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in New York, New York,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the
Company.
SECTION 10.4. Statement by Officers as to Default.
-----------------------------------
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
SECTION 10.5. Existence.
---------
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory); provided, however, that the Company shall not be
-------- -------
required to preserve any such right or franchise if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and that the loss thereof is not disadvantageous in
any material respect to the Holders.
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SECTION 10.6. Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Section 10.5, if before the time for such
compliance the Holders of at least a majority in principal amount of the
Outstanding Securities shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the Trustee
in respect of any such covenant or condition shall remain in full force and
effect.
ARTICLE ELEVEN
Redemption of Securities
SECTION 11.1. Right of Redemption.
-------------------
The Securities may be redeemed at the election of the Company, in
whole or from time to time in part, at any time on or after September 20, 2000,
at the Redemption Prices specified in the form of Security hereinbefore set
forth, together with accrued interest, to the Redemption Date.
SECTION 11.2. Applicability of Article.
------------------------
Redemption of Securities at the election of the Company as permitted
by any provision of this Indenture shall be made in accordance with such
provision and this Article.
SECTION 11.3. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities pursuant to
Section 11.1 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company of less than all the Securities, the
Company shall, at least 60 days prior to the Redemption Date fixed by the
Company (unless a shorter period shall be satisfactory to the Trustee), notify
the Trustee of such Redemption Date and of the principal amount of Securities to
be redeemed. In case of any redemption at the election of the Company of all of
the Securities, the Company shall, at least 45 days prior to the Redemption Date
fixed by the Company (unless a shorter period shall be satisfactory to the
Trustee), notify the Trustee of such Redemption Date.
SECTION 11.4. Selection by Trustee of Securities to be Redeemed.
-------------------------------------------------
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by lot or by such other method as the Trustee shall deem
fair and appropriate and which may provide for the selection for redemption of
portions (equal to $1,000 or any integral multiple thereof) of the principal
amount of Securities of a denomination larger than $1,000.
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If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed (so
far as may be) to be the portion selected for redemption. Securities which have
been converted during a selection of Securities to be redeemed shall be treated
by the Trustee as Outstanding for the purpose of such selection. In any case
where more than one Security is registered in the same name, the Trustee in its
discretion may treat the aggregate principal amount so registered as if it were
represented by one Security.
The Trustee shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 11.5. Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 15 nor more than 60 days prior to the Redemption
Date, to the Trustee and to each Holder of Securities to be redeemed, at his
address appearing in the Security Register.
All notices of redemption shall state:
(a) the Redemption Date,
(b) the Redemption Price,
(c) if less than all the Outstanding Securities are to be redeemed,
the identification (and, in the case of partial redemption of any
Securities, the principal amounts) of the particular Securities to be
redeemed,
(d) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that (unless the
Company shall default in payment of the Redemption Price) interest thereon
will cease to accrue on and after said date,
(e) the conversion price, the date on which the right to convert the
Securities to be redeemed will terminate and the place or places where such
Securities may be surrendered for conversion, and
(f) the place or places where such Securities are to be surrendered
for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request received
by the Trustee at least 40
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days prior to the Redemption Date, by the Trustee in the name and at the expense
of the Company.
SECTION 11.6. Deposit of Redemption Price.
---------------------------
At or prior to 9:00 a.m. (New York City time) on any Redemption Date,
the Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 10.3) an amount of money in same day funds sufficient to pay
the Redemption Price of, and (except if the Redemption Date shall be an Interest
Payment Date) accrued interest on, all the Securities or portions thereof which
are to be redeemed on that date other than any Securities called for redemption
on that date which have been converted prior to the date of such deposit.
If any Security called for redemption is converted, any money
deposited with the Trustee or with any Paying Agent or so segregated and held in
trust for the redemption of such Security shall (subject to any right of the
Holder of such Security or any Predecessor Security to receive interest as
provided in the last paragraph of Section 3.7) be paid to the Company upon
Company Request or, if then held by the Company, shall be discharged from such
trust.
SECTION 11.7. Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that installments of interest whose
-------- -------
Maturity is on or prior to the Redemption Date shall be payable to the Holders
of such Securities, or one or more Predecessor Securities, registered as such at
the close of business on the relevant Record Dates according to their terms and
the provisions of Section 3.7.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and premium, if any, shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Security.
SECTION 11.8. Securities Redeemed in Part.
---------------------------
Any Security which is to be redeemed only in part shall be surrendered
at an office or agency of the Company maintained for that purpose pursuant to
Section 10.2 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing), and the Company shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Security without service charge, a new
Security or Securities, of any Authorized Denomination as requested by such
Holder, in aggregate principal
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amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
ARTICLE TWELVE
Subordination of Securities
SECTION 12.1. Securities Subordinated to Senior Indebtedness.
----------------------------------------------
The Company covenants and agrees, and each Holder of a Security, by
his acceptance thereof, likewise covenants and agrees, that, at all times and in
all respects, the indebtedness represented by the Securities and the payment of
the principal of and premium, if any, and interest on each and all of the
Securities are hereby expressly made subordinate and subject in right of payment
to the prior payment in full of all Senior Indebtedness.
SECTION 12.2. Payment Over of Proceeds Upon Dissolution, Etc.
----------------------------------------------
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding, relative to the Company or to its creditors, as such, or to a
substantial part of its assets, or (b) any proceeding for the liquidation,
dissolution or other winding up of the Company, whether voluntary or involuntary
and whether or not involving insolvency or bankruptcy, or (c) any general
assignment for the benefits of creditors or any other marshaling of assets and
liabilities of the Company, then and in any such event the holders of Senior
Indebtedness shall be entitled to receive payment in full of all amounts due or
to become due on or in respect of all Senior Indebtedness; or provision shall be
made for such payment in money or money's worth, before the Holders of the
Securities are entitled to receive any payment or distribution of any kind or
character, whether in cash, property or securities, on account of principal of
or premium, if any, or interest on the Securities, and to that end the holders
of Senior Indebtedness shall be entitled to receive, for application to the
payment thereof, any payment or distribution of any kind or character, whether
in cash, property or securities, including any such payment or distribution
which may be payable or deliverable by reason of the payment of any other
indebtedness of the Company being subordinated to the payment of the Securities,
which may be payable or deliverable in respect of the Securities in any such
case, proceeding, dissolution, liquidation or other winding up or event.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any such payment or
distribution which may be payable or deliverable by reason of the payment of any
other indebtedness of the Company being subordinated to the payment of the
Securities, before all Senior Indebtedness is paid in full or payment thereof
provided for, and if such fact shall, at or prior to the time of such payment or
distribution, have been made known to the Trustee or such Holder, as the case
may be, then and in such event such payment or distribution shall be paid over
or delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of
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the Company for application to the payment of all Senior Indebtedness remaining
unpaid, to the extent necessary to pay all Senior Indebtedness in full, after
giving effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness.
For purposes of this Article only, the words "cash, property or
securities" shall not be deemed to include securities of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, which are subordinated
in right of payment to all Senior Indebtedness which may at the time be
outstanding to substantially the same extent as, or to a greater extent than,
the Securities are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the conveyance
or transfer of its properties and assets substantially as an entirety to another
Person upon the terms and conditions set forth in Article Eight shall not be
deemed a dissolution, winding up, liquidation, reorganization, general
assignment for the benefit of creditors or marshaling of assets and liabilities
of the Company for the purposes of this Section if the Person formed by such
consolidation or into which the Company is merged or which acquires by
conveyance or transfer such properties and assets substantially as an entirety,
as the case may be, shall, as a part of such consolidation, merger, conveyance
or transfer, comply with the conditions set forth in Article Eight.
SECTION 12.3. Prior Payment to Senior Indebtedness upon Acceleration of
---------------------------------------------------------
Securities.
- ----------
In the event that any Securities are declared due and payable before
their Stated Maturity, then and in such event the holders of Senior Indebtedness
outstanding at the time such Securities so become due and payable shall be
entitled to receive payment in full of all amounts due on or in respect of such
Senior Indebtedness, or provision shall be made for such payment in money or
money's worth, before the Holders of the Securities are entitled to receive any
payment (including any payment which may be payable by reason of the payment of
any other indebtedness of the Company being subordinated to the payment of the
Securities) by the Company on account of the principal of or premium, if any, or
interest on the Securities or on account of the purchase or other acquisition of
Securities.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to the Trustee or such Holder, as the
case may be, then and in such event such payment shall be paid over the
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 12.2 would be applicable.
SECTION 12.4. No Payment When Senior Indebtedness in Default.
----------------------------------------------
(a) In the event and during the continuation of any default in the
payment of principal of or premium, if any, or interest on any Senior
Indebtedness beyond any applicable grace period with respect thereto, or in the
event that any event of default with respect to any
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Senior Indebtedness shall have occurred and be continuing and shall have
resulted in such Senior Indebtedness becoming or being declared due and payable
prior to the date on which it would otherwise have become due and payable,
unless and until such event of default shall have been cured or waived or shall
have ceased to exist and such acceleration shall have been rescinded or
annulled, or (b) in the event any judicial proceeding shall be pending with
respect to any such default in payment or event of default, then no payment
(including any payment which may be payable by reason of the payment of any
other indebtedness of the Company being subordinated to the payment of the
Securities) shall be made by the Company on account of the principal of or
premium, if any, or interest on the Securities or on account of the purchase or
other acquisition of Securities.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to the Trustee or such Holder, as the
case may be, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 12.2 would be applicable.
SECTION 12.5. Payment Permitted If No Default.
-------------------------------
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Securities shall prevent (a) the Company, at any time except during
the pendency of any case, proceeding, dissolution, liquidation or other winding
up, general assignment for the benefit of creditors or other marshaling of
assets and liabilities of the Company referred to in Section 12.2 or under the
conditions described in Section 12.3 or 12.4, from making payments at any time
of principal of and premium, if any, or interest on the Securities, or (b) the
application by the Trustee of any money deposited with it hereunder to the
payment of or on account of the principal of and premium, if any, or interest on
the Securities or the retention of such payment by the Holders, if, at the time
of such application by the Trustee, it did not have knowledge that such payment
would have been prohibited by the provisions of this Article.
SECTION 12.6. Subrogation to Rights of Holders of Senior Indebtedness.
-------------------------------------------------------
Subject to the payment in full of all amounts due on or in respect of
Senior Indebtedness, the Holders of the Securities 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 (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 substantially the same
extent as the Securities are subordinated and is entitled to like rights of
subrogation) to the rights of the holders of such Senior Indebtedness to receive
payments and distributions of cash, property and securities applicable to the
Senior Indebtedness until the principal of and premium, if any, and Interest on
the Securities shall be paid in full. For 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 Securities or the Trustee
would otherwise be entitled except
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for the provisions of this Article, and no payments over pursuant to the
provisions of this Article to the holders of Senior Indebtedness by Holders of
the Securities or the Trustee, shall, as among the Company, its creditors other
than holders of Senior Indebtedness and the Holders of the Securities, be deemed
to be a payment or distribution by the Company to or on account of the Senior
Indebtedness.
SECTION 12.7. Provisions Solely to Define Relative Rights.
-------------------------------------------
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Securities is
intended to or shall (a) impair, as among the Company, its creditors other than
holders of Senior Indebtedness and the Holders of the Securities, the obligation
of the Company, which is absolute and unconditional, to pay to the Holders of
the Securities the principal of and premium, if any, and interest on the
Securities as and when the same shall become due and payable in accordance with
their terms; or (b) affect the relative rights against the Company or the
Holders of the Securities and creditors of the Company other than the holders of
Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Security
from exercising all remedies otherwise permitted by applicable law upon default
under this Indenture, subject to the rights, if any, under this Article of the
holders of Senior Indebtedness to receive cash, property and securities
otherwise payable or deliverable to the Trustee or such Holder.
SECTION 12.8. Trustee to Effectuate Subordination.
-----------------------------------
Each holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 12.9. No Waiver of Subordination Provisions.
-------------------------------------
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 any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article or
the obligations hereunder of the Holders of the Securities to the holders of
Senior Indebtedness, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Indebtedness, or otherwise amend
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or supplement in any manner Senior Indebtedness or any instrument evidencing the
same or any agreement under which Senior Indebtedness is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Indebtedness; (iii) release any Person liable in any
manner for the collection of Senior Indebtedness; and (iv) exercise or refrain
from exercising any rights against the Company and any other Person.
SECTION 12.10. Notice to Trustee.
-----------------
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities. Notwithstanding the provisions of
this Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Indebtedness or from any trustee therefor; and,
prior to the receipt of any such written notice, the Trustee, subject to the
provisions of Section 6.1, shall be entitled in all respects to assume that no
such facts exist; provided, however, that if the Trustee shall not have received
-------- -------
the notice provided for in this Section at least four Business Days prior to the
date upon which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of and premium, if
any, or interest on any Security), then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such money and to apply the same to the purpose for which such money was
received and shall not be affected by any notice to the contrary which may be
received by it within four Business Days prior to such date.
Subject to the provisions of Section 6.1, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee
therefor) to establish that such notice has been given by a holder of Senior
Indebtedness (or a trustee therefor). In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of any
Person as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior 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, and if such evidence
is not furnished, the Trustee may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such payment.
SECTION 12.11. Reliance on Judicial Order or Certificate of Liquidating Agent.
--------------------------------------------------------------
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee, subject to the provisions of Section 6.1, and the
Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy,
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receiver, liquidating trustee, custodian, assignee for the benefit of creditors,
agent or other person making such payment or distribution, delivered to the
Trustee or to the Holders of Securities, for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
the Senior 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.
SECTION 12.12. Trustee Not Fiduciary for Holders of Senior Indebtedness.
--------------------------------------------------------
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to Holders of Securities
or to the Company or to any other Person cash, property or securities to which
holders of Senior Indebtedness shall be entitled by virtue of this Article or
otherwise. 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, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Article against the Trustee.
SECTION 12.13. Rights of Trustee as Holder of Senior Indebtedness; Preservation
----------------------------------------------------------------
of Trustee's Rights.
-------------------
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Indebtedness which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 6.7.
SECTION 12.14. Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee; provided,
--------
however, that Section 12.13 shall not apply to the Company or any Affiliate of
- -------
the Company if it or such Affiliate acts as Paying Agent.
SECTION 12.15. Certain Conversions Deemed Payment.
----------------------------------
For the purposes of this Article only, (1) the issuance and delivery
of junior securities upon conversion of Securities in accordance with Article
Thirteen shall not be deemed to constitute a payment or distribution on account
of the principal of or premium or interest on Securities or on account of the
purchase or other acquisition of Securities, and (2) the payment, issuance or
delivery of cash, property or securities (other than junior securities) upon
conversion
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of a Security shall be deemed to constitute payment on account of the principal
of such Security. For the purposes of this Section, the term "junior securities"
means (a) shares of any class of capital stock of the Company and (b) securities
of the Company which are subordinated in right of payment to all Senior
Indebtedness which may be outstanding at the time of issuance or delivery of
such securities to substantially the same extent as, or to a greater extent
than, the Securities are so subordinated as provided in this Article. Nothing
contained in this Article or elsewhere in this Indenture or in the Securities is
intended to or shall impair, as among the Company, its creditors other than
holders of Senior Indebtedness and the Holders of the Securities, the right,
which is absolute and unconditional, of the Holder of any Security to convert
such Security in accordance with Article Thirteen.
SECTION 12.16. No Suspension of Remedies.
-------------------------
Nothing contained in this Article shall limit the right of the Trustee
or the Holders of the Securities to take any action to accelerate the maturity
of the Securities pursuant to the provisions described under Article Five and as
set forth in this Indenture or to pursue any rights or remedies hereunder or
under applicable law, subject to the rights, if any, under this Article of the
holders, from time to time, of Senior Indebtedness to receive the cash, property
or securities receivable upon the exercise of such rights or remedies.
ARTICLE THIRTEEN
Conversion of Securities
SECTION 13.1. Conversion Privilege and Conversion Price.
-----------------------------------------
Subject to and upon compliance with the provisions of this Article, at
the option of the Holder thereof, any Security or any portion of the principal
amount thereof which equals $1,000 or any integral multiple thereof may be
converted at any time at the principal amount thereof, or of such portion
thereof, into fully paid and nonassessable shares (calculated as to each
conversion to the nearest 1/100 of a share) of Common Stock, at the conversion
price, determined as hereinafter provided, in effect at the time of conversion.
Such conversion right shall expire at the close of business on September 15,
2002. In case a Security or portion thereof is called for redemption, such
conversion right in respect of the Security or portion so called shall expire at
the close of business on the second business day preceding the applicable
Redemption Date, unless the Company defaults in making the payment due upon
redemption.
The price at which shares of Common Stock shall be delivered upon
conversion (herein called the "conversion price") shall be initially $69.15 per
share of Common Stock. The conversion price shall be adjusted in certain
instances as provided in paragraphs (a), (b), (c), (d), (e), (f) and (i) of
Section 13.4.
SECTION 13.2. Exercise of Conversion Privilege.
--------------------------------
In order to exercise the conversion privilege, the Holder of any
Security shall surrender such Security, duly endorsed or assigned to the Company
or in blank, at any office or
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agency of the Company maintained pursuant to Section 10.2, accompanied by
written notice to the Company in the form provided in the Security (or such
other notice as is acceptable to the Company) at such office or agency that the
Holder elects to convert such Security or, if less than the entire principal
amount thereof is to be converted, the portion thereof to be converted.
Securities surrendered for conversion during the period from the close of
business on any Regular Record Date next preceding any Interest Payment Date to
the close of business on such Interest Payment Date shall (except in the case of
Securities or portions thereof which have been called for redemption) be
accompanied by payment in New York Clearing House funds or other funds
acceptable to the Company of an amount equal to the interest payable on such
Interest Payment Date on the principal amount being surrendered for conversion.
Except as provided in the immediately preceding sentence and subject to the
fourth paragraph of Section 3.7, no payment or adjustment shall be made upon any
conversion on account of any interest accrued on the Securities surrendered for
conversion or on account of any dividends on the Common Stock issued upon
conversion.
Securities shall be deemed to have been converted immediately prior to
the close of business on the day of surrender of such Securities for conversion
in accordance with the foregoing provisions, and at such time the rights of the
Holders of such Securities as Holders shall cease, and the Person or Persons
entitled to receive the Common Stock issuable upon conversion shall be treated
for all purposes as the record holder or holders of such Common Stock as and
after such time. As promptly as practicable on or after the conversion date,
the Company shall issue and shall deliver at such office or agency a certificate
or certificates for the number of full shares of Common Stock issuable upon
conversion, together with payment in lieu of any fraction of a share, as
provided in Section 13.3.
In the case of any Security which is converted in part only, upon such
conversion the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a new Security or
Securities of Authorized Denominations in aggregate principal amount equal to
the unconverted portion of the principal amount of such Security.
SECTION 13.3. Fractions of Shares.
-------------------
No fractional share of Common Stock shall be issued upon conversion of
Securities. If more than one Security shall be surrendered for conversion at
one time by the same Holder, the number of full shares which shall be issuable
upon conversion thereof shall be computed on the basis of the aggregate
principal amount of the Securities (or specified portions thereof) so
surrendered. Instead of any fractional share of such Common Stock which would
otherwise be issuable upon conversion of any Security or Securities (or
specified portions thereof), the Company shall pay a cash adjustment in respect
of such fraction in an amount equal to the same fraction of the Closing Price
(as hereinafter defined) at the close of business on the day of conversion (or,
if such day is not a Trading Day (as hereafter defined), on the Trading Day
immediately preceding such day).
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SECTION 13.4. Adjustment of Conversion Price.
------------------------------
(a) In case the Company shall pay or make a dividend or other
distribution on Common Stock exclusively in Common Stock or shall pay or make a
dividend or other distribution on any other class of capital stock of the
Company which dividend or distribution includes Common Stock, the conversion
price in effect at the opening of business on the day following the date fixed
for the determination of shareholders entitled to receive such dividend or other
distribution shall be reduced by multiplying such conversion price by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the total number of
shares constituting such dividend or other distribution, such 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 shall not pay any
dividend or make any distribution on shares of Common Stock held in the treasury
of the Company.
(b) Subject to paragraph (g) of this Section, in case the Company shall
pay or make a dividend or other distribution on Common Stock consisting
exclusively of, or shall otherwise issue to all holders of any class of Common
Stock, rights or warrants entitling the holders thereof to subscribe for or
purchase shares of Common Stock at a price per share less than the Current
Market Price (determined as provided in paragraph (h) of this Section) on the
date fixed for the determination of shareholders entitled to receive such rights
or warrants, the conversion price in effect at the opening of business on the
day following the date fixed for such determination shall be reduced by
multiplying such conversion price by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares of Common Stock
which the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would purchase at such
Current Market Price and the denominator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective immediately after
the opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (b), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company. The Company shall not issue any rights or warrants in
respect of shares of Common Stock held in the treasury of the Company.
(c) In case outstanding shares of Common Stock shall be subdivided into
a greater 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
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effective immediately after the opening of business on the day following the day
upon which subdivision or combination becomes effective.
(d) Subject to the last sentence of this paragraph (d) and to paragraph
(g) of this Section, in case the Company shall, by dividend or otherwise,
distribute to all holders of any class of Common Stock evidences of its
indebtedness, shares of any class of its capital stock, cash or other assets
(including securities, but excluding any rights or warrants referred to in
paragraph (b) of this Section, excluding any dividend or distribution paid
exclusively in cash and excluding any dividend or distribution referred to in
paragraph (a) of this Section), the conversion price shall be reduced by
multiplying the conversion price in effect immediately prior to the close of
business on the date fixed for the determination of shareholders entitled to
such distribution by a fraction of which the numerator shall be the Current
Market Price (determined as provided in paragraph (h) of this Section) on such
date less the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) on such
date of the portion of the evidences of indebtedness, shares of capital stock,
cash and other assets to be distributed applicable to one share of Common Stock
and the denominator shall be such Current Market Price, such reduction to become
effective immediately prior to the opening of business on the day following such
date. If the Board of Directors determines the fair market value of any
distribution for purposes of this paragraph (d) by reference to the actual or
when-issued trading market for any securities comprising part or all of such
distribution, it must in doing so consider the prices in such market over the
same period used in computing the Current Market Price pursuant to paragraph (h)
of this Section, to the extent possible. For purposes of this paragraph (d), any
dividend or distribution that includes shares of Common Stock, rights or
warrants to subscribe for or purchase shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock shall be deemed to
be (x) a dividend or distribution of the evidences of indebtedness, cash, assets
or shares of capital stock other than such shares of Common Stock, such rights
or warrants or such convertible or exchangeable securities (making any
conversion price reduction required by this paragraph (d)) immediately followed
by (y) in the case of such shares of Common Stock or such rights or warrants, a
dividend or distribution thereof (making any further conversion price reduction
required by paragraph (a) and (b) of this Section, except 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 paragraph (a) of this Section), or (z) in the case of such
convertible or exchangeable securities, a dividend or distribution of the number
of shares of Common Stock as would then be issuable upon the conversion or
exchange thereof, whether or not the conversion or exchange of such securities
is subject to any conditions (making any further conversion price reduction
required by paragraph (a) of this Section, except the shares deemed to
constitute 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 paragraph (a) of this Section).
(e) In case the Company shall, by dividend or otherwise, at any time
distribute to all holders of any class of Common Stock cash (excluding any cash
that is distributed as part of a distribution referred to in paragraph (d) of
this Section or in connection with a transaction to which Section 13.11 applies)
in an aggregate amount that, together with (A) the aggregate amount of any other
distributions to all holders of any class of Common Stock made exclusively
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in cash within the 12 months preceding the date fixed for the determination of
shareholders entitled to such distribution and in respect of which no conversion
price adjustment pursuant to this paragraph (e) has been made previously and (B)
the aggregate of any cash plus the fair market value (as determined by the Board
of Directors, whose determination shall be conclusive and described in a Board
Resolution) as of such date of determination of consideration payable in respect
of any tender offer by the Company or a Significant Subsidiary of the Company
for all or any portion of Common Stock consummated within the 12 months
preceding such date of determination and in respect of which no conversion price
adjustment pursuant to paragraph (f) of this Section has been made previously,
exceeds 12.5% of the product of the Current Market Price (determined as provided
in paragraph (h) of this Section) on such date of determination times the number
of shares of Common Stock outstanding on such date, the conversion price shall
be reduced by multiplying the conversion price in effect immediately prior to
the close of business on such date of determination by a fraction of which the
numerator shall be the Current Market Price (determined as provided in paragraph
(h) of this Section) on such date less the amount of cash to be distributed at
such time applicable to one share of Common Stock and the denominator shall be
such Current Market Price, such reduction to become effective immediately prior
to the opening of business on the day after such date.
(f) In case a tender offer made by the Company or a Significant
Subsidiary of the Company for all or any portion of Common Stock shall be
consummated and such tender offer shall involve an aggregate consideration
having a fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) as of the
last time (the "Expiration Time") that tenders may be made pursuant to such
tender offer (as it shall have been amended) that, together with (A) the
aggregate of the cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution) as of the Expiration Time of the other consideration paid in respect
of any other tender offer by the Company or a Significant Subsidiary of the
Company for all or any portion of Common Stock consummated within the 12 months
preceding the Expiration Time and in respect of which no conversion price
adjustment pursuant to this paragraph (f) has been made previously and (B) the
aggregate amount of any distributions to all holders of any class of Common
Stock made exclusively in cash within the 12 months preceding the Expiration
Time and in respect of which no conversion price adjustment pursuant to
paragraph (e) of this Section has been made previously, exceeds the 12.5% of the
product of the Current Market Price (determined as provided in paragraph (h) of
this Section) immediately prior to the Expiration Time times the number of
shares of Common Stock outstanding (including any tendered shares) at the
Expiration Time, the conversion price shall be reduced by multiplying the
conversion price in effect immediately prior to the Expiration Time by a
fraction of which the numerator shall be (x) the product of the Current Market
Price (determined as provided in paragraph (h) of this Section) immediately
prior to the Expiration Time times the number of shares of Common Stock
outstanding (including any tendered shares at the Expiration Time minus (y) the
fair market value (determined as aforesaid) of the aggregate consideration
payable to shareholders upon consummation of such tender offer and the
denominator shall be the product of (A) such Current Market Price times (B) such
number of outstanding shares at the Expiration Time minus the number of shares
accepted for payment in such tender offer (the "Purchased Shares"), such
reduction to become effective immediately prior
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to the opening of business on the day following the Expiration Time; provided,
--------
that if the number of Purchased Shares or the aggregate consideration payable
therefor have not been finally determined by such opening of business, the
adjustment required by this paragraph (f) shall, pending such final
determination, be made based upon the preliminarily announced results of such
tender offer, and, after such final determination shall have been made, the
adjustment required by this paragraph (f) shall be made based upon the number of
Purchased Shares and the aggregate consideration payable therefor as so finally
determined.
(g) The reclassification of any class of Common Stock into securities
which include securities other than Common Stock (other than any
reclassification upon a consolidation or merger to which Section 13.11 applies)
shall be deemed to involve (i) a distribution of such securities other than
Common Stock to all holders of such class of Common Stock (and the effective
date of such reclassification shall be deemed to be "the date fixed for the
determination of shareholders entitled to such distribution" within the meaning
of paragraph (d) of this Section), and (ii) a subdivision or combination, as the
case may be, of the number of shares of Common Stock outstanding immediately
prior to such reclassification into the number of shares of Common Stock
outstanding immediately thereafter (and the effective date of such
reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective,"
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (c) of this Section).
Rights or warrants issued by the Company to all holders of any class
of Common Stock entitling the holders thereof to subscribe for or purchase
shares of Common Stock (either initially or under certain circumstances), which
rights or warrants (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, in each case in clauses (i) through (iii) until the
occurrence of a specified event or events ("Trigger Event"), shall for purposes
of this Section 13.4 not be deemed issued until the occurrence of the earliest
Trigger Event. If any such rights or warrants, including any such existing
rights or warrants distributed prior to the date of this Indenture are subject
to subsequent events, upon the occurrence of each of which such rights or
warrants shall become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the occurrence of each such event shall be
deemed to be such date of issuance and record date with respect to new rights or
warrants (and a termination or expiration of the existing rights or warrants
without exercise by the holder thereof). In addition, in the event of any
distribution (or deemed distribution) of rights or warrants, or any Trigger
Event with respect thereto, that was counted for purposes of calculating a
distribution amount for which an adjustment to the Conversion Price under this
Section 13.4 was made, (1) in the case of any such rights or warrant which shall
all have been redeemed or repurchased without exercise by any holders thereof,
the Conversion Price shall be readjusted upon such final redemption or
repurchase to give effect to such distribution or Trigger Event, as the case may
be, as though it were a cash distribution, equal to the per share redemption or
repurchase price received by a holder 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 which
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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.
(h) For the purpose of any computation under this paragraph and
paragraphs (b), (d) and (e) of this Section, the current market price per share
of Common Stock (the "Current Market Price") on any date shall be deemed to be
the average of the daily Closing Prices for the 5 consecutive Trading Days
selected by the Company commencing not more than 20 Trading Days before, and
ending not later than, the date in question; provided, however, that (i) if the
-------- -------
"ex" date for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the conversion price pursuant to
paragraph (a), (b), (c), (d), (e) or (f) above occurs on or after the 20th
Trading Day prior to the date in question and prior to the "ex" date for the
issuance or distribution requiring such computation, 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, (ii) if the
"ex" date for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the conversion price pursuant to
paragraph (a), (b), (c), (d), (e) or (f) above occurs on or after the "ex" date
for the issuance or distribution requiring such computation and on or prior to
the date 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 (iii) if the "ex"
date for the issuance or distribution requiring such computation is on or prior
to the date in question, after taking into account any adjustment required
pursuant to clause (ii) 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 on the date in question (as determined by the
Board of Directors in a manner consistent with any determination of such value
for purposes of paragraph (d) or (e) of this Section, whose determination shall
be conclusive and described in a Board Resolution) 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 the purpose of any computation under paragraph (f) of this
Section, the Current Market Price on any date shall be deemed to be the average
of the daily Closing Prices for the 5 consecutive Trading Days selected by the
Company commencing on or after the latest (the "Commencement Date") of (i) the
date 20 Trading Days before the date in question, (ii) the date of commencement
of the tender offer requiring such computation and (iii) the date of the last
amendment, if any, of such tender offer involving a change in the maximum number
of shares for which tenders are sought or a change in the consideration offered,
and ending not later than the Expiration Time of such tender offer; provided,
--------
however, that if the "ex" date for any event (other than the tender offer
- -------
requiring such computation) that requires an adjustment to the conversion price
pursuant to paragraph (a), (b), (c), (d), (e) or (f) above occurs on or after
the Commencement Date and prior to the Expiration Time for the tender offer
requiring such computation, 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. The closing price for any Trading Day
(the "Closing Price") shall be the last reported sales price regular way or, in
case no such reported sale takes place on such day, the average of the reported
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closing bid and asked prices regular way, in either case on the New York Stock
Exchange or, if the Common Stock is not listed or admitted to trading on such
exchange, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading or, if not listed or admitted to trading
on any national securities exchange, on the Nasdaq Stock Market's National
Market or, if the Common Stock is not listed or admitted to trading on any
national securities exchange or quoted on such National Market, the average of
the closing bid and asked prices in the over-the-counter market as furnished by
any New York Stock Exchange member firm selected from time to time by the
Company for that purpose. For purposes of this paragraph, the term "Trading Day"
means each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day
on which securities are generally not traded on the applicable securities
exchange or in the applicable securities market and the term "`ex' date," (i)
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 Prices were obtained without the right to
receive such issuance or distribution, (ii) 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
(iii) when used with respect to any tender offer means the first date on which
the Common Stock trades regular way on such exchange or in such market after the
last time that tenders may be made pursuant to such tender offer (as it shall
have been amended).
(i) The Company may make such reductions in the conversion price, in
addition to those required by paragraphs (a), (b), (c), (d), (e) and (f) of this
Section, (i) to the extent permitted by law, by any amount for any period of at
least 20 days or (ii) as it considers to be advisable (as evidenced by a Board
Resolution) in order that any event treated for federal income tax purposes as a
dividend of stock or stock rights shall not be taxable to the recipients or, if
that is not possible, to diminish any income taxes that are otherwise payable
because of such event.
(j) No adjustment in the conversion price shall be required unless such
adjustment (plus any other adjustments not previously made by reason of this
paragraph (j)) would require an increase or decrease of at least 1% in the
conversion price; provided, however, that any adjustments which by reason of
-------- -------
this paragraph (j) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment.
(k) Notwithstanding any other provision of this Section 13.4, no
adjustment to the conversion price shall reduce the conversion price below the
then par value per share of the Common Stock, and any such purported adjustment
shall instead reduce the conversion price to such par value. The Company hereby
covenants not to take any action to increase the par value per share of the
Common Stock.
SECTION 13.5. Notice of Adjustments of Conversion Price.
-----------------------------------------
Whenever the conversion price is adjusted as herein provided:
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(a) the Company shall compute the adjusted conversion price in
accordance with Section 13.4 and shall prepare an Officers' Certificate signed
by the Treasurer of the Company setting forth the adjusted conversion price and
showing in reasonable detail the facts upon which such adjustment is based, and
such certificate shall forthwith be filed (with a copy to the Trustee) at each
office or agency maintained for the purpose of conversion of Securities pursuant
to Section 10.2; and
(b) a notice stating that the conversion price has been adjusted and
setting forth the adjusted conversion price shall forthwith be prepared, and as
soon as practicable after it is prepared, such notice shall be mailed by the
Company to all Holders at their last addresses as they shall appear in the
Security Register. In the case of any adjustment pursuant to Section 13.4(i)(i),
such notice shall be mailed at least 15 days before the date the reduced
conversion price shall take effect and shall state the reduced conversion price
and the period it will be in effect.
SECTION 13.6. Notice of Certain Corporate Action.
----------------------------------
In case:
(a) the Company shall declare a dividend (or any other distribution)
on Common Stock payable (i) otherwise than exclusively in cash or (ii)
exclusively in cash in an amount that would require a conversion price
adjustment pursuant to paragraph (e) of Section 13.4; or
(b) the Company shall authorize the granting to the holders of any
Common Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any other rights (excluding shares of capital
stock or option for capital stock issued pursuant to a benefit plan for
employees, officers or directors of the Company); or
(c) of any reclassification of Common Stock (other than a subdivision
or combination of the outstanding shares of Common Stock), or of any
consolidation, merger or share exchange 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
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company shall commence a tender offer for all or a portion of
outstanding shares of Common Stock (or shall amend any such tender offer to
change the maximum number of shares being sought or the amount or type of
consideration being offered therefor);
then the Company shall cause to be filed at each office or agency maintained
pursuant to Section 10.2, and shall cause to be mailed to the Trustee and all
Holders at their last addresses as they shall appear in the Security Register,
at least 21 days (or 11 days in any case specified in
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clause (a), (b) or (e) above) prior to the applicable record, effective or
expiration date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution or granting
of rights or warrants, or, if a record is not to be taken, the date as of which
the holders of Common Stock of record who will be entitled to such dividend,
distribution, rights or warrants are to be determined, (y) the date on which
such reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, share
exchange, sale, transfer, dissolution, liquidation or winding up, or (z) the
date on which such tender offer commenced, the date on which such tender offer
is scheduled to expire unless extended, the consideration offered and the other
material terms thereof (or the material terms of any amendment thereto). Neither
the failure to give any such notice nor any defect therein shall affect the
legality or validity of any action described in clauses (a) through (e) of this
Section 13.6.
SECTION 13.7. Company to Reserve Common Stock.
-------------------------------
The Company shall at all times reserve and keep available, free from
preemptive rights, out of the authorized but unissued Common Stock or out of the
Common Stock held in treasury, for the purpose of effecting the conversion of
Securities, the full number of shares of Common Stock then issuable upon the
conversion of all outstanding Securities. Shares of Common Stock issuable upon
conversion of outstanding Securities shall be issued out of the Common Stock
held in Treasury to the extent available.
SECTION 13.8. Taxes on Conversions.
--------------------
The Company will pay any and all taxes that may be payable in respect
of the issue or delivery of shares of Common Stock on conversion of Securities
pursuant hereto. 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 shares of Common Stock in a name other than that of the Holder of
the Security or Securities to be converted, and no such issue or delivery shall
be made unless and until the Person requesting such issue has paid to the
Company the amount of any such tax, or has established to the satisfaction of
the Company that such tax has been paid.
SECTION 13.9. Covenant as to Common Stock.
---------------------------
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Securities will upon issue be fully paid and
nonassessable and, except as provided in Section 13.8, the Company will pay all
taxes, liens and charges with respect to the issue thereof.
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SECTION 13.10. Cancellation of Converted Securities.
------------------------------------
All Securities delivered for conversion shall be delivered to the
Trustee to be canceled by or at the direction of the Trustee, which shall
dispose of the same as provided in Section 3.9.
SECTION 13.11. Provisions of Consolidation, Merger or Sale of Assets.
-----------------------------------------------------
In case of any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another Person into the Company
(other than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock) or any sale or
transfer of all or substantially all of the assets of the Company, the Person
formed by such consolidation or resulting from such merger or which acquires
such assets, as the case may be, shall execute and deliver to the Trustee a
supplemental indenture providing that the Holder of each Security then
Outstanding shall have the right thereafter, during the period such Security
shall be convertible as specified in Section 13.1, to convert such Security only
into the kind and amount of securities, cash and other property, if any,
receivable upon such consolidation, merger, sale or transfer by a holder of the
number of shares of Common Stock into which such Security might have been
converted immediately prior to such consolidation, merger, sale or transfer,
assuming such holder of Common Stock (i) is not a Person with which the Company
consolidated or into which the Company merged or which merged into the Company
or to which such sale or transfer was made, as the case may be (a "Constituent
Person"), or an Affiliate of a Constituent Person and (ii) failed to exercise
his rights of election, if any, as to the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer
(provided that if the kind or amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer is not the same for
each share of Common Stock held immediately prior to such consolidation, merger,
sale or transfer by other than a Constituent Person or an Affiliate thereof and
in respect of which such rights of election shall not have been exercised
("nonelecting share"), then for the purpose of this Section the kind and amount
of securities, cash and other property receivable upon such consolidation,
merger, sale or transfer by each nonelecting share shall be deemed to be the
kind and amount so receivable per share by a plurality of the nonelecting
shares). Such supplemental indenture shall provide for adjustments which, for
events subsequent to the effective date of such supplemental indenture, shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Article. The above provisions of this Section shall similarly apply to
successive consolidations, mergers, sales or transfers.
SECTION 13.12. Trustee's Disclaimer.
--------------------
The Trustee has no duty to determine when an adjustment under this
Article Thirteen should be made, how it should be made or what such adjustment
should be, but may accept as conclusive evidence of the correctness of any such
adjustment, and shall be protected in relying upon, the Officers' Certificate
with respect thereto which the Company is obligated to file with the Trustee
pursuant to Section 13.5. The Trustee makes no representation as to the
validity
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or value of any securities or assets issued upon conversion of Securities, and
the Trustee shall not be responsible for the Company's failure to comply with
any provisions of this Article Thirteen.
The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture executed
pursuant to Section 13.11, but may accept as conclusive evidence of the
correctness thereof, and shall be protected in relying upon, the Officers'
Certificate with respect thereto which the Company is obligated to file with the
Trustee pursuant to Section 13.11.
ARTICLE FOURTEEN
Right to Require Repurchase
SECTION 14.1. Right to Require Repurchase.
---------------------------
In the event that there shall occur a Repurchase Event (as defined in
Section 14.6), then each Holder shall have the right, at such Holder's option,
to require the Company to purchase, and upon the exercise of such right, the
Company shall, subject to the provisions of Section 12.3 and applicable law,
purchase, all or any part of such Holder's Securities on the date (the
"Repurchase Date") that is 30 days after the date the Company gives notice of
the Repurchase Event as contemplated in Section 14.2(a) at a price (the
"Repurchase Price") equal to 100% of the principal amount thereof, together with
accrued and unpaid interest to the Repurchase Date.
SECTION 14.2. Notice; Method of Exercising Repurchase Right.
---------------------------------------------
(a) On or before the 15th day after the occurrence of a Repurchase
Event, the Company, or at the request of the Company received by the Trustee at
least 40 days prior to the Repurchase Date, the Trustee (in the name and at the
expense of the Company), shall give notice of the occurrence of the Repurchase
Event and of the repurchase right set forth herein arising as a result thereof
by first-class mail, postage prepaid, to the Trustee and to each Holder of the
Securities at such Holder's address appearing in the Security Register. The
Company shall also deliver a copy of such notice of a repurchase right to the
Trustee.
Each notice of a repurchase right shall state:
(1) the event constituting the Repurchase Event and the date thereof,
(2) the Repurchase Date,
(3) the date by which the repurchase right must be exercised,
(4) the Repurchase Price, and
(5) the instructions a Holder must follow to exercise a repurchase
right.
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No failure of the Company to give the foregoing notice shall limit any Holder's
right to exercise a repurchase right. The Trustee shall have no affirmative
obligation to determine if there shall have occurred a Repurchase Event.
(b) To exercise a repurchase right, a Holder shall deliver to the
Company (or an agent designated by the Company for such purpose in the notice
referred to in (a) above) and to the Trustee on or before the close of business
on the Repurchase Date (i) written notice of the Holder's exercise of such
right, which notice shall set forth the name of the Holder, the principal amount
of the Security or Securities (or portion of a Security) to be repurchased, and
a statement that an election to exercise the repurchased right is being made
thereby, and (ii) the Security or Securities with respect to which the
repurchase right is being exercised, duly endorsed for transfer to the Company.
Such written notice shall be irrevocable. If the Repurchase Date falls between
any Regular Record Date and the next succeeding Interest Payment Date,
Securities to be repurchased must be accompanied by payment from the Holder of
an amount equal to the interest thereon which the registered Holder thereof is
to receive on such Interest Payment Date.
In the event a repurchase right shall be exercised in accordance with
the terms hereof, the Company shall on the Repurchase Date pay or cause to be
paid in cash to the Holder thereof the Repurchase Price of the Security or
Securities as to which the repurchase right had been exercised. In the event
that a repurchase right is exercised with respect to less than the entire
principal amount of a surrendered Security, the Company shall execute and
deliver to the Trustee and the Trustee shall authenticate for issuance in the
name of the Holder a new Security or Securities in the aggregate principal
amount of the unrepurchased portion of such surrendered security.
SECTION 14.3. Deposit of Repurchase Price.
---------------------------
On or prior to the Repurchase Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 10.3) an amount of
money in same day funds sufficient to pay the Repurchase Price of the Securities
which are to be repaid on the Repurchase Date.
SECTION 14.4. Securities Not Repurchased on Repurchase Date.
---------------------------------------------
If any Security surrendered for repurchase shall not be so paid on the
Repurchase Date, the principal shall, until paid, bear interest to the extent
permitted by applicable law from the Repurchase Date at the rate per annum borne
by such Security.
SECTION 14.5. Securities Repurchased in Part.
------------------------------
Any Security which is to be repurchased only in part shall be
surrendered at any office or agency of the Company designated for that purpose
pursuant to Section 10.2 (with, if the Company or the Trustee so requires, due
endorsement by, or written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or
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Securities of any Authorized Denomination as requested by such Holder, in
aggregate principal amount equal to and in exchange for the unrepurchased
portion of the principal of the Security so surrendered.
SECTION 14.6. Certain Definitions.
-------------------
For purposes of this Article:
(a) A "Repurchase Event" shall have occurred upon the occurrence of a
Change in Control or Termination of Trading after the date of this Indenture and
on or prior to September 15, 2002.
(b) A "Change in Control" shall occur when :
(i) all or substantially all of the Company's assets are sold as
an entirety to any person or related group of persons;
(ii) there shall be consummated any consolidation or merger of
the Company (A) in which the Company is not the continuing or
surviving corporation (other than a consolidation or merger with a
Wholly-owned Subsidiary of the Company in which all shares of Common
Stock outstanding immediately prior to the effectiveness thereof are
changed into or exchanged for the same consideration) or (B) pursuant
to which Common Stock would be converted into cash, securities or
other property, in each case, other than a consolidation or merger of
the Company in which the holders of Common Stock immediately prior to
the consolidation or merger have, directly or indirectly, at least a
majority of the total voting power of all classes of capital stock
entitled to vote generally in the election of directors of the
continuing or surviving corporation immediately after such
consolidation or merger in substantially the same proportion as their
ownership of Common Stock immediately before such transaction;
(iii) any person, or any persons acting together which would
constitute a "group" for purposes of Section 13(d) of the Exchange Act
(a "Group") (in each case other than members of the Current Control
Group), together with any Affiliates thereof, shall beneficially own
(as defined in Rule 13d-3 under the Exchange Act) at least 50% of the
total voting power of all classes of capital stock of the Company
entitled to vote generally in the election of directors of the
Company;
(iv) at any time during any consecutive two-year period,
individuals who at the beginning of such period constituted the Board
of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election
by the stockholders of the Company was approved by a vote of 66 2/3%
of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination
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for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in
office; or
(v) the Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution.
(c) "Current Control Group" means the members of the Board of
Directors and the executive officers of the Company as of the date of the
Purchase Agreement, their spouses, children, parents and siblings, the trustee
of any trust created for the benefit of any such member of the Board of
Directors, officer or family member, the executor or administrator (in his or
her capacity as such) of the estate of any such member of the Board of
Directors, officer or family member.
(d) A "Termination of Trading" shall occur if the Common Stock (or
other common stock into which the Securities are then convertible) is neither
listed for trading on a U.S. national securities exchange nor approved for
trading on an established automated over-the-counter trading market in the
United States.
_____________________________
This instrument may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
90
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
CREDENCE SYSTEMS CORPORATION
By: ___________________________
Name:
Title:
Attest:
___________________________
STATE STREET BANK AND TRUST COMPANY OF
CALIFORNIA, N.A.,
as Trustee
By: __________________________________
Name: Mark Henson
Title: Assistant Vice President
Attest:
______________________________
91
<PAGE>
STATE OF )
: ss.:
COUNTY OF___________)
On the _________ day of September, 1997, before me personally came
________________________, to me known, who, being by me duly sworn, did depose
and say that he is ________________________ of Credence Systems Corporation, one
of the corporations described in and which executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation; and that he signed his name thereto by
like authority.
_____________________________________
STATE OF )
: ss.:
COUNTY OF __________)
On the _________ day of September, 1997, before me personally came
________________________, to me known, who, being by me duly sworn, did depose
and say that he is ________________________ of State Street Bank and Trust
Company of California, N.A., a ________________________, described in and which
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such seal; that it was so affixed by
authority of the Board of Directors of said corporation; and that he signed his
name thereto by like authority.
_____________________________________
<PAGE>
EXHIBIT A
---------
[FORM OF CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER
OF SECURITIES]
CERTIFICATE FOR EXCHANGE OR TRANSFER
Re: 5 1/4% Convertible Subordinated Notes due 2002
This Certificate relates to $_________ principal amount of Securities
held in *____________ book-entry or *____________ definitive form by _________
(the "Transferor").
The Transferor*:
[_] has requested the Trustee by written order to deliver in exchange
for its beneficial interest in a Global Security held by the
Depositary a Security or Securities in definitive, registered form
of authorized denominations and an aggregate principal amount equal
to its beneficial interest in such Global Security (or the portion
thereof indicated above); or
[_] has requested the Trustee by written order to deliver in exchange
for its Security or Securities a beneficial interest in a Global
Security held by the Depositary in a principal amount equal to the
aggregate principal amount of such Security or Securities; or
[_] has requested the Trustee by written order to exchange or register
the transfer of a Security or Securities.
In connection with such request and in respect of each such security, the
Transferor does hereby certify to the Company and the Trustee that
Transferor is familiar with the Indenture relating to the above captioned
Notes and, as provided in Section 3.5 of such Indenture, the transfer of
this Security does not require registration under the Securities Act (as
defined below) because*:
[_] Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 3.5(b)(ii)(A) or
Section 3.5(f)(i)(A) of the Indenture).
[_] Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of 1933, as
amended (the "Securities Act")) in reliance on Rule 144A or pursuant
to an exemption from registration in accordance with Regulation S
under the Securities Act (in satisfaction of Section 3.5(b)(ii)(B),
Section 3.5(c)(i), Section 3.5(d)(i), Section 3.5(f)(i)(B), Section
3.5(g)(iii) or Section 3.5(h)(iii) of the Indenture). An opinion of
counsel to the effect that such
_____________
* Check applicable box.
<PAGE>
transfer does not require registration under the Securities Act
accompanies this Certificate (in satisfaction of Section
3.5(b)(ii)(B), Section 3.5(c)(i), Section 3.5(d)(i), Section
3.5(f)(i)(B), Section 3.5(g)(iii) or Section 3.5(h)(iii) of the
Indenture).
[_] Such Security is being transferred in accordance with Rule 144 under
the Securities Act, or pursuant to an effective registration
statement under the Securities Act (in satisfaction of Section
3.5(b)(ii)(B), Section 3.5(f)(i)(B) or Section 3.5(k)(ii) of the
Indenture). If such Security is being transferred in accordance with
Rule 144 under the Securities Act, an opinion of counsel to the
effect that such transfer does not require registration under the
Securities Act accompanies this Certificate (in satisfaction of
Section 3.5(b)(ii)(B), Section 3.5(f)(i)(B) or Section 3.5(k)(ii) of
the Indenture).
[_] Such Security is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the
Securities Act, other than Rule 144A, 144 or Regulation S under the
Securities Act. An opinion of counsel to the effect that such
transfer does not require registration under the Securities Act
accompanies this Certificate (in satisfaction of Section
3.5(b)(ii)(C) or Section 3.5(f)(i)(C) of the Indenture).
You are entitled to rely upon this certificate and you are
irrevocably authorized to produce this certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
[INSERT NAME OF TRANSFEROR]
By: ____________________________________
Date:
<PAGE>
EXHIBIT 4.3
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of September 4, 1997
relating to
$115,000,000 in Aggregate Principal Amount
of 5 1/4% Convertible Subordinated
Notes due 2002
by and between
Credence Systems Corporation
and
Smith Barney Inc.
================================================================================
<PAGE>
This Registration Rights Agreement (the "Agreement") is made and
entered into as of September 4, 1997, by and between Credence Systems
Corporation, a Delaware corporation (the "Company") and Smith Barney Inc. (the
"Initial Purchaser"), who has purchased $100,000,000 in aggregate principal
amount of 5 1/4% Convertible Subordinated Notes due 2002 (the "Firm Notes") of
the Company pursuant to the Purchase Agreement (as defined below). The Company
also proposes, upon the terms and conditions set forth in the Purchase
Agreement, to issue and sell to the Initial Purchaser up to an additional
$15,000,000 aggregate principal amount of its 5 1/4% Convertible Subordinated
Notes due 2002 (the "Additional Notes"). The Firm Notes and the Additional
Notes are hereinafter collectively referred to as the "Notes."
This Agreement is made pursuant to a Purchase Agreement, dated
September 4, 1997 (the "Purchase Agreement"), between the Company and the
Initial Purchaser. In order to induce the Initial Purchaser to enter into the
Purchase Agreement, the Company has agreed to provide the registration rights
set forth in this Agreement. The execution and delivery of this Agreement is a
condition to closing under the Purchase Agreement. All defined terms used but
not defined herein shall have the meanings ascribed to them in the Indenture (as
defined herein).
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall
have the following meanings:
Act: The Securities Act of 1933, as amended.
---
Closing Date: The date on which all the Firm Notes are sold by
------------
the Company to the Initial Purchaser.
Commission: The Securities and Exchange Commission.
----------
Common Stock: The voting Common Stock, par value $.001 per
------------
share, of the Company.
Damages Payment Date: With respect to the Notes or the Common
--------------------
Stock, as applicable, each Interest Payment Date as defined in the Indenture.
Effectiveness Target Date: As defined in Section 4.
-------------------------
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Exempt Resales: The transactions in which the Initial Purchaser
--------------
proposes to sell the Notes (i) inside the United States to certain "qualified
institutional buyers" (as such term is defined in Rule 144A under the Act) and
(ii) outside the United States in reliance on Regulation S under the Act.
Holders: As defined in Section 2(b) hereof.
-------
Indenture: The Indenture, dated as of September 10, 1997,
---------
between the Company and First National Bank and Trust Company of California,
N.A., as trustee (the "Trustee"), pursuant to which the Notes are to be issued,
as such Indenture is amended or supplemented from time to time in accordance
with the terms thereof.
Interest Payment Date: As defined in the Indenture.
---------------------
NASD: National Association of Securities Dealers, Inc.
----
Offering Memorandum: The Offering Memorandum, dated September
-------------------
4,1997, and all amendments and supplements thereto, relating to the Notes and
prepared by the Company pursuant to the Purchase Agreement.
<PAGE>
Person: An individual, partnership, corporation, trust or
------
unincorporated organization, or a government or agency or political subdivision
thereof.
Preliminary Prospectus: As defined in Section 3(g).
----------------------
Prospectus: The prospectus included in the Shelf Registration
----------
Statement (as defined herein), as amended or supplemented by any Prospectus
Supplement with respect to the terms of the offering of any portion of the
Transfer Restricted Securities (as defined herein) covered by the Shelf
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments, and all material which may be
incorporated by reference into such prospectus.
Prospectus Supplement: As defined in Section 5(b).
---------------------
Record Holder: (i) With respect to any Damages Payment Date
-------------
relating to the Notes, each Person who is registered on the books of the
Registrar as the holder of Notes on the record date with respect to the Interest
Payment Date on which such Damages Payment Date shall occur and (ii) with
respect to any Damages Payment Date relating to the Common Stock, each Person
who is a holder of record of such Common Stock fifteen days prior to the Damages
Payment Date.
Shelf Registration Statement: As defined in Section 3(a)
----------------------------
hereof.
TIA: The Trust Indenture Act of 1939, as amended (15 U.S.C.
---
Section 77aaa-77bbbb) as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Debenture and share of
------------------------------
Common Stock of the Company issuable upon conversion of a Debenture, until each
such Debenture or share (i) has been effectively registered under the Act and
disposed of in accordance with the Shelf Registration Statement covering it,
(ii) is distributed to the public pursuant to Rule 144 or (iii) may be sold or
transferred pursuant to Rule 144(k) (or any similar provisions then in force)
under the Securities Act or otherwise.
Underwriter: Any underwriter, placement agent, selling broker,
-----------
dealer manager, qualified independent underwriter or similar securities industry
professional.
Underwritten Registration or Underwritten Offering: An
--------------------------------------------------
offering in which securities of the Company are sold to an Underwriter or with
the assistance of such Underwriter for reoffering to the public on a firm
commitment or best efforts basis.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled
------------------------------
to the benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is
-----------------------------------------
deemed to be a holder of Transfer Restricted Securities (each, a "Holder")
whenever such Person owns Transfer Restricted Securities.
SECTION 3. SHELF REGISTRATION
(a) The Company shall cause to be filed with the Commission on
or prior to 60 days after the Closing Date, a shelf registration statement
pursuant to Rule 415 under the Act (as may then be amended, the "Shelf
Registration Statement") on Form S-1, or Form S-3 if the use of such form is
then available, to cover resales of Transfer Restricted Securities by the
Holders thereof who satisfy certain conditions relating to the provision of
information in connection with the Shelf Registration Statement. The Holders of
such Transfer Restricted Securities shall have provided the representations
required pursuant to Section 3(g) hereof. The Company shall use its reasonable
best efforts to cause such Shelf Registration Statement to be declared effective
by the Commission on or prior to 120 days after the Closing Date. The Company
shall use its reasonable best efforts to keep such Shelf Registration Statement
continuously effective for a period ending two years following the Closing Date
or such shorter period that will terminate when each of the Transfer Restricted
Securities covered by the Shelf Registration
2
<PAGE>
Statement shall cease to be a Transfer Restricted Security. The Company further
agrees to use its reasonable best efforts to prevent the happening of any event
that would cause the Shelf Registration Statement to contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or to
be not effective and useable for resale of the Transfer Restricted Securities
during the period that such Shelf Registration Statement is required to be
effective and useable.
Upon the occurrence of any event that would cause the Shelf
Registration Statement (i) to contain a any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or (ii) to be not effective and
useable for resale of Transfer Restricted Securities during the period that such
Shelf Registration Statement is required to be effective and useable, the
Company shall as promptly as reasonably practicable file an amendment to the
Shelf Registration Statement, in the case of clause (i), correcting any such
misstatement or omission, and in the case of either clause (i) or (ii), use its
reasonable best efforts to cause such amendment to be declared effective and
such Shelf Registration Statement to become useable as soon as reasonably
practicable thereafter.
(b) None of the Company nor any of its security holders (other
than the Holders of Transfer Restricted Securities in such capacity) shall have
the right to include any of the Company's securities in the Shelf Registration
Statement.
(c) No Holder of Transfer Restricted Securities may include any
of its Transfer Restricted Securities in any Shelf Registration Statement
pursuant to this Agreement unless such Holder furnishes to the Company in
writing, within 10 business days after receipt of a request therefor, such
information as the Company may reasonably request for use in connection with any
Shelf Registration Statement or Prospectus or preliminary Prospectus (a
"Preliminary Prospectus") included therein.
SECTION 4. LIQUIDATED DAMAGES
(a) If (i) the Shelf Registration Statement is not filed with
the Commission on or prior to 60 days after the Closing Date, (ii) the Shelf
Registration Statement has not been declared effective by the Commissioner
within 120 days after the Closing Date (the "Effectiveness Target Date"), or
(iii) the Shelf Registration Statement is filed and declared effective but shall
thereafter cease to be effective (without being succeeded immediately by any
additional Shelf Registration Statement filed and declared effective) or useable
for the offer and sale of Transfer Restricted Securities for a period of time
(including any period during which offers and sales are prohibited) which shall
exceed 60 days in the aggregate in any 12-month period during the period
beginning on the Closing Date and ending on or prior to the second anniversary
of the Closing Date (each such event referred to in clauses (i) through (iii), a
"Registration Default"), the Company will pay liquidated damages to each Holder
of Transfer Restricted Securities who has complied with such Holder's
obligations under this Agreement; provided, however, that if any Registration
Default results solely from the failure of any Holder of Transfer Restricted
Shares to provide the Company with information required by it in connection with
the Shelf Registration Statement, the Company shall not be liable for any
liquidated damages hereunder for so long as such Registration Default continues
solely due to the failure of such Holder or Holders to provide the required
information. The amount of liquidated damages payable during any period in which
a Registration Default shall have occurred and be continuing is that amount
which is equal to one-quarter of one percent (25 basis points) per annum per
$1,000 principal amount of Notes or, if applicable, $2.50 per annum per 14.4613
shares of Common Stock (subject to adjustment in the event of stock splits,
stock recombinations, stock dividends and the like) constituting Transfer
Restricted Securities for the first 90 days during which a Registration Default
has occurred and is continuing and 50 basis points per annum per $1,000
principal amount of Notes or $5.00 per annum per 14.4613 shares of Common Stock
(subject to adjustment as set forth above) constituting Transfer Restricted
Securities for any additional days during which a Registration Default has
occurred and is continuing. It being understood that all calculations pursuant
to the preceding sentences shall be carried out to four decimals. All accrued
liquidated damages shall be paid to Record Holders by wire transfer of
immediately available funds or by federal funds check by the Company on each
Damages Payment Date. Following the cure of all Registration Defaults,
liquidated damages will cease to accrue with respect to such Registration
Default.
3
<PAGE>
All of the Company's obligations set forth in the preceding
paragraph which are outstanding with respect to any Transfer Restricted Security
at the time such security ceases to be a Transfer Restricted Security shall
survive until such time as all such obligations with respect to such security
shall have been satisfied in full.
SECTION 5. REGISTRATION PROCEDURES
In connection with the Shelf Registration Statement, the Company
will use its reasonable best efforts to effect such registration to permit the
sale of the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution or disposition thereof, and pursuant
thereto the Company will as expeditiously as possible after the Closing Date:
(a) prepare and file with the Commission a Shelf Registration
Statement relating to the registration on Form S-1, or Form S-3 if the use of
such form is then available, for the sale of the Transfer Restricted Securities
in accordance with the intended method or methods of distribution thereof and
shall include all financial statements required to be included or incorporated
by reference therein; cooperate and assist in any filings required to be made
with the NASD and use its reasonable best efforts to cause such Shelf
Registration Statement to become effective and approved by such governmental
agencies or authorities as may be necessary to enable the selling Holders to
consummate the disposition of such Transfer Restricted Securities; provided,
however, that before filing a Shelf Registration Statement or any Prospectus, or
any amendments or supplements thereto, the Company will furnish to the Holders
copies of all such documents filed (except that the Company shall not be
required to furnish any exhibits to such documents, including those incorporated
by reference, unless so requested by a Holder in writing), and the Company will
not file any Shelf Registration Statement or amendment thereto or any Prospectus
or any supplement thereto to which and if (A) only Notes are to be registered in
the Shelf Registration Statement and the Holders of a majority in aggregate
principal amount of the Notes registered in the Shelf Registration Statement
shall reasonably object, or (B) any shares of Common Stock issued upon
conversion of the Notes are included in the Shelf Registration Statement and the
Holders of a majority of the shares of Common Stock so registered in the Shelf
Registration Statement shall reasonably object, in each such case within five
business days after the receipt thereof. A Holder or Underwriter, if any, shall
be deemed to have reasonably objected to such filing if the Shelf Registration
Statement, amendment, Prospectus or supplement, as applicable, as proposed to be
filed contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading which misstatement or omission is specifically identified
to the Company in writing within such five business days;
(b) prepare and file with the Commission such amendments and
post-effective amendments to the Shelf Registration Statement as may be
necessary to keep the Shelf Registration Statement effective for the applicable
period set forth in Section 3(a) hereof, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Shelf
Registration Statement have been sold; cause the Prospectus to be supplemented
by any required supplement thereto (a "Prospectus Supplement"), and as so
supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully
with the applicable provisions of Rules 424 and 430A under the Act in a timely
manner; and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Shelf Registration Statement
during the applicable period in accordance with the intended method or methods
of distribution by the sellers thereof set forth in such Shelf Registration
Statement, Prospectus or Prospectus Supplement;
(c) if requested by the Holders of Transfer Restricted
Securities, or if the Transfer Restricted Securities are being sold in an
Underwritten Offering, the Underwriter(s) of such Underwritten Offering,
promptly incorporate in the Prospectus, any Prospectus Supplement or post-
effective amendment to the Shelf Registration Statement such information as the
Underwriters and/or the Holders of Transfer Restricted Securities being sold
agree should be included therein relating to the plan of distribution of the
Transfer Restricted Securities, including, without limitation, information with
respect to the principal amount of Transfer Restricted Securities being sold to
such Underwriter(s), the purchase price being paid therefor and any other terms
with respect to the offering of the Transfer Restricted Securities to be sold in
such offering; and make all required filings of such Prospectus, Prospectus
Supplement or post-effective amendment as soon as practicable after the Company
is notified of the matters to be incorporated in such Prospectus, Prospectus
Supplement or post-effective amendment;
4
<PAGE>
(d) advise the Underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, to confirm such advice in writing,
(i) when the Prospectus or any Prospectus Supplement or post-effective amendment
to the Shelf Registration Statement has been filed, and, with respect to the
Shelf Registration Statement or any post-effective amendment thereto, when the
same has become effective, (ii) of any request by the Commission for amendments
to the Shelf Registration Statement or amendments or supplements to the
Prospectus or for additional information relating thereto, (iii) of the issuance
by the Commission of any stop order suspending the effectiveness of the Shelf
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted Securities
for offering or sale in any jurisdiction, or the initiation of any proceeding
for any of the preceding purposes, (iv) if at any time the representations and
warranties of the Company contemplated by paragraph (m)(i) below cease to be
true and correct, and (v) of the existence of any fact and the happening of any
event that makes any statement of a material fact made in the Shelf Registration
Statement, the Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue, or that requires the making of any
additions to or changes in the Shelf Registration Statement or the Prospectus in
order to make the statements therein not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of the Shelf
Registration Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under state securities or
Blue Sky laws, the Company shall use their reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(e) promptly following the filing of any document that is to be
incorporated by reference into the Shelf Registration Statement or the
Prospectus subsequent to the initial filing of the Shelf Registration Statement,
provide copies of such document (excluding exhibits, unless requested by a
Holder in writing) to the Holders if requested by the Holder;
(f) furnish to each Holder and each of the Underwriter(s), if
any, without charge, at least one copy of the Shelf Registration Statement, as
first filed with the Commission, and of each amendment thereto, excluding all
documents incorporated by reference therein and all exhibits (excluding exhibits
to documents incorporated by reference therein unless requested by such Holder);
(g) deliver to each selling Holder and each of the
Underwriter(s), if any, without charge, as many copies of any Preliminary
Prospectus and the Prospectus and any amendments or supplements thereto as such
Persons may reasonably request; the Company consents to the use of any
Preliminary Prospectus and the Prospectus and any amendments or supplements
thereto by each of the selling Holders and each of the Underwriter(s), if any,
in connection with the public offering and the sale of the Transfer Restricted
Securities covered by any Preliminary Prospectus and the Prospectus or any
amendments or supplements thereto;
(h) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the Underwriter(s), if any, and
one counsel for all Holders in connection with the registration and
qualification of the Transfer Restricted Securities under the securities or Blue
Sky laws of such jurisdictions as the selling Holders or Underwriter(s) may
request and do any and all other acts or things necessary or advisable to enable
the disposition in such jurisdiction of the Transfer Restricted Securities
covered by the Shelf Registration Statement; provided, however, that the
-------
Company shall not be required (i) to register or qualify as a foreign
corporation where it is not now so qualified, (ii) to take any action that would
subject it to the service of process in suits, other than as to matters and
transactions relating to the Shelf Registration Statement, in any jurisdiction
where it is not now so subject, or (iii) to take any action that would subject
it to taxation in any jurisdiction in an amount greater than it would be so
subject without having taken such action;
(i) cooperate with the selling Holders and the Underwriter(s),
if any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and enable such Transfer Restricted Securities to be in
such denominations and registered in such names as the Holders or the
Underwriter(s), if any, may request as soon as possible;
(j) use its reasonable best efforts to cause the Transfer
Restricted Securities covered by the Shelf Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the seller or sellers thereof or the
Underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (h) above;
5
<PAGE>
(k) if any fact or event contemplated by clause (d)(v) above
shall exist or have occurred, prepare a post-effective amendment or supplement
to the Shelf Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of Transfer Restricted Securities, the
Prospectus will not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading;
(l) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Shelf Registration Statement
and provide the Trustee under the Indenture and/or the transfer agent for the
Common Stock with printed certificates for the Transfer Restricted Securities
which are in a form eligible for deposit with the Depository Trust Company;
(m) enter into such agreements (including an underwriting
agreement) and take all such other actions in connection therewith as may
reasonably be required in order to expedite or facilitate the disposition of the
Transfer Restricted Securities pursuant to the Shelf Registration Agreement, in
connection with an Underwritten Registration, set forth in full or incorporate
by reference in the underwriting agreement the indemnification provisions and
procedures of Section 7 hereof with respect to all parties to be indemnified
pursuant to said Section. The above shall be done at or prior to each closing
under such underwriting agreement, as and to the extent required thereunder;
(n) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as practicable, a consolidated
earnings statement, which consolidated earnings statement shall satisfy the
provisions of Section 11(a) of the Act, for the twelve-month period (i)
commencing at the end of any fiscal quarter in which Transfer Restricted
Securities are sold to Underwriters in a firm commitment or best efforts
Underwritten Offering or (ii) if not sold to Underwriters in such an offering,
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of the Shelf Registration Statement;
(o) cause the Indenture to be qualified under the TIA, and, in
connection therewith, cooperate with the Trustee and the Holders to effect such
changes to the Indenture as may be required for such Indenture to be so
qualified in accordance with the terms of the TIA; and execute and use its best
efforts to cause the Trustee to execute, all documents as may be required to
effect such changes and all other forms and documents required to be filed with
the Commission to enable such Indenture to be so qualified in a timely manner;
(p) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the Shelf Registration Statement at
the earliest possible moment;
(q) cause all Transfer Restricted Securities covered by the
Shelf Registration Statement to be listed on the securities exchange or
quotation system on which similar securities issued by the Company are then
listed if requested by the Holders of a majority in aggregate principal amount
and/or number of shares of such Transfer Restricted Securities or the
Underwriters, if any; cause the Notes covered by the Shelf Registration
Statement to be rated with the appropriate rating agencies, if so requested by
the Holders of a majority in aggregate principal amount of such Notes or the
Underwriters; and
(r) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by any
Underwriter (including any "qualified independent Underwriter" that is required
to be retained in accordance with the rules and regulations of the NASD).
Each Holder as to which any Shelf Registration Statement is
being effected agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not materially misleading or necessary to cause
such Shelf Registration Statement not to omit a material fact with respect to
such Holder necessary in order to make the statements therein not misleading.
Each Holder agrees by acquisition of such Transfer Restricted
Securities that, upon receipt of any notice from the Company of the existence of
any fact of the kind described in Section 5(d)(v) hereof, such Holder will
forthwith discontinue disposition of Transfer Restricted Securities until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(k) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings with respect to the
Prospectus. If so directed by the Company, each Holder
6
<PAGE>
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities current at the time of receipt of
such notice. In the event Company shall give any such notice, the time period
regarding the effectiveness of Shelf Registration Statement set forth in Section
3(a) hereof shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to Section 5(d)(v)
hereof to and including the date when each selling Holder covered by such Shelf
Registration Statement shall have received the copies of the supplemented or
amended Prospectus contemplated by Section 5(k) hereof or shall have received
the Advice.
SECTION 6. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or
compliance with this Agreement (the "Registration Expenses") will be borne by
the Company, regardless whether a Shelf Registration Statement becomes
effective, including without limitation:
(i) all registration and filing fees and expenses
(including filings made with the NASD);
(ii) fees and expenses of compliance with federal
securities or state blue sky laws;
(iii) expenses of printing (including, without limitation,
expenses of printing or engraving certificates for the Transfer Restricted
Securities in a form eligible for deposit with Depository Trust Company and of
printing the Prospectus and any Preliminary Prospectus), messenger and delivery
services and telephone;
(iv) reasonable fees and disbursements of counsel for the
Company and for one counsel to Holders of the Transfer Restricted
Securities which, it is agreed shall be Morrison & Foerster LLP (subject to
the provisions of Section 6(b) hereof);
(v) fees and disbursements of all independent certified
public accountants of the Company (including the expenses of any special
audit and "cold comfort" letters required by or incidental to the
preparation and filing of a Shelf Registration Statement and Prospectus and
the disposition of Transfer Restricted Securities);
(vi) fees and expenses associated with any NASD filing
required to be made in connection with the Shelf Registration Statement,
including, if applicable, the fees and expenses of any "qualified
independent Underwriter" (and its counsel) that is required to be retained
in accordance with the rules and regulations of the NASD; and
(vii) fees and expenses of listing the Transfer Restricted
Securities on any securities exchange or quotation system in accordance with
Section 5(q) hereof.
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, rating agency fees and the fees and expenses of any Person, including
special experts, retained by the Company. The Holders of Transfer Restricted
Securities shall bear the expense of any broker's commission or Underwriters'
discount or commission.
(b) In connection with the Shelf Registration Statement, the
Company will reimburse the Holders of Transfer Restricted Securities being
registered pursuant to such Shelf Registration Statement for the fees and
disbursements of not more than one counsel which, it is agreed shall be Morrison
& Foerster LLP.
Notwithstanding the provisions of this Section 6(b), each Holder
of Transfer Restricted Securities shall pay all Registration Expenses to the
extent required by applicable law.
SECTION 7. INDEMNIFICATION
(a) The Company agrees to indemnity and hold harmless each
Holder (each such Holder an "Indemnified Holder"), each agent, employee, officer
and director of any Indemnified Holder and each person that controls each
Indemnified Holder within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act, and agents, employees, officers and directors or any such
controlling person of any Indemnified Holder from and against
7
<PAGE>
any and all reasonable losses, claims, damages, judgments, liabilities and
expenses (including the reasonable fees and expenses of counsel and other
expenses in connection with investigating, defending or settling any such action
or claim) which arise out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in the Shelf Registration
Statement or the Prospectus or any amendment or supplement thereto or 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, except (i) the Company
shall not be liable to any Indemnified Holder in any such case insofar as such
losses, claims, damages, judgments, liabilities or expenses arise out of, or are
based upon, any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to such Indemnified Holder or
Indemnified Underwriter furnished in writing by such Indemnified Holder to the
Company expressly for use therein and (ii) the Company shall not be liable to
any Indemnified Holder under the indemnity agreement in this Section 7(a) with
respect to any Preliminary Prospectus to the extent that any such loss, claim,
damage, judgment, liability or expense results solely from the fact that any
Indemnified Holder sold Transfer Restricted Securities to a person to whom there
was not sent or given, at or prior to the written confirmation of such sale, a
copy of the Prospectus as then amended or supplemented, if the Company has
previously furnished sufficient copies thereof to the Indemnified Holder.
(b) If any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted against any
Indemnified Holder with respect to which indemnity may be sought against the
Company pursuant to this Section 7, such Indemnified Holder shall promptly
notify the Company in writing, and the Company shall have the right to assume
the defense thereof, including the employment of counsel reasonably satisfactory
to such Indemnified Holder and payment of all fees and expenses; provided,
however, that the omission so to notify the Company shall not relieve the
Company from any liability that they may have to any Indemnified Holder (except
to the extent that the Company is materially prejudiced or otherwise forfeits
substantive rights or defenses by reason of such failure). An Indemnified Holder
shall have the right to employ separate counsel in any such action or proceeding
and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Holder unless (i) the
Company agrees in writing to pay such fees and expenses, (ii) the Company has
failed promptly to assume the defense and employ counsel satisfactory to the
Indemnified Holder or (iii) the named parties to any such action or proceeding
(including any unpleaded parties) include both the Indemnified Holder and the
Company and such Indemnified Holder shall have been advised in writing by its
counsel that representation of them and the Company by the same counsel would be
inappropriate under applicable standards of professional conduct (whether or not
such representation has been proposed) due to actual or potential differing
interests between them (in which case the Company shall not have the right to
assume the defense of such action on behalf of such Indemnified Holder). It is
understood that the Company shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) at any time for such Indemnified Holders, which firm shall be
designated in writing by the Holders of the majority of the aggregate principal
amount of Notes and/or the number of shares of Common Stock on behalf of such
Indemnified Holders, and that all such fees and expenses shall be reimbursed as
they are incurred. The Company shall not be liable for any settlement of any
such action effected without the written consent of the Company, but if settled
with the written consent of the Company, or if there is a final judgment with
respect thereto, the Company agrees to indemnify and hold harmless each
Indemnified Holder from and against any loss or liability by reason of such
settlement or judgment. The Company shall not, without the prior written consent
of each Indemnified Holder affected thereby, effect any settlement of any
pending or threatened proceeding in which such Indemnified Holder has sought
indemnity hereunder, unless such settlement includes an unconditional release of
such Indemnified Holder from all liability arising out of such action, claim,
litigation or proceeding.
(c) Each Indemnified Holder agrees to indemnify and hold
harmless the Company, its directors, its officers who sign the Registration
Statement and any person controlling the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act (collectively, the "Company
Indemnified Parties") to the same extent as the foregoing indemnity from the
Company to any Indemnified Holder, but only with respect to information relating
to each Indemnified Holder furnished to the Company in writing by each
Indemnified Holder, expressly for use in the Registration Statement, Prospectus
(or any amendment or supplement thereto), or any Preliminary Prospectus. In case
any action shall be brought against any Company Indemnified Party based on the
Registration Statement, Prospectus (or any amendment or supplement thereto), or
any Preliminary Prospectus and in respect of which indemnification may be sought
against each Indemnified Holder pursuant to this Section 7(c),
8
<PAGE>
each Indemnified Holder shall have the rights and duties given to the Company by
Section 7(a) (except that if the Company shall have assumed the defense thereof,
each Indemnified Holder may, but shall not be required to, employ separate
counsel therein and participate in the defense thereof and the fees and expenses
of such counsel shall be at the expense of the Indemnified Holder) and the
Company Indemnified Parties shall have the rights and duties given to the
Indemnified Holders by Section 7(b).
(d) If the indemnification provided for in this Section 7 is
unavailable to any party entitled to indemnification pursuant to Section 7(a) or
7(c), then each 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, claims, damages, judgments, liabilities and expenses
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and each Indemnified Holder on the other
from the offering of the Transfer Restricted Securities 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 Company on
the one hand and each Indemnified Holder on the other in connection with the
statements or omissions which resulted in such losses, claims, damages,
judgments, liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and each Indemnified Holder on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total net proceeds from the
offering (before deducting expenses) received by each Indemnified Holder, as set
forth in the table on the cover page of the Prospectus. The relative fault of
the Company on the one hand and each Indemnified Holder on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or by the Indemnified Holder on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The Company and each Indemnified Holder agree that it would
not be just and equitable if contribution pursuant to Section 7(d) were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in Section 7(d).
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or expenses 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. No
person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not found guilty of such fraudulent misrepresentation.
(f) The Company shall also indemnify each Underwriter
participating in the distribution (as described in such registration statement),
their officers and directors and each person who controls such persons (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) to the same extent as provided above with respect to the indemnification of
the Holders.
(g) The indemnity and contribution agreements contained in this
Section 7 are in addition to any liability that any indemnifying party may
otherwise have to any indemnified party.
SECTION 8. RULE 144A
The Company hereby agrees with each Holder, for so long as any
of the Notes or shares of Common Stock that are Transfer Restricted Securities
remain outstanding or, if earlier, two years from the Closing Date, and during
any such period in which the Company is not subject to Section 13 or 15(d) of
the Exchange Act, to make available to the Initial Purchaser or any beneficial
owner of the Notes or shares of such Common Stock in connection with any sale
thereof and any prospective purchaser of such Notes or Common Stock from the
Initial Purchaser or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A.
SECTION 9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Offering hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements, (b) completes and
executes all
9
<PAGE>
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements and
(c) furnishes the Company in writing information in accordance with Section 3(g)
and agrees to indemnify and hold harmless the Company, its directors, its
officers who sign the Registration Statement and any person controlling the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act to the extent contemplated by Section 7(c).
SECTION 10. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the
Shelf Registration Statement who desire to do so may sell such Transfer
Restricted Securities in an Underwritten Offering. In any such Underwritten
Offering, the Underwriter(s) that will administer the offering will be selected
by the Holders of the Transfer Restricted Securities included in such offering
in the manner specified in Section 3(c); provided, however, that such
Underwriters must be reasonably satisfactory to the Company.
SECTION 11. MISCELLANEOUS
(a) Remedies. Each Holder of Transfer Restricted Securities,
--------
in addition to being entitled to exercise all rights provided herein, and as
provided in the Purchase Agreement and granted by law, including recovery of
damages, will be entitled to specific performance of such Holder's rights under
this Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not on or
--------------------------
after the date of this Agreement enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders of
Transfer Restricted Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders of Transfer Restricted
Securities hereunder do not in any way conflict with and are not inconsistent
with the rights granted to the holders of the Company's securities under any
other agreements.
(c) 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 in aggregate principal amount of the Notes constituting Transfer
Restricted Securities affected by such amendment, modification, supplement,
waiver or departure (provided that, if any such Transfer Restricted Securities
are shares of Common Stock issued upon conversion of Notes, consents by Holders
of such shares shall be calculated as if such conversions had not taken place).
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders of Transfer
Restricted Securities whose securities are being sold pursuant to such Shelf
Registration Statement and that does not directly or indirectly affect the
rights of other Holders of Transfer Restricted Securities shall be valid only
with the written consent of Holders of at least 66-2/3% of the Transfer
Restricted Securities being sold, in each case calculated in accordance with the
provisions of Section 3(c).
(d) Notices. All notices and other communications provided
-------
for or permitted hereunder shall be made in writing by hand-delivery, first-
class mail (registered or certified, return receipt requested), telex,
telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder of Transfer Restricted Securities, at
the address set forth on the records of the Registrar under the Indenture,
with a copy to the Registrar; and
(ii) if to the Company or an Initial Purchaser, initially
at its address set forth in the Purchase Agreement and thereafter at such
other address, notice of which is given in accordance with the provisions
of this Section.
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged, if telecopied; and on
the next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
10
<PAGE>
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee
under the Indenture at the address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder of Transfer Restricted Securities unless
and to the extent such successor or assign acquired Transfer Restricted
Securities from such Holder; and provided further that nothing herein shall be
deemed to permit any assignment, transfer or any disposition of Transfer
Restricted Securities in violation of the terms of the Purchase Agreement. If
any transferee of any Holder shall acquire Transfer Restricted Securities, in
any manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement and by
taking and holding such Transfer Restricted Securities such person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement and such Person shall be entitled to
receive the benefits hereof.
(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 an 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 CALIFORNIA, WITHOUT REGARD
TO THE CONFLICTS OF LAW RULES THEREOF.
(i) Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(j) Entire Agreement. This Agreement together with the other
----------------
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and 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. 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
Company with respect to the securities sold pursuant to the Purchase Agreement.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
Credence Systems Corporation
By:
-----------------------------
Name:
Title:
Smith Barney Inc.
By:
-----------------------------
Name:
Title:
12
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF BROBECK, PHLEGER & HARRISON LLP]
November 4, 1997
Credence Systems Corporation
215 Fourier Avenue
Fremont, California 94539
Ladies and Gentlemen:
This opinion is rendered to you in connection with a registration
statement (the "Registration Statement") on Form S-3 filed today with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
for the registration of $115,000,000 principal amount of 5-1/4% Convertible
Subordinated Notes due 2002 (the "Notes") of Credence Systems Corporation
("Credence") and 1,663,051 shares of Common Stock of Credence issuable upon
conversion of the Notes plus such additional indeterminate number of shares of
Common Stock of Credence as may become issuable upon conversion of the Notes by
means of an adjustment in the conversion price (the "Shares"). Credence
originally sold the Notes pursuant to a Purchase Agreement dated September 4,
1997 between Credence and Smith Barney Inc. The Notes were issued pursuant to
the provisions of an Indenture dated as of September 10, 1997 (the "Indenture")
between Credence and State Street Bank and Trust Company of California, N.A. as
Trustee. The Notes and the Shares are being registered to permit public
secondary trading of such securities by the holders thereof from time to time
after the effective date of the Registration Statement.
We have acted as counsel for Credence in connection with the issuance and
sale of the Notes and the preparation of the Registration Statement. For
purposes of this opinion, we have examined and relied upon the information set
forth in the Registration Statement and such other documents and records as we
have deemed necessary.
We have assumed that no issuance of the Shares will result in the
issuance by Credence of shares in excess of its then authorized Common Stock and
that the price received by Credence for the Shares will not be less than the par
value thereof.
Based on the foregoing, we are of the opinion that:
1. The Notes are valid and legally binding obligations of Credence and
are entitled to the benefits of the Indenture, except that enforcement of rights
and remedies created by the Notes is subject to bankruptcy, reorganization
insolvency or similar laws of
<PAGE>
[LETTERHEAD OF BROBECK PHLEGER & HARRISON LLP]
Credence Systems Corporation November 3, 1997
Page 2
general application affecting the rights and remedies of creditors and that the
availability of the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding therefor may
be brought.
2. The Shares have been duly authorized and reserved for issuance upon
conversion of the Notes, and when issued upon such conversion in accordance with
the terms of the Notes, will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as part of the
Registration Statement and to the use of our name therein and in the related
prospectus under the caption "Legal Matters."
It is understood that this opinion is to be used only in connection with
the offer and sale of the Notes and the Shares while the Registration Statement
is in effect.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
Exhibit 12.1
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED OCTOBER 31, ENDED JULY 31,
------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
------- ------ ------- ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Income before income taxes $(8,206) $8,574 $24,939 $46,649 $58,267 $51,770 $7,172
Add-back fixed charges(1):
Interest expense 2,624 1,365 841 786 1,420 1,316 1,027
------- ------ ------- ------- ------- ------- ------
Earnings before fixed charges $(5,582) $9,939 $25,780 $47,435 $59,687 $53,086 $8,199
======= ====== ======= ======= ======= ======= ======
Fixed charges(1):
Interest expense 2,624 1,365 841 786 1,420 1,316 1,027
------- ------ ------- ------- ------- ------- ------
Total fixed charges 2,624 1,365 841 786 1,420 1,316 1,027
======= ====== ======= ======= ======= ======= ======
Ratio of Earnings to
Fixed Charges n/a(2) 7.3x 30.7x 60.4x 42.0x 40.3x 8.0x
</TABLE>
(1) Fixed charges consist of interest expense incurred, including capital
leases, authorization of interest costs and the portion of rental expenses
under operating leases deemed by the Company to be representative of the
interest factor.
(2) Earnings were inadequate to cover fixed charges for fiscal 1992 by
approximately $8.0 million.
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Credence Systems
Corporation for the registration of $115,000,000 5 1/4% Convertible Subordinated
Notes due 2002 and 1,663,051 shares of its common stock and to the incorporation
by reference therein of our reports dated December 2, 1996, with respect to the
consolidated financial statements of Credence Systems Corporation incorporated
by reference in its Annual Report (Form 10-K) for the year ended October 31,
1996 and the related financial statement schedule included therein, filed with
the Securities and Exchange Commission.
/s/ Ernst & Young LLP
San Jose, California
October 31, 1997
<PAGE>
Exhibit 23.3
CONSENT
-------
The undersigned hereby consents to the use of its name and the discussion
of advice given by it in the Credence Systems Corporation Registration Statement
on Form S-3 as filed with the Securities and Exchange Commission on November 3,
1997.
IN WITNESS WHEREOF, the undersigned has executed this Consent as of the
31st day of October, 1997.
/s/ John Smith-Hill
SMITH-HILL AND BEDELL, P.C.
<PAGE>
EXHIBIT 25.1
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2) [X]
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA,
NATIONAL ASSOCIATION
- ------------------------------------------------------------------------------
(Exact name of trustee as specified in its charter)
UNITED STATES
- ------------------------------------------------------------------------------
(Jurisdiction of incorporation or organization if not a U.S. national bank)
06-1143380
- ------------------------------------------------------------------------------
(IRS Employer Identification No.)
725 SOUTH FIGUEROA STREET, SUITE 3100, LOS ANGELES, CALIFORNIA 90017
- ------------------------------------------------------------------------------
(Address of principal executive offices)
90017
- ------------------------------------------------------------------------------
(Zip code)
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
725 SOUTH FIGUEROA STREET, SUITE 3100, LOS ANGELES, CALIFORNIA, 90017
213-362-7338
- ------------------------------------------------------------------------------
(Name, address and telephone number of agent for service)
CREDENCE SYSTEMS CORPORATION
- ------------------------------------------------------------------------------
(Exact Name of Obligor as specified in its charter)
DELAWARE
- ------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
94-2878499
- ------------------------------------------------------------------------------
(IRS Employer Identification No.)
215 FOURIER AVENUE, FREMONT, CALIFORNIA
- ------------------------------------------------------------------------------
(Address of principal executive offices)
94539
- ------------------------------------------------------------------------------
(Zip code)
5 1/4% CONVERTIBLE SUBORDINATED NOTES DUE 9/15/2002
- ------------------------------------------------------------------------------
(Title of the indenture securities)
<PAGE>
Item 1. General Information.
(a) The trustee is subject to the supervision of the Comptroller of the
Currency, Western District Office, 50 Fremont Street, Suite 3900, San
Francisco, CA 94105-2292.
(b) The trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with the obligor.
The trustee is not affiliated with the obligor.
No responses are included for Items 3-15 of this form T-1 because the obligor is
not in default on securities issued under indentures under which State Street
Bank and Trust Company of California, N.A. is trustee.
Item 16. List of Exhibits
1. Articles of Association of State Street Bank and Trust Company of
California, National Association.*
2. Certificate of Corporate Existence (with fiduciary powers) from the
Comptroller of the Currency, Administrator of National Banks.*
3. Authorization of the Trustee to exercise fiduciary powers (included in
Exhibits 1 and 2; no separate instrument).
4. By-laws of State Street Bank and Trust Company of California, National
Association.*
5. Consent of State Street Bank and Trust Company of California, National
Association required by Section 321(b) of the Act.*
6. Consolidated Report of Income at the close of business March 31, 1997,
Federal Financial Institutions Examination Council, Consolidated Reports of
Condition and Income for A Bank With Domestic Offices Only and Total Assets
of Less Than $100 Million - FFIEC 034.**
* The indicated documents have been filed as exhibits with corresponding
exhibit numbers to the Form T-1 of Oasis Residential, Inc., filed pursuant
to Section 305(b)(2) of the Act, filed with the Securities and Exchange
Commission on November 18, 1996 (Registration No. 033-90488), and are
incorporated herein by reference.
** The indicated document was filed as an exhibit with a corresponding exhibit
number to the Form T-1 filed as Exhibit 25 to a Registration Statement on
Form S-4 of Silicon Graphics, Inc., filed with the Securities and Exchange
Commission on July 30, 1997 (Registration No. 333-32379), and is
incorporated herein by reference.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
trustee, State Street Bank and Trust Company of California, National Association
organized and existing under the laws of the United States of America, has duly
caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Los Angeles, and
State of California, on the 31st day of October, 1997.
State Street Bank and Trust Company of California,
National Association
By: /s/ Mark D. Henson
---------------------------------------------
Mark D. Henson
Assistant Vice President
