<PAGE> 1
As filed with the Securities and Exchange Commission on September 17, 1996
Registration No. 333-9661
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
AMENDMENT NO. 1
TO
FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
______________
BROADBAND TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-1615990
(State of Incorporation) (I.R.S. Employer Identification No.)
4024 Stirrup Creek Drive, P. O. Box 13737
Durham, North Carolina 27709-3737
(919) 544-0015
(Address, including Zip Code and telephone number, including
area code, of registrant's principal executive offices)
With copies to
Salim A. L. Bhatia, President James F. Verdonik, Esq.
BroadBand Technologies, Inc. Petree Stockton, L.L.P.
4024 Stirrup Creek Drive 4101 Lake Boone Trail
P.O. Box 13737 Suite 400
Durham, North Carolina 27709-3737 Raleigh, North Carolina 27607
(919) 544-0015 (919) 420-1700
(Name, address, including Zip Code,
and telephone number, including area
code, of agent for service)
Approximate date of commencement of proposed sale to public: From
time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE> 2
------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until
the Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
<PAGE> 3
BROADBAND TECHNOLOGIES, INC.
$115,000,000
5% Convertible Subordinated Notes Due May 15, 2001
(Interest Payable May 15 and November 15)
and
2,772,420 Shares of Common Stock, par value $.01 per share, issuable upon
conversion of such 5% Convertible Subordinated Notes
_________________
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 such state.
___________________
This Prospectus relates to the offering for resale of up to
$115,000,000 aggregate principal amount of the outstanding 5% Convertible
Subordinated Notes (the "Notes") due May 15, 2001 of BroadBand Technologies,
Inc. (the "Company" or "BroadBand"), issued under an Indenture (the "Indenture")
dated as of May 22, 1996 between the Company and Marine Midland Bank, as trustee
(the "Trustee"), and the 2,772,420 shares of Common Stock, par value $0.01 per
share of BroadBand ("Common Stock") that are issuable upon conversion of the
Notes at the initial conversion rate of 24.1080 shares per U.S. $1,000
principal amount of Notes, subject to adjustment in certain events in accordance
with the provisions of the Indenture (the "Conversion Shares"). The Notes and
the Conversion Shares are collectively referred to herein as the "Offered
Securities."
The Notes were issued and sold (the "Original Offering") on May 22,
1996 to Goldman, Sachs & Co. and Bear, Stearns & Co. Inc. (the "Initial
Purchasers") and were simultaneously sold by the Initial Purchasers in
transactions exempt from the registration requirements of the Securities Act of
1933, as amended (the "Securities Act"), in the United States to persons
reasonably believed by the Initial Purchasers to be "qualified institutional
buyers" as defined in, and in reliance on, Rule 144A under the Securities Act
and outside the United States to non-U.S. persons in offshore transactions in
reliance on Regulation S under the Securities Act. The Notes were also sold in
the United States to a limited number of institutional accredited investors in
transactions exempt from registration under the Securities Act otherwise than
in reliance on Rule 144A or Regulation S under the Securities Act.
<PAGE> 4
The Offered Securities may be offered and sold from time to time
pursuant to this Prospectus by the holders thereof named herein or in
supplements hereto (collectively, the "Selling Holders"). Information concerning
the Selling Holders may change from time to time and, to the extent required,
will be set forth in supplements to this Prospectus. The Offered Securities may
be sold by the Selling Holders from time to time directly to purchasers or
through agents, underwriters or dealers. See "Plan of Distribution" and
"Selling Holders." If required, the names of any such agent or underwriter
involved in the sale of the Offered Securities and the applicable agent's
commission, dealer's purchase price or underwriter's discount, if any, will be
set forth in supplements to this Prospectus.
The Company's Common Stock is quoted on The Nasdaq National Market
under the symbol "BBTK." On September 12, 1996, the last reported sale price of
the Common Stock as reported on The Nasdaq National Market was U.S. $21.25 per
share.
The Notes are convertible into shares of Common Stock at any time prior
to the close of business on May 15, 2001, the maturity date, unless previously
redeemed or repurchased, initially at a conversion rate of 24.1080 shares per
U.S. $1,000 principal amount of Notes (equivalent to a conversion price of U.S.
$41.480 per share), subject to adjustment in certain events in accordance with
the provisions of the Indenture. See "Description of Notes - Conversion Rights."
_______________
SEE "RISK FACTORS," COMMENCING ON PAGE 5, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
SECURITIES OFFERED HEREBY.
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.
_______________
<PAGE> 5
<TABLE>
<CAPTION>
Underwriting
Price to Discounts & Proceeds to Company or
Public Commissions other Persons
-------- ------------ -------------------
<S> <C> <C> <C>
Per Unit (1) (2) (3) (4)
Total (1) (2) (3) (4)
</TABLE>
(1) The Selling Holders may from time to time effect the sale of the
Offered Securities at prices and at terms then prevailing or at prices
related to the then-current market price, or in negotiated
transactions.
(2) The Selling Holders will receive all of the net proceeds from the sale
of the Offered Securities and will pay all underwriting discounts and
selling commissions, if any, applicable to any such sale. The Selling
Holders and any broker-dealers, agents or underwriters who participate
in the distribution of the Offered Securities may be deemed to be
"underwriters" within the meaning of the Securities Act, and any
commission received by them and any profit on the resale of the
Offered Securities purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. See "Plan of
Distribution" for a description of indemnification arrangements
between the Company and the Selling Holders.
(3) The Company will not receive any proceeds from the sales of the Notes
or Conversion Shares.
(4) Expenses of preparing and filing the Registration Statement of which
this Prospectus forms a part and all post-effective amendments to the
Registration Statement and/or supplements to this Prospectus will be
borne by the Company. In the event of a firm underwritten offering of
some or all of the Offered Securities, the Selling Holders
participating in such underwritten offering will be responsible for
any expenses customarily borne by selling securityholders, including,
without limitation, underwriting discounts and commissions.
Interest on the Notes is payable on May 15 and November 15 of each
year, commencing on November 15, 1996. The Notes may be redeemed at the option
of the Company at any time on or after the close of business on May 15, 1999,
in whole or in part, at the redemption prices set forth herein, plus accrued
interest to the redemption date. See "Description of Notes - Optional
Redemption." The Notes are not entitled to any sinking fund. The Notes will
mature on May 15, 2001.
In the event of a Change in Control, each holder of Notes may require
the Company to repurchase its Notes, in whole or in part, at a repurchase price
of 100% of the principal amount of Notes to be repurchased, plus accrued
interest to the repurchase date. The repurchase price is payable in cash, or,
at the option of the Company but subject to the satisfaction of certain
conditions on its part, in Common Stock (valued at 95% of the average closing
bid prices of the Common Stock for the five trading days immediately preceding
and including the third trading day prior to the repurchase date). See
"Description of Notes - Repurchase at Option of Holders Upon a Change in
Control."
The Notes are unsecured obligations of the Company subordinated in
right of payment to all existing and future Senior Debt of the Company (as
defined in the Indenture -- see "Description of Notes") and effectively
subordinated
<PAGE> 6
in right of payment to all indebtedness and other liabilities of the Company's
subsidiaries. As of August 31, 1996, the aggregate amount of outstanding Senior
Debt of the Company was approximately $72,000. The Indenture under which the
Notes are issued does not restrict the Company or any subsidiary from incurring
additional Senior Debt or other indebtedness. See "Description of Notes -
Subordination."
The Notes issued and sold in reliance on Rule 144A are currently
eligible for trading in the Private Offerings, Resales and Trading through
Automated Linkages (PORTAL) System of the National Association of Securities
Dealers, Inc. Notes sold pursuant to the Registration Statement of which this
Prospectus forms a part are not expected to remain eligible for trading on the
PORTAL System. The Company does not intend to apply for listing of the Notes
on any securities exchange or for inclusion of the Notes on any automated
quotation system.
The date of this Prospectus is September 17, 1996
<PAGE> 7
(Inside front cover page of Prospectus)
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 and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at its
Regional Offices located at 7 World Trade Center, Suite 1300, New York, New
York 10048, and at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material can be obtained from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 upon request and payment of the prescribed fee.
The Company's Common Stock is quoted in The Nasdaq National Market
System, and reports, proxy statements and other information filed by the
Company can be inspected at such exchange.
This Prospectus constitutes a part of a registration statement on Form
S-3 (together with all amendments and exhibits, the "Registration Statement")
filed by the Company with the Commission in Washington, D.C. This Prospectus
omits certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement for further information
with respect to the Company and the securities offered hereby. Statements
contained herein concerning the provisions of any documents are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference. Items of information omitted from
this Prospectus but contained in the Registration Statement may be obtained
from the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, upon request and payment of the prescribed fee.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, each of which was previously filed by the
Company with the Commission pursuant to Section 13 of the Exchange Act, are
incorporated herein by reference:
a. The Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995;
b. The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996;
c. The Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996;
d. The Company's Report on Form 8-K dated May 17, 1996;
e. The Company's Report on Form 8-K dated May 22, 1996;
f. All other reports filed by the Company pursuant to Section
13(a) or 15(d) of the Exchange Act since the end of the fiscal
year ended December 31, 1995; and
g. The description of the Common Stock contained under the
caption "Description of Registrant's Securities to be
Registered" in the Company's registration statement on Form
8-A filed pursuant to Section 12(g) of the Exchange Act.
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All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering made hereby shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of the
filing of such reports and documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein or in any
accompanying supplement to this Prospectus modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered upon written or oral request of each such person, a
copy of any documents incorporated herein by reference, other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
into the documents that this Prospectus incorporates. Requests for such copies
should be directed to BroadBand Technologies, Inc., Attention: Secretary, 4024
Stirrup Creek Drive, P. O. Box 13737, Durham, North Carolina 27709-3737, (919)
544-0015.
SUMMARY
The following summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus.
Notes . . . . . . . . . . . . . U.S. $115,000,000 principal amount of 5%
Convertible Subordinated Notes due May 15,
2001 (the "Notes"), with interest payable on
May 15 and November 15, commencing on November
15, 1996.
Issuer . . . . . . . . . . . . BroadBand Technologies, Inc., a Delaware
corporation.
Conversion Rate . . . . . . . . A conversion rate of 24.1080 shares per
U.S. $1,000 principal amount of Notes
(equivalent to U.S. $41.480 per share),
subject to adjustment.
Form and Denomination . . . . . Upon transfer in a transaction registered
under the Securities Act, pursuant to the
Registration Rights Agreement (as defined
herein), except as otherwise provided in the
Indenture, the Notes offered hereby will be
represented by a global note in definitive,
fully registered form and will be deposited
with a custodian for and registered in the
name of a nominee of The Depository Trust
Company ("DTC"). See "Description of Notes -
Form and Denomination."
Convertibility . . . . . . . . The Notes are convertible into shares of
Common Stock of the Company at any time prior
to the close of business on the maturity date,
unless previously redeemed or repurchased, at
the conversion price set forth above. Holders
of Notes called for redemption or repurchase
are entitled to convert the Notes to and
including, but not after the close of business
on the date fixed for redemption or
repurchase, as the case may be.
Optional Redemption . . . . . . The Notes may be redeemed at the option of
the Company at any time on or after the close
of business on May 15, 1999, in whole or in
part, at the redemption
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<PAGE> 9
prices set forth herein, plus accrued
interest to the redemption date. See
"Description of Notes" - Optional Redemption.
Repurchase at Option of
Holders Upon Change in
Control . . . . . . . . . . In the event of a Change in Control (as
defined below under "Description of Notes
- Repurchase at Option of Holders Upon a
Change in Control"), each holder of Notes may
require the Company to repurchase its Notes,
in whole or in part, at a repurchase price of
100% of the principal amount thereof, plus
accrued interest to the repurchase date. The
repurchase price is payable in cash or, at the
option of the Company but subject to the
satisfaction of certain conditions on its
part, in Common Stock (valued at 95% of the
average closing bid prices of the Common
Stock for the five trading days immediately
preceding and including the third trading day
prior to the repurchase date).
Subordination . . . . . . . . . The Notes are subordinated to present and
future Senior Debt (as defined below
under "Description of Notes - Subordination")
of the Company and its subsidiaries. As of
August 31, 1996, the aggregate amount of
outstanding Senior Debt was approximately U.S.
$72,000. As of the same date, the Company
had no subsidiaries. The Indenture does not
limit the Company's ability to incur Senior
Debt or any other indebtedness.
Events of Default . . . . . . . Events of Default include: (a) failure to pay
principal of or premium, if any, on any Note
when due, whether or not such payment is
prohibited by the subordination provisions of
the Indenture: (b) failure to pay interest on
any Note or coupon when due, continuing for 30
days, whether or not such payment is
prohibited by the subordination provisions of
the Indenture; (c) default in the Company's
obligation to provide notice of a Change in
Control; (d) failure to perform any other
covenant of the Company in the Indenture,
continuing for 60 days after written notice as
provided in the Indenture; (e) any
indebtedness for money borrowed by the Company
in an outstanding principal amount in excess
of $5,000,000 is not paid at final maturity or
upon acceleration thereof and such default in
payment or acceleration is not cured or
rescinded within 30 days after written notice
as provided in the Indenture; and (f) certain
events of bankruptcy, insolvency or
reorganization.
Listing . . . . . . . . . . . . The Notes are currently eligible for trading
on the PORTAL System of the National
Association of Securities Dealers, Inc. Notes
sold pursuant to the Registration Statement
of which this Prospectus forms a part are not
expected to remain eligible for trading on
the PORTAL System. The Company's Common
Stock is quoted on The Nasdaq National Market
System under the symbol "BBTK."
Governing Law . . . . . . . . . New York.
Indenture . . . . . . . . . . . Dated as of May 22, 1996, between the Company
and Marine Midland Bank, as Trustee.
4
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RISK FACTORS
Before purchasing the Offered Securities, prospective investors should consider
carefully the following risk factors relating to the business of the Company
and this offering.
UNCERTAINTY OF COMMERCIAL DEPLOYMENT OF FIBER-TO-THE-CURB LOCAL DISTRIBUTION
NETWORKS
The current infrastructure in the local distribution networks of
telephone companies, the Company's initial primary market, is based on copper
wire. The Company's FLX System works only in fiber-to-the-curb local
distribution networks. There can be no assurance that telephone companies will
pursue the large scale deployment of fiber required for fiber-to-the-curb local
distribution networks, or, if deployment occurs, as to the volume and timing of
such deployment. In the past, telephone companies have been cautious in
deploying new technologies. Significant deployment may be prevented or delayed
by a number of factors, including cost, regulatory barriers, lack of
programming content for Advanced Interactive Services, lack of consumer demand
for Advanced Interactive Services and the availability of alternative
technologies. Even if telephone companies deploy fiber-to-the-curb distribution
networks, there can be no assurance that telephone companies will deploy the
Company's products. Although the Company's FLX System has narrowband transport
capability, the Company believes its primary competitive advantage is the
broadband capability of its system to transmit Advanced Interactive Services or
high speed connections to the Internet or to digital video transmissions.
Systems with high performance broadband capability, such as the Company's FLX
System, would be attractive to telephone companies only to the extent that they
plan to offer such services. Currently, very little programming content exists
for video types of Advanced Interactive Services which utilize the full
features of a high performance local distribution network. Substantial amounts
of time, effort and money will be required to develop such programming content.
There can be no assurance that sufficient programming content for Advanced
Interactive Services will be developed to justify investment in deploying fiber
in local distribution networks, or that programming content will be both
attractive to consumers and offered at prices that will create a mass market.
The Company has invested substantial amounts to develop systems with high
performance broadband capability. However, unless and until telephone companies
consider the capability to transmit Advanced Interactive Services or high speed
connections to the Internet or to digital video broadcast to be the primary
factor in purchasing decisions for their local distribution networks, the
Company's business will be materially and adversely affected.
HISTORY OF LOSSES; UNCERTAIN FUTURE PROFITABILITY; FUTURE CAPITAL NEEDS
The Company has not been profitable since its inception in 1988 and
was a development stage company until the third quarter of 1993. There can be
no assurance that the Company will achieve profitability. At June 30, 1996,
the Company had an accumulated deficit of approximately $116.2 million. The
Company expects to continue to incur substantial losses in future periods.
There can be no assurance that telephone companies or other potential customers
will deploy the Company's FLX System on a widespread basis, or, if deployment
sales are made, that the volume, pricing and timing will be sufficient to
permit the Company to achieve profitability in the future. Based on its current
operating plan, the Company anticipates that the net proceeds to the Company
from the securities offered hereby, together with its existing cash balances,
will be sufficient to meet the Company's cash requirements to support expected
growth in sales volumes for the next several years. However, there can be no
assurance that the Company will not require additional capital before that
date. The Company's capital requirements will depend on numerous
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factors, including the progress of the Company's research and development
efforts, the resources the Company devotes to production of its products and
the Company's sales and customer support efforts, and the demand for its
products. If adequate additional funding is not available, or if funding is not
available on satisfactory terms, the business of the Company would be
materially adversely affected.
DEPENDENCE ON LUCENT IN THE UNITED STATES AND CANADA
The Company has an agreement with Lucent Technologies, Inc.
("Lucent"), whereby Lucent has the exclusive right to sell in the United States
and Canada the Company's Second Generation Product configured for use in
connection with digital loop carriers. The Lucent agreement makes sales of the
Company's Second Generation Product in the United States and Canada
substantially dependent on the efforts of and on the attractiveness to
telephone company carriers of the digital loop carrier product of Lucent with
which the Company's Second Generation Product is designed to operate. The
Company anticipates that Lucent will continue to market other products that
compete with the Company's Second Generation Product. Failure by Lucent to
aggressively market the Company's Second Generation Product, or failure by
telephone company customers to purchase the Lucent digital loop carrier with
which the Company's Second Generation Product is compatible, will have a
material adverse effect on the Company and the value of the Company. The
Company is similarly dependent on foreign digital loop carrier vendors for
sales in other countries.
PURCHASING PRACTICES OF TELEPHONE COMPANIES
In recent years the purchasing practices of telephone companies have
increasingly been characterized by the use of fewer, larger contracts. This
trend, which is expected to intensify as telephone companies merge or otherwise
form strategic alliances, contributes to the variability of the Company's
operating results. Larger purchase contracts typically involve longer
negotiating cycles, require the dedication of substantial amounts of working
capital and other resources and require investments by the Company which may
substantially precede the time periods during which revenues will be recognized
from such investments. Furthermore, in return for large contracts customers
demand more stringent product acceptance criteria, which can also delay revenue
recognition.
For example, customers have requested that products be priced based on
volume estimates of customers' future requirements, but the failure of such
customers to take delivery of product comparable to volume anticipated could
result in negative margins on product sales. Certain multi-year contracts may
relate to new technologies which may not have been previously deployed on a
large-scale basis. The Company may incur significant initial cost overruns and
losses on such contracts which would be recognized in the quarter in which they
became ascertainable. Future estimates on such contracts are revised
periodically over the lives of the contracts, and such revisions can have a
significant impact on reported earnings in any one quarter. As the Company
announces succeeding generations of its products to better meet the changing
requirements of customers, customers may delay orders of existing products
until the next generation product is available for shipment, or until small
volumes of next generation products are adequately field tested.
MARKET AND CUSTOMER CONCENTRATION
The primary market on which the Company initially is focusing is
dominated by the Regional Bell Operating Companies ("RBOCs") and GTE. Market
concentration would increase if the two recently announced mergers of RBOCs are
consummated: SBC Communications with Pacific Telesis, and Bell Atlantic with
NYNEX. In the event the Company fails to gain a significant share of the
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<PAGE> 12
purchases of these companies or in the event these companies fail to purchase
commercial quantities of electronics and software for fiber-to-the-curb
distribution networks, there can be no assurance that the Company will have
significant alternative purchasers for its product. The Company believes it is
unlikely it will receive substantial deployment orders from every one of the
companies to which it is marketing. Even if demand for the Company's products
from these customers is high, the telephone companies have sufficient
bargaining power to demand low prices, expensive warranties and maintenance
obligations, penalties or other terms and conditions of sale which may
adversely affect operating results of the Company. Although the Company
believes there may be other potential future customers (such as interexchange
carriers, alternative local exchange carriers and cable television companies),
substantial sales to such companies are not expected in the near future and
would require substantial investment by the Company to achieve. There can be no
assurance that the Company will be successful in expanding into such
alternative markets.
MANAGEMENT OF GROWTH
The Company is in the process of making a transition from being
primarily devoted to marketing and product development to supplying and
supporting large volumes of quality products to telephone companies on a timely
basis at a reasonable cost to the Company. The Company's ability to achieve
this transition effectively requires it to implement and continually expand
operational and financial systems, recruit additional employees and train and
manage both current and new employees. The Company expects that growth will
place a significant strain on its operational resources and systems. Failure to
effectively manage the transition would have a material adverse effect on the
business of the Company.
COMPETITION
The segment of the telecommunications industry in which the Company
competes is intensely competitive. Many of the Company's competitors have more
extensive engineering, manufacturing, and marketing capabilities and greater
financial and personnel resources than those of the Company. The Company's
ability to compete is dependent upon several factors, including partners'
capabilities, product features, innovation, quality, reliability, service,
support and price. The Company believes its competition may come from companies
that have or are developing products for a number of different types of
technology. Included are technologies that can be described as Switched Digital
Video ("SDV") with fiber-to-the-curb, Hybrid-Fiber-Coax ("HFC"), Asymmetric
Digital Subscriber Line ("ADSL"), Plain Old Telephone Service ("POTS") over
fiber-to-the-curb and cellular broadband. Companies that have announced plans
to develop these technologies are Lucent, ADC Telecommunications, Alcatel, DSC
Communications, Fujitsu, General Instrument, Nortel, Ericsson-Raynet, Reliance
(Rel/Tec), Siemens, Scientific Atlanta, Pairgain Technologies and Westell
Technologies. Some competitors are developing systems that combine two or more
of these different technologies to transmit different types of services. The
Company believes that the principal criteria for competition in the market for
electronics and software for local distribution networks will be cost
competitiveness, flexibility, revenue generation capability, compatibility with
the existing telephone or cable television networks and upgradeability, as well
as customer support. The Company believes that it competes favorably on these
factors for those telephone companies that consider the capability to transmit
high performance Advanced Interactive Services important, but there can be no
assurance the Company will continue to compete favorably on these factors.
Virtually all of the Company's competitors are more established, benefit from
greater market recognition and have greater financial, technical, production
and marketing resources than the Company. Competition could increase if new
companies enter the market or if existing competitors expand their product
lines.
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<PAGE> 13
DEPENDENCE ON THIRD-PARTY SUPPLIERS
The Company's strategic initiatives in the manufacturing arena depend
largely on third party suppliers of mechanical and electrical components and
contract assembly of printed circuit packs utilizing surface mount technology
("SMT"). Specifically, the Company uses numerous application specific
integrated circuits ("ASICs") and electro-optical components which constitute
the core technology. These components are all currently single sourced with
highly viable industry leaders. In some instances, the Company retains
exclusive intellectual property rights should the need to dual source dictate.
The Company has engaged in formal contracts with two large SMT contract
manufacturers to provide turnkey sources for all circuit pack assembly and some
functional testing. Additionally, the Company has supply agreements in place
for most component original equipment manufacturers ("OEMs") and distribution
to ensure continued supply and competitive pricing, including, but not limited
to, static random access memory ("SRAM"), dynamic random access memory ("DRAM")
and other key SMT components. Currently, the overall availability of components
is sufficient to meet expected demand. However, there can be no assurance that
this condition will continue and should industry-wide component allocation
occur, the Company could experience assembly delays and thus could incur
shipment delays which would have a materially adverse effect on the Company's
operating results. Furthermore, delays in filling orders may have a material
adverse effect on the Company's credibility with its customers, thereby causing
a permanent loss of sales.
REGULATORY MATTERS
Telephone companies, which constitute the Company's initial primary
market, are subject to extensive regulation by both the federal and state
governments. Many of the statutes and regulations applicable to the telephone
companies have the effect of limiting their economic incentive to deploy
fiber-to-the-curb distribution networks. Although many of these restrictions
recently have been, or are in the process of being, either eliminated or
modified, other restrictions remain, particularly state regulations. The
Federal Communications Commission ("FCC") is considering issuing regulations
under the Telecommunications Reform Act, including regulations with respect to
allocating costs for the provision of video services over integrated networks
by telephone companies. The FCC also is considering revising its regulations
governing telephone and cable inside wire to reflect the use of such wire,
among other things, for broadband services. The nature of such regulations and
their effect on the Company cannot be determined at this time. Such regulations
could, however, have a material adverse effect on the purchasing decisions of
telephone companies as they relate to purchasing products of the Company.
Government regulations may be a significant adverse factor in purchasing
decisions by the telephone companies as the restrictions limit the potential
profitability of providing video programming and may materially and adversely
affect the telephone companies' demand for the products of the Company. Cable
television companies, which may become a future market for the Company, are
also subject to extensive governmental regulations that may discourage them
from deploying fiber-to-the-curb distribution networks or otherwise cause them
not to purchase products from the Company.
RESEARCH AND DEVELOPMENT
The telecommunications equipment market is characterized by the
continuing advancement of technology and the development of increasingly
sophisticated and powerful systems. To remain competitive, the Company must
dedicate significant resources to the development and enhancement of its
current and future products. There can be no assurance that the Company's
development efforts will be successful.
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INDUSTRY STANDARDS AND COMPATIBILITY WITH EQUIPMENT AND SOFTWARE
Widespread commercial deployment of the FLX System by telephone
companies will depend on the determinations by the telephone companies as to
whether the FLX System is compatible with the existing equipment and software
used by the telephone industry as well as standards for future products and
requirements for manufacturing processes, quality controls, suppliers and
components ("Standards"). In the past, the Company has had substantial
deviations from industry Standards and some deviations continue. The Company
continues to adapt its products to changing Standards. Failure to comply
substantially with such Standards in a timely manner, either as they exist at
the present time or as they evolve in the future, would have a material adverse
effect on the business of the Company. In some cases, to be compatible with
equipment or software the Company must obtain the cooperation of competitors
who may seek to prevent or delay such compatibility. Failure of the FLX System
to be compatible with the equipment and operating systems and other software
used by the telephone companies in a timely manner would have a material
adverse effect on the business of the Company.
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends in large part on the continued
service of its key technical and management personnel and on its ability to
continue to attract and retain highly-skilled engineering, manufacturing,
marketing and managerial personnel. The competition for such personnel is
intense, and the loss of key employees, not all of whom are subject to
noncompetition agreements, may have a material adverse effect on the business
of the Company. In addition, there can be no assurance the Company will be able
to enforce noncompetition agreements against employees who have executed such
agreements.
LACK OF PROTECTION FROM PROPRIETARY RIGHTS
The Company relies on a combination of patent, copyright, trademark
and trade secret protection and non- disclosure agreements to establish and
protect its proprietary rights. The Company is not expecting to rely on its
patents as a primary resource in competing in its market. Despite the Company's
efforts to safeguard and maintain its proprietary rights, there can be no
assurance that the Company will be successful in doing so, or that the
Company's competitors will not independently develop or patent technologies
that are substantially equivalent or superior to the Company's technologies. In
the event that there is a determination that the Company has infringed a third
party patent, the business of the Company may be materially and adversely
affected.
RISK OF INTERNATIONAL GROWTH AND FOREIGN EXCHANGE
The Company intends to continue to pursue growth opportunities in
international markets. In many international markets, long-standing
relationships between potential customers of the Company and their domestic
providers, and protective regulations, including local content requirements and
type approvals, create barriers to entry. In addition, pursuit of such
international growth opportunities may require significant investments for an
extended period before returns on such investments, if any, are realized. Such
projects and investments could be adversely affected by reversals or delays in
the opening of foreign markets to new competitors, exchange controls, currency
fluctuations, investment policies, repatriation of cash, nationalization,
social and political risks, taxation, and other factors, depending on the
country in which such opportunity arises. In addition, the laws and policies of
the United States affecting foreign trade, investment and taxation could also
adversely affect such projects and investments. There can be no assurance that
the Company will be able to overcome these barriers.
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A significant change in the value of the dollar against the currency
of one or more countries where the Company recognizes substantial revenue or
earnings may materially adversely affect the Company's results. The Company
will attempt to mitigate any such effects through the use of foreign currency
hedging, although there can be no assurance that such attempts will be
successful.
VARIABILITY OF QUARTERLY OPERATING RESULTS AND POSSIBLE VOLATILITY OF
SECURITIES PRICES
Based on the recent trading in stocks of other technology companies,
the Company believes that factors such as announcements of new products by the
Company or its competitors and quarterly variations in financial results could
cause the market price of the securities of the Company to fluctuate
substantially. Stock prices for many high technology companies fluctuate widely
for reasons which may be unrelated to operating performance or new product
announcements. Broad market fluctuations, earnings and other announcements of
other companies, general economic conditions or other matters unrelated to the
Company and outside the control of the Company also could affect the market
price of the Company's securities. In addition, the market for the products of
the Company is highly concentrated. Quarterly sales may fluctuate widely based
on the timing of customer orders. Announcements by telephone, cable or other
companies or government agencies of their plans with respect to fiber in the
distribution network of for field trials or deployment orders for products of
competitors of the Company could cause the market price of the Company's
securities to fluctuate substantially. Announcements of regulatory changes, or
the failure to make changes that are anticipated by the telephone, cable
television or other industries or the public, may create public perception that
the business prospects of the Company will be adversely affected. Such a
perception may adversely affect the market price of the securities of the
Company.
DILUTION
Investors in the securities offered hereby may suffer an immediate
and substantial dilution in the net tangible book value per share of the Common
Stock (assuming conversion of the Notes into shares of Common Stock) from the
conversion price of the Notes. As of June 30, 1996, the amount of such dilution
would have been $31.68 per share.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE NOTES
The obligations of the Company under the Notes are subordinate to all
present and future Senior Debt of the Company and pari passu with obligations
to, or rights of, the Company's general unsecured creditors. The Notes are also
effectively subordinated in right of payment to all indebtedness and other
liabilities of the Company's subsidiaries. As of August 31, 1996, the Company
had no indebtedness outstanding for borrowed money, and no subsidiaries, but the
Company had equipment capital lease obligations of $72,000. The Indenture does
not limit the Company's ability to incur Senior Debt or any other indebtedness.
See "Description of Notes -- Subordination."
ABSENCE OF DIVIDENDS
The Company has never paid any dividends and does not anticipate
paying dividends in the foreseeable future. In addition, the terms of future
loan agreements and other debt documents may restrict the Company's ability to
pay dividends.
ABSENCE OF TRADING MARKET
The Company does not intend to list the Notes on any national
securities exchange or to seek
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the admission thereof to trading in the National Association of Securities
Dealers Automated Quotation system. Although the Notes issued and sold in
reliance on Rule 144A have been designated for trading through PORTAL, there
can be no assurance as to the liquidity of any such market that may develop,
the ability of holders to sell such securities, the price at which the holders
of Notes will be able to sell such securities or whether a trading market, if
it develops, will continue. In addition, Notes sold pursuant to the
Registration Statement of which this Prospectus forms a part are not expected
to remain eligible for trading on the PORTAL System.
POSSIBLE LIMITATIONS ON TAX LOSS CARRYFORWARDS
The Company currently has substantial net operating loss carryforwards
("NOLs"). Section 382 of the Internal Revenue Code of 1986, as amended (the
"Code"), imposes limits on the change in ownership percentage of the Company's
stock which, if exceeded, would limit the Company's future use of its NOLs. The
limitations of Section 382 could be triggered by a combination of past and of
future issuances of equity securities by the Company, including issuances of
shares of Common Stock upon conversion of the Notes. If the ownership
percentage of the Company changes in excess of the limits imposed by this
provision, the annual utilization of NOLs attributable to losses incurred prior
to the change in ownership would generally be limited to an amount determined by
multiplying the fair market value of the Company immediately prior to the change
in ownership percentage by the federal long-term tax exempt interest rate at the
time of the change.
POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER AND STATUTORY PROVISIONS
The Company's Certificate of Incorporation authorizes the issuance of
preferred stock with designations, rights and preferences determined from time
to time by the Board of Directors, without further action by the stockholders.
These provisions could have the effect of deterring hostile takeovers or
delaying or preventing changes in control or management of the Company and may
limit the price that certain investors may be willing to pay in the future for
shares of the Common Stock. Additionally, the Restated Certificate of
Incorporation of the Company (the "Certificate"), and the Amended and Restated
Bylaws of the Company (the "Bylaws") and applicable provisions of the Delaware
General Corporation Law (the "DGCL") contain several provisions that may make
more difficult the acquisition of control of the Company without the approval
of the Board of Directors of the Company, including provisions to, among other
things (i) classify the Company's Board of Directors into three classes, each
of which (after an initial transition period) serves for staggered three-year
periods; (ii) provide that a director of the Company may be removed by the
stockholders only for cause; (iii) provide that only the President, the
Chairman of the Board, a majority of the Board of Directors or the holders of
shares entitled to cast a majority of the votes entitled to be cast by all
outstanding shares may call special meetings of the stockholders; and (iv)
provide that the stockholders may take action only at a meeting of the
stockholders. A supermajority vote of the holders of shares entitled to cast
75% of the votes entitled to be cast by all outstanding shares is required to
change the provisions described in (i), (iii) and (iv) above. With certain
exceptions, Section 203 of the DGCL ("Section 203") imposes certain
restrictions on mergers and other business combinations between the Company and
any holder of 15% or more of the Common Stock.
CAUTIONARY STATEMENT IDENTIFYING IMPORTANT FACTORS THAT COULD CAUSE THE
COMPANY'S ACTUAL RESULTS TO DIFFER FROM THOSE PROJECTED IN FORWARD LOOKING
STATEMENTS:
The cautionary statements made above and elsewhere herein by the
Company should not be construed as exhaustive or as any admission regarding the
adequacy of disclosures made by the Company prior to the effective date of the
Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Forward
looking statements are beyond the ability of the Company to control and in many
cases the Company cannot predict what factors would cause actual results to
differ materially from those indicated by the forward looking statements.
In connection with the "safe harbor" provisions of the Reform Act,
readers of this document, and any document incorporated by reference herein,
are advised that this document and documents incorporated by reference into
this document contain both statements of historical facts and forward looking
statements. Forward looking statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from those
indicated by the forward looking statements. Examples of forward looking
statements include, but are not limited to (i) projections of revenues, income
or loss, earnings or loss per share, capital expenditures, dividends, capital
structure and other financial items, (ii) statements of the plans and
objectives of the Company or its management or Board of Directors, including
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<PAGE> 17
the introduction of new products, or estimates or predictions of actions by
customers, suppliers, competitors or regulatory authorities, (iii) statements
of future economic performance and (iv) statements of assumptions underlying
other statements and statements about the Company or its business.
This Prospectus and any documents incorporated by reference herein
also identify important factors which could cause actual results to differ
materially from those indicated by the forward looking statements. These risks
and uncertainties include the factors described above and other factors which
are described herein and/or in documents incorporated by reference herein.
RATIO OF EARNINGS TO FIXED CHARGES
For the years ended December 31, 1991, 1992, 1993, 1994 and 1995 and
for the six months ended June 30, 1996, the Company's earnings were not
sufficient to cover its fixed charges. Additional earnings of $8.383 million,
$11.821 million, $18.990 million, $24.170 million, $27.902 million, and $14.05
million, respectively, would have been required to achieve ratios of earnings
to fixed charges of 1.0.
USE OF PROCEEDS
The Selling Holders will receive all of the proceeds from the sale of
the Offered Securities. The Company will receive no proceeds from such sales.
THE COMPANY
The Company designs, manufactures, markets and supports a
sophisticated electronics and software platform for the telecommunications
industry, focusing primarily on operators of local exchange telephone networks
in the United States. During 1994 and 1995, the Company expanded its marketing
efforts in Canada, Europe and the Asia/Pacific markets. Its platform (the "FLX
System") provides operators of fiber based distribution networks with the
capability to transmit voice, video and data in a wide array of advanced,
interactive entertainment, information, communications, transactions and other
services ("Advanced Interactive Services") to residential and business
subscribers. A network utilizing the Company's FLX System could transmit
applications such as high speed access to the Internet and digital video
broadcast.
The Company's second generation product is a "global core" platform
that enables a Digital Loop Carrier (DLC) system providing the telephony
interfaces to interface with the Company's FLX-2500 System, which provides
broadband video and data interfaces and switching, as well as transport
technology (the "Second Generation Product"). The Company believes this
provides the flexibility to partner with some of the world's most experienced
telecommunication providers. In North America, the DLC Access System partner
is Lucent. In France, SAT, a SAGEM Company, will provide the DLC Access System
and in Korea, Samsung Electronics will provide the DLC Access System.
Although the Company's first generation products included the
telephony interfaces, the Company believes the flexibility of its Second
Generation Product, worldclass suppliers as partners providing the telephony
interfaces and a more cost competitive platform make the FLX-2500 an attractive
single, integrated end-to-end access solution for network operators.
The Company was organized in the state of North Carolina in July 1988,
and reincorporated in the state of Delaware in December 1988. The Company's
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executive offices are located at 4024 Stirrup Creek Drive, P. O. Box 13737,
Durham, NC 27709-3737. Its telephone number is (919) 544-0015.
DESCRIPTION OF NOTES
The Notes were issued under an Indenture, dated as of May 22, 1996
(the "Indenture"), between the Company and Marine Midland Bank, as Trustee (the
"Trustee"), filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. Wherever particular defined terms of the Indenture
(including the Notes and the various forms thereof) are referred to, such
defined terms are incorporated herein by reference (the Notes being referred to
in the Indenture as "Securities"). The following summaries of certain
provisions of the Indenture do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, the detailed provisions of
the Notes and the Indenture, including the definitions therein of certain
terms. Section references below are to sections of the Indenture.
GENERAL
The Notes are unsecured subordinated obligations of the Company, are
limited to U.S. $115,000,000 aggregate principal amount and will mature on May
15, 2001. Payment in full of the principal amount of the Notes will be due on
May 15, 2001 and be payable at a price of 100% of the principal amount thereof.
The Notes bear interest at the rate of five percent (5%) per annum from May 22,
1996, payable semiannually in arrears on May 15 and November 15 of each year,
commencing on November 15, 1996. Interest payable per U.S. $1,000 principal
amount of Notes for the period from May 22, 1996 to November 15, 1996, will be
U.S. $24.0278. (Sections 3.1 and 3.7).
The Notes are convertible into Common Stock initially at the conversion
rate of 24.1080 shares per U.S. $1,000 principal amount of Notes (equivalent to
a conversion price of U.S. $41.480 per share), subject to adjustment upon the
occurrence of certain events in accordance with the provisions of the Indenture
(see "- Conversion Rights") at any time prior to the close of business on the
maturity date, unless previously redeemed or repurchased. (Sections 2.4 and
12.1).
The Notes are redeemable at the option of the Company, at any time on
or after the close of business on May 15, 1999, in whole or in part, at the
redemption prices set forth below under "- Optional Redemption," plus accrued
interest to the redemption date. (Sections 2.2 and 11.1).
FORM AND DENOMINATION
Upon transfer in a transaction registered under the Securities Act,
pursuant to the Registration Rights Agreement (as defined herein), the Notes
offered hereby will be represented by (i) a global Note (the "Unrestricted
Global Note") in definitive, fully registered form, without interest coupons,
and will be deposited with the Trustee as custodian for DTC and registered in
the name of a nominee of DTC or (ii) upon the request of a Selling Holder of
Notes in certificated (i.e., non-global) form, in certificated form registered
in the names requested.
Upon each sale by a Selling Holder of Notes or the Conversion Shares,
as the case may be, offered hereby, such Selling Holder will be required to
deliver a notice (the "Notice") of such sale to the Trustee and the Company.
The Notice will, among other things, identify the sale as a sale pursuant to the
Registration Statement of which this Prospectus forms a part, certify that the
prospectus delivery requirements, if any, of the Securities Act have been
satisfied, and certify that the Selling Holder and the aggregate principal
amount of Notes or the number of Conversion Shares owned by such holder are
identified in the Prospectus in accordance with the applicable rules and
regulations under the Securities Act. A copy of the Notice is included herein
in Appendix A. Additional copies may be requested from the Company,
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Attention: Secretary, 4024 Stirrup Creek Drive, P.O. Box 13737, Durham, North
Carolina 27709-3737, telephone: (919) 544-0015.
Upon receipt by the Trustee of the Notice relating to a sale of the
Notes, an appropriate adjustment will be made to reflect a decrease in the
principal amount of the Restricted Global Note or the Regulation S Global Note,
as the case may be, or the cancellation of a Note in certificated form upon the
transfer thereof, and a corresponding increase in the principal amount of the
Unrestricted Global Note (or, upon the request of a Selling Holder of Notes in
certificated form, the authentication and delivery of a Note in certificated
form).
The provisions below describe the form and denomination of the Notes
in connection with their original offering in a transaction or transactions not
required to be registered under the Securities Act.
Notes initially sold in reliance on Rule 144A (the "144A Notes") under
the Securities Act are represented by a global Note in definitive, fully
registered form without interest coupons (the "Restricted Global Note") and
have been deposited with the Trustee as custodian for DTC and registered in the
name of a nominee of DTC.
Notes initially sold in reliance on Regulation S ("Regulation S Notes")
under the Securities Act are represented by a global Note in fully registered
form without interest coupons (the "Regulation S Global Note" and, together with
the Restricted Global Note and, where the context requires, the Unrestricted
Global Note, the "Global Notes" or each individually, a "Global Note")
registered in the name of a nominee of DTC and deposited with the Trustee, for
the accounts of Euroclear and CEDEL. From the date of original issue of the
Notes until July 1, 1996 (such period, the "Restricted Period"), beneficial
interests in the Regulation S Global Note could be held only through Euroclear
or CEDEL, unless delivery was made through the Restricted Global Note in
accordance with the certification requirements described below. The Regulation S
Global Note (and any Notes issued in exchange therefor) bears the legend set
forth in the Indenture (the "Regulation S Legend").
Except in the limited circumstances described below under "- Global
Notes," owners of beneficial interests in the Global Notes are not entitled to
receive physical delivery of certificated Notes. The Notes are not issuable in
bearer form.
Notes initially sold to a limited number of institutional accredited
investors in transactions exempt from registration under the Securities Act
otherwise than in reliance on Rule 144A or Regulation S under the Securities Act
were issued in the form of Notes in certificated (i.e., non-global) form
("Regulation D Notes"). Regulation D Notes initially issued in certificated
form may not be exchanged for beneficial interests in any Global Note, except in
a sale pursuant to the Registration Statement of which this Prospectus forms a
part and except in limited circumstances described below. See "- Transfer,
Exchange and Withdrawal - Exchange of Certificated Notes for Interest in Global
Notes."
The Notes were issued in fully registered form. The Notes were issued
in minimum denominations of $1,000, except that Regulation D Notes were issued
only in certificated form and were subject to a minimum initial purchase
requirement of $250,000 and integral multiples of $1,000 in excess thereof. No
service charge will be made for any registration of transfer or exchange of
Notes, but the Company may require payment of a sum sufficient to cover any tax
or other government charge payable in connection therewith.
Rule 144A Notes (including beneficial interests in the Restricted
Global Note) and Regulation D Notes are subject to certain restrictions on
transfer and bear a restrictive legend as described in the Indenture. (Section
2.2) In addition, transfer of the beneficial interests in the Global Notes will
be subject to the applicable rules and procedures of DTC and its participants
(as
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<PAGE> 20
defined below) or indirect participants (as defined below) (including, if
applicable, those of Euroclear and CEDEL), which may change from time to time.
The Company appointed the Trustee at its Corporate Trust Office as
paying agent, transfer agent, registrar and conversion agent for the Notes. In
such capacities, the Trustee is responsible for, among other things, (i)
maintaining a record of the aggregate holdings of Notes represented by the
Global Notes and accepting Notes for exchange and registration of transfer, (ii)
ensuring that payments of principal, premium, if any, and interest in respect of
the Notes received by the Trustee from the Company are duly paid to DTC or its
nominees, (iii) transmitting to the Company any notices from holders of the
Notes, (iv) accepting conversion notices and related documents, and transmitting
the relevant items to the Company and (v) delivering certificates for Common
Stock issued in conversion of the Notes.
The Company will cause each transfer agent to act as a registrar and
will cause to be kept at the office of each transfer agent a register in which,
subject to such reasonable regulations as it may prescribe, the Company will
provide for the registration of the Notes and registration of transfers of the
Notes. The Company may vary or terminate the appointment of any paying agent,
transfer agent or conversion agent, or appoint additional or other such agents
or approve any change in the office through which any such agent acts, provided
that there shall at all times be a paying agent, a transfer agent and a
conversion agent in the Borough of Manhattan, The City of New York, New York.
The Company will cause notice of any resignation, termination or appointment of
the Trustee or any paying agent, transfer agent or conversion agent, and of any
change in the office through which any such agent will act, to be provided to
holders of the Notes.
GLOBAL NOTES
The descriptions of the operations and procedures of DTC, Euroclear
and CEDEL that follow are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to changes by them from time to time. The
Company takes no responsibility for these operations and procedures and urges
investors to contact the system or their participants directly to discuss these
matters.
DTC has advised the Company that its current practice, upon the
issuance of the Regulation S Global Note, the Restricted Global Note and the
Unrestricted Global Note, is to credit, on its internal system, the respective
principal amount of the individual beneficial interests represented by such
Global Notes to the accounts with DTC ("participants") of persons who hold
interests through participants. Ownership of beneficial interests in the Global
Notes will be shown on, and the transfer of that ownership will be effected only
through, records maintained by DTC or its nominees (with respect to interests of
participants) and the records of participants and indirect participants as
defined below (with respect to interests of persons other than participants).
AS LONG AS DTC, OR ITS NOMINEE, IS THE REGISTERED HOLDER OF A GLOBAL
NOTE, DTC OR SUCH NOMINEE, AS THE CASE MAY BE, WILL BE CONSIDERED THE SOLE OWNER
AND HOLDER OF THE NOTES REPRESENTED BY SUCH GLOBAL NOTE FOR ALL PURPOSES UNDER
THE INDENTURE AND THE NOTES. Unless DTC notifies the Company that it is
unwilling or unable to continue as depository for a Global Note, or ceases to be
a "Clearing Agency" registered under the Exchange Act, or announces an intention
permanently to cease business or does in fact do so, or an Event of Default (as
defined below) has occurred and is continuing with respect to a Global Note,
owners of beneficial interests in a Global Note, except as provided below, will
not be entitled to have any portions of such Global Note registered in their
names, will not receive or be entitled to receive physical delivery of Notes in
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<PAGE> 21
definitive form and will not be considered the owners or holders of the Global
Note (or any Notes presented thereby) under the Indenture or the Notes. In
addition, no beneficial owner of an interest in a Global Note will be able to
transfer that interest except in accordance with DTC's applicable procedures
(in addition to those under the Indenture referred to herein and, if
applicable, those of Euroclear and CEDEL). In the event that owners of
beneficial interests become entitled to receive Notes in definitive
certificated form, such Notes will be issued only in registered form in
denominations of U.S. $1,000 and integral multiples thereof.
Investors may hold their interests in the Regulation S Global Note
through CEDEL or Euroclear, if they are participants in such systems, or
indirectly through organizations which are participants in such systems. Upon
the expiration of the Restricted Period, investors may also hold such interests
through organizations other than CEDEL and Euroclear that are participants in
the DTC system. CEDEL and Euroclear will hold interests in the Regulation S
Global Note on behalf of their participants through customers' securities
accounts in their respective names on the books of their respective
depositaries which are Morgan Guaranty Trust Company of New York, Brussels
office, as operator of Euroclear, and Citibank, N.A., as operator of CEDEL.
The depositaries, in turn, will hold such interests in the Regulation S Global
Note in customers' securities accounts in the depositaries' names on the books
of DTC. Investors may hold their interests in the Restricted Global Note
directly through DTC, if they are participants in such system, or indirectly
through organizations (including Euroclear and CEDEL) which are participants in
such system. All interests in a Global Note, including those held through
Euroclear or CEDEL, may be subject to the procedures and requirements of DTC.
Those interests held through Euroclear and CEDEL may also be subject to the
procedures and requirements of DTC. Those interests held through Euroclear and
CEDEL may also be subject to the procedures and requirements of such system.
The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer beneficial interests in a Global Note to such person may be
limited to that extent. Because DTC can act only on behalf of its
participants, which in turn act on behalf of indirect participants and certain
banks, the ability of a person having beneficial interests in a 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 interests, may be affected
by the lack of physical certificate evidencing such interests.
The principal amount of Notes are payable in U.S. dollars, against
surrender thereof at the Corporate Trust Office of the Trustee in the Borough
of Manhattan, The City of New York, or, subject to any applicable laws and
regulations, at the office of any paying agent, by dollar check drawn on, or by
transfer to a dollar account (such transfer to be made only to holders of an
aggregate principal amount of Notes in excess of U.S. $2,000,000) maintained by
the holder with, a bank in New York City. Payment of any installment of
interest on Notes will be made to the person in whose name such Notes (or any
predecessor note) are registered at the close of business on the May 1 or the
November 1 (whether or not a Business Day) immediately preceding the relevant
Interest Payment Date (a "Regular Record Date"). Payments of such interest
will be made by a dollar check drawn on a bank in New York City mailed to the
holder at such holder's registered address or, upon application by the holder
thereof to the Trustee not later than the applicable Regular Record Date, by
transfer to a dollar account (such transfer to be made only to holders of an
aggregate principal amount of Notes in excess of U.S.$2,000,000) maintained by
the holder with a bank in New York City. No transfer to a dollar account will
be made unless the Trustee has received written wire instructions not less than
15 days prior to the relevant payment date.
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Payments of the principal of, premium, if any, and interest on Global
Notes will be made to DTC or its nominee as the registered owner thereof.
Neither the Company, the Trustee nor any of their respective agents has any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest.
Transfers of beneficial interests in the Restricted Global Note and the
Unrestricted Global Note between participants in DTC will be effected in
accordance with DTC's procedures, and such beneficial interests will trade in
DTC's Same-Day Funds Settlement System; consequently, secondary market trading
activity in such interests will settle in immediately available funds.
Transfers of beneficial interests in the Regulation S Global Note between
participants in Euroclear and CEDEL will be effected in the ordinary way in
accordance with their respective rules and operating procedures, whereas
cross-markets transfers of such interests (including, by DTC participants other
than Euroclear and CEDEL) will be subject to considerations described below.
Subject to compliance with the transfer restrictions applicable to the
Notes described above, cross-market transfers between DTC participants, on the
one hand, and Euroclear participants, on the other hand, will be effected by
DTC in accordance with DTC's rules on behalf of Euroclear or CEDEL, as the case
may be, by its respective depositary; however, such cross-market transactions
will require delivery of instructions to Euroclear or CEDEL, as the case may
be, by the counterparts in such system in accordance with the rules and
procedures and within the established deadlines (Brussels time) of such system.
Euroclear or CEDEL, as the case may be, will, if the transaction meets its
settlement requirements, deliver instructions to its respective depository to
take action to effect final settlement on its behalf by delivering or receiving
interests in the relevant Global Note in DTC, and making or receiving payment
in accordance with normal procedures for same-day funds settlement applicable
to DTC, Euroclear participants and CEDEL participants may not deliver
instructions directly to the depositaries for Euroclear or CEDEL.
Because of time zone differences, the securities account of a
Euroclear or CEDEL participant purchasing an interest in a Global Note from a
DTC participant will be credited, and any such crediting will be reported to
the relevant Euroclear or CEDEL participant, during the securities settlement
processing day (which must be a business day for Euroclear and CEDEL)
immediately following the DTC settlement date. Cash received on Euroclear or
CEDEL as a result of sales of interests in a Global Note by or through a
Euroclear or CEDEL participant to a DTC participant will be received with value
on the DTC settlement date but will be available in the relevant Euroclear or
CEDEL cash account only as of the business day for Euroclear or CEDEL following
the DTC settlement date.
DTC has advised the Company that it will take any action permitted to
be taken by a holder of Notes (including the presentation of Notes for exchange
as described below) only at the direction of one or more participants to whose
account with DTC interests in the Global Notes are credited and only in respect
of such portion of the aggregate principal amount of the Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default (as defined below) under the Notes, DTC reserves the
right to exchange the Global Notes for legended Notes in certificated form,
bearing such legends as may be required under the Indenture, and to distribute
such notes to its participants.
DTC has advised the Company that it is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and a "Clearing Agency" registered pursuant to
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<PAGE> 23
the provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical transfer and delivery of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to
the DTC system is available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship
with a participant, either directly or indirectly ("indirect participants").
Although DTC, Euroclear and CEDEL have agreed to the foregoing
procedures in order to facilitate transfers of beneficial ownership interests
in the Global Notes among participants of DTC, Euroclear and CEDEL, they are
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Company, the Trustee
nor any of their respective agents has any responsibility for the performance
by DTC, Euroclear and CEDEL, their participants or indirect participants of
their respective obligations under the rules and procedures governing their
operations, including maintaining, supervising or reviewing the records
relating to, or payments made on account of, beneficial ownership interest in
Global Notes.
REGISTRATION RIGHTS
The Selling Holders are entitled to the benefits of a Registration
Rights Agreement, dated as of May 17, 1996, between the Company and the Initial
Purchasers, entered into in connection with the Original Offering (the
"Registration Rights Agreement"). Pursuant to the Registration Rights
Agreement, the Company has, at its expense, filed with the Commission a shelf
registration statement on Form S-3 of which this Prospectus forms a part (the
"Shelf Registration Statement") with respect to resales of the Notes and the
Conversion Shares. In addition, pursuant to the Registration Rights Agreement,
the Company has agreed to use its best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission within 180 days after the
original issuance of the Notes and use its best efforts to maintain such
Registration Statement continuously effective under the Securities Act until
the third annual anniversary of the date of the effectiveness of the Shelf
Registration Statement or such earlier date as is provided in the Registration
Rights Agreement.
If the Registration Statement has not been declared effective within
such 180-day period ("Registration Default"), additional interest ("Liquidated
Damages") will accrue on the Notes from and including the day following such
Registration Default to but excluding the day on which such Registration
Default has been cured. Liquidated Damages will be paid semi-annually in
arrears, with the first semi-annual payment due on the first Interest Payment
Date in respect of the Notes following the date on which such Liquidated
Damages begin to accrue, and will accrue at a rate per annum equal to an
additional one-quarter of one percent (0.25%) of the principal amount of the
Notes to and including the 90th day following such Registration Default and at
a rate per annum equal to one-half of one percent (0.50%) thereof from and
after the 91st day following such Registration Default. In the event that the
Shelf Registration Statement ceases to be effective prior to the third annual
anniversary of the initial effective date of the Shelf Registration Statement
(or such earlier date as is provided in the Registration Rights Agreement) for
a period in excess of 60 days, whether or not consecutive, during any 12-month
period, then the interest rate borne by the Notes shall increase by an
additional one-half of one percent (0.50%) per annum on the 61st day of the
applicable 12-month period such Shelf Registration Statement ceases to be
effective to but excluding the day on which the Shelf Registration Statement
again becomes effective. (Section 10.11).
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<PAGE> 24
This summary of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, filed as an exhibit to the Registration Statement.
CONVERSION RIGHTS
The holder of any Note has the right, at the holder's option, to
convert any portion of the principal amount of a Note that is an integral
multiple of $1,000, into shares of Common Stock at any time, unless previously
redeemed or repurchased, at the Conversion Rate (subject to adjustment as
described below). The right to convert a Note called for redemption or
delivered for repurchase will terminate at the close of business on the
redemption date or repurchase date for such Note. (Sections 2.4 and 12.1).
The right of conversion attaching to any Note may be exercised by the
holder by delivering the Note at the specified office of the Conversion Agent,
accompanied by a duly signed and completed notice of conversion, a copy of
which may be obtained from the Conversion Agent. The conversion date will be
the date on which the Note and the duly signed and completed notice of
conversion are so delivered. As promptly as practicable on or after the
conversion date, the Company will issue and deliver to the Trustee a
certificate or certificates for the number of full shares of Common Stock
issuable upon conversion, together with payment in lieu of any fraction of a
share or, at the Company's option, rounded up to the next whole number of
shares; such certificate will be sent by the Trustee to the Conversion Agent
for delivery to the holder. Such shares of Common Stock issuable upon
conversion of the Notes, in accordance with the provisions of the Indenture,
will be fully paid and non-assessable and will be pari passu with the other
shares of Common Stock of the Company from time to time and shall bear
restrictive legends governing their transfer as provided in the Indenture. Any
Note surrendered for conversion during the period from the close of business on
any Regular Record Date next preceding any Interest Payment Date to the opening
of business on the next Interest Payment Date (except Notes (or portions
thereof) called for redemption on a Redemption Date or repurchasable on a
Repurchase Date, occurring in either case, within such period) must be
accompanied by payment of an amount equal to the interest payable on such
Interest Payment Date on the principal amount of such Notes being surrendered
for conversion. (Sections 12.2 and 12.3).
The interest payable on such Interest Payment Date with respect to any
Note (or portion thereof, if applicable) which has been called for redemption
on a Redemption Date, or is repurchasable on a Repurchase Date, occurring, in
either case, during the period from the close of business on any Record Date
next preceding any Interest Payment Date to the opening of business on such
Interest Payment Date, which Note (or portion thereof, if applicable) is
surrendered for conversion during such period, shall be paid to the holder of
such Note being converted in an amount equal to the interest that would have
been payable on such Note if such Note had been converted as of the close of
business on such Interest Payment Date. The interest so payable on such
Interest Payment Date in respect of any Note (or portion thereof, as the case
may be) which has not been called for redemption on a Redemption Date, or is
not eligible for repurchase on a Repurchase Date, occurring, in either case,
during the period from the close of business on any Record Date next preceding
any Interest Payment Date to the opening of business on such Interest Payment
Date, which Note (or portion thereof, as the case may be) is surrendered for
conversion during such period, shall be paid to the holder of such Note as of
such Regular Record Date. Interest payable on any Interest Payment Date in
respect of any Note surrendered for conversion or repurchase on or after an
Interest Payment Date shall be paid to the holder of such Note as of the next
preceding Regular Record Date, notwithstanding the exercise of the right of
conversion. (Section 12.2).
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<PAGE> 25
As a result of the foregoing provisions, except as provided above,
holders that surrender Notes for conversion on a date that is not an Interest
Payment Date will not receive any interest for the period from the Interest
Payment Date next preceding the date of conversion to the date of conversion or
for any later period, even if the Notes are surrendered after a notice of
redemption (except for the payment of interest on Notes called for redemption
on a Redemption Date or repurchasable on a Repurchase Date between a Regular
Record Date and the Interest Payment Date to which it relates, as provided
above). No other payment or adjustment for interest, or for any dividends in
respect of Common Stock, will be made upon conversion. Holders of Common Stock
issued upon conversion will not be entitled to receive any dividends payable to
holders of Common Stock as of any record date before the close of business on
the conversion date. No fractional shares will be issued upon conversion but,
in lieu thereof, the Company will calculate an appropriate amount to be paid in
cash on the basis set forth in the Indenture. (Sections 1.1, 2.4, 3.7,
12.1, 12.2 and 12.3).
A holder delivering a Note for conversion is not required to pay any
taxes or duties in respect of the issue or delivery of Common Stock on
conversion. However, the Company is not required to pay any tax or duty which
may be payable in respect of any transfer involved in the issue or delivery of
the Common Stock in a name other than that of the holder of the Note.
Certificates representing shares of Common Stock will not be issued or
delivered unless the person requesting such issue has paid to the Company the
amount of any such tax or duty or has established to the satisfaction of the
Company that such tax or duty has been paid. (Sections 12.2 and 12.8).
The Conversion Rate is subject to adjustment in certain events,
including: (a) dividends (and other distributions) payable in Common Stock on
shares of capital stock of the Company, (b) the issuance to all holders of
Common Stock of rights, options or warrants entitling for or purchase Common
Stock at less than the then current market price of Common Stock as of the
record date for shareholders entitled to receive such rights, options or
warrants (determined as provided in the Indenture), (c) subdivisions,
combinations and reclassifications of Common Stock, (d) distributions to all
holders of Common Stock of evidences of indebtedness of the Company, shares of
capital stock, or other property (including securities, but excluding those
dividends, rights, options, warrants and distributions referred to above,
dividends and distributions paid exclusively in cash and distributions upon
mergers or consolidations to which the next succeeding paragraph applies), (e)
distributions consisting exclusively of cash (excluding any cash portion of
distributions referred to in (d) above, or cash distributed upon a merger or
consolidation to which the next succeeding paragraph applies) to all holders of
Common Stock in an aggregate amount that, combined together with (i) other such
all-cash distributions made within the preceding 12 months in respect of which
no adjustment has been made and (ii) any cash and the fair market value of
other consideration payable in respect of any tender offer by the Company or
any of its subsidiaries for Common Stock concluded within the preceding 12
months in respect of which no adjustment has been made, exceeds 12.5% of the
Company's market capitalization (being the product of the then current market
price of the Common Stock and the number of shares of Common Stock then
outstanding) on the record date for such distribution and (f) the successful
completion of a tender offer made by the Company or any of its subsidiaries for
Common Stock which involves an aggregate consideration that, together with (i)
any cash and other consideration payable in a tender offer by the Company or
any of its subsidiaries for Common Stock expiring within the 12 months
preceding the expiration of such tender offer in respect of which no adjustment
has been made and (ii) the aggregate amount of any such all-cash distributions
referred to in (e) above to all holders of Common Stock within the 12 months
preceding the expiration of such tender offer in respect of which no
adjustments have been made, exceeds 10% of the Company's market capitalization
on the expiration of such tender offer. The Company reserves
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<PAGE> 26
the right to make such increases in the conversion rate in addition to those
required in the foregoing provisions as it considers to be advisable in order
that any event treated for income tax purposes as a dividend or distribution of
stock or issuance of rights or warrants to purchase or subscribe for stock will
not be taxable to the recipients. No adjustment of the Conversion Rate will be
required to be made until the cumulative adjustments amount to 1.0% or more of
the Conversion Rate. (Section 12.4). The Company will compute any adjustments
to the conversion price pursuant to this paragraph and will give notice to the
holders of the Notes of any such adjustments. (Section 12.5).
In case of any consolidation or merger of the Company with or into
another Person or any merger of another Person into the Company (other than a
merger which does not result in any reclassification, conversion, exchange or
cancellation of the Common Stock), or in the case of any conveyance, sale,
transfer or lease of all or substantially all of the assets of the Company,
each Note then outstanding will, without the consent of the holder of any Note,
become convertible only into the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer by a
holder of the number of shares of Common Stock into which such Note was
convertible immediately prior thereto (assuming such holder of Common Stock
failed to exercise any rights of election and that such Note was then
convertible). (Section 12.11).
If at any time the Company makes a distribution of property to its
shareholders which would be taxable to such shareholders as a dividend for
federal income tax purposes (e.g., distributions of evidences of indebtedness
or assets of the Company, but generally not stock dividends on Common Stock or
rights to subscribe for Common Stock) and, pursuant to the anti-dilution
provisions of the Indenture, the number of shares into which Notes are
convertible is increased, such increase may be deemed for federal income tax
purposes to be the payment of a taxable dividend to holders of Notes. (Section
12.4).
SUBORDINATION
The payment of the principal of, premium, if any, and interest on, the
Notes (including Liquidated Damages) are subordinated in right of payment to
the extent set forth in the indenture to the prior full and final payment of
all Senior Debt of the Company. "Senior Debt" means the principal of (and
premium, if any) and interest (including all interest accruing subsequent to
the commencement of any bankruptcy or similar proceeding, whether or not a
claim for post-petition interest is allowable as a claim in any such
proceeding) on, and all fees and other amounts (including, without limitation,
collection expenses, attorney's fees and late charges) owing with respect to,
the following, whether direct or indirect, absolute or contingent, secured or
unsecured, due or to become due, outstanding at the date of execution of this
Indenture of thereafter incurred, created or assumed: (a) indebtedness of the
Company for money borrowed or evidenced by a note or similar instrument or
written agreement given in connection with the acquisition of any businesses,
properties or assets, including securities, (b) indebtedness of the Company to
banks, insurance companies or other financial institutions evidenced by notes
or other written obligations (including bank overdrafts), (c) indebtedness of
the Company evidenced by notes, debentures, bonds or other securities issued
under the provisions of an indenture or similar instrument, (d) indebtedness of
others of the kinds described in the preceding clauses (a), (b) and (c) that
the Company has assumed, guaranteed or otherwise assured the payment thereof,
directly or indirectly, (e) obligations of the Company as lessee under leases
required to be capitalized on the balance sheet of the lessee under United
States generally accepted accounting principles, (f) obligations of the Company
under interest rate and currency swaps, caps, floors, collars or similar
arrangements intended to protect the Company against fluctuations in interest
or currency exchange rates and/or (g) deferrals, renewals,
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<PAGE> 27
extensions and refundings of, or bonds, debentures, notes or other evidences of
indebtedness issued in exchange for, or amendments, modifications or
supplements to, or covenants and other obligations of the Company in connection
with, the indebtedness described in the preceding clauses (a) through (e)
whether or not there is any notice to or consent of the holders of Notes;
except (i) indebtedness and advances among the Company and its direct and
indirect Subsidiaries, and (ii) any particular indebtedness, deferral, renewal,
extension or refunding, if it is expressly stated in the governing terms or in
the assumption thereof that the indebtedness involved is not Senior Debt.
(Sections 1.1 and 13.1).
No payment on account of principal, premium, if any, or interest on,
the Notes (including Liquidated Damages) may be made if there shall have
occurred and be continuing (i) a default in the payment of principal, premium,
if any, or interest (including a default under any repurchase or redemption
obligation) or other amounts with respect to any Senior Debt or (ii) any other
event of default with respect to any Senior Debt, permitting the holders
thereof to accelerate the maturity thereof, and such event of default shall not
have been cured or waived or shall not have ceased to exist after written
notice of such event of default shall have been given to the Company and the
Trustee by any holder of Senior Debt. Upon any acceleration of the principal
due on the Notes or payment or distribution of assets of the Company to
creditors upon any dissolution, winding up, liquidation or reorganization,
whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or
other proceedings, all principal, premium, if any, and interest due on all
Senior Debt must be paid in full before the holders of the Notes are entitled
to receive any payment. By reason of such subordination, in the event of
insolvency, creditors of the Company who are holders of Senior Debt may recover
more, ratably, than the holders of the Notes, and such subordination may result
in a reduction or elimination of payments to the holders of the Notes.
(Sections 13.2 and 13.3). As of July 31, 1996, the aggregate principal amount
of outstanding Senior Debt was approximately $131,000.
In addition, the Notes are structurally subordinated to all
indebtedness and other liabilities (including trade payables and lease
obligations) of the Company's subsidiaries, if any, as any right of the Company
to receive any assets of its subsidiaries upon their liquidation or
reorganization (and the consequent right of the holders of the Notes to
participate in those assets) are effectively subordinated to the claims of that
subsidiary's creditors (including trade creditors) except to the extent that
the Company itself is recognized as a creditor of such subsidiary, in which
case the claims of the Company would still be subordinate to any security
interest in the assets of such subsidiary and any indebtedness of such
subsidiary senior to that held by the Company. As of July 15, 1996, the Company
had no subsidiaries.
The Indenture does not limit the Company's ability to incur Senior
Debt or any other indebtedness.
OPTIONAL REDEMPTION
The Notes may not be redeemed prior to the close of business on May
15, 1999. Thereafter, the Notes may be redeemed, in whole or in part, at the
option of the Company, upon not less than 30 nor more than 60 days' prior
notice as provided under "- Notices" below, at the redemption prices set forth
below. Such redemption prices (expressed as a percentage of principal amount)
are as follows for the 12-month period beginning on May 15 of the following
years:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ------
<S> <C>
1999 102.00
2000 101.00
</TABLE>
and thereafter at a redemption price equal to 100% of the principal amount, in
each case together with accrued interest to the redemption date. (Section 2.2,
Article Eleven).
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<PAGE> 28
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE IN CONTROL
If a Change in Control (as defined below) occurs, each holder of Notes
shall have the right, at the holder's option, to require the Company to
repurchase all of such holder's Notes, or any portion of the principal amount
thereof that is equal to $1,000 or an integral multiple of $1,000 in excess
thereof, on the date (the "Repurchase Date") that is 45 days after the date of
the Company Notice (as defined below), at a price in cash equal to 100% of the
principal amount of the Notes to be repurchased, together with interest accrued
to the Repurchase Date (the "Repurchase Price"). (Section 14.1).
The Company may, at its option, in lieu of paying the Repurchase Price
in cash, pay the Repurchase Price in Common Stock. The number of shares of
Common Stock tendered in payment shall be determined by dividing the Repurchase
Price by the value of the Common Stock which, for this purpose shall be equal
to 95% of the average of the closing bid prices of the Common Stock for the
five consecutive Trading Days ending on and including the third Trading Day
preceding the Repurchase Date. Such payment may not be made in Common Stock
unless the Company satisfies certain conditions with respect thereto prior to
the Repurchase Date as provided in the Indenture. (Sections 14.1, 14.2
and 14.3).
Within 30 days after the occurrence of a Change in Control, the
Company is obligated to give to all holders of the Notes and the Trustee
notice, as provided in the Indenture (the "Company Notice"), of the occurrence
of such Change in Control and of the repurchase right arising as a result
thereof, or at the request of the Company, on or before the 15th day after such
occurrence, the Trustee shall give the Company Notice. To exercise the
repurchase right, a holder of Notes must deliver on or before the 30th day
after the date of the Company Notice irrevocable written notice to the Trustee
of the holder's exercise of such right, together with the Notes with respect to
which the right is being exercised. (Section 14.3).
A Change in Control shall be deemed to have occurred at such time
after the original issuance of the Notes as there shall occur:
(i) the acquisition by any Person of beneficial ownership, directly or
indirectly, through a purchase, merger or other acquisition
transaction or series of transactions, of shares of capital stock of
the Company entitling such Person to exercise 50% or more of the total
voting power of all shares of capital stock of the Company entitled to
vote generally in elections of directors, other than any such
acquisition by the Company, any subsidiary of the Company or any
employee benefit plan of the Company existing on the date of the
Indenture; or
(ii) any consolidation or merger of the Company with or into, any
other Person, any merger of another Person into the Company, or any
conveyance, sale, transfer or lease of all or substantially all of the
assets of the Company to another Person (other than (a) any such
transaction (x) which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common
Stock and (y) pursuant to which holders of Common Stock immediately
prior to such transaction have the entitlement to exercise, directly
or indirectly, 50% or more of the total voting power of all shares of
capital stock entitled to vote generally in the election of directors
of the continuing or surviving person immediately after such
transaction
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<PAGE> 29
and (b) any merger which is effected solely to change the jurisdiction
of incorporation of the Company and results in a reclassification,
conversion or exchange of outstanding shares of Common Stock into
solely shares of common stock);
provided, however, that a Change in Control shall not be deemed to have
occurred if the closing price per share of the Common Stock for any five
Trading Days within the period of 10 consecutive Trading Days ending
immediately after the later of the date of the Change in Control or the date of
the public announcement of the change in Control (in the case of a Change in
Control under clause (i) above) or ending immediately before the Change in
Control (in the case of a Change in Control under clause (ii) above) shall
equal or exceed 105% of the Conversion Price of the Notes in effect on each
such Trading Day. The "Conversion Price" is equal to $1,000 divided by the
Conversion Rate. "Beneficial owner" shall be determined in accordance with Rule
13d-3 promulgated by the Commission under the Exchange Act, as in effect on the
date of original execution of the Indenture. "Person" includes any syndicate or
group which would be deemed to be a "person" under Section 13(d)(3) of the
Exchange Act. (Section 14.4).
Any repurchase in connection with a Change in Control would, to the
extent that a Change in Control constituted an Event of Default with respect to
such Senior Debt, be blocked by the subordination provisions of the Notes. See
"- Subordination." Failure by the Company to repurchase the Notes when
required would result in an Event of Default with respect to the Notes whether
or not such repurchase is permitted by the subordination provisions. See "-
Events of Default."
Rule 13e-4 under the Exchange Act requires the dissemination of
certain information to security holders in the event of an issuer tender offer
and may apply in the event that the repurchase option becomes available to
holders of the Notes. The Company will comply with this rule to the extent
applicable at that time.
The Company may, to the extent permitted by applicable law, at any
time purchase Notes in the open market or by tender at any price or by private
agreement. Any Note so purchased by the Company will be re-issued or resold or
may, at the Company's option, be surrendered to the Trustee for cancellation.
Any Notes surrendered as aforesaid may not be reissued or resold and will be
cancelled promptly.
The foregoing provisions would not necessarily afford holders of the
Notes protection in the event of highly leveraged or other transactions
involving the Company that may adversely affect holders of the Notes.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate or merge with or into any other Person
or, directly or indirectly, convey, transfer, sell, lease or otherwise dispose
of all or substantially all of its properties and assets to any Person (other
than a wholly-owned subsidiary), and the Company may not permit any Person
(other than a wholly-owned subsidiary) to consolidate with or merge into the
Company or convey, transfer, sell, lease or otherwise dispose of all or
substantially all of its properties and assets to the Company, unless (a) the
Person formed by such consolidation or into or with which the Company is merged
or the Person to which the properties and assets of the Company are so
conveyed, transferred, sold or leased is a corporation, limited liability
company, partnership or trust organized and existing under the laws of the
United States, any State thereof or the District of Columbia and must expressly
assume the due and punctual payment of the principal of, premium, if any, and
interest on the Notes and the performance of the other covenants of the Company
under the Indenture, (b) immediately after giving effect to such
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<PAGE> 30
transaction, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have occurred and be
continuing, and (c) the Company has provided to the Trustee an Officer's
Certificate and Opinion of Counsel as provided in the Indenture. (Section
7.1).
EVENTS OF DEFAULT
The following are Events of Default under the Indenture: (a) failure
to pay principal or Redemption Price of any Note when due; (b) failure to pay
any interest (including Liquidated Damages) on any Note when due and payable,
continuing for 30 days; (c) default in the Company's obligation to provide
notice of a Change in Control; (d) failure to perform any other covenant or
warranty of the Company in the Indenture, continuing for 60 days after written
notice to the Company by the Trustee as provided in the Indenture; (e) any
indebtedness for money borrowed by the Company in an outstanding principal
amount in excess of $5,000,000 that is not paid at final maturity or upon
acceleration thereof and such default in payment or acceleration is not cured
or rescinded within 30 days after written notice as provided in the Indenture;
and (f) certain events of bankruptcy, insolvency or reorganization. (Section
5.1). Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Trustee
is under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders of the Notes,
unless such holders of the Notes shall have offered to the Trustee reasonable
indemnity. (Section 6.3). Subject to such provisions for the indemnification
of the Trustee, the holders of a majority in aggregate principal amount of the
Outstanding Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee. (Section 5.12).
If an Event of Default (other than an Event of Default specified in
subsections (a), (b), and (f) above) occurs and is continuing, the Trustee or
the holders of not less than 25% in aggregate principal amount of the
Outstanding Notes, by notice in writing to the Company (and to the Trustee if
given by the holders of the Notes), may declare the principal of all the Notes
to be due and payable immediately, and upon any such declaration such principal
and any accrued interest and any unpaid Liquidated Damages thereon will become
immediately due and payable. If an Event of Default specified in subsections
(a) or (b) occurs and is continuing, the holder of any Outstanding Note may, by
notice in writing to the Company (with a copy to the Trustee), declare the
principal of such Note to be due and payable immediately, and upon any such
declaration such principal and (subject to Indenture) any accrued interest and
Liquidated Damages thereon will become immediately due and payable. If an
Event of Default specified in subsection (f) occurs and is continuing, the
principal and any accrued interest, together with any Liquidated Damages
thereon, on all of the Notes then Outstanding shall ipso facto become due and
payable immediately without any declaration or other Act on the part of the
Trustee or any holder of the Notes. (Section 5.2).
At any time after a declaration of acceleration has been made but
before a judgment or decree based on acceleration, the holders of a majority in
aggregate principal amount of Outstanding Notes may, under certain
circumstances as set forth in the Indenture, rescind and annul such
acceleration if all Events of Default, other than the nonpayment of accelerated
principal and interest, have been cured or waived as provided in the Indenture.
(Section 5.2). For information as to waiver of defaults, See " -Meetings,
Modification and Waiver."
No holder of any Note has any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless also the holders of at least 25% in aggregate
25
<PAGE> 31
principal amount of the Outstanding Notes shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee, and the Trustee shall not have received from the holders of a majority
in aggregate principal amount of the Outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. (Section 5.7). However, such limitations do not apply to suit
instituted by a holder of a Note for the enforcement of payment of the
principal of, premium, if any, or interest on such Note or after the respective
due dates expressed in such Note or of the right to convert such Note in
accordance with the Indenture. (Section 5.8).
The Company 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. (Section 10.9).
MEETINGS, MODIFICATION AND WAIVER
The Indenture contains provisions for convening meetings of the
holders of Notes to consider matters affecting their interests. (Article
Nine).
Modifications and amendments of the Indenture may be made, and certain
past defaults by the Company may be waived, either (i) with the written consent
of the holders of not less than a majority in principal amount of the Notes at
the time Outstanding or (ii) by the adoption of a Resolution, at a meeting of
holders of the Notes at which a quorum in present, by the holders of at least
66 2/3% in principal amount of the Outstanding Notes represented at such
meeting. However, no such modification or amendment may, without the consent
of the holder of each Outstanding Note affected thereby, (a) change the Stated
Maturity of the principal of, or any installment of interest on, any Note, (b)
reduce the principal amount of, or the premium, if any, or rate of interest on,
any Note, (c) reduce the amount payable upon redemption or repurchase, (d)
modify the provisions with respect to the repurchase right of the holders in a
manner adverse to the holders, (e) change the coin or currency of payment of
principal of, premium, if any, or interest on any Note, (f) impair the right to
institute suit for the enforcement of any payment on or with respect to any
Note, (g) (except as otherwise permitted or contemplated by provisions
concerning consolidation, merger, conveyance, transfer, sale or lease of all or
substantially all of the property or assets of the Company) adversely affect
the right to convert Notes, (h) modify the subordination provisions in a manner
adverse to the holders of the Notes, (i) reduce the above-stated percentage of
aggregate principal amount of Outstanding Notes necessary for waiver of
compliance with certain provisions of the indenture or for waiver of certain
defaults, (k) reduce the percentage in aggregate principal amount of Notes
Outstanding required for the adoption of a Resolution or the quorum required at
any meeting of holders of Notes at which a Resolution is adopted, or (l) modify
the obligation of the Company to deliver information required under Rule 144A
to permit resales of Notes and other Common Stock issuable upon conversion
thereof in the event the Company ceases to be subject to certain reporting
requirements under the United States securities laws (Section 8.2). The
quorum at any meeting called to adopt a Resolution will be persons holding or
representing a majority in aggregate principal amount of the Notes at the time
Outstanding and, at any reconvened meeting adjourned for lack of quorum, 25% of
such aggregate principal amount. (Section 9.4).
The holders of a majority in aggregate principal amount outstanding
Notes may waive compliance by the Company with certain restrictive provisions
of the Indenture. (Section 10.12). The holders of a majority in aggregate
principal amount of the Outstanding Notes may waive any past default under the
Indenture, except a default in the payment of principal, premium, if any, or
interest. (Section 5.13).
26
<PAGE> 32
PURCHASE BY THE COMPANY
The Company or any subsidiary may at any time and from time to time
purchase Notes at any price in the open market or otherwise.
TRANSFER, EXCHANGE AND WITHDRAWAL
Exchange of Interests in Restricted Global Notes, Regulation S Global
Notes and Regulation D Notes for Interests in Unrestricted Global Notes. Upon
each sale by a Selling Holder of Notes or Conversion Shares, as the case may
be, offered hereby, such Selling Holder will be required to deliver a notice
(the "Notice") of such sale to the Trustee and the Company. The Notice will,
among other things, identify the sale as a sale pursuant to the Registration
Statement of which this Prospectus forms a part, certify that the prospectus
delivery requirements, if any, of the Securities Act have been satisfied, and
certify that the Selling Holder and the aggregate principal amount of Notes or
the number of Conversion Shares owned by such holder are identified in the
Prospectus in accordance with the applicable rules and regulations under the
Securities Act. See Appendix A. A copy of the Notice is included herein as
Appendix A. Additional copies may be requested from the Company, Attention:
Secretary, 4024 Stirrup Creek Drive, P. O. Box 13737, Durham, North Carolina
27709-3737, telephone: (919) 544-0015.
Upon receipt by the Trustee of the Notice relating to a sale of Notes,
an appropriate adjustment will be made to reflect a decrease in the principal
amount of the Restricted Global Note or the Regulation S Global Note, as the
case may be, or the cancellation of a Note in certificated form upon the
transfer thereof, and a corresponding increase in the principal amount of the
Unrestricted Global Note (or, upon the request of a Selling Holder of Notes in
certificated form, the authentication and delivery of a Note in certificated
form).
Exchange of Interests in Global Notes for Certificated Notes. As long
as DTC, or its nominee, is the registered holder of a Global Note, DTC or such
nominee, as the case may be, will be considered the sole owner and holder of the
Notes represented by such Global Note for all purposes under the Indenture and
the Notes. Unless DTC notifies the Company that it is unwilling or unable to
continue as depository for a Global Note, or ceases to be a "Clearing Agency"
registered under the Exchange Act, or announces an intention permanently to
cease business or does in fact do so, or an Event of Default has occurred and is
continuing with respect to a Global Note, owners of beneficial interests in a
Global Note, except as provided below, will not be entitled to have any portions
of such Global Note registered in their names, will not receive or be entitled
to receive physical delivery of Notes in definitive form and will not be
considered the owners or holders of the Global Note (or any Notes represented
thereby) under the Indenture or the Notes. In addition, no beneficial owner of
an interest in a Global Note will be able to transfer that interest except in
accordance with DTC's applicable procedures (in addition to those under the
Indenture referred to herein). In addition, following the Restricted Period
beneficial interests in the Regulation S Global Note may be exchanged for Notes
in certificated (i.e. non-global) form upon timely request given to the Trustee
by or on behalf of DTC in accordance with its customary procedures. In all
cases, Notes in certificated form delivered in exchange for the Regulation S
Global Note or beneficial interest therein will be registered in the names, and
issued in any approved denominations, requested by or on behalf of DTC as the
Depository (in accordance with its customary procedures) and will be subject to
restrictions on resale (and will bear a legend as set forth in the Indenture
unless the Company determines otherwise in compliance with applicable law). In
the event that owners of beneficial interest in a Global Note become entitled to
receive Notes in certificated form, such Notes will be issued only as Notes in
certificated form in denominations of U.S. $1,000 and integral multiples
thereof. (Sections 3.4 and 3.5).
27
<PAGE> 33
Exchange of Certificated Notes for Interests in Restricted Global
Notes or Regulation S Global Notes. Regulation D Notes, which were issued in
certificated (i.e. non-global) form, may not be exchanged for beneficial
interests in any Restricted Global Note or Regulation S Global Note unless such
exchange occurs in connection with or following a transfer of such Regulation D
Notes and, in the case of initial purchasers thereof, the transferor first
delivers to the Trustee a written certificate (in the form provided in the
Indenture) to the effect that such transfer will comply with the appropriate
transfer restrictions applicable to such Notes as set forth in the Indenture.
In the case of any such exchange of a Regulation D Note initially issued in
certificated form for (a) an interest in the Regulation S Global Note, such
transfer must occur pursuant to Regulation S or Rule 144 (if available) or (b)
an interest in the Restricted Global Note, such transfer must occur pursuant to
Rule 144A. (Section 3.5).
Exchanges between the Regulation S Global Notes and the Restricted
Global Notes. Beneficial interests in the Restricted Global Note may be
transferred to a person who acquires the same in the form of a beneficial
interest in the Regulation S Global Note, whether before or after the
expiration of the Restricted Period, only if the transferor first delivers to
the Trustee a written certificate (in the form provided in the Indenture) to
the effect that such transfer is being made in accordance with Rule 904 of
Regulation S or Rule 144 (if available) and that, if such transfer occurs prior
to the expiration of the Restricted Period, the interest transferred will be
held immediately thereafter through Euroclear or CEDEL. (Section 3.5).
Any beneficial interest in one of the Global Notes that is transferred
to a person who takes delivery in the form of an interest in the other Global
Note will, upon transfer, cease to be an interest in such Global Note and will
become an interest in the other Global Note and, accordingly, will thereafter
be subject to all transfer restrictions and other procedures applicable to
beneficial interests in such other Global Notes for so long as it remains such
an interest. (Section 3.5).
Transfers involving an exchange of a beneficial interest in the
Regulation S Global Note for a beneficial interest in the Restricted Global
Note or vice versa will be effected in DTC by means of an instruction
originated by the Trustee through the DTC/Deposit Withdraw at Custodian (DWAC)
system. Accordingly, appropriate adjustments will be made to reflect a
decrease in the principal amount of the Regulation S Global Note and a
corresponding increase in the principal amount of the Restricted Global Note or
vice versa, as applicable.
TITLE
The Company and the Trustee may treat the registered owner (as
reflected in the Security Register) of any Note as the absolute owner thereof
(whether or not such Note shall be overdue) for the purpose of making payment
and for all other purposes.
NOTICES
Notice to holders of the Notes are to be given by mail to the
addresses of such holders as they appear in the Security Register. Such
notices are deemed to be given on the date of mailing of the notice. (Section
1.6).
Notice of a redemption of Notes will be given at least once not less
than 30 nor more than 60 days prior to the Redemption Date (which notice shall
be irrevocable) and will specify the Redemption Date and the Redemption Price.
(Section 11.5).
28
<PAGE> 34
REPLACEMENT OF NOTES
Notes that become mutilated, destroyed, stolen or lost will be
replaced by the Company at the expense of the holder upon delivery to the
Trustee or to a transfer agent outside the United States of the mutilated Notes
or evidence of the loss, theft or destruction thereof satisfactory to the
Company and the Trustee. In the case of a lost, stolen or destroyed Note,
indemnity satisfactory to the Trustee and the Company may be required at the
expense of the holder of such Note before a replacement Note will be issued.
(Section 3.6).
PAYMENT OF STAMP AND OTHER TAXES
The Company shall pay all stamp and other duties, if any, which may be
imposed by the United States or any political subdivision thereof or taxing
authority thereof or therein with respect to the issuance of the Notes. The
Company is not required to make any payment with respect to any other tax,
assessment or governmental charge imposed by any government or any political
subdivision thereof or taxing authority therein.
GOVERNING LAW
The Indenture, the Notes and the coupons are governed by and construed
in accordance with the laws of the State of New York, United States of America
(Section 1.11).
THE TRUSTEE
In case an Event of Default shall occur (and shall not be cured), the
Trustee will be required to use the degree of care of a prudent person in the
conduct of his own affairs in the exercise of its powers. Subject to such
provisions, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request of any of the holders of Notes,
unless they shall have offered to the Trustee reasonable security or indemnity.
(Sections 6.1 and 6.3).
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue up to 30,000,000 shares of Common
Stock, par value $0.01 per share, and 7,500,000 shares of Preferred Stock, par
value $0.01 per share. As of September 13, 1996, there were 13,241,806 shares
of Common Stock outstanding held by approximately 8,000 holders of record and
beneficial owners. There are no shares of Preferred Stock outstanding. In
addition, as of September 16, 1996 the Company had 2,417,386 shares reserved for
issuance upon the exercise of outstanding options and 1,225,000 shares reserved
for issuance upon the exercise of outstanding warrants.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share
held of record on each matter submitted to a vote of shareholders. Subject to
contractual restrictions on dividends and to preferences which may be granted
to holders of Preferred Stock, each holder of Common Stock is entitled to share
ratably in distributions to shareholders and to receive ratably such dividends
as may be declared by the Board of Directors out of funds legally available
therefor. In the event of a liquidation, dissolution or winding up of the
Company, each holder of Common Stock is entitled to share ratably in all assets
remaining after payments of liabilities and the liquidation preference of
outstanding Preferred Stock, if any. Holders of Common Stock have no
conversion, preemptive rights or other rights to subscribe for additional
shares of Common Stock, and there are not redemption rights or sinking fund
provisions with respect to the Common Stock. The outstanding
29
<PAGE> 35
shares of Common Stock are, and the shares issuable upon conversion will be,
when issued upon conversion, validly issued, fully paid and nonassessable.
The rights, preferences and privileges of the holders of Common Stock
are subject to the rights of the holders of shares of any class or series of
Preferred Stock that the Company may designate and issue in the future, and
except for such rights, preferences and privileges as the holders of Preferred
Stock may have, the holders of Common Stock have all powers, preferences and
rights conferred upon owners of shares of capital stock under the laws of the
State of Delaware.
PREFERRED STOCK
The Board of Directors, without further action by the holders of
Common Stock but subject to any limitations prescribed by law, may issue shares
of Preferred Stock in one or more series and may fix or alter the rights,
preferences, privileges and restrictions, including voting rights, redemption
provisions (including sinking fund provisions), dividend rights, dividend
rates, liquidation preferences and conversion rights, and the description and
number of shares constituting wholly unissued shares of Preferred Stock. The
Board of Directors, without further shareholder approval but subject to any
limitations prescribed by law, can issue Preferred Stock with voting and
conversion rights which could adversely affect the voting power of the holders
of Common Stock. No shares of Preferred Stock currently are outstanding, and
the Company currently has no plans to issue shares of Preferred Stock. The
issuance of shares of Preferred Stock under certain circumstances could have
the effect of delaying or preventing a change of control or other corporate
action.
CERTAIN CHARTER PROVISIONS
The Company's Restated Certificate of Incorporation (the "Certificate
of Incorporation") authorizes the issuance of a preferred stock with
designations, rights, and preferences determined from time to time by the Board
of Directors, without further action by the stockholders.
The Company's Certificate of Incorporation provides that the
stockholders may not take action by written consent as Delaware law would
otherwise permit, but may act only at an annual or special meeting of the
stockholders. The affirmative vote of the holders of shares of the Company's
capital stock entitled to cast 75% or more of the aggregate number of votes
entitled to be cast by all holders of outstanding shares of the Company's
capital stock is required to change this provision of the Certificate of
Incorporation.
The Company's Amended and Restated Bylaws contain provisions which
provide for a classified Board of Directors consisting of three classes with
directors serving staggered three-year terms. Therefore, only one third of the
directors are subject to election by the stockholders each year. The
affirmative vote of the holders of the Company's capital stock which are
entitled to cast at least 75% of the aggregate number of votes entitled to be
cast by all holders of the Company's outstanding capital stock is required to
amend this provision of the Amended and Restated Bylaws. Under Delaware law,
if a Board of Directors is classified, a director may not be removed except for
cause unless the corporation's certificate of incorporation provides otherwise.
The Company's Certificate of Incorporation does not contain a provision
altering this statutory provision.
The Company's Amended and Restated Bylaws provide that a special
meeting of the stockholders may be called by the President or the Chairman of
the Board or at the request of a majority of the Board of Directors or the
holders of shares entitled to cast a majority of the votes entitled to be cast
by all
30
<PAGE> 36
outstanding shares. The affirmative vote of the holders of the Company's
capital stock which are entitled to cast at least 75% of the aggregate number
of votes entitled to be cast by all holders of the Company's outstanding
capital stock is required to amend this provision of the Amended and Restated
Bylaws.
These provisions in the Company's Certificate of Incorporation and
Amended and Restated Bylaws could have the effect of deterring hostile
takeovers or delaying or preventing changes in control or management of the
Company or the removal of the incumbent Board of Directors.
The Company has also included in its Certificate of Incorporation
provisions to eliminate the personal liability of its directors to the Company
or its stockholders for monetary damages to the fullest extent permitted under
Delaware law. The Company's Amended and Restated Bylaws include provisions
indemnifying the Company's officers and directors to the fullest extent
permitted by Delaware law (including without limitation the advancement of
expenses for such officers and directors) and granting the Company the power to
(i) indemnify, and advance expenses to, its employees and agents to the fullest
extent permitted by Delaware law, and (ii) purchase and maintain insurance for
its directors, officers, employees and agents to the fullest extent permitted
by Delaware law. The Company does not have any indemnification agreements with
any of its directors or officers.
CERTAIN PROVISIONS OF DELAWARE LAW
The Company is a Delaware corporation and is subject to Section 203 of
the Delaware General Corporation Law. Section 203 provides, subject to certain
exceptions, that a Delaware corporation may not engage in a "business
combination" (as defined under Delaware law) with an "interested stock holder"
(defined generally as a person owning 15% or more of the corporation's
outstanding voting stock) for three years following the date such person became
an interested stockholder unless: (i) before such person became an interested
stockholder, the board of directors of the corporation approved the transaction
in which the interested stockholder became an interested stockholder or
approved the business combination, (ii) upon consummation of the transaction
that resulted in the interested stockholder becoming an interested stockholder,
the interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced (excluding stock
held by directors who are also officers of the corporation and by employee
stock plans that do not provide employees with the rights to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer), or (iii) at or subsequent to the time the person
became an interested stockholder, the business combination is approved by the
board of directors of the corporation and approved at a meeting of stockholders
by the affirmative vote of the holders of at least 66 2/3% of the outstanding
voting stock of the corporation that is not owned by the interested
stockholder. 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 defined as any person
who is: (i) the owner of 15% or more of the outstanding voting stock of the
corporation or (ii) an affiliate or associate of the corporation who was the
owner of 15% or more of the outstanding voting stock of the corporation at any
time within the three-year period immediately prior to the date on which it is
sought to be determined whether such person is an interested stockholder.
The foregoing provisions could delay or frustrate a change in control
of the Company. The provisions could also discourage or make more difficult a
merger, tender offer or proxy contest, even if such event would be favorable to
the interests of stockholders.
31
<PAGE> 37
TRANSFER AGENT
The transfer agent for the Common Stock is First Union National Bank
of North Carolina.
SELLING HOLDERS
This Prospectus relates to the offering for resale of the Offered
Securities by the holders listed below and other holders identified in
supplements to this Prospectus (the "Selling Holders"). The Notes were
originally issued by the Company and sold by the Initial Purchasers in
transactions exempt from the registration requirements of the Securities Act, in
the United States to persons reasonably believed by the Initial Purchasers to be
"qualified institutional buyers" as defined in Rule 144A under the Securities
Act and outside the United States to non-U.S. persons in offshore transactions
in reliance on Regulation S under the Securities Act. The Notes were also sold
in the United States to a limited number of institutional accredited investors
in transactions exempt from registration under the Securities Act otherwise than
in reliance on Rule 144A or Regulation S under the Securities Act.
The following table sets forth, as of a recent practicable date prior
to the effectiveness of the Registration Statement of which this Prospectus
forms a part, certain information with regard to the beneficial ownership by the
holders listed below of the Offered Securities and the principal amount of Notes
or number of shares of Common Stock that may be offered by each such holder
pursuant to this Prospectus. Such information has been obtained from such
holders, DTC and/or the Trustee. None of such holders has, or within the past
three years, has had any position, office or other material relationship with
the Company.
32
<PAGE> 38
<TABLE>
<CAPTION>
===================================================================================================
Name of Selling Principal Principal Common Stock Common Stock
Holder Amount of Amount of Owned Prior Offered
Notes Owned Notes to Offering Hereby (2)
Offered (1)
Hereby
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arnhold & S. 2,250,000 2,250,000 54,243 54,243
Bleichroeder, Inc.
---------------------------------------------------------------------------------------------------
Allstate Insurance 2,500,000 2,500,000 60,270 60,270
Company
---------------------------------------------------------------------------------------------------
Bond Fund Series- 1,250,000 1,250,000 30,135 30,135
Oppenheimer Bond Fund
for Growth
---------------------------------------------------------------------------------------------------
Lincoln National 1,590,000 1,590,000 38,331 38,331
Insurance-Corporate
Convertible Securities
Pool
---------------------------------------------------------------------------------------------------
Lincoln National 730,000 730,000 17,598 17,598
Convertible Securities
Fund
---------------------------------------------------------------------------------------------------
Weirton Trust 180,000 180,000 4,339 4,339
Convertible
--------------------------------------------------------------------------------------------------
The Dreyfus Growth and 5,000,000 5,000,000 120,540 120,540
Income Fund
---------------------------------------------------------------------------------------------------
The Common Fund 1,000,000 1,000,000 24,108 24,108
---------------------------------------------------------------------------------------------------
OCM Convertible Trust 4,240,000 4,240,000 102,217 102,217
---------------------------------------------------------------------------------------------------
Dreyfus Variable 2,000,000 2,000,000 48,216 48,216
Investment-Growth and
Income Portfolio
---------------------------------------------------------------------------------------------------
BT Securities Corp. 200,000 200,000 4,821 4,821
---------------------------------------------------------------------------------------------------
PML General Account 500,000 500,000 12,054 12,054
---------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 39
<TABLE>
<CAPTION>
===================================================================================================
Name of Selling Principal Principal Common Stock Common Stock
Holder Amount of Amount of Owned Prior Offered
Notes Owned Notes to Offering Hereby (2)
Offered (1)
Hereby
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>33
Hudson River Trust 1,000,000 1,000,000 24,108 24,108
Growth Investors
---------------------------------------------------------------------------------------------------
Equitable Separate 2,895,000 2,895,000 69,792 69,792
Account - Convertibles
---------------------------------------------------------------------------------------------------
Hudson River Trust 1,495,000 1,495,000 36,041 36,041
Balanced Portfolio
---------------------------------------------------------------------------------------------------
Chase Manhattan Bank 3,650,000 3,650,000 87,994 87,994
Trustee for IBM
Corp. Retirement Plan
---------------------------------------------------------------------------------------------------
Merrill Lynch 2,500,000 2,500,000 60,270 60,270
Convertible Holdings,
Inc. (World Income
Fund)
---------------------------------------------------------------------------------------------------
Columbia/HCA Healthcare 900,000 900,000 21,697 21,697
Corp.
---------------------------------------------------------------------------------------------------
First Hawaiian Bank 370,000 370,000 8,919 8,919
Custodian for Hotel
Union & Industry of
Hawaii
---------------------------------------------------------------------------------------------------
Bankers Trust 350,000 350,000 8,437 8,437
International, PLC
---------------------------------------------------------------------------------------------------
Moser Family Partners 50,000 50,000 1,205 1,205
Ltd.
---------------------------------------------------------------------------------------------------
Delta Air Lines
Master Trust 2,530,000 2,530,000 60,993 60,993
---------------------------------------------------------------------------------------------------
Memphis Light, Gas and 1,100,000 1,100,000 26,518 26,518
Water Retirement Fund
---------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE> 40
<TABLE>
<CAPTION>
===================================================================================================
Name of Selling Principal Principal Common Stock Common Stock
Holder Amount of Amount of Owned Prior Offered
Notes Owned Notes to Offering Hereby (2)
Offered (1)
Hereby
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First National Bank of 300,000 300,000 7,232 7,232
Omaha Custodian for
Catholic Mutual Relief
Society of America
Retirement Plan and
Trust
---------------------------------------------------------------------------------------------------
First National Bank of 200,000 200,000 4,821 4,821
Omaha Custodian for
Catholic Mutual Relief
Society of America
---------------------------------------------------------------------------------------------------
Danskin Pension 50,000 50,000 1,205 1,205
---------------------------------------------------------------------------------------------------
Pennaco Pension 50,000 50,000 1,205 1,205
---------------------------------------------------------------------------------------------------
Interstate Johnson/Lane 250,000 250,000 6,027 6,027
Corporation
---------------------------------------------------------------------------------------------------
South Dakota Retirement 1,000,000 1,000,000 24,108 24,108
System
---------------------------------------------------------------------------------------------------
Glen Eagles Fund 150,000 150,000 3,616 3,616
---------------------------------------------------------------------------------------------------
Palladin Partners 175,000 175,000 4,218 4,218
---------------------------------------------------------------------------------------------------
Gershon Partners 150,000 150,000 3,616 3,616
---------------------------------------------------------------------------------------------------
Ramius Fund 175,000 175,000 4,218 4,218
---------------------------------------------------------------------------------------------------
State Employees' 930,000 930,000 22,420 22,420
Retirement Fund of the
State of Delaware
---------------------------------------------------------------------------------------------------
OCM Convertible Limited 250,000 250,000 6,027 6,027
Partnership
---------------------------------------------------------------------------------------------------
Declaration of Trust 290,000 290,000 6,991 6,991
for the Defined Benefit
Plans of ZENECA
Holdings, Inc.
---------------------------------------------------------------------------------------------------
Delaware State 1,405,000 1,405,000 33,871 33,871
Employees' Retirement
Fund
---------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 41
<TABLE>
<CAPTION>
===================================================================================================
Name of Selling Principal Principal Common Stock Common Stock
Holder Amount of Amount of Owned Prior Offered
Notes Owned Notes to Offering Hereby (2)
Offered (1)
Hereby
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Declaration of Trust 435,000 435,000 10,486 10,486
for the Defined Benefit
Plans of ICI American
Holdings Inc.
---------------------------------------------------------------------------------------------------
Christian Science 90,000 90,000 2,169 2,169
Trustees for Gifts and
Endowments
---------------------------------------------------------------------------------------------------
First Church of Christ, 105,000 105,000 2,531 2,531
Scientist - Endowment
---------------------------------------------------------------------------------------------------
General Motors Employees 3,300,000 3,300,000 79,556 79,556
Domestic Group Trust
---------------------------------------------------------------------------------------------------
Thermo Electron 500,000 500,000 12,054 12,054
Balanced Investment
Fund
---------------------------------------------------------------------------------------------------
TeePak, Inc. Master Retirement 25,000 25,000 602 602
Trust
---------------------------------------------------------------------------------------------------
Hillside Capital 100,000 100,000 2,410 2,410
Incorporated Corporate
Account
---------------------------------------------------------------------------------------------------
Lord Abbett Bond 2,000,000 2,000,000 48,216 48,216
Debenture Fund
---------------------------------------------------------------------------------------------------
Salomon Brothers Equity 1,500,000 1,500,000 36,162 36,162
Arbitrage Finance
Limited I
---------------------------------------------------------------------------------------------------
Golden Rule Insurance 2,250,000 2,250,000 54,243 54,243
Company
---------------------------------------------------------------------------------------------------
Public Employees' 1,000,000 1,000,000 24,108 24,108
Retirement Association
of Colorado
---------------------------------------------------------------------------------------------------
Colonial Penn Life 175,000 175,000 4,218 4,218
Insurance
---------------------------------------------------------------------------------------------------
Colonial Penn Insurance 175,000 175,000 4,218 4,218
---------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE> 42
<TABLE>
<CAPTION>
===================================================================================================
Name of Selling Principal Principal Common Stock Common Stock
Holder Amount of Amount of Owned Prior Offered
Notes Owned Notes to Offering Hereby (2)
Offered (1)
Hereby
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robertson, Stephens & 500,000 500,000 12,054 12,054
Company, LLP
---------------------------------------------------------------------------------------------------
Robertson Stephens Growth & 1,750,000 1,750,000 42,189 42,189
Income Fund
---------------------------------------------------------------------------------------------------
State of Connecticut 1,550,000 1,550,000 37,367 37,367
Retirement and Trust
Funds
---------------------------------------------------------------------------------------------------
MainStay Convertible 2,500,000 2,500,000 76,270 60,270
Fund
---------------------------------------------------------------------------------------------------
Merrill Lynch World 1,250,000 1,250,000 30,135 30,135
Income Fund
---------------------------------------------------------------------------------------------------
LB Series Fund Inc. - 6,250,000 6,250,000 150,675 150,675
Growth Portfolio
---------------------------------------------------------------------------------------------------
Value Line Convertible 500,000 500,000 12,054 12,054
Fund
---------------------------------------------------------------------------------------------------
Convertible Fund Series 1,250,000 1,250,000 30,135 30,135
---------------------------------------------------------------------------------------------------
Xerox Profit Sharing 1,750,000 1,750,000 42,189 42,189
Trust
---------------------------------------------------------------------------------------------------
Nalco Co. Retirement 150,000 150,000 3,616 3,616
Trust
---------------------------------------------------------------------------------------------------
Saif Corporation 2,500,000 2,500,000 60,270 60,270
---------------------------------------------------------------------------------------------------
Oregon Equity Fund 3,590,000 3,590,000 86,547 86,547
---------------------------------------------------------------------------------------------------
Delaware State 1,085,000 1,085,000 26,157 26,157
Retirement Fund -
Froley, Revy
---------------------------------------------------------------------------------------------------
Wafra Discretionary 200,000 200,000 4,821 4,821
---------------------------------------------------------------------------------------------------
ICI American Holdings 415,000 415,000 10,004 10,004
Pension
---------------------------------------------------------------------------------------------------
Zeneca Holdings Pension 410,000 410,000 9,884 9,884
Trust
---------------------------------------------------------------------------------------------------
List & Co. 1,750,000 1,750,000 42,189 42,189
---------------------------------------------------------------------------------------------------
AIM Global Utilities Fund 800,000 800,000 19,286 19,286
---------------------------------------------------------------------------------------------------
AIM Balanced Fund 800,000 800,000 19,286 19,286
---------------------------------------------------------------------------------------------------
AIM V.I. Global Utilities 10,000 10,000 241 241
Fund
---------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 43
<TABLE>
<CAPTION>
=====================================================================================================
Name of Selling Principal Principal Common Stock Common Stock
Holder Amount of Amount of Owned Prior Offered
Notes Owned Notes to Offering Hereby (2)
Offered (1)
Hereby
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hull Overseas, Ltd. 500,000 500,000 12,054 12,054
-----------------------------------------------------------------------------------------------------
David Lipscomb 110,000 110,000 2,651 2,651
University - General
Endowment Fund
-----------------------------------------------------------------------------------------------------
Hudson River Trust 550,000 550,000 13,259 13,259
Growth & Income
Portfolio
-----------------------------------------------------------------------------------------------------
The HCA Foundation 280,000 280,000 6,750 6,750
-----------------------------------------------------------------------------------------------------
Equitable Life 5,000,000 5,000,000 120,540 120,540
Assurance Separate
Account - Equity
Pension Plus
-----------------------------------------------------------------------------------------------------
Cova Bond Debenture Fund 50,000 50,000 1,205 1,205
-----------------------------------------------------------------------------------------------------
Elf Acquitaine Inc. 100,000 100,000 2,410 2,410
-----------------------------------------------------------------------------------------------------
CFW-C, L.P. 2,500,000 2,500,000 60,270 60,270
-----------------------------------------------------------------------------------------------------
Seligman Common Stock 2,750,000 2,750,000 66,297 66,297
Fund, Inc.
-----------------------------------------------------------------------------------------------------
Seligman Income 2,750,000 2,750,000 66,297 66,297
Fund, Inc.
-----------------------------------------------------------------------------------------------------
SUBTOTAL 97,910,000 97,910,000 2,376,414 2,360,414
-----------------------------------------------------------------------------------------------------
Unnamed holders of 17,090,000 17,090,000 412,005 412,005
Offered Securities or (4)
any future transferees,
pledgees, donees or
successors of or from
any such unnamed holder
(3)
-----------------------------------------------------------------------------------------------------
TOTAL 115,000,000 115,000,000 2,788,420 2,772,420(5)
=====================================================================================================
</TABLE>
- ------------
(1) Includes Common Stock as to which the Selling Holder has sole or shared
voting or investment power and Common Stock issuable pursuant to
options and/or warrants exercisable within the next 60 days. Also
includes the shares of Common Stock into which the Notes held by such
Selling Holder are convertible at the initial conversion rate. The
Conversion Rate and the number of shares of Common Stock issuable upon
conversion of the Notes are subject to adjustment under certain
circumstances. See "Description of Notes - Conversion Rights."
Accordingly, the number of shares of Common Stock issuable upon
conversion of the Notes may increase or decrease from time to time.
(2) Assumes conversion into Common Stock of the full amount of Notes held
by the Selling Holder at the initial conversion rate and the offering
of such shares by such Selling Holder pursuant to the Registration
Statement of which this Prospectus forms a part. The Conversion Rate
and the number of shares of Common Stock issuable upon conversion of
the Notes is subject to adjustment under certain circumstances. See
"Description of Notes - Conversion Rights." Accordingly, the number of
shares of Common Stock issuable upon conversion of the Notes may
increase or decrease from time to time. Fractional shares will not be
issued upon conversion of the Notes; rather, cash will be paid in lieu
of fractional shares, if any.
38
<PAGE> 44
(3) No such holder may offer Notes or Conversion Shares pursuant to
the Registration Statement of which this Prospectus forms a part until
such holder is included as a Selling Holder in a supplement to this
Prospectus in accordance with the Registration Rights Agreement.
(4) Assumes that the unnamed holders of Offered Securities or any future
transferees, pledges, donees, or successors of or from any such
unnamed holder do not beneficially own any Common Stock other than the
Common Stock issuable upon conversion of the Notes at the initial
conversion rate.
(5) Due to rounding, the total of this column may not exactly equal the
aggregate number of shares of Common Stock issuable upon conversion of
the Notes at the initial conversion rate.
Because the Selling Holders may, pursuant to this Prospectus, offer
all or some portion of the Offered Securities they presently hold, no estimate
can be given as to the amount of the Offered Securities that will be held by
the Selling Holders upon termination of any such sales. In addition, the
Selling Holders identified above may have sold, transferred or otherwise
disposed of all or a portion of their Offered Securities since the date on
which they provided the information regarding their Offered Securities, in
transactions exempt from the registration requirements of the Securities Act.
See "Plan of Distribution."
Only Selling Holders identified above who beneficially own the Offered
Securities set forth opposite each such Selling Holder's name in the foregoing
table on the effective date of the Registration Statement of which this
Prospectus forms a part may sell such Offered Securities pursuant to the
Registration Statement. The Company may from time to time, in accordance with
the Registration Rights Agreement, include additional Selling Holders in
supplements to this Prospectus.
PLAN OF DISTRIBUTION
The Selling Holders may from time to time effect the sale of their
Offered Securities in one or more transactions in the public market (which may
include a firm underwritten offering) at fixed prices, at prices and at terms
then prevailing or at prices related to the then-current market price, or in
negotiated transactions or otherwise. The Offered Securities may be sold
pursuant to the Registration Statement of which this Prospectus is a part,
another registration statement or pursuant to an exemption from registration,
including Rule 144 or Rule 144A, or pursuant to Rule 904 of Regulation S.
The Offered Securities may be sold in transactions effected on The
Nasdaq Stock Market, in other over-the-counter markets, on any national
securities exchange or other quotation service on which the Offered Securities
may be listed or quoted at the time of sale, or otherwise than on such
exchanges or over-the-counter markets. If all or a portion of the Offered
Securities are sold in such transactions, they may be sold: (a) by means of a
block trade in which the broker or dealer so engaged will attempt to sell the
Registrable Securities as agent but may position and resell a portion of the
block as principal to facilitate the transactions; (b) through purchases by a
broker (or, in the case of a firm underwritten offering, an underwriter or
underwriters ("Underwriter" or "Underwriters") as principal and resale by such
broker (or Underwriter) for its account pursuant to this Prospectus; (c) by
means of an exchange distribution in accordance with the rules of such
exchange; (d) through ordinary brokerage transactions and transactions in which
the broker solicits purchasers; (e) through the writing of options; (f)
directly to purchasers by the holders of the Notes; (g) by means of a
combination of the foregoing methods; or (h) otherwise.
In effecting sales, brokers, dealers or Underwriters, as the case may
be, engaged by the Selling Holders may arrange for other brokers, dealers or
Underwriters to participate. The Selling Holders and any brokers, dealers or
Underwriters engaged by the Selling Holders may receive commissions or
discounts from the Selling Holders in amounts to be negotiated. Such brokers,
39
<PAGE> 45
dealers or Underwriters, as the case may be, and any other participating
brokers, dealers or Underwriters, as well as the Selling Holders, may be deemed
to be "underwriters" within the meaning of the Securities Act in connection
with such sales and any profit on the sale of Offered Securities and any
discounts or commission received by any Underwriter, broker or dealer may be
deemed to be underwriting discounts and commissions under the Securities Act.
To the best knowledge of the Company, there are currently no plans,
arrangements or understandings between any Selling Holders and any broker,
dealer or Underwriter regarding the sale of the Offered Securities by the
Selling Holders. There is no assurance that any Selling Holder will sell any
or all of Offered Securities offered by it hereunder or that any such Selling
Holder will not transfer, devise or gift such Offered Securities by other means
not described herein.
At the time a particular offering of the Offered Securities is made, a
Prospectus Supplement, if required, will be distributed which will set forth
the aggregate amount and type of Offered Securities being offered and the terms
of the offering, including the name or names or any underwriters,
broker/dealers or agent, any discounts, commissions and other terms
constituting compensation from the Selling Holders and any discounts,
commissions or concessions allowed or reallowed or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if
applicable, the Offered Securities will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain jurisdictions the Offered Securities may not be offered or
sold unless they have been registered or qualified for sale in such
jurisdictions or any exemption from registration or qualification is available
and is complied with.
The Selling Holders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Offered Securities by the
Selling Holders. The foregoing may affect the marketability of such
securities.
The outstanding Common Stock of the Company is listed for trading on
the Nasdaq National Market, and the Company currently intends to apply for
listing of the Conversion Shares on The Nasdaq National Market. The Notes are
currently eligible for trading in the PORTAL market of the National Association
of Securities Dealers, Inc. Notes sold pursuant to the Registration Statement
of which this Prospectus forms a part are not expected to remain eligible for
trading through the PORTAL System. The Company does not intend to apply for
listing of the Notes on any securities exchange or for inclusion of the Notes
on any automated quotation system. There is no assurance as to development or
liquidity of any trading market that may develop for the Notes.
Pursuant to agreements entered into in connection with the offer and
sale of the Notes by the Company, each of the Company and the Selling Holders
will be indemnified by the other against certain liabilities, including certain
liabilities under the Securities Act, or will be entitled to contribution in
connection therewith. The Company has agreed to pay expenses incident to the
offer and sale of the Offered Securities by the Selling Holders other than
brokers' commissions and underwriting discounts and commissions.
UNITED STATES TAXATION
The following is a summary of certain United States federal income and
estate tax considerations relating to the purchase, ownership and disposition
of the Notes and of Common Stock into which Notes may be converted but does
40
<PAGE> 46
not purport to be a complete analysis of all the potential tax considerations
relating thereto. This summary is based on laws, regulations, rulings and
decisions now in effect (or, in the case of certain United States Treasury
Regulations ("Treasury Regulations"), now in proposed form), all of which are
subject to change. This summary deals only with holders that will hold Notes
and Common Stock into which Notes may be converted as "capital assets" (within
the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended
(the "Code")) and does not address tax considerations applicable to investors
that may be subject to special tax rules, such as banks, tax-exempt
organizations, insurance companies, dealers in securities or currencies, persons
that will hold Notes as a position in a hedging transaction, "straddle" or
"conversion transaction" for tax purposes, or persons that have a "functional
currency" other than the U.S. dollar. This summary discusses the tax
considerations applicable to the initial purchasers of the Notes who purchase
the Notes at their "issue price" as defined in Section 1273 of the Code and does
not generally discuss the tax considerations applicable to subsequent purchasers
of the Notes. The Company has not sought any ruling from the Internal Revenue
Service with respect to the statements made and the conclusions reached in the
following summary, and there can be no assurance that the Internal Revenue
Service will agree with such statements and conclusions.
INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNTIED STATES FEDERAL INCOME
AND ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX
CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING
JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
UNITED STATES HOLDERS
As used herein, the term "United States Holder" means the beneficial
owner of a Note or Common Stock that for United States federal income tax
purposes is (i) a citizen or resident of the United States, (ii) treated as a
domestic corporation or domestic partnership, or (iii) an estate or trust other
than a "foreign estate" or "foreign trust" as defined in Section 7701(a)(31) of
the Code.
Payment of Interest
Interest on a Note generally will be includable in the income of a
United States Holder as ordinary income at the time such interest is received
or accrued, in accordance with such Holder's method of accounting for United
States federal income tax purposes.
Sale, Exchange or Redemption of the Notes
Upon the sale, exchange or redemption of a Note, a United States
Holder generally will recognize capital gain or loss equal to the difference
between (i) the amount of cash proceeds and the fair market value of any
property received on the sale, exchange or redemption (except to the extent
such amount is attributable to accrued interest income, which is taxable as
ordinary income) and (ii) such holder's adjusted tax basis in the Note. A
United States Holder's adjusted tax basis in a Note generally will equal the
cost of the Note to such holder, less any principal payments received by such
holder. Such capital gain or loss will be long-term capital gain or loss if
the United States Holder's holding period in the Note is more than one year at
the time of sale, exchange or redemption.
Market Discount
In general, a United States Holder that purchases a Note subsequent to
its original issuance for an amount that is less than the remaining principal
amount of such Note will be treated for Federal income tax purposes as having
acquired the Note at a market discount. If the amount of such market discount
exceeds a certain de minimis amount (i.e., 0.25% of the principal amount times
the weighted average remaining life of the Note), the market discount must be
included as ordinary income by the United States Holder as principal payments
are received on the Note and at the time of a sale or other disposition of the
Note, if any. The United States Holder will be required to allocate any
principal payments received first to the extent of accrued market discount that
has not previously been includable in income. In lieu of the treatment
described above, a United States Holder may elect to accrue any market discount
on a constant yield basis. In addition, it should be noted that indebtedness
incurred or continued by a United States Holder in connection with the
acquisition or holding of a Note with market discount may be required to defer
the deduction of all or a portion of the interest on such indebtedness until
the corresponding amount of market discount is included in income. Prospective
United States Holders who may acquire a Note at a discount are urged to consult
their tax advisers with respect to the application of the market discount
rules.
Premium
In general, a United States Holder of a Note acquired at a cost
greater than its principal amount may be considered to have purchased such Note
at a premium. A Holder may elect to treat such premium as "amortizable bond
premium" under Section 171 of the Code. In general, pursuant to such an
election, the amount of any interest received on the Note that is required to
be included in the Holder's income for any period will be reduced by the
portion of the premium allocable to such period. The legislative history of
the Tax Reform Act of 1986 indicates, and recently proposed Treasury
regulations under Code section 171 provide, that amortizable bond premiums is
to be allocated to an accrual period on a constant yield method. In general,
if an election is made to amortize premium, such election will also apply to
all taxable bonds held by the United States Holder at the beginning of the
first taxable year to which the election applies and to all taxable bonds
thereafter acquired. Moreover, such an election is irrevocable without the
consent of the Internal Revenue Service (the "IRS"). In general, if an
election is not made, the United States Holder must include the full amount of
each interest payment in income in accordance with its regular method of
accounting, and a loss attributable to allocated premium will generally be
recognized at such time as principal payments are received on the Notes. Any
premium remaining upon a sale or disposition of a Note will be taken into
account in determining any gain or loss recognized pursuant to any such
transaction. Prospective United States Holders should note that the
determination of whether a convertible bond, such as a Note, has been acquired
at a premium for purposes of Code section 171 involves certain special complex
rules relating to the allocation of the purchase price for the bond between the
portion attributable to the indebtedness and the portion attributable to the
conversion privilege. Accordingly, holders are urged to consult their tax
advisers with respect to any potential application to them of the bond premium
rules.
Conversion of the Notes
A United States Holder generally will not recognize any income, gain
or loss upon conversion of a Note into Common Stock except with respect to cash
received in lieu of a fractional Share of Common Stock. Such holder's tax
basis in the Common Stock received on conversion of a Note will be the same as
such holder's adjusted tax basis in the Note at the time of conversion (reduced
by any basis allocable to a fractional share interest), and the holding period
for the
41
<PAGE> 47
Common Stock received on conversion will generally include the holding period
of the Note converted.
Cash received in lieu of a fractional share of Common Stock upon
conversion will be treated as a payment in exchange for the fractional share of
Common Stock. Accordingly, the receipt of cash in lieu of a fractional share
of Common Stock generally will result in capital gain or loss (measured by the
difference between the cash received for the fractional share and the United
States Holder's adjusted tax basis in the fractional share).
Dividends
Distributions paid on the Common Stock generally will be includable in
the income of the United States Holder as ordinary income to the extent of the
Company's current or accumulated earnings and profits. Distributions paid on
shares of Common Stock that are in excess of the Company's current or
accumulated earnings and profits will generally be treated, first, as a
tax-free return of capital to the extent of the United States Holder's adjusted
tax basis in its shares, and then as capital gain.
Holders should also note that, as a consequence of the conversion
feature inherent in the Notes, under Section 305 of the Code, certain events,
such as a modification to the conversion price of the Notes to take into
account certain dividends, if any, distributed on the Common Stock, could cause
a holder of Notes to realize ordinary income in respect of the Notes without a
corresponding receipt of cash or other property.
Sale of Common Stock
Upon the sale or exchange of Common Stock, a United States Holder
generally will recognize capital gain or loss equal to the difference between
(i) the amount of cash and the fair market value of any property received
pursuant to the sale or exchange and (ii) such holder's adjusted tax basis in
the Common Stock. Such capital gain or loss will be long-term capital gain or
loss if the United States Holder's holding period in the Common Stock is more
than one year at the time of the sale or exchange. A United States Holder's
basis and holding period in Common Stock received upon conversion of a Note are
determined as discussed above under "- Conversion of the Notes."
Information Reporting and Backup Withholding Tax
In general, information reporting requirements will apply to payments
of principal, premium, if any, and interest on a Note, payments of dividends on
Common Stock, payments of the proceeds of the sale of a Note and payments of the
proceeds of the sale of Common Stock to certain noncorporate United States
Holders, and a 31% backup withholding tax may apply to such payments if the
United States Holder (i) fails to furnish or certify his correct taxpayer
identification number to the payor in the manner required, (ii) is notified by
the IRS that he has failed to report payments of interest and dividends
properly, or (iii) under certain circumstances, fails to certify that he has not
been notified by the IRS that he is subject to backup withholding for failure to
report interest and dividend payments. Any amounts withheld under the backup
withholding rules from a payment to a United States Holder will be allowed as a
credit against such holder's United States federal income tax and may entitle
the holder to a refund, provided that the required information is furnished to
the IRS.
NON-UNITED STATES HOLDERS
As used herein, the term "Non-United States Holder" means any
beneficial owner of a Note or Common Stock that is not a United States Holder.
Payment of Interest
Payment of interest on a Note by the Company or any Paying Agent to a
Non-United States Holder will qualify for the "portfolio interest exemption"
42
<PAGE> 48
and therefore will not be subject to United States federal income tax or
withholding tax, provided that such interest income is not effectively
connected with a United States trade or business of the Non-United States
Holder and provided that the Non-United States Holder (i) does not actually or
constructively own 10% or more of the combined voting power of all classes of
stock of the Company entitled to vote, (ii) is not a controlled foreign
corporation related to the Company actually or constructively through stock
ownership, (iii) is not a bank receiving interest on a loan entered into in the
ordinary course of business and (iv) either (a) provides a Form W-8 (or
suitable substitute form) signed under penalties of perjury that includes its
name and address and certifies as to its non-United States status in compliance
with applicable law and regulations, or (b) deposits the Note with a securities
clearing organization, bank or financial institution that holds customers'
securities in the ordinary course of its trade or business and which holds the
Note and provides a statement to the Company or its agent under penalties of
perjury in which it certifies that such a Form W-8 (or a suitable substitute)
has been received by it from the Non-United States Holder or qualifying
intermediary and furnishes the Company or its agent with a copy thereof.
Recently proposed Treasury Regulations (the "Proposed Regulations")
would provide alternative methods for satisfying the certification requirement
described in clause (iv) above. The Proposed Regulations also would require, in
the case of Notes held by a foreign partnership, that (a) the certification
described in clause (iv) above be provided by the partners rather than by the
foreign partnership and (b) the partnership provide certain information,
including a United States taxpayer identification number. A look-through rule
would apply in the case of tiered partnerships. The Proposed Regulations are to
be effective for payments made after December 31, 1997. There can be no
assurance that the Proposed Regulations will be adopted or as to the provisions
that they will include if and when adopted in temporary or final form.
Except to the extent otherwise provided under an applicable treaty, a
Non-United States Holder generally will be taxed in the same manner as a United
States Holder with respect to interest on a Note if such interest income is
effectively connected with a United States trade or business of the Non-United
States Holder. Effectively connected interest received by a corporate
Non-United States Holder may also, under certain circumstances, be subject to
an additional "branch profits tax" at a 30% rate (or, if applicable, a lower
treaty rate). Even though such effectively connected interest is subject to
income tax, and may be subject to the branch profits tax, it is not subject to
withholding tax if the holder delivers IRS Form 4224 to the payor.
Interest income of a Non-United States Holder that is not effectively
connected with a United States trade or business and that does not qualify for
the portfolio interest exemption described above will generally be subject to a
withholding tax at a 30% rate (or, if applicable, a lower treaty rate).
Sale, Exchange or Redemption of the Notes
A Non-United States Holder of a Note will generally not be subject to
United States federal income tax or withholding tax on any gain realized on the
sale, exchange or redemption of a Note (including the receipt of cash in lieu
of fractional shares upon conversion of a Note to Common Stock) unless (1) the
gain is effectively connected with a United States trade or business of the
Non-United States Holder, (2) in the case of a Non-United States Holder who is
an individual, such holder is present in the United States for a period or
periods aggregating 183 days or more during the taxable year of the
disposition, and either such holder has a "tax home" in the United States or
the disposition is attributable to an office or other fixed place of business
maintained by such holder in the United States, (3) the holder is subject to
tax pursuant to the provisions of the Code applicable to certain United States
expatriates, or (4) the Company is a United States real property holding
43
<PAGE> 49
corporation (see discussion under "United States Foreign Investment in Real
Property Tax Act" below).
Conversion of the Notes
In general, no United States federal income tax or withholding tax
will be imposed upon the conversion of a Note into Common Stock by a Non-United
States Holder except with respect to the receipt of cash in lieu of fractional
shares by Non-United States Holders upon conversion of a Note where any one of
the four exceptions described above under "Non-United States Holders -- Sale,
Exchange or Redemption of the Notes" is applicable.
Sale or Exchange of Common Stock
A Non-United States Holder generally will not be subject to United
States federal income tax or withholding tax on the sale or exchange of Common
Stock unless any one of the four exceptions described above under "Non-United
States Holders -- Sale, Exchange or Redemption of the Notes" is applicable.
Dividends
Dividends paid (or deemed paid, as described above under "United
States Holders -- Dividends") on Common Stock to a Non-United States Holder
will be subject to United States federal withholding tax at 30% rate (or lower
rate provided under an applicable income tax treaty), unless the dividends are
effectively connected with the conduct of a trade or business in the United
States (and are attributable to a United States permanent establishment of such
holder, if an applicable income tax treaty so requires as a condition for the
Non-United States Holder to be subject to United States income taxes on a net
income basis in respect of such dividends). Except to the extent otherwise
provided under an applicable tax treaty, a Non-United States Holder will be
taxed in the same manner as a United States Holder on dividends paid (or deemed
paid) that are effectively connected with the conduct of a trade or business in
the United States by the Non-United States Holder. If such Non-United States
Holder is a foreign corporation, it may also be subject to a United States
branch profits tax on such effectively connected income at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty. Even though
such effectively connected dividends are subject to income tax, and may be
subject to the branch profits tax, they will not be subject to U.S. withholding
tax if the holder timely delivers IRS Form 4224 to the payor.
Under current Treasury Regulations, dividends paid to an address in a
foreign country are presumed to be paid to a resident of that country (unless
the payor has knowledge to the contrary) for purposes of the withholding rules
discussed below and, under the current interpretation of Treasury Regulations,
for purposes of determining the applicability of a tax treaty rate. Under the
Proposed Regulations, however, a Non-United States Holder of Common Stock who
wishes to claim the benefit of an applicable treaty rate would be required to
satisfy applicable certification requirements. In addition, under the Proposed
Regulations, in the case of Common Stock held by a foreign partnership, (x) the
certification requirement would generally be applied to the partners of the
partnership and (y) the partnership would be required to provide certain
information, including a United States taxpayer identification number. The
Proposed Regulations also provide look-through rules for tiered partnerships.
It is not certain whether, or in what form, the Proposed Regulations will be
adopted or the provisions they will include if and when adopted in temporary or
final form.
Death of a Non-United States Holder
A Note held by an individual who is not a citizen or resident of the
United States at the time of death will not be includable in the decedent's
gross estate for United States estate tax purposes, provided that such holder
or beneficial owner did not at the time of death actually or constructively own
10% or more of the combined voting power of all classes of stock of the Company
entitled to vote, and provided that, at the time of death, payments with
respect to such Note
44
<PAGE> 50
would not have been effectively connected with the conduct by such Non-United
States Holder of a trade or business within the United States.
Common Stock actually or beneficially held by a Non-United States Holder at the
time of his or her death (or previously transferred subject to certain retained
rights or powers) will be subject to United States federal estate tax unless
otherwise provided by an applicable estate tax treaty.
Information Reporting and Backup Withholding Tax
Under current law, information reporting on IRS Form 1099 and backup
withholding will not apply to payments on a Note to a Non-United States Holder
if the statement described in "Non-United States Holders -- Payment of
Interest" is duly provided by such holder, provided that the payor does not
have actual knowledge that the holder is a United States person. The Company or
a paying agent, however, may report (on IRS Form 1042S) payments of interest on
Notes.
Information reporting requirements and backup withholding tax will not
apply to any payment of the proceeds of the sale of a Note or any payment of
the proceeds of the sale of Common Stock effected outside the United States by
a foreign office of a "broker" (as defined in applicable Treasury Regulations),
unless such broker (i) is a United States person, (ii) derives 50% or more of
its gross income for certain periods from the conduct of a trade or business in
the United States or (iii) is a controlled foreign corporation as to the United
States. Payment of the proceeds of any such sale effected outside the United
States by a foreign office of any broker that is described in (i), (ii) or
(iii) of the preceding sentence will not be subject to backup withholding tax,
but will be subject to information reporting requirements unless such broker
has documentary evidence in its records that the beneficial owner is a
Non-United States Holder and certain other conditions are met, or the
beneficial owner otherwise establishes an exemption. Payment of the proceeds of
any such sale to or through the United States office of a broker is subject to
information reporting and backup withholding requirements, unless the
beneficial owner of the Note provides the statement described in "Non-United
States Holder -- Payment of Interest" or otherwise establishes an exemption.
If paid to an address outside the United States, dividends on Common
Stock held by a Non-United States Holder will generally not be subject to the
information reporting and backup withholding requirements described in this
section, provided the payor does not have definite knowledge that the payee is
a United States person (see discussion under "Non-United States Holder --
Dividends" with respect to the Proposed Regulations).
These backup withholding and information reporting rules are under
review by the United States Department of the Treasury, and their application
to the Notes and Common Stock could be changed prospectively by future
regulations.
United States Foreign Investment in Real Property Tax Act
Under the Foreign Investment in Real Property Tax Act ("FIRPTA"), any
person who acquires a "United States real property interest" (as described
below) from a foreign person must deduct and withhold a tax equal to 10% of the
amount realized by the foreign transferor. In addition, a foreign person who
disposes of a United States real property interest generally is required to
recognize gain or loss that is subject to United States federal income tax. A
"United States real property interest" generally includes any interest (other
than an interest solely as a creditor) in a United States corporation unless it
is established under specific procedures that the corporation is not (and was
not for the prior five-year period) a "United States real property holding
corporation". The Company has not been, is not, and does not anticipate becoming
a United States real property holding corporation. In the unlikely event that it
is not established that the Company is not a United States real property holding
corporation, then, unless an exemption applies, as described below, both the
Common Stock and the Notes would be treated as United States real property
interests and the disposition of either Common Stocks or Notes by a Non-United
States Holder would be subject to FIRPTA tax and withholding.
45
<PAGE> 51
However, an interest in a United States corporation generally will not
be treated as a United States real property interest if, at any time during the
calendar year, any class of stock of the corporation is "regularly traded" on
an established securities market (the "regularly-traded exemption"). The
Company believes that the Company's Common Stock is regularly traded on an
established securities market within the meaning of the applicable regulations,
although there can be no assurance that the Common Stock will remain regularly
traded. The remainder of this discussion assumes that the Common Stock is and
will remain regularly traded on an established securities market. Except as
described below, shares of Common Stock and Notes held by a Non-United States
Holder will generally not be treated as United States real property Interests,
and the disposition of such shares and Notes (including a conversion or
redemption of such Notes) by a United States Holder will not be subject to
FIRPTA tax or withholding.
The regularly-traded exemption is not available to a regularly traded
interest (such as the Common Stock) if such interest is owned by a person who
beneficially owns (actually or constructively) more than 5% of the total fair
market value of that class of interests at any time during the five-year period
ending on the date of disposition of such interest or other applicable
determination date. Accordingly, except with respect to a sale or other
disposition of Common Stock by a Non-United States Holder whose aggregate
beneficial ownership has exceeded that 5% threshold, no withholding or income
taxation under the FIRPTA rules should be required with respect to the sale,
exchange or other disposition of Common Stock by a Non-United States Holder.
The regularly-traded exemption is also not applicable to a
"non-regularly traded" class of interests in a United States corporation that
is convertible into a regularly traded class of interests in the corporation
if, on the date such non-regularly traded interest was acquired by its present
holder, such interest had a fair market value greater than the fair market
value on that date of 5% of the regularly traded class of the corporation's
stock into which it is convertible. (Interests of a non-regularly traded class
acquired over a period of time will be aggregated for purposes of applying the
5% test described above.) Accordingly, the sale, exchange, conversion or
redemption by a Non-United States Holder of Notes which, on an applicable
determination date, had a fair market value greater than 5% of the Common Stock
will be subject to FIRPTA tax and withholding. The foregoing discussion assumes
that the Notes constitute interests that are non-regularly traded interests
convertible into a regularly traded class of interests. It is not entirely
certain how the regularly-traded exception will apply if the Notes become
"regularly traded" within the meaning of the FIRPTA rules. A Non-United States
Holder who sells or otherwise disposes of Notes may be required to inform its
transferee whether such Notes constitute a United States real property
interest.
Any investor who believes that it may approach or exceed any of the 5%
ownership thresholds discussed above, either alone or in conjunction with
related persons, should consult its tax advisor concerning the United States
tax consequences that may arise as a result of such ownership.
EXPERTS
The financial statements of the Company as of December 31, 1995 and
1994 and for the three years in the period ended December 31, 1995 appearing in
the Annual Report on Form 10-K for the fiscal year ended December 31, 1995
incorporated herein by reference have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein
and incorporated herein by reference. Such 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.
46
<PAGE> 52
LEGAL MATTERS
The validity of the Notes and of the Common Stock offered hereby will
be passed upon for the Company by Petree Stockton, L.L.P., Raleigh, North
Carolina. As of September 15, 1996, attorneys at Petree Stockton, L.L.P. owned
1,500 shares of the Common Stock of the Company.
INDEMNIFICATION AND LIMITATION OF LIABILITY
The Bylaws of the Company provide that the Company shall indemnify the
directors and officers of the Company against liability (and expenses related
thereto) arising out of their status as directors and officers to the extent
permitted by law. Additionally, certain mandatory indemnification rights are
available under the Delaware General Corporation Law (the "DGCL") to officers
and directors who are wholly successful in the defense of any proceeding to
which such person was a party by virtue of his position as a director or
officer.
Further, as permitted by the DGCL, the Certificate of Incorporation of
the Company includes a provision limiting the personal liability of its
directors for monetary damages for certain breaches of their duties as
directors to the extent permitted under the DGCL.
Such limitation of liability pursuant to state law does not affect
liability, if any, arising under the federal securities laws. Further, insofar
as indemnification or limitation of monetary damages for liabilities arising
under the Securities Act may be permitted to directors, officers and
controlling persons of the Company pursuant to contractual provisions or
otherwise, the Company has been advised that in the opinion of the Commission,
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
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<PAGE> 53
APPENDIX A
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
Marine Midland Bank, as Trustee
BroadBand Technologies, Inc.
c/o Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005
Attention: Corporate Trust Services - BroadBand
Re: BroadBand Technologies, Inc. (the "Company") 5% Convertible
Subordinated Notes due May 15, 2001 (the "Notes")
Dear Sirs:
Please be advised that ___________________________ has transferred
$_________________ aggregate principal amount of the above-referenced Notes, or
___________ number of shares of the Company's Common Stock, par value $0.01 per
share (the "Common Stock"), issued upon conversion of the Notes, pursuant to an
effective Registration Statement on Form S-3 (File No. 333-9661) filed by the
Company.
We hereby certify that the prospectus delivery requirements, if any, of
the Securities Act of 1933, as amended, have been satisfied and that the
above-named beneficial owner of the Notes or Common Stock is named as a "Selling
Holder" in the Prospectus dated September 17, 1996 or in supplements thereto,
and that the aggregate principal amount of the Notes or shares of Common Stock
transferred are (or are included in) the Notes or shares of Common Stock listed
in such Prospectus opposite such owner's name.
Dated:
Very truly yours,
-----------------------
(Name)
By: -----------------------
(Authorized Signature)
48
<PAGE> 54
PROSPECTUS
BROADBAND TECHNOLOGIES, INC.
September 17, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Information by Reference . . . . . . . . . . 2
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Ratio of Earnings to Fixed Charges . . . . . . . . . . . . . . . . . 12
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Description of Notes . . . . . . . . . . . . . . . . . . . . . . . . 13
Description of Capital Stock . . . . . . . . . . . . . . . . . . . 29
Selling Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . 39
United States Taxation . . . . . . . . . . . . . . . . . . . . . . . 40
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Indemnification and Limitation of Liability . . . . . . . . . . . . . 47
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with this offering, and, if given or made, such
information or representations must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to
sell or solicitation of an offer to buy, any securities other than the
registered securities to which it relates, or an offer to or solicitation of
any person in any jurisdiction in which such offer or solicitation would be
unlawful. The delivery of this Prospectus at any time does not imply that
information herein is correct as of any time subsequent to its date.
49
<PAGE> 55
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of this offering (other than
underwriting discounts and commissions) will be paid by the Registrant and are
as follows:
<TABLE>
<S> <C>
Registration Fee-Securities and Exchange Commission $ 39,655
---------
Legal Fees and Expenses $ 50,000
---------
Printing Expenses $ 10,000
---------
Accounting Fees and Expenses $ 10,000
---------
Miscellaneous $ 20,000
---------
Total $ 129,655
=========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article VII of the Bylaws of the Registrant provides as follows:
1. Right to Indemnification. Each person who was or is made
a party or is threatened to be made a party to or is otherwise
involved in any action, suit or proceeding, whether civil, criminal,
administrative, investigative or otherwise (hereinafter a
"Proceeding"), by reason of the fact that he or she is or was (a) a
director of the corporation, (b) an officer of the corporation elected
or appointed by the stockholders or the board of directors, or (c)
serving, at the request of the corporation as evidenced by a vote of
the board of directors prior to the occurrence of the event to which
the indemnification relates, as a director, officer, employee or agent
of another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to an employee
benefit plan (such persons described in (a), (b) and (c) are sometimes
hereinafter referred to as an "Indemnitee"), whether the basis of such
Proceeding is alleged action in an official capacity as such a
director or officer of the corporation or as such other director,
officer, employee or agent or in any other capacity while serving as
such a director or officer of the corporation or as such other
director, officer, employee or agent, shall be indemnified and held
harmless by the corporation to the fullest extent authorized by the
General Corporation Law of Delaware, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to
the extent that such amendment permits the corporation to provide
broader indemnification rights than permitted prior thereto), against
all expense, liability and loss (including, but not limited to,
attorneys' fees, judgments, fines, ERISA, excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by
such Indemnitee in connection therewith and such indemnification shall
continue as to an Indemnitee who has ceased to be such a director,
officer, employee or agent and shall inure to the benefit of the
Indemnitee's heirs, executors and administrators; provided, however,
that, except as provided in Section 3 of this Article with respect to
Proceedings to enforce rights to indemnification, the corporation
shall indemnify any such Indemnitee in connection with a Proceeding
(or part thereof) initiated by such Indemnitee only if such Proceeding
(or part thereof) was authorized or ratified by the board of directors
of the corporation. The right to indemnification conferred in this
Article shall be a contract right and shall include the right to be
paid by the corporation the expenses incurred in defending any
Proceeding in advance of its final disposition (hereinafter an
"Advancement of Expenses"); provided, however, that, if the General
Corporation Law of
II-1
<PAGE> 56
Delaware requires, an Advancement of Expenses incurred by an
Indemnitee in his or her capacity as a director or officer of the
corporation (but not in any other capacity in which service was or is
rendered by such Indemnitee, including, without limitation, service to
an employee benefit plan) shall be made only upon delivery to the
corporation of an undertaking (hereinafter an "Undertaking"), by or on
behalf of such Indemnitee, to repay all amounts so advanced if it
shall ultimately be determined by final judicial decision from which
there is no further right to appeal (hereinafter a "Final
Adjudication") that such Indemnitee is not entitled to be indemnified
for such expenses under this Article or otherwise.
2. Indemnification of Employees and Agents of the
Corporation. The corporation may, to the extent authorized from time
to time by the board of directors, grant rights to indemnification,
and to an Advancement of Expenses, to any employee or agent of the
corporation to the fullest extent of the provisions of this Article.
3. Right of Indemnitee to Bring Suit. If a claim under this
Article is not paid in full by the corporation within sixty (60) days
after a written claim has been received by the corporation, except in
the case of a claim for an Advancement of Expenses, in which case the
applicable period shall be twenty (20) days, the Indemnitee may at any
time thereafter bring suit against the corporation to recover the
unpaid amount of the claim. If the Indemnitee is successful in whole
or in part in any such suit, or in a suit brought by the corporation
to recover an Advancement of Expenses pursuant to the terms of an
Undertaking, the Indemnitee shall also be entitled to be paid the
expense of prosecuting or defending such suit. In any suit brought by
the Indemnitee to enforce a right to indemnification hereunder (but
not in a suit brought by the Indemnitee to enforce a right to an
Advancement of Expenses), it shall be a defense that the Indemnitee
has not met the applicable standard of conduct set forth in the
General Corporation Law of Delaware. In addition, in any suit by the
corporation to recover an Advancement of Expenses pursuant to the
terms of an Undertaking, the corporation shall be entitled to recover
such expenses upon a Final Adjudication that the Indemnitee has not
met the applicable standard of conduct set forth in the General
Corporation Law of Delaware. Neither the failure of the corporation
(including its board of directors, independent legal counsel, or
stockholders) to have made a determination prior to the commencement
of such suit that indemnification of the Indemnitee is proper in the
circumstances because the Indemnitee has met the applicable standard
of conduct set forth in the General Corporation Law of Delaware, nor
an actual determination by the corporation (including its board of
directors, independent legal counsel, or stockholders) that the
Indemnitee has not met such applicable standard of conduct, shall
create a presumption that the Indemnitee has not met the applicable
standard of conduct or, in the case of such a suit brought by the
Indemnitee, be a defense to such suit. In any suit brought by the
Indemnitee to enforce a right to indemnification or to an Advancement
of Expenses hereunder, or by the corporation to recover an Advancement
of Expenses pursuant to the terms of an Undertaking, the burden of
proving that the Indemnitee is not entitled to be indemnified, or to
such Advancement of Expenses, under this Article or otherwise shall be
on the corporation.
4. Non-Exclusivity of Rights. The rights to indemnification
and to Advancement of Expenses conferred in this Article shall not be
exclusive of any other right which any person may have or hereafter
acquire under these bylaws, the certificate of incorporation or any
statute, agreement, vote of stockholders, of disinterested directors
or otherwise.
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<PAGE> 57
5. Insurance. The corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or
agent of the corporation or any director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such
expense, liability or loss under the General Corporation Law of
Delaware.
6. Severability. If this Article or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction,
then the corporation shall nevertheless indemnify each director or
officer and may indemnify each employee or agent of the corporation as
to costs, charges and expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement with respect to any action, suit
or proceeding, whether civil, criminal, administrative or
investigative, including an action by or in the right of the
corporation, to the fullest extent permitted by any applicable portion
of this Article that shall not have been invalidated and to the
fullest extent permitted by applicable law.
Reference is made to Article 10 of the Certificate of Incorporation of
the Registrant, which provides as follows:
10. A member of the Board of Directors of the corporation
shall not be personally liable to the corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's 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) under Section 174 of the General
Corporation Law of Delaware or any successor provision, or (iv) for
any transaction from which such director derived an improper personal
benefit. If the General Corporation Law of Delaware is amended after
the effective date of this Restated Certificate of Incorporation to
authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of
the corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of Delaware, as so amended.
Any repeal or modification of this Article 10 (i) by the
stockholders of the corporation or (ii) by an amendment to the General
Corporation Law of Delaware (unless such statutory amendment
specifically provides to the contrary) shall not adversely affect any
right or protection, existing at the time of such repeal or
modification with respect to any acts or omissions occurring either
before or after such repeal or modification, of a person serving as a
director at the time of such repeal or modification.
Reference is also made to Section 145 of Title 8 of the Delaware Code,
which provides as follows:
(a) A corporation shall have power to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith
II-3
<PAGE> 58
and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was
unlawful.
(b) A corporation shall have power to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable
to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent
of a corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in subsections
(a) and (b) of this section, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
(d) Any indemnification under subsections (a) and (b) of this
section (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper
in the circumstances because he has met the applicable standard of
conduct set forth in subsections (a) and (b). Such determination
shall be made (1) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a
quorum, or (2) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (3) by
the stockholders.
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal, administrative,
or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the
corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the board of directors
deems appropriate.
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<PAGE> 59
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this section
shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled
under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and
as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him
against such liability under the provisions of this section.
(h) For purposes of this section, references to "the
corporation" shall include, in addition to the resulting corporation,
any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its
separate existence had continued, would have had power and authority
to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of
such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with
respect to the resulting or surviving corporation as he would have
with respect to such constituent corporation if its separate existence
had continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes
duties on, or involves services by, such director, officer, employee,
or agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have
acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided
by, or granted pursuant to, this section shall, unless otherwise
provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a
person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of
expenses or indemnification brought under this section or under any
bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise. The Court of Chancery may summarily determine a
corporation's obligation to advance expenses (including attorneys'
fees).
Further, the Company maintains a directors' and officers' liability
policy which insures such persons against claims arising from certain acts or
decisions by them in their capacities as directors and officers of the Company,
subject to certain exclusions and deductible and maximum amounts.
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<TABLE>
<CAPTION>
ITEM 16. EXHIBITS.
<S> <C>
3.1* Amended and Restated Certificate of Incorporation of
Registrant (Incorporated by reference to Exhibit 3.1
to the Registrant's Registration Statement on Form
S-1, Registration Number 33-62754, declared
effective June 30, 1993)
3.2* Amended and Restated Bylaws of Registrant
(Incorporated by reference to exhibit to the
Registrant's Quarterly Report on Form 10-Q for
the period ended June 30, 1994)
4.1* Amended and Restated Certificate of Incorporation of
Registrant (Included as Exhibit 3.1 to this
Registration Statement)
4.2* Amended and Restated Bylaws of Registrant (Included
as Exhibit 3.2 to this Registration Statement)
4.3* Form of Common Stock Certificate (Incorporated by
reference to Exhibit 4.1 to the Registrant's
Registration Statement on Form S-1, Registration
Number 33-62754, declared effective June 30, 1993)
4.4* Indenture, dated as of May 22, 1996, by and between
the Registrant and Marine Midland Bank, as Trustee
(Incorporated by reference to Exhibit 10.1 to the
Registrant's Current Report on Form 8-K, Commission
File Number 0-21766, dated May 22, 1996)
4.4A Cross Reference Sheet
4.5* Registration Rights Agreement, dated as of May 17,
1996, by and between the Registrant and Goldman,
Sachs & Co. and Bear, Stearns & Co. Inc. (as Initial
Purchasers) (Incorporated by reference to Exhibit 10.3
of Registrant's Current Report on Form 8-K,
Commission File Number 0-21766, dated May 22, 1996)
4.6 Form of 5% Convertible Subordinated Notes due May 15,
2001 (Unrestricted Global Note)
4.7 Form of 5% Convertible Subordinated Notes Due May 15,
2001 (Certificated Note)
5.1 Opinion of Petree Stockton, L.L.P.
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Petree Stockton, L.L.P. (contained
in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
24.1* Power of Attorney (Contained on Signature Page of
Registration Statement previously filed)
25.1* Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939, as amended, on Form T-1
of Marine Midland Bank.
----------------------
* Previously filed.
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned 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;
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<PAGE> 61
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(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 set forth 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 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% 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;
Provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the Registration Statement is on Form S-3 or Form
S-8, and the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the Registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 as may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-7
<PAGE> 62
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Durham, State of North Carolina, on September 16,
1996.
BROADBAND TECHNOLOGIES, INC.
By: /s/ Salim A. L. Bhatia
----------------------------
Salim A. L. Bhatia
President
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities indicated on the 16th day of September, 1996.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Salim A. L. Bhatia President (principal executive officer)
------------------------- and Director
Salim A. L. Bhatia
/s/ Timothy K. Oakley Vice President (principal financial
------------------------- officer and principal accounting
Timothy K. Oakley officer)
* Chairman of the Board and Director
-------------------------
John R. Hutchins, III
* Director
-------------------------
J. Richard Jones
* Director
-------------------------
Fredric R. Boswell
* Director
-------------------------
Richard P. Clark
* Director
-------------------------
Charles T. Lee
* Director
-------------------------
Lawrence A. McLernon
* By: /s/ Salim A. L. Bhatia
----------------------
Salim A. L. Bhatia,
Attorney-in-fact
</TABLE>
II-8
<PAGE> 63
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
3.1* Amended and Restated Certificate of Incorporation of Registrant (Incorporated by reference to Exhibit
3.1 to the Registrant's Registration Statement Form S-1, Registration Number 33-62754, declared
effective June 30, 1993)
3.2* Amended and Restated Bylaws of Registrant (Incorporated by reference to exhibit to the Registrant's
Quarterly Report on Form 10-Q for the period ended June 30, 1994)
4.1* Amended and Restated Certificate of Incorporation of Registrant (Included as Exhibit 3.1 to this
Registration Statement)
4.2* Amended and Restated Bylaws of Registrant (Included as Exhibit 3.2 to this Registration Statement)
4.3* Form of Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to the Registrant's
Registration Statement on Form S-1, Registration Number 33-62754, declared effective June 30, 1993)
4.4* Indenture, dated as of May 22, 1996, by and between the Registrant and Marine Midland
Bank, as Trustee (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on
Form 8-K, Commission File Number 0-21766, dated May 22, 1996)
4.4A Cross Reference Sheet
4.5* Registration Rights Agreement, dated as of May 17, 1996, by and between the Registrant
and Goldman, Sachs & Co. and Bear, Stearns & Co. Inc. (as Initial Purchasers)
(Incorporated by reference to Exhibit 10.3 of Registrant's Current Report on Form 8-K,
Commission File Number 0-21766, dated May 22, 1996)
4.6 Form of 5% Subordinated Convertible Notes due May 15, 2001 (Unrestricted Global Note)
4.7 Form of 5% Subordinated Convertible Notes due May 15, 2001 (Certificated Note)
5.1 Opinion of Petree Stockton, L.L.P.
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Petree Stockton, L.L.P. (contained
in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
24.1* Power of Attorney (Contained on Signature Page of Registration Statement previously filed)
25.1* Statement of Eligibility and Qualification under the Trust Indenture Act of 1939, as
amended, on Form T-1 of Marine Midland Bank
</TABLE>
- -----------------------
* Previously filed
II-9
<PAGE> 1
EXHIBIT 4.4A
CROSS REFERENCE SHEET
CERTAIN SECTIONS OF THE INDENTURE (DATED AS OF MAY 22, 1996,
BETWEEN BROADBAND TECHNOLOGIES, INC. AND MARINE MIDLAND
BANK, AS TRUSTEE) RELATING TO SECTIONS 310 THROUGH 318 OF
THE TRUST INDENTURE ACT OF 1939 (THE "ACT"):
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C> <C>
Section 310(a)(1) ............................ 6.8
(a)(2) ............................ 6.8
(a)(3) ............................ Not Applicable
(a)(4) ............................ Not Applicable
(b) ........................... 6.13
6.9
Section 311(a) ............................ 6.14
(b) ............................ 6.14
Section 312(a) ............................ 15.1
15.2
(b) ............................ *
(c) ............................ *
Section 313(a) ............................ *
(a)(4) ............................ 1.1
10.8
(b) ............................ *
(c) ............................ *
(d) ............................ *
Section 314(a) ............................ *
(b) ............................ Not Applicable
(c)(1) ............................ 1.2
(c)(2) ............................ 1.2
(c)(3) ............................ Not Applicable
(d) ............................ Not Applicable
(e) ............................ 1.2
Section 315(a) ............................ 6.1
(b) ............................ 6.2
(c) ............................ 6.1
(d) ............................ 6.1
(e) ............................ 5.14
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C>
Section 316(a) ................................ 1.1
(a)(1)(A) ................................ 5.2
5.12
(a)(1)(B) ................................ 5.13
(a)(2) ................................ Not Applicable
(b) ................................ 5.8
(c) ................................ 1.4(e)
Section 317(a)(1) ................................ 5.3
(a)(2) ................................ 5.4
(b) ................................ 10.3
Section 318(a) ................................ 1.13
</TABLE>
- ------------------------------
* Such Section of the Act is deemed to be a part of and to govern the
Indenture pursuant to Section 318 of the Act and Section 1.1 of the
Indenture.
Note: This reconciliation and tie shall not, for any purpose, be deemed
to be a part of the Indenture.
<PAGE> 1
EXHIBIT 4.6
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A
NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE COMPANY, THE TRUSTEE AND
ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS SECURITY FOR ALL PURPOSES.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OR TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE REGISTERED FORM IN THE LIMITED CIRCUMSTANCES REFERRED TO IN THE
INDENTURE, THIS GLOBAL 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.
<PAGE> 2
BROADBAND TECHNOLOGIES, INC.
5% CONVERTIBLE SUBORDINATED NOTE
DUE MAY 15, 2001
No. __________ U.S.$ 0.00
CUSIP NO. 111309AC4
BROADBAND TECHNOLOGIES, INC., 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 referred to on the reverse
hereof), for value received, hereby promises to pay to Cede & Co., as nominee
for The Depository Trust Company, or registered assigns, the principal sum of
Zero United States Dollars (U.S. $ 0.00) (which principal amount may from time
to time be increased or decreased to such other principal amounts (which, taken
together with the principal amounts of all other Outstanding Securities, shall
not exceed $115,000,000 in the aggregate at any time) by adjustments made on the
records of the Trustee hereinafter referred to in accordance with the Indenture)
on May 15, 2001 and to pay interest thereon, from May 22, 1996, or from the most
recent Interest Payment Date (as defined below) to which interest has been paid
or duly provided for, semi-annually in arrears on May 15 and November 15 in each
year (each, an "Interest Payment Date"), commencing November 15, 1996, at the
rate of 5% per annum, until the principal hereof is due, and at the rate of 5%
per annum on any overdue principal and premium, if any, and, to the extent
permitted by law, on any overdue interest. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in the 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 May 1 or November
1 (whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Except as otherwise provided in the Indenture, 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 Company, notice whereof shall be
given to Holders of Securities not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in the Indenture. Payments of principal shall be made upon the
surrender of this Security at the option of the Holder at the Corporate Trust
Office of the Trustee, or at such other office or agency of the Company as may
be designated by it for such purpose in the Borough of Manhattan, The City of
New
<PAGE> 3
York, in such coin or currency of the United States of America as at the time
of payment shall be legal tender for the payment of public and private debts,
or at such other offices or agencies as the Company may designate, by United
States Dollar check drawn on a bank in the Borough of Manhattan, The City of
New York or by transfer to a United States Dollar account (such a transfer to
be made only to a Holder of an aggregate principal amount of Securities in
excess of U.S. $2,000,000, and only if such Holder shall have furnished wire
instructions in writing to the Trustee no later than 15 days prior to the
relevant payment date) maintained by the payee with a bank in the Borough of
Manhattan, The City of New York. Payment of interest, including payment of any
Liquidated Damages (as defined on the reverse hereof) on this Security may be
made by United States Dollar check drawn on a bank in the Borough of Manhattan,
The City of New York mailed to the address of the Person entitled thereto as
such address shall appear in the Security Register, or, upon written
application by the Holder to the Security Registrar setting forth wire
instructions not later than the relevant Record Date, by transfer to a United
States Dollar account (such a transfer to be made only to a Holder of an
aggregate principal amount of Securities in excess of U.S.$2,000,000)
maintained by the payee with a bank in the Borough of Manhattan, The City of
New York.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof or an Authenticating Agent by the
manual signature of one of their respective authorized signatories, this
Security shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
2
<PAGE> 4
IN WITNESS WHEREOF, the Company has caused this Security to be duly
executed under its corporate seal.
Dated: _______________ , 1996
BROADBAND TECHNOLOGIES, INC.
[Corporate Seal]
By:
---------------------------
Name:
Title:
Attest:
- ----------------------------
Name:
Title:
3
<PAGE> 5
This is one of the Securities referred to in the within-mentioned Indenture.
Dated: ________ , 1996
MARINE MIDLAND BANK,
as Trustee
By:
------------------------------
Name:
Title:
4
<PAGE> 6
[FORM OF REVERSE]
This Security is one of a duly authorized issue of securities of the
Company designated as its "5% Convertible Subordinated Notes due May 15, 2001"
(herein called the "Securities"), limited in aggregate principal amount to
U.S.$115,000,000, issued and to be issued under an Indenture, dated as of May
22, 1996 (herein called the "Indenture"), between the Company and Marine
Midland Bank, 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 Debt and the Holders of the Securities and
of the terms upon which the Securities are, and are to be, authenticated and
delivered. The Securities are issuable in registered form, without coupons, in
denominations of U.S.$1,000 and integral multiples of U.S.$1,000 in excess
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 any authorized denominations as requested by the Holder
surrendering the same upon surrender of the Security or Securities to be
exchanged, at the Corporate Trust Office of the Trustee or at such other office
or agency of the Company as may be designated by it for such purpose in the
Borough of Manhattan, The City of New York or at such other offices or agencies
as the Company may designate (each a "Transfer Agent"). The Transfer Agent (if
other than the Trustee) will then forward such surrendered Securities (together
with any payment surrendered therewith) to the Trustee. The Trustee upon such
surrender by the Holder or receipt from the Transfer Agent will issue the new
Securities in the requested denominations.
No sinking fund is provided for the Securities. The Securities are
subject to redemption at the option of the Company at any time on or after the
close of business on May 15, 1999, in whole or in part, upon not less than 30
nor more than 60 days' notice to the Holders prior to the Redemption Date at the
Redemption Prices set forth below, together with accrued interest to the
Redemption Date; provided, that interest installments on Securities whose Stated
Maturity is on or prior to such Redemption Date will be payable to the Holders
of such Securities, or one or more Predecessor Securities, of record at the
close of business on the relevant Record Dates referred to on the face hereof,
all as provided in the Indenture.
The Redemption Prices (expressed as a percentage of principal amount)
are as follows for the 12-month period beginning on May 15 of the following
years:
<PAGE> 7
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----
<S> <C>
1999 102.00
2000 101.00
</TABLE>
and thereafter at a Redemption Price equal to 100% of the principal amount, in
each case together with accrued interest to the Redemption Date.
In the event of a redemption of less than all of the Securities, the
Company will not be required (a) to register the transfer or exchange of
Securities for a period of 15 days immediately preceding the date notice is
given identifying the serial numbers of the Securities called for such
redemption or (b) to register the transfer or exchange of any Security, or
portion thereof, called for redemption.
Notice of redemption will be given by mail to Holders of Securities.
Notice to the Holders will be given not less than 30 nor more than 60 days prior
to the Redemption Date as provided in the Indenture.
In any case where the due date for the payment of the principal of,
premium, if any, or interest, including any Liquidated Damages, on any Security
or the last day on which a Holder of a Security has a right to convert his
Security shall be, at any Place of Payment or Place of Conversion, as the case
may be, a day on which banking institutions at such Place of Payment or Place of
Conversion are authorized or obligated by law or executive order to close, then
payment of principal, premium, if any, or interest, including any Liquidated
Damages, or delivery for conversion of such Security need not be made on or by
such date at such place but may be made on or by the next succeeding day at such
place which is not a day on which banking institutions are authorized or
obligated by law or executive order to close, with the same force and effect as
if made on the date for such payment or the date fixed for redemption or
repurchase, or by such last day for conversion, and no interest shall accrue on
the amount so payable for the period after such date.
Subject to and upon compliance with the provisions of the Indenture, the
Holder of this Security is entitled, at his option, at any time on or after
August 20, 1996, and on or before the close of business on May 15, 2001, or in
case this Security or a portion hereof is called for redemption or the Holder
hereof has exercised his right to require the Company to repurchase this
Security or such portion hereof, then in respect of this Security until and
including, but (unless the Company defaults in making the payment due upon
redemption or repurchase, as the case may be) not after, the close of business
on the Redemption Date or the Repurchase Date, as the case may be, to convert
this Security (or any portion of the principal amount hereof that is an integral
multiple of U.S.$1,000, provided that the unconverted portion of such principal
amount is U.S.$1,000 or any integral multiple of
2
<PAGE> 8
U.S.$1,000 in excess thereof) into fully paid and nonassessable shares of
Common Stock of the Company at an initial Conversion Rate of 24.1080 for each
share of Common Stock (or at the current adjusted Conversion Rate 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 and, in case
such surrender shall be made during the period from the close of business on
any Regular Record Date next preceding any Interest Payment Date to the opening
of business on such Interest Payment Date (except if this Security has been
called for redemption on a Redemption Date or is repurchasable on a Repurchase
Date occurring, in either case, during such period and is surrendered for such
conversion during such period), also accompanied by payment in New York
Clearing House 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 and also the conversion notice hereon duly
executed, to the Company at the Corporate Trust Office of the Trustee, or at
such other office or agency of the Company, subject to any laws or regulations
applicable thereto and subject to the right of the Company to terminate the
appointment of any Conversion Agent (as defined below) as may be designated by
it for such purpose in the Borough of Manhattan, The City of New York, or at
such other offices or agencies as the Company may designate (each a "Conversion
Agent"), provided further, that if this Security or portion hereof has been
called for redemption on a Redemption Date or is repurchasable on a Repurchase
Date occurring, in either case, during the period from the close of business on
any Regular Record Date next preceding any Interest Payment Date to the opening
of business on such succeeding Interest Payment Date and is surrendered for
conversion during such period, then the Holder of this Security who converts
this Security or a portion hereof during such period will be entitled to
receive the interest accruing hereon from the Interest Payment Date next
preceding the date of such conversion to such succeeding Interest Payment Date
and shall not be required to pay such interest upon surrender of this Security
for conversion. Subject to the provisions of the preceding sentence and, in
the case of a conversion after the close of business on the Regular Record Date
next preceding any Interest Payment Date and or before the close of business on
such Interest Payment Date, to the right of the Holder of this Security (or any
Predecessor Security of record as of such Regular Record Date) to receive the
related installment of interest to the extent and under the circumstances
provided in the Indenture, no cash payment or adjustment is to be made on
conversion for interest accrued hereon from the Interest Payment Date next
preceding the day of conversion, or for dividends on the Common Stock issued on
conversion hereof. The Company shall thereafter deliver to the Holder the
fixed number of shares of Common Stock (together with any cash adjustment, as
provided in the Indenture) into which this Security is convertible and such
delivery will be deemed to satisfy the Company's obligation to pay the
principal amount of this Security. No fractions of shares or scrip
representing fractions of shares will be issued on conversion, but instead of
any fractional interest (calculated to the nearest 1/100th of a share) the
Company shall pay a cash adjustment as provided in the Indenture or,
alternatively, the Company shall round up to the next
3
<PAGE> 9
higher whole share. The Conversion Rate 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 conveyance,
transfer, sale or lease of all or substantially all of the property and 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 such consolidation, merger, conveyance, transfer, sale
or lease by a holder of the number of shares of Common Stock of the Company
into which this Security could have been converted immediately prior to such
consolidation, merger, conveyance, transfer, sale or lease (assuming such
holder of Common Stock is not a Constituent Person, 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 and further assuming, if such
consolidation, merger, conveyance, transfer, sale or lease occurs prior to the
end of the Restricted Period, that the Security was convertible at the time of
such occurrence at the Conversion Rate specified above as adjusted from the
issue date of such Security to such time as provided in the Indenture). No
adjustment in the Conversion Rate will be made until such adjustment would
require an increase or decrease of at least one percent of such rate, provided
that any adjustment that would otherwise be made will be carried forward and
taken into account in the computation of any subsequent adjustment.
Subject to certain limitations in the Indenture, at any time when the
Company is not subject to Section 13 or 15(d) of the United States Securities
Exchange Act of 1934, as amended, upon the request of a Holder of a Restricted
Security or the holder of shares of Common Stock issued upon conversion
thereof, the Company will promptly furnish or cause to be furnished Rule 144A
Information (as defined below) to such Holder of Restricted Securities or such
holder of shares of Common Stock issued upon conversion of Restricted
Securities, or to a prospective purchaser of any such security designated by
any such Holder or holder, as the case may be, to the extent required to permit
compliance by any such Holder or holder with Rule 144A under the Securities Act
of 1933, as amended (the "Securities Act"), in connection with the resale of
any such security. "Rule 144A Information" shall be such information as is
specified pursuant to Rule 144A(d)(4) under the Securities Act (or any
successor provision thereto).
If this Security is a Registrable Security, then the Holder of this
Security (including any Person that has a beneficial interest in this Security)
and the Common Stock issuable upon conversion thereof is entitled to the
benefits of a Registration Rights Agreement, dated as of May 17, 1996 (the
"Registration Rights Agreement"), executed by the Company. Pursuant to the
Registration Rights Agreement, the Company has agreed for the benefit of the
Holders from time to time of Registrable Securities, at the Company's expense,
(a) to file within 90 days after the first date of original issuance of the
Securities, a shelf registration statement (the
4
<PAGE> 10
"Shelf Registration Statement") with the Commission with respect to resales of
the Registrable Securities, (b) within 180 days after the date of original
issuance of the Securities to use its best efforts to cause such Shelf
Registration Statement to be declared effective by the Commission as promptly
as practicable, and (c) to use its best efforts to maintain such Shelf
Registration Statement continuously effective under the Securities Act for a
period of three years from the date the Shelf Registration Statement is
declared effective or, if earlier, (i) until there are no outstanding
Registrable Securities or (ii) until, in the written opinion of independent
counsel to the Company, all outstanding Registrable Securities held by persons
that are not affiliates of the Company may be resold without registration under
the Securities Act pursuant to Rule 144(k) under the Securities Act or any
successor provision thereof.
If (i) on or prior to 90 days following the first date of original
issuance of the Securities, a Shelf Registration Statement has not been filed
with the Commission, or (ii) on or prior to the 180th day following the first
date of original issuance of the Securities, such Shelf Registration Statement,
is not declared effective (each, a "Registration Default"), additional interest
("Liquidated Damages") will accrue on this Security from and including the day
following such Registration Default to but excluding the day on which such
Registration Default has been cured. Liquidated Damages will be paid
semi-annually in arrears, with the first semi-annual payment due on the first
Interest Payment Date in respect of the Securities following the date on which
such Liquidated Damages begin to accrue, and will accrue at a rate per annum
equal to an additional one-quarter of one percent (0.25%) of the principal
amount of the Securities to and including the 90th day following such
Registration Default and at a rate per annum equal to one-half of one percent
(0.50%) thereof from and after the 91st day following such Registration
Default. In the event that the Shelf Registration Statement ceases to be
effective prior to the third annual anniversary of the initial effective date
of the Shelf Registration Statement or such earlier date as is provided in the
Registration Rights Agreement for a period in excess of 60 days, whether or not
consecutive, during any 12-month period, then the interest rate borne by the
Securities shall increase by an additional one-half of one percent (0.50%) per
annum from the 61st day of the applicable 12-month period such Shelf
Registration Statement ceases to be effective to but excluding the day on which
the Shelf Registration Statement again becomes effective.
Whenever in this Security there is a reference, in any context, to the
payment of the principal of, premium, if any, or interest on, or in respect of,
any Security such mention shall be deemed to include mention of the payment of
Liquidated Damages payable as described in the preceding paragraph to the
extent that, in such context, Liquidated Damages are, were or would be payable
in respect of such Security and express mention of the payment of Liquidated
Damages (if applicable) in any provisions of this Security shall not be
construed as excluding Liquidated Damages in those provisions of this Security
where such express mention is not made.
5
<PAGE> 11
If this Security is a Registrable Security and the Holder of this
Security (including any Person that has a beneficial interest in this Security)
elects to sell this Security pursuant to the Shelf Registration Statement then,
by such election, such Holder of this Security agrees to be bound by the terms
of the Registration Rights Agreement relating to the Registrable Securities
which are the subject of such election.
If a Change in Control occurs, the Holder of this Security, at the
Holder's option, shall have the right, in accordance with the provisions of the
Indenture, to require the Company to repurchase this Security (or any portion
of the principal amount hereof that is an integral multiple of $1,000, provided
that the portion of the principal amount of this Security to be Outstanding
after such repurchase is at least equal to U.S.$1,000) for cash at a Repurchase
Price equal to 100% of the principal amount thereof plus interest accrued to
the Repurchase Date. At the option of the Company, the Repurchase Price may be
paid in cash or, subject to the conditions provided in the Indenture, by
delivery of shares of Common Stock having a fair market value equal to the
Repurchase Price. For purposes of this paragraph, the fair market value of
shares of Common Stock shall be determined by the Company and shall be equal to
95% of the average of the Closing Prices Per Share for the five consecutive
Trading Days ending on and including the third Trading Day immediately
preceding the Repurchase Date. Whenever in this Security there is a reference,
in any context, to the principal of any Security as of any time, such reference
shall be deemed to include reference to the Repurchase Price payable in respect
of such Security to the extent that such Repurchase Price is, was or would be
so payable at such time, and express mention of the Repurchase Price in any
provision of this Security shall not be construed as excluding the Repurchase
Price so payable in those provisions of this Security when such express mention
is not made; provided, however, that for the purposes of the third succeeding
paragraph, such reference shall be deemed to include reference to the
Repurchase Price, only if the Repurchase Price is payable in cash.
In the event of a deposit or withdrawal of an interest in this
Security, including an exchange, transfer, redemption, repurchase or conversion
of this Security in part only, the Trustee, as custodian of the Depositary,
shall make an adjustment on its records to reflect such deposit or withdrawal
in accordance with the Applicable Procedures.
The indebtedness evidenced by this Security is, to the extent and in
the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Debt of the Company, and
this Security is issued subject to such provisions of the Indenture with
respect thereto. Each Holder of this Security, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes and directs the
Trustee on 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.
6
<PAGE> 12
If an Event of Default shall occur and be continuing, the principal of
all the Securities, together with accrued interest to the date of declaration,
may be declared due and payable in the manner and with the effect provided in
the Indenture. Upon payment (i) of the amount of principal so declared due and
payable, together with accrued interest to the date of declaration, and (ii) of
interest on any overdue principal and overdue interest, all of the Company's
obligations in respect of the payment of the principal of and interest on the
Securities shall terminate.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with either (a) the written consent of
the Holders of a majority in principal amount of the Securities at the time
Outstanding, or (b) by the adoption of a resolution, at a meeting of Holders of
the Outstanding Securities at which a quorum is present, by the Holders of
66-2/3% in principal amount of the Outstanding Securities represented and
entitled to vote at such meeting. The Indenture also contains provisions
permitting the Holders of specified percentages in principal amount of the
Securities at the time Outstanding, on behalf of the Holders of all the
Securities, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Security shall be conclusive
and binding upon such Holder and upon all future Holders of this Security and
of any Security issued in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security or such other
Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee
or for any other remedy thereunder, unless such Holder shall have previously
given the Trustee written notice of a continuing Event of Default, the Holders
of not less than 25% in principal amount of the Outstanding Securities shall
have made written request to the Trustee to institute proceedings in respect of
such Event of Default as Trustee and offered the Trustee reasonable indemnity
and the Trustee shall not have received from the Holders of a majority in
principal amount of the Securities Outstanding a direction inconsistent with
such request, and shall have failed to institute any such proceeding, for 60
days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof, premium, if any, or
interest hereon (including any Liquidated Damages) on or after the respective
due dates expressed herein or for the enforcement of the right to convert this
Security as provided in the Indenture.
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
7
<PAGE> 13
absolute and unconditional, to pay the principal of, premium, if any, and
interest on (including Liquidated Damages) this Security at the times, places
and rate, and in the coin or currency, herein prescribed or to convert this
Security as provided in the Indenture.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of Securities is registrable on the Security Register
upon surrender of a Security for registration of transfer at the Corporate
Trust Office of the Trustee or at such other office or agency of the Company as
may be designated by it for such purpose in the Borough of Manhattan, The City
of New York, or at such other offices or agencies as the Company may designate,
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 thereof 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 by
the Registrar. No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to recover any tax or other governmental charge payable in connection
therewith.
Prior to due presentation of 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 thereof for
all purposes, whether or not such Security be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
8
<PAGE> 1
EXHIBIT 4.7
BROADBAND TECHNOLOGIES
5% CONVERTIBLE SUBORDINATED NOTE
DUE MAY 15, 2001
No. ________ U.S.$___________
CUSIP NO. - 111309AC4
BROADBAND TECHNOLOGIES, INC., 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 referred to on the
reverse hereof), for value received, hereby promises to pay to
____________________, or registered assigns, the principal sum of
__________________________ United States Dollars (U.S.$ _______) on May 15,
2001 and to pay interest thereon, from May 22, 1996, or from the most recent
Interest Payment Date (as defined below) to which interest has been paid or
duly provided for, semi-annually in arrears on May 15 and November 15 in each
year (each, an "Interest Payment Date"), commencing November 15, 1996, at the
rate of 5% per annum, until the principal hereof is due, and at the rate of 5%
per annum on any overdue principal and premium, if any, and, to the extent
permitted by law, on any overdue interest. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in the 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 May 1 or
November 1 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date. Except as otherwise provided in the Indenture, 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 Company, notice
whereof shall be given to Holders of Securities not less than 10 days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture. Payments of principal
shall be made upon the surrender of this Security at the option of the Holder
at the Corporate Trust Office of the Trustee, or at such other office or agency
of the Company as may be designated by it for such purpose in the Borough of
Manhattan, The City of New York, in such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts, or at such other offices or agencies as the Company
may designate, by United States Dollar check drawn on a bank in the Borough of
Manhattan, The City of New York or by transfer to a United States Dollar
account (such a transfer to be made only to a Holder of an aggregate principal
amount of Securities in excess of U.S. $2,000,000, and only if such Holder
shall have furnished wire instructions in writing to the
<PAGE> 2
Trustee no later than 15 days prior to the relevant payment date) maintained by
the payee with a bank in the Borough of Manhattan, The City of New York.
Payment of interest, including payment of any Liquidated Damages (as defined on
the reverse hereof) on this Security may be made by United States Dollar check
drawn on a bank in the Borough of Manhattan, The City of New York mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register, or, upon written application by the Holder to the Security
Registrar setting forth wire instructions not later than the relevant Record
Date, by transfer to a United States Dollar account (such a transfer to be made
only to a Holder of an aggregate principal amount of Securities in excess of
U.S.$2,000,000) maintained by the payee with a bank in the Borough of
Manhattan, The City of New York.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof or an Authenticating
Agent by the manual signature of one of their respective authorized
signatories, this Security shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose.
2
<PAGE> 3
IN WITNESS WHEREOF, the Company has caused this Security to be
duly executed under its corporate seal.
Dated: ______, ____
BROADBAND TECHNOLOGIES, INC.
[Corporate Seal]
By:_____________________________
Name:
Title:
Attest:
________________________
Name:
Title:
<PAGE> 4
This is one of the Securities referred to in the
within-mentioned Indenture.
Dated: _______, ____
MARINE MIDLAND BANK,
as Trustee
By:___________________________
Name:
Title:
<PAGE> 5
[FORM OF REVERSE]
This Security is one of a duly authorized issue of securities
of the Company designated as its "5% Convertible Subordinated Notes due May 15,
2001" (herein called the "Securities"), limited in aggregate principal amount
to U.S.$115,000,000, issued and to be issued under an Indenture, dated as of
May 22, 1996 (herein called the "Indenture"), between the Company and Marine
Midland Bank, 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 Debt and the Holders of the Securities and
of the terms upon which the Securities are, and are to be, authenticated and
delivered. The Securities are issuable in registered form, without coupons, in
denominations of U.S.$1,000 and integral multiples of U.S.$1,000 in excess
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 any authorized denominations as requested by the Holder
surrendering the same upon surrender of the Security or Securities to be
exchanged, at the Corporate Trust Office of the Trustee or at such other office
or agency of the Company as may be designated by it for such purpose in the
Borough of Manhattan, The City of New York or at such other offices or agencies
as the Company may designate (each a "Transfer Agent"). The Transfer Agent (if
other than the Trustee) will then forward such surrendered Securities (together
with any payment surrendered therewith) to the Trustee. The Trustee upon such
surrender by the Holder or receipt from the Transfer Agent will issue the new
Securities in the requested denominations.
No sinking fund is provided for the Securities. The
Securities are subject to redemption at the option of the Company at any time
on or after the close of business on May 15, 1999, in whole or in part, upon
not less than 30 nor more than 60 days' notice to the Holders prior to the
Redemption Date at the Redemption Prices set forth below, together with accrued
interest to the Redemption Date; provided, that interest installments on
Securities whose Stated Maturity is on or prior to such Redemption Date will be
payable to the Holders of such Securities, or one or more Predecessor
Securities, of record at the close of business on the relevant Record Dates
referred to on the face hereof, all as provided in the Indenture.
The Redemption Prices (expressed as a percentage of principal
amount) are as follows for the 12-month period beginning on May 15 of the
following years:
<PAGE> 6
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----
<S> <C>
1999 102.00
2000 101.00
</TABLE>
and thereafter at a Redemption Price equal to 100% of the principal amount, in
each case together with accrued interest to the Redemption Date.
In the event of a redemption of less than all of the
Securities, the Company will not be required (a) to register the transfer or
exchange of Securities for a period of 15 days immediately preceding the date
notice is given identifying the serial numbers of the Securities called for
such redemption or (b) to register the transfer or exchange of any Security, or
portion thereof, called for redemption.
Notice of redemption will be given by mail to Holders of
Securities. Notice to the Holders will be given not less than 30 nor more than
60 days prior to the Redemption Date as provided in the Indenture.
In any case where the due date for the payment of the
principal of, premium, if any, or interest, including any Liquidated Damages,
on any Security or the last day on which a Holder of a Security has a right to
convert his Security shall be, at any Place of Payment or Place of Conversion,
as the case may be, a day on which banking institutions at such Place of
Payment or Place of Conversion are authorized or obligated by law or executive
order to close, then payment of principal, premium, if any, or interest,
including any Liquidated Damages, or delivery for conversion of such Security
need not be made on or by such date at such place but may be made on or by the
next succeeding day at such place which is not a day on which banking
institutions are authorized or obligated by law or executive order to close,
with the same force and effect as if made on the date for such payment or the
date fixed for redemption or repurchase, or by such last day for conversion,
and no interest shall accrue on the amount so payable for the period after such
date.
Subject to and upon compliance with the provisions of the
Indenture, the Holder of this Security is entitled, at his option, at any time
on or after August 20, 1996, and on or before the close of business on May 15,
2001, or in case this Security or a portion hereof is called for redemption or
the Holder hereof has exercised his right to require the Company to repurchase
this Security or such portion hereof, then in respect of this Security until
and including, but (unless the Company defaults in making the payment due upon
redemption or repurchase, as the case may be) not after, the close of business
on the Redemption Date or the Repurchase Date, as the case may be, to convert
this Security (or any portion of the principal amount hereof that is an
integral multiple of U.S.$1,000, provided that the unconverted portion of such
principal amount is U.S.$1,000 or any integral multiple of U.S.$1,000 in excess
thereof) into fully paid and nonassessable shares of Common Stock of the
Company at an initial Conversion Rate of 24.1080 for each share of
2
<PAGE> 7
Common Stock (or at the current adjusted Conversion Rate 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 and, in case such surrender
shall be made during the period from the close of business on any Regular
Record Date next preceding any Interest Payment Date to the opening of business
on such Interest Payment Date (except if this Security has been called for
redemption on a Redemption Date or is repurchasable on a Repurchase Date
occurring, in either case, during such period and is surrendered for such
conversion during such period), also accompanied by payment in New York
Clearing House 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 and also the conversion notice hereon duly
executed, to the Company at the Corporate Trust Office of the Trustee, or at
such other office or agency of the Company, subject to any laws or regulations
applicable thereto and subject to the right of the Company to terminate the
appointment of any Conversion Agent (as defined below) as may be designated by
it for such purpose in the Borough of Manhattan, The City of New York, or at
such other offices or agencies as the Company may designate (each a "Conversion
Agent"), provided further, that if this Security or portion hereof has been
called for redemption on a Redemption Date or is repurchasable on a Repurchase
Date occurring, in either case, during the period from the close of business on
any Regular Record Date next preceding any Interest Payment Date to the opening
of business on such succeeding Interest Payment Date and is surrendered for
conversion during such period, then the Holder of this Security who converts
this Security or a portion hereof during such period will be entitled to
receive the interest accruing hereon from the Interest Payment Date next
preceding the date of such conversion to such succeeding Interest Payment Date
and shall not be required to pay such interest upon surrender of this Security
for conversion. Subject to the provisions of the preceding sentence and, in
the case of a conversion after the close of business on the Regular Record Date
next preceding any Interest Payment Date and or before the close of business on
such Interest Payment Date, to the right of the Holder of this Security (or any
Predecessor Security of record as of such Regular Record Date) to receive the
related installment of interest to the extent and under the circumstances
provided in the Indenture, no cash payment or adjustment is to be made on
conversion for interest accrued hereon from the Interest Payment Date next
preceding the day of conversion, or for dividends on the Common Stock issued on
conversion hereof. The Company shall thereafter deliver to the Holder the
fixed number of shares of Common Stock (together with any cash adjustment, as
provided in the Indenture) into which this Security is convertible and such
delivery will be deemed to satisfy the Company's obligation to pay the
principal amount of this Security. No fractions of shares or scrip
representing fractions of shares will be issued on conversion, but instead of
any fractional interest (calculated to the nearest 1/100th of a share) the
Company shall pay a cash adjustment as provided in the Indenture or,
alternatively, the Company shall round up to the next higher whole share. The
Conversion Rate 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 conveyance, transfer, sale or
lease of all or substantially all of the property and 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
3
<PAGE> 8
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 such consolidation, merger, conveyance, transfer, sale or lease
by a holder of the number of shares of Common Stock of the Company into which
this Security could have been converted immediately prior to such
consolidation, merger, conveyance, transfer, sale or lease (assuming such
holder of Common Stock is not a Constituent Person, 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 and further assuming, if such
consolidation, merger, conveyance, transfer, sale or lease occurs prior to the
end of the Restricted Period, that the Security was convertible at the time of
such occurrence at the Conversion Rate specified above as adjusted from the
issue date of such Security to such time as provided in the Indenture). No
adjustment in the Conversion Rate will be made until such adjustment would
require an increase or decrease of at least one percent of such rate, provided
that any adjustment that would otherwise be made will be carried forward and
taken into account in the computation of any subsequent adjustment.
Subject to certain limitations in the Indenture, at any time
when the Company is not subject to Section 13 or 15(d) of the United States
Securities Exchange Act of 1934, as amended, upon the request of a Holder of a
Restricted Security or the holder of shares of Common Stock issued upon
conversion thereof, the Company will promptly furnish or cause to be furnished
Rule 144A Information (as defined below) to such Holder of Restricted
Securities or such holder of shares of Common Stock issued upon conversion of
Restricted Securities, or to a prospective purchaser of any such security
designated by any such Holder or holder, as the case may be, to the extent
required to permit compliance by any such Holder or holder with Rule 144A under
the Securities Act of 1933, as amended (the "Securities Act"), in connection
with the resale of any such security. "Rule 144A Information" shall be such
information as is specified pursuant to Rule 144A(d)(4) under the Securities
Act (or any successor provision thereto).
If this Security is a Registrable Security, then the Holder of
this Security and the Common Stock issuable upon conversion thereof is entitled
to the benefits of a Registration Rights Agreement, dated as of May 17, 1996
(the "Registration Rights Agreement"), executed by the Company. Pursuant to
the Registration Rights Agreement, the Company has agreed for the benefit of
the Holders from time to time of Registrable Securities, at the Company's
expense, (a) to file within 90 days after the first date of original issuance
of the Securities, a shelf registration statement (the "Shelf Registration
Statement") with the Commission with respect to resales of the Registrable
Securities, (b) within 180 days after the date of original issuance of the
Securities to use its best efforts to cause such Shelf Registration Statement
to be declared effective by the Commission as promptly as practicable, and (c)
to use its best efforts to maintain such Shelf Registration Statement
continuously effective under the Securities Act for a period of three years
from the date the Shelf Registration Statement is declared effective or, if
earlier, (i) until there are no outstanding Registrable Securities or (ii)
until, in the written opinion of independent counsel to the Company, all
outstanding Registrable Securities held by persons that are not affiliates
4
<PAGE> 9
of the Company may be resold without registration under the Securities Act
pursuant to Rule 144(k) under the Securities Act or any successor provision
thereof.
If (i) on or prior to 90 days following the first date of
original issuance of the Securities, a Shelf Registration Statement has not
been filed with the Commission, or (ii) on or prior to the 180th day following
the first date of original issuance of the Securities, such Shelf Registration
Statement is not declared effective (each, a "Registration Default"),
additional interest ("Liquidated Damages") will accrue on this Security from
and including the day following such Registration Default to but excluding the
day on which such Registration Default has been cured. Liquidated Damages will
be paid semi-annually in arrears, with the first semi-annual payment due on the
first Interest Payment Date in respect of the Securities following the date on
which such Liquidated Damages begin to accrue, and will accrue at a rate per
annum equal to an additional one-quarter of one percent (0.25%) of the
principal amount of the Securities to and including the 90th day following such
Registration Default and at a rate per annum equal to one-half of one percent
(0.50%) thereof from and after the 91st day following such Registration
Default. In the event that the Shelf Registration Statement ceases to be
effective prior to the third annual anniversary of the initial effective date
of the Shelf Registration Statement or such earlier date as is provided in the
Registration Rights Agreement for a period in excess of 60 days, whether or not
consecutive, during any 12-month period, then the interest rate borne by the
Securities shall increase by an additional one-half of one percent (0.50%) per
annum from the 61st day of the applicable 12-month period such Shelf
Registration Statement ceases to be effective to but excluding the day on which
the Shelf Registration Statement again becomes effective.
Whenever in this Security there is a reference, in any
context, to the payment of the principal of, premium, if any, or interest on,
or in respect of, any Security such mention shall be deemed to include mention
of the payment of Liquidated Damages payable as described in the preceding
paragraph to the extent that, in such context, Liquidated Damages are, were or
would be payable in respect of such Security and express mention of the payment
of Liquidated Damages (if applicable) in any provisions of this Security shall
not be construed as excluding Liquidated Damages in those provisions of this
Security where such express mention is not made.
If this Security is a Registrable Security and the Holder of
this Security elects to sell this Security pursuant to the Shelf Registration
Statement then, by such election, such Holder of this Security agrees to be
bound by the terms of the Registration Rights Agreement relating to the
Registrable Securities which are the subject of such election.
If a Change in Control occurs, the Holder of this Security, at
the Holder's option, shall have the right, in accordance with the provisions of
the Indenture, to require the Company to repurchase this Security (or any
portion of the principal amount hereof that is an integral multiple of $1,000,
provided that the portion of the principal amount of this Security to be
Outstanding after such repurchase is at least equal to U.S.$1,000) for cash at
a Repurchase Price equal to 100% of the principal amount thereof plus interest
accrued to the
5
<PAGE> 10
Repurchase Date. At the option of the Company, the Repurchase Price may be
paid in cash or, subject to the conditions provided in the Indenture, by
delivery of shares of Common Stock having a fair market value equal to the
Repurchase Price. For purposes of this paragraph, the fair market value of
shares of Common Stock shall be determined by the Company and shall be equal to
95% of the average of the Closing Prices Per Share for the five consecutive
Trading Days ending on and including the third Trading Day immediately
preceding the Repurchase Date. Whenever in this Security there is a reference,
in any context, to the principal of any Security as of any time, such reference
shall be deemed to include reference to the Repurchase Price payable in respect
of such Security to the extent that such Repurchase Price is, was or would be
so payable at such time, and express mention of the Repurchase Price in any
provision of this Security shall not be construed as excluding the Repurchase
Price so payable in those provisions of this Security when such express mention
is not made; provided, however, that for the purposes of the third succeeding
paragraph, such reference shall be deemed to include reference to the
Repurchase Price, only if the Repurchase Price is payable in cash.
In the event of redemption, repurchase or conversion of this
Security in part only, a new Security or Securities for the unredeemed,
unrepurchased or unconverted portion hereof will be issued in the name of the
Holder hereof.
The indebtedness evidenced by this Security is, to the extent
and in the manner provided in the Indenture, subordinate and subject in right
of payment to the prior payment in full of all Senior Debt of the Company, and
this Security is issued subject to such provisions of the Indenture with
respect thereto. Each Holder of this Security, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes and directs the
Trustee on 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, together with accrued interest to the date of
declaration, may be declared due and payable in the manner and with the effect
provided in the Indenture. Upon payment (i) of the amount of principal so
declared due and payable, together with accrued interest to the date of
declaration, and (ii) of interest on any overdue principal and overdue
interest, all of the Company's obligations in respect of the payment of the
principal of and interest on the Securities shall terminate.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities
under the Indenture at any time by the Company and the Trustee with either (a)
the written consent of the Holders of a majority in principal amount of the
Securities at the time Outstanding, or (b) by the adoption of a resolution, at
a meeting of Holders of the Outstanding Securities at which a quorum is
present, by the Holders of 66-2/3% in principal amount of the Outstanding
Securities represented and
6
<PAGE> 11
entitled to vote at such meeting. The Indenture also contains provisions
permitting the Holders of specified percentages in principal amount of the
Securities at the time Outstanding, on behalf of the Holders of all the
Securities, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Security shall be conclusive
and binding upon such Holder and upon all future Holders of this Security and
of any Security issued in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security or such other
Security.
As provided in and subject to the provisions of the Indenture,
the Holder of this Security shall not have the right to institute any
proceeding with respect to the Indenture or for the appointment of a receiver
or trustee or for any other remedy thereunder, unless such Holder shall have
previously given the Trustee written notice of a continuing Event of Default,
the Holders of not less than 25% in principal amount of the Outstanding
Securities shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default as Trustee and offered the
Trustee reasonable indemnity and the Trustee shall not have received from the
Holders of a majority in principal amount of the Securities Outstanding a
direction inconsistent with such request, and shall have failed to institute
any such proceeding, for 60 days after receipt of such notice, request and
offer of indemnity. The foregoing shall not apply to any suit instituted by
the Holder of this Security for the enforcement of any payment of principal
hereof, premium, if any, or interest hereon (including any Liquidated Damages)
on or after the respective due dates expressed herein or for the enforcement of
the right to convert this Security as provided in the Indenture.
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, premium,
if any, and interest on (including Liquidated Damages) this Security at the
times, places and rate, and in the coin or currency, herein prescribed or to
convert this Security as provided in the Indenture.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of Securities is registrable on the
Security Register upon surrender of a Security for registration of transfer at
the Corporate Trust Office of the Trustee or at such other office or agency of
the Company as may be designated by it for such purpose in the Borough of
Manhattan, The City of New York, or at such other offices or agencies as the
Company may designate, 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 thereof 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 by the Registrar. No service charge shall be made for any such
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to recover any tax or other governmental charge payable in
connection therewith.
7
<PAGE> 12
Prior to due presentation 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
thereof for all purposes, whether or not such Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES
OF AMERICA.
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
8
<PAGE> 1
EXHIBIT 5.1
PETREE STOCKTON, L.L.P.
ATTORNEYS AT LAW
4101 LAKE BOONE TRAIL, SUITE 400
RALEIGH, NORTH CAROLINA 27607-6519
TELEPHONE (919) 420-1700
FAX (919) 420-1800 OTHER OFFICES
CHARLOTTE, N. C.
WINSTON-SALEM, N. C.
September 16, 1996
BroadBand Technologies, Inc.
4024 Stirrup Creek Drive
Durham, NC 27703
Re: BroadBand Technologies, Inc.
Registration Statement on Form S-3
(No. 333-9661)
Gentlemen:
We refer to the above-referenced Registration Statement (the
"Registration Statement") filed by BroadBand Technologies, Inc., a Delaware
corporation (the "Company"), with the Securities and Exchange Commission with
respect to the registration under the Securities Act of 1933, as amended (the
"Act"), of the offering for resale of (i) up to $115,000,000 aggregate
principal amount of the outstanding 5% Convertible Subordinated Notes Due May
15, 2001 of the Company (the "Notes"), issued under the indenture dated as of
May 22, 1996 (the "Indenture") between the Company and Marine Midland Bank, as
Trustee, and (ii) the shares ("the "Conversion Shares") of the common stock,
par value $.01 per share, of the Company that are issuable upon conversion of
the Notes.
As your counsel, and in connection with the preparation of the
Registration Statement, we have examined such documents and corporate records
of the Company and such other instruments and other certificates of public
officials, officers and representatives of the Company and such other persons,
and we have made such investigations of law, as we have deemed appropriate as a
basis for the opinions expressed below.
In rendering the opinions expressed below, we have assumed the
authenticity of all documents submitted to us as originals and the conformity
to the originals of all documents submitted to us as copies. In addition, we
have assumed and have not verified (i) the accuracy as to factual matters of
each document we have reviewed and (ii) that the Notes have been duly executed,
authenticated and delivered in accordance with the Indenture and the terms of
the Notes.
<PAGE> 2
Based on the foregoing, and subject to the further assumptions and
qualifications set forth below, it is our opinion that:
1. The Notes have been duly authorized and are the legal,
valid and binding obligations of the Company.
2. The Conversion Shares have been duly authorized and, upon
issuance thereof on conversion of the Notes in accordance with the
Indenture and the terms of the Notes, will be validly issued, fully
paid and nonassessable.
Insofar as the foregoing opinions relate to the legality, validity or
binding effect of any agreement or obligation of the Company, (i) we have
assumed that each other party to such agreement or obligation has satisfied
those legal requirements that are applicable to it to the extent necessary to
make such agreement or obligation binding against it and (ii) such opinions are
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general principles of equity.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and further consent to the reference to our name in the
"Legal Matters" section of the Registration Statement, including the Prospectus
forming a part thereof, and any amendments thereto. This consent is not to be
construed as an admission that we are "experts" within the meaning of the Act
or the rules and regulations thereunder with respect to any part of the
Registration Statement, including this exhibit.
Very truly yours,
PETREE STOCKTON, L.L.P.
/s/ Petree Stockton, L.L.P.
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
BROADBAND TECHNOLOGIES, INC.
(IN THOUSANDS)
<TABLE>
<CAPTION>
Fiscal Year ended December 31
----------------------------------------------------------------------------------
1991 1992 1993 1994 1995
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EARNINGS AVAILABLE FOR FIXED
CHARGES:
Net loss (8,383) (11,821) (18,990) (24,170) (27,902)
Fixed Charges 599 393 365 187 135
----------------------------------------------------------------------------------
EARNINGS AVAILABLE FOR FIXED
CHARGES: (7,784) (11,428) (18,625) (23,983) (27,767)
==================================================================================
FIXED CHARGES:
Interest Expense on
Indebtedness 582 378 328 123 65
Interest Factor of rent
expense 17 15 37 64 70
----------------------------------------------------------------------------------
TOTAL FIXED CHARGES 599 393 365 187 135
----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Quarter Quarter Six Months
Ended Ended Ended
3/31/96 6/30/96 6/30/96
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
EARNINGS AVAILABLE FOR FIXED
CHARGES:
Net loss (7,541) (6,509) (14,050)
Fixed Charges 10 797 807
-----------------------------------------------------------------------------------
EARNINGS AVAILABLE FOR FIXED
CHARGES: (7,531) (5,712) (13,243)
===================================================================================
FIXED CHARGES:
Interest Expense on
Indebtedness 6 784 790
Interest Factor of rent
expense 4 13 17
-----------------------------------------------------------------------------------
TOTAL FIXED CHARGES 10 797 807
===================================================================================
</TABLE>
For the years ended December 31, 1991, 1992, 1993, 1994 and 1995 and
for the six months ended June 30, 1996, the Company's earnings were not
sufficient to cover its fixed charges. Additional earnings of $8.383 million,
$11.821 million, $18.990 million, $24.170 million, $27.902 million, and $14.05
million, respectively, would have been required to achieve ratios of earnings to
fixed charges of 1.0.
<PAGE> 1
EXHIBIT 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 the Registration Statement (Form S-3 No. 333-9661) and related
Prospectus of BroadBand Technologies, Inc. for the registration of 5%
Convertible Subordinated Notes due May 15, 2001 and the shares of its common
stock issuable upon conversion of the Notes and to the incorporation by
reference therein of our report dated February 7, 1996, with respect to the
financial statements of BroadBand Technologies, Inc. included in the its Annual
Report (From 10-K) for the year ended December 31, 1995, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
ERNEST & YOUNG LLP
Raleigh, North Carolina
September 17, 1996
