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As filed with the Securities and Exchange Commission on October 15, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________
LEVEL ONE COMMUNICATIONS, INCORPORATED
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(Exact name of registrant as specified in its charter)
______________________
California 33-0128224
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9750 Goethe Road
Sacramento, California 95827
(916) 855-5000
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(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
______________________
ROBERT S. PEPPER, PH.D.
Level One Communications, Incorporated
Chief Executive Officer
9750 Goethe Road
Sacramento, California 95827
(916) 855-5000
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(Name, address, including zip code, and telephone number, including area code,
of agent for service)
______________________
Copies to:
GILLES S. ATTIA, ESQ. BRUCE F. DRAVIS , ESQ.
Graham & James LLP General Counsel
400 Capitol Mall, Suite 2400 Level One Communications,Incorporated
Sacramento, California 95814 9750 Goethe Road
(916) 558-6700 Sacramento, California 95827
(916) 855-5000
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, 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. [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================================
Title of each Amount to be Proposed Proposed Maximum Amount of
class of securities Registered Maximum Offering Aggregate Registration
to be Registered Price Per Security Offering Price(1) Fee
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<S> <C> <C> <C> <C>
4% Convertible
Subordinated Notes
due 2004 $115,000,000 100% $115,000,000 $34,848
- -------------------------------------------------------------------------------------------------------------
Common Stock(1)
no par value 2,875,000/(2)/ -- -- --
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated in accordance with Rule 457(i) under the Securities Act of 1933,
as amended.
(2) Such number represents the number of shares of Common Stock as are
initially issuable upon conversion of the 4% Convertible Subordinated Notes
due 2004 registered hereby and, pursuant to Rule 416 under the Securities
Act of 1933, as amended, such indeterminate number of shares of Common
Stock as shall be required for issuance upon conversion of the aforesaid
notes. Pursuant to Rule 457(i), no registration fee is required.
<PAGE>
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 THE 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.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION DATED OCTOBER __, 1997
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[LOGO]
4% CONVERTIBLE SUBORDINATED NOTES DUE 2004
This Prospectus relates to 4% Convertible Subordinated Notes due 2004 (the
"Notes") of Level One Communications, Incorporated ("Level One") which were
originally sold by the Company in August and September 1997 under the Securities
Act of 1933, as amended (the "Securities Act"), and the shares of the Company's
common stock, no par value ("Common Stock"), issuable upon conversion of the
Notes. The Notes registered hereby were issued and sold (the "Original
Offering") in transactions exempt from the registration requirements of the
Securities Act, to persons reasonably believed by Robertson, Stephens & Company,
Alex. Brown & Sons Incorporated and Montgomery Securities, as the initial
purchasers (the "Initial Purchasers") of the Notes, to be "qualified
institutional buyers" (as defined by Rule 144A under the Securities Act) or
other institutional "accredited investors" (as defined in Rule 501(a)(1), (2),
(3) or (7) under Regulation D of the Securities Act). The Notes and the Common
Stock issuable upon conversion thereof may be offered and sold from time to time
by the holders named herein or by their transferees, pledgees, donees or their
successors (collectively, the "Selling Holders") pursuant to this Prospectus.
The Registration Statement of which this prospectus is a part has been filed
with the Securities and Exchange Commission pursuant to a registration rights
agreement dated as of August 15, 1997 (the "Registration Rights Agreement")
between the Company and the Initial Purchasers, entered into in connection with
the Original Offering.
The Notes are convertible into shares of Common Stock at any time prior to
the close of business on the maturity date, unless previously redeemed or
repurchased, at a conversion price of $40 per share (equivalent to a conversion
rate of 25 shares per $1,000 principal amount of Notes), subject to adjustment
in certain events. On October 10, 1997, the closing price of the Common Stock,
which is listed on the Nasdaq National Market under the symbol "LEVL," was
$43.75 per share.
Interest on the Notes is payable on March 1 and September 1 of each year,
commencing on March 1, 1998. Principal and interest payments will be made
without any deduction for United States withholding taxes, except to the extent
described herein. The Notes are not redeemable by the Company prior to
September 7, 2000. At any time on or after that date, the Notes may be redeemed
at the option of the Company on at least 20 days notice, in whole or in part at
any time, initially at 102.286% of the principal amount thereof, and thereafter
at prices declining to 100% at maturity, together with accrued and unpaid
interest. See "Description of Notes -- Optional Redemption." The Notes are not
entitled to any sinking fund. The Notes will mature on September 1, 2004. The
Notes issued and sold in the Original Offering in reliance on Rule 144A have
been designated 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 will not remain eligible for trading on the
PORTAL System.
In the event that a Repurchase Event (as defined) occurs, each holder of a
Note may require the Company to repurchase all or a portion of such holder's
Notes for cash or, at the Company's option, Common Stock (valued at 95% of the
average of the closing prices for the five trading days immediately preceding
and including the third trading day prior to the repurchase date) at a
repurchase price of 105% of the principal amount of the Notes to be repurchased,
plus accrued and unpaid interest to the repurchase date. See "Risk Factors ---
Limitations on Repurchase of Notes" and "Description of Notes -- Repurchase at
Option of Holders Upon a Repurchase Event."
The Notes are unsecured obligations, subordinated in right of payment to
all existing and future Senior Indebtedness (as defined) of the Company. See
"Description of Notes -- Subordination."
<PAGE>
The Notes and the Common Stock issuable upon conversion of the Notes may be
sold by the Selling Holders from time to time directly to purchasers or through
agents, underwriters or dealers. See "Selling Securityholders" and "Plan of
Distribution." If required, the names of any such agents or underwriters
involved in the sale of the Notes and the Common Stock issuable upon conversion
of the Notes in respect of which this Prospectus is being delivered and the
applicable agent's commission, dealer's purchase price or underwriter's
discount, if any, will be set forth in an accompanying supplement to this
prospectus (the "Prospectus Supplement").
The Selling Holders will receive all of the net proceeds from the sale of
the Notes and the Common Stock issuable upon conversion of the Notes and will
pay all underwriting discounts and selling commissions, if any, applicable to
the sale of the Notes and the Common Stock issuable upon conversion of the
Notes. The Company is responsible for payment of all other expenses incident to
the offer and sale of the Notes and the Common Stock issuable upon conversion of
the Notes.
The Selling Holders and any broker/dealers, agents or underwriters which
participate in the distribution of the Notes and the Common Stock issuable upon
conversion of the Notes 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 Notes and Common Stock issuable upon conversion of the Notes
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.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS
IN EVALUATING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY. SEE "RISK
FACTORS" ON PAGE 9.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
________________________
THE DATE OF THIS PROSPECTUS IS OCTOBER 15, 1997
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and information statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and information statements and other information may
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at Seven World
Trade Center, Suite 1300, New York, New York 10048 and at the Citicorp Center,
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
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Reports,
proxy statements and information statements and other information filed
electronically by the Company with the Commission are available at the
Commission's worldwide web site at http:\\www.sec.gov. The Company's Common
Stock is quoted on the Nasdaq National Market. Reports, proxy statements and
information statements and other information concerning the Company may also be
inspected at the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W., Washington D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated by reference in this Prospectus and made a part hereof:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1996;
2. The Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 30, 1997 and June 29, 1997;
3. The Company's Current Report on Form 8-K dated August 14, 1997; and
4. The description of the Company's Common Stock under the caption
"Description of Registrant's Securities to be Registered" in the
Company's Registration Statement on Form 8-A, dated July 8, 1993.
All reports and other documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and documents. Any statement incorporated or deemed to be
incorporated herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
3
<PAGE>
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all of
the foregoing documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into such documents). Requests for such documents should be made orally or in
writing to the attention of Level One Communications, Incorporated, Attn:
Investor Relations, 9750 Goethe Road, Sacramento, California 95827, Telephone:
(916) 855-5000.
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<PAGE>
PROSPECTUS SUMMARY
The following information does not purport to be complete and is qualified
in its entirety by, and should be read in conjunction with, the more detailed
information in this Prospectus and in the documents, financial statements and
other information incorporated by reference herein. The securities offered
hereby involve a high degree of risk. See "Risk Factors." This Prospectus
contains certain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in this Prospectus under the heading "Risk Factors"
and elsewhere in this Prospectus. Unless the context suggest otherwise,
references in this Prospectus to the "Company" or "Level One" mean Level One
Communications, Incorporated and its subsidiaries. The Company will not
undertake to update any forward-looking statement that may be made from time to
time, by or on behalf of, the Company.
All share and per share numbers in this Prospectus reflect the effect of a
3-for-2 stock split to shareholders of record on August 5, 1997 effected on
August 26, 1997.
THE COMPANY
Level One designs, develops and markets mixed-signal application specific
standard integrated circuit products ("ASSPs") for high-speed digital signal
transmission and networking connectivity to systems that transport information,
within an office or around the world. Such systems connect to local area
networks ("LANs"), wide area networks ("WANs") and public telephone transmission
networks. LANs, WANs, and telephone transmission networks make possible such
activities as the use of intra-enterprise networking ("intranets") and the use
of the Internet and World Wide Web.
Level One ASSPs transmit, regenerate and receive digitized voice, data, and
video signals using a wide variety of protocols. Because these products both
transmit and receive signals, they are called "transceivers". All networks, LAN,
WAN, and transmission, require transceivers. Level One combines its strengths in
analog and digital circuit design with its communications systems expertise to
produce mixed-signal solutions with increased functionality and greater
reliability, resulting in lower total system cost.
As the volume of transmitted digital information continues to grow,
communications original equipment manufacturers ("OEMs") that supply products
and systems to the transmission and networking markets face a fundamental
challenge of providing greater data throughput on a cost-effective basis. Level
One addresses the needs of leading communications OEMs by providing high
performance mixed-signal ASSPs that optimize the allocation of analog and
digital signal processing functions. The Company's proprietary simulation
software and sophisticated design and testing methodology accelerate the product
design cycle to improve time to market.
A key challenge for Level One's OEM customers and their end users is the
creation of access technologies that maximize the use of the large installed
base of twisted-pair copper telephone lines to transport information. With more
than 1.3 billion miles in place in the United States, copper telephone wire is
expected to remain the primary medium for local connectivity to the "electronic
superhighway" transport media that handle long-distance data transmissions. Such
long-distance transport media include copper telephone lines, coaxial cable,
fiber optic cable, wireless and satellite transmission. Copper telephone wire,
which was originally designed to transmit relatively slow analog voice signals,
requires special signal conditioning circuits to enable transmission of high-
speed digital signals.
Level One develops and sells advanced ASSPs and custom derivatives that
provide silicon connectivity solutions and achieve improved integration of
functions. The Company's current products
5
<PAGE>
address the needs of two primary segments of the communications connectivity
market: the networking market and the transmission market.
Level One's networking products address the rapid evolution and the growing
convergence of the LAN and WAN networking connectivity markets. For these
markets, Level One produces Fast Ethernet transceivers, Ethernet transceivers,
single chip quad Ethernet repeaters, managed Ethernet repeaters, and integrated
transceiver solutions for Frame Relay, Switched 56/DDS and T1/E1 access
products.
Level One's transmission products service the growing demand for high-speed
digital signal transmission utilizing the industry-wide specifications referred
to as "T1" in North America, and "E1" in Europe, Asia and much of the rest of
the world. T1 systems transmit 1.544 million bits per second and E1 systems
transmit 2.048 million bits per second. Level One's products also address the
transmission service known as "Fractional T1," in which users can access
multiple 64kbs sub-channel rates of T1, and High-bit-rate Digital Subscriber
Line ("HDSL") service, which enables high speed transmission up to 12,000 feet
without repeaters.
The Company's proprietary technology includes systems simulation and
testing software and an extensive circuit cell library. Level One believes that
a key competitive factor in its success is its ability to use this technology,
in conjunction with industry standard design tools, to rapidly design and
introduce new products. The Company continuously reviews new opportunities in
emerging technologies such as Digital Subscriber Line ("DSL"), Switched
Ethernet, Fast and Gigabit Ethernet, infrared, ATM, wireless, frame relay and
cable transmission.
During the first half of 1997, the Company announced products and
developments for the DSL and Ethernet markets. During the first quarter of 1997,
the Company introduced its Multi-rate Digital Subscriber Line ("MDSL") chipset,
which enables the design of digital modems for Internet access, delivering 10
times the data rate of analog modems at lower component cost. During the second
quarter of 1997, the Company announced a strategic alliance between Level One,
Pairgain Technologies and ADC Telecommunications to develop the next generation
of HDSL ("HDSL2") standards and technology. HDSL2 will allow data to be
transmitted over a single pair of copper wire versus the two pairs of copper
wire currently required for HDSL. During the second quarter, the Company
released its LXT970 10/100 Fast Ethernet transceiver, which has generated
significant market acceptance. The Company sampled follow-on Fast Ethernet
products during the third quarter of 1997, with production expected in late 1997
or the first quarter of 1998. The Company also has been a significant
contributor to the development of a final specification for Gigabit Ethernet.
Level One's customer base includes many of the leading OEMs in both the
telecommunications and networking markets. The Company's sales and marketing
strategy is to achieve design wins by developing products with superior mixed-
signal processing functions that are designed into equipment offered by industry
leaders. To implement its strategy, Level One has a direct sales force and a
worldwide network of independent distributors and sales representatives.
The Company was incorporated in California in November 1985. The Company's
executive offices are located at 9750 Goethe Road, Sacramento, California 95827
and its telephone number is (916) 855-5000.
6
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THE OFFERING
<TABLE>
<C> <S>
Securities Offered.................. $115,000,000 principal amount of 4% Convertible Subordinated Notes due 2004 (the "Notes").
Interest Payment Dates.............. March 1 and September 1, beginning March 1, 1998.
Maturity............................ September 1, 2004
Conversion.......................... Convertible into Common Stock, no par value, of the Company (the "Common Stock") at any
time through the close of business on the final maturity date of the Notes, unless
previously redeemed or repurchased, at a conversion price of $40 per share, subject to
adjustment in certain events. See "Description of Notes -- Conversion."
Optional Redemption................. The Notes are not redeemable at the option of the Company prior to September 7, 2000.
Thereafter, the Notes will be redeemable on at least 20 days' notice at the option of the
Company, in whole or in part at any time, initially at 102.286% of the principal amount
thereof, and thereafter at prices declining to 100% at maturity, together with accrued and
unpaid interest. See "Description of Notes-- Optional Redemption by the Company."
Repurchase at Option of
Holders Upon a Repurchase Event.... In the event that a Repurchase Event (as defined) occurs, each holder of a Note may require
the Company to repurchase all or a portion of such holder's Notes for cash or, at the
Company's option, Common Stock (valued at 95% of the average of the closing prices for the
five trading days immediately preceding and including the third trading day prior to the
repurchase date) at a repurchase price of 105% of the principal amount of the Notes to be
repurchased, plus accrued and unpaid interest to the repurchase date. See "Risk Factors --
Limitations on Repurchase of Notes" and "Description of Notes -- Repurchase at Option of
Holders Upon a Repurchase Event."
Ranking............................. Subordinate to all existing and future Senior Indebtedness (as defined) of the Company. As
of June 29, 1997, the Company had approximately $4.3 million of indebtedness outstanding
(excluding accrued interest thereon) that would have constituted Senior Indebtedness. The
Indenture governing the terms of the Notes (the "Indenture") contains no limitations on the
incurrence of additional Senior Indebtedness or other indebtedness by the Company. See
"Description of Notes -- Subordination."
</TABLE>
7
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<TABLE>
<C> <S>
Registration Rights................. The Company agreed to file with the Commission the registration statement of which this
Prospectus is a part with respect to the resale of the Notes and the Common Stock issuable
upon conversion of the Notes and to keep such registration statement effective until
September 25, 1999 or such shorter period ending when there ceases to be any securities
requiring registration outstanding. The Company will be required to pay liquidated damages
to the holders of the Notes or the Common Stock issuable upon conversion of the Notes, as
the case may be, under certain circumstances if the Company is not in compliance with its
registration obligations. See "Description of Notes -- Registration Rights."
Listing............................. The Notes are currently eligible for trading on the PORTAL Market. Notes sold pursuant to
this Prospectus will not remain eligible for trading on the PORTAL Market. The Company's
Common Stock is traded on the NASDAQ National Market under the symbol "LEVL".
</TABLE>
8
<PAGE>
RISK FACTORS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The statements contained in this Prospectus that are not purely
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including without limitation statements regarding the Company's
expectations, beliefs, intentions or strategies regarding the future. All
forward-looking statements included in this document are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statements. The Company's actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth in the
following risk factors and elsewhere in this Prospectus. Potential investors
should consider carefully the following factors, as well as the more detailed
information contained elsewhere in this Prospectus, before making a decision to
invest in the Notes offered hereby.
Manufacturing Risks
The Company does not manufacture the wafers used for its products. The
Company's wafers are manufactured by foundries located in the United States,
Europe and Asia. The Company depends upon these suppliers to produce wafers at
acceptable yields and to deliver them in a timely manner at competitive prices.
The Company may sustain an adverse impact on operating results from problems
with the cost, timeliness, yield and quality of wafer deliveries from suppliers.
From time to time, the available industry-wide foundry capacity can fluctuate
significantly. During periods of constrained supply, the Company may experience
difficulty in securing an adequate supply of wafers, and/or its suppliers may
increase wafer prices. The Company's operating results depend in substantial
part on its ability to maintain or increase the capacity available from its
existing or new foundries. In prior years, the Company has experienced increased
costs and delays in customer shipments as a result of a foundry reducing
shipments to the Company without prior notice, requiring the Company to transfer
products to a new foundry. Although the Company believes that it has planned to
meet customer demand, there can be no assurances that unforeseen demand, current
supplier interruptions or other changes will not have a material impact on the
Company's business.
Manufacturing process technologies are subject to rapid change. Other
companies in the industry have experienced difficulty in migrating to new
manufacturing processes, and, consequently, have suffered reduced yields, delays
in product deliveries and increased expense levels. The Company's business,
financial condition and results of operations could be materially adversely
affected if any such transition is substantially delayed or inefficiently
implemented.
The Company is also dependent upon third-party assembly companies that
package the semiconductor die. The Company depends upon these suppliers to
produce products in a timely manner and at competitive prices. The Company may
sustain an adverse financial impact from problems with the cost, timeliness,
yield and quality of product deliveries from these suppliers.
Factors Affecting Annual and Quarterly Operating Results
The semiconductor industry is characterized by rapid technological change,
intense competitive pressure and cyclical market patterns. The Company's results
of operations are affected by a wide variety of factors, including general
economic conditions, semiconductor industry environment, changes in average
selling prices, the timing of new product introductions (by the Company and its
customers), use of new technologies, the ability to safeguard patents and
intellectual property, and rapid change of demand for products. The level of net
revenues in any specific quarter can also be affected by the level of orders
placed during that quarter. The Company attempts to respond to changes in market
conditions as soon as possible; however, the rapidity of their onset may make
prediction of and reaction to such
9
<PAGE>
events difficult. Due to the foregoing and other factors, past results, such as
those described in this Prospectus, may not be predictive of future performance.
Dependence on New Products
The Company's future success depends on its ability to timely develop and
introduce new products which compete effectively. Because of the complexity of
its products, the Company may experience delays in completing development and
introduction of new products, and, as a result, not achieve the market share
anticipated for such products. The Company's strategy is to develop products for
the fastest growing segments of the communications market. The Company conducts
its own analysis of market trends and reviews forecasts and information provided
by industry analysts. Market conditions may change rapidly as technology,
economic, or user-preference conditions cause different communications
technologies to experience growth other than that forecast by the Company or
others. There can be no assurance that the Company will successfully identify
new product opportunities and bring new products to market in a timely manner,
that products or technologies developed by others will not render the Company's
products or technologies obsolete or noncompetitive, or that the Company's
products will be selected for design into the products of its targeted
customers. In addition, the average selling price for any particular product
tends to decrease over the product's life. To offset such price decreases, the
Company relies primarily on obtaining yield improvements and corresponding cost
reductions in the manufacture of existing products and on introducing new
products which incorporate advanced features and other price/performance factors
such that higher average selling prices and higher margins are achievable
relative to existing product lines. To the extent that cost reductions and new
product introductions with higher margins do not occur in a timely manner, or
the Company's products do not achieve market acceptance, the Company's operating
results could be adversely affected.
Management of Growth; Dependence on Key Personnel
The Company is currently experiencing a period of significant growth which
has placed, and could continue to place, a significant strain on the Company's
personnel and other resources. The Company's ability to manage its growth
effectively will require continued expansion and refinement of the Company's
operational, financial and management and control systems as well as a
significant increase in the Company's development, testing, quality control,
marketing, logistics and service capabilities, any of which could place a
significant strain on the Company's resources. The Company's success also
depends to a significant extent upon the continued services of its key personnel
and its ability to attract and retain key technical, sales and management
personnel in the future. Competition for such personnel is intense and there can
be no assurance that the Company will be able to attract and retain key
technical, sales and management personnel in the future. If the Company's
management is unable to manage growth effectively, maintain the quality and
marketability of the Company's products and retain, hire and integrate key
personnel, the Company's business, financial condition and results of operations
could be materially adversely affected.
Intellectual Property
The Company relies upon patent, trademark, trade secret and copyright law
to protect its intellectual property. There can be no assurance that such
intellectual property rights can be successfully asserted or will not be
invalidated, circumvented or challenged. Litigation, regardless of its outcome,
could result in substantial cost and diversion of resources for the Company. Any
infringement claim or other litigation against or by the Company could have a
material effect on the Company's financial condition and results of operations.
In November 1995 the Company commenced infringement litigation against a
competitor.
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Semiconductor Industry
The semiconductor industry has historically been cyclical and subject to
significant economic downturns at various times. The Company may experience
substantial period-to-period fluctuations in operating results due to general
semiconductor industry conditions, overall economic conditions or other factors.
In addition, the securities of many high technology companies have
historically been subject to extreme price and volume fluctuations, factors
which may affect the market price of the Company's Common Stock. As is common in
the semiconductor industry, the Company frequently ships more product in the
third month of a quarter than in the other months. If a disruption in the
Company's production or shipping occurs near the end of a quarter, the Company's
revenues for that quarter could be adversely affected.
The Company must order wafers and build inventory in advance of product
shipments. There is risk that the Company could produce excess or insufficient
inventories of particular products because the Company's markets are volatile
and subject to rapid technology and price changes. This inventory risk is
heightened because certain of the Company's customers place orders with long
lead times which may be subject to cancellation or rescheduling by that
customer. To the extent the Company produces excess or insufficient inventories
of particular products, the Company's revenues and earnings could be adversely
affected.
Increased demand for semiconductor products may result in a reduction in
the availability of wafers from foundries. Such capacity limitations may
adversely affect the Company's ability to deliver products on a timely basis and
affect the Company's margins. Additionally, the Company believes that during
periods of strong demand and/or restricted semiconductor capacity, customers
will over-order to assure an adequate supply. Certain of the Company's customers
may cancel or postpone orders without notice if product becomes available
elsewhere.
Shortages of components from other suppliers could cause the Company's
customers to cancel or delay programs incorporating the Company's products,
resulting in the cancellation or delay of orders for the Company's products.
Intense Competition
The semiconductor industry is intensely competitive. The Company's
competition consists of semiconductor companies and semiconductor divisions of
vertically integrated companies. In the transmission market, the Company's
principal competitors are Brooktree Corporation (a subsidiary of Rockwell
International, Inc.), Crystal Semiconductor, Inc. (a subsidiary of Cirrus Logic,
Inc.) ("Crystal"), Dallas Semiconductor, Inc., Lucent Technologies Inc.
("Lucent"), PMC-Sierra Inc. and Siemens A.G. In the networking market, the
Company's principal competitors are Advanced Micro Devices, Inc., Crystal,
Integrated Circuit Systems, Inc., Lucent, Micro Linear Corp., National
Semiconductor Corporation, Quality Semiconductor, Inc., Seeq Technologies, Inc.
and Texas Instruments, Incorporated. Many of these competitors have longer
operating histories, greater name recognition, access to larger customer bases
and significantly greater financial and other resources than the Company with
which to pursue engineering, manufacturing, marketing and distribution of
products.
The ability of the Company to compete successfully in the rapidly evolving
area of high performance integrated circuit technology depends on factors both
within and outside of the Company's control. Such factors include, without
limitation, success in designing and manufacturing new products, implementing
new technologies, intellectual property programs, product quality, reliability,
price, efficiency of production, and general economic conditions. There is no
assurance that the Company will be able to compete successfully against current
and future competitors. Increased competition may result
11
<PAGE>
in price reductions, reduced gross margins and loss of market share, any of
which may have a material adverse effect on the Company's business, financial
condition and results of operations.
International Operations
Due to its reliance on international sales and foreign third-party
manufacturing and assembly operations, the Company is subject to the risks of
conducting business outside of the United States including government regulatory
risks, political, social and economic instability, potential hostilities and
changes in diplomatic and trade relationships. There can be no assurance that
one or more of the foregoing factors will not have a material adverse effect on
the Company's business, financial condition or operating results.
Increased Leverage
In connection with the sale of the Notes, the Company has incurred
approximately $115.0 million in additional indebtedness which increases the
ratio of its long-term debt to its total capitalization from 3.0%, at June 29,
1997, to 53.7%, on a pro forma basis. As a result of this increased leverage,
the Company's principal interest obligations will increase substantially. The
degree to which the Company will be leveraged could adversely affect the
Company's ability to obtain additional financing for working capital,
acquisitions or other purposes and could make it more vulnerable to economic
downturns and competitive pressures. The Company's increased leverage could also
adversely affect its liquidity, as a substantial portion of available cash from
operations may have to be applied to meet debt service requirements and, in the
event of a cash shortfall, the Company could be forced to reduce other
expenditures and forego potential acquisitions to be able to meet such
requirements.
Subordination
The Notes are unsecured obligations of the Company and subordinated in
right of payment in full to all existing and future Senior Indebtedness (as
defined) of the Company. As a result of such subordination, in the event of any
insolvency, liquidation or reorganization of the Company, payment default on
Senior Indebtedness and certain other events, the assets of the Company will be
available to pay obligations on the Notes only after all Senior Indebtedness has
been paid in full, and there may not be sufficient assets remaining to pay
amounts due on any or all of the Notes then outstanding. The Indenture does not
prohibit or limit the incurrence of Senior Indebtedness or the incurrence of
other indebtedness and other liabilities by the Company, and the incurrence of
additional indebtedness and other liabilities by the Company could adversely
affect the Company's ability to pay its obligations on the Notes. As of June 29,
1997, the Company had approximately $4.3 million of outstanding indebtedness
which would have constituted Senior Indebtedness. The Company anticipates that
from time to time it and its subsidiaries will incur additional indebtedness,
including Senior Indebtedness. See "Description of Notes -- Subordination."
Limitations on Repurchase of Notes
If a Repurchase Event (as defined) were to occur, there can be no assurance
that the Company would have sufficient financial resources, or would be able to
arrange financing to pay the repurchase price in cash for all Notes tendered by
holders thereof. The Company's ability to repurchase Notes with cash may also be
limited or prohibited by the terms of its then-existing borrowing arrangements.
Moreover, although under the Indenture the Company may elect, subject to
satisfaction of certain conditions, to pay the repurchase price for the Notes
using shares of Common Stock, any future credit agreements or other agreements
relating to other indebtedness (including other Senior Indebtedness) to which
the Company becomes a party may contain restrictions on or prohibitions of the
repurchase of the Notes by the Company that apply even if the purchase price is
paid with shares of capital stock. In the event a Repurchase Event occurs at a
time when the Company is prohibited from repurchasing Notes,
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<PAGE>
the Company could seek the consent of its lenders to the repurchase of the Notes
or could attempt to refinance the borrowings that contain such prohibition. If
the Company does not obtain such a consent or repay such borrowings, the Company
would remain prohibited from repurchasing Notes. In such case, the Company's
failure to repurchase the Notes would constitute an Event of Default under the
Indenture whether or not payment of the repurchase price is permitted by the
subordination provisions of the Indenture. Any such default may, in turn, cause
a default under Senior Indebtedness of the Company. Moreover, the occurrence of
a Repurchase Event in and of itself may constitute an event of default under
Senior Indebtedness of the Company. As a result, in either case, payment of the
repurchase price of the Notes with cash would, absent a waiver, be prohibited
under the subordination provisions of the Indenture until the Senior
Indebtedness is paid in full. See "Description of Notes -- Subordination" and "
- -- Subordination."
No Notes may be repurchased at the option of holders upon a Repurchase
Event if there has occurred and is continuing an Event of Default described
under "Description of Notes -- Events of Default and Remedies" below (other than
a default in the payment of the repurchase price with respect to such Notes on
the repurchase date).
Absence of Public Market for the Notes and Restrictions on Resale
Prior to the Original Offering, there was no trading market for the Notes.
Although the Initial Purchasers have advised the Company that they currently
intend to make a market in the Notes, they are not obligated to do so and may
discontinue such market making at any time without notice. In addition, the
Notes are currently eligible for trading in the PORTAL Market, but Notes sold
pursuant to this Prospectus will not remain eligible for trading on the PORTAL
Market. Finally any market making activity taken by the Initial Purchasers will
be subject to the limits imposed by the Securities Act and the Exchange Act.
Accordingly, there can be no assurance that any market for the Notes will
develop or, if one does develop, that it will be maintained. The failure of an
active market for the Notes to develop or to be sustained could have a material
adverse effect on the trading price of such Notes.
Volatility of Notes and Stock Price
Economic and other external factors, many of which are beyond the control
of the Company, may have a significant impact on the Company's business and on
the market price of the Notes and the Common Stock into which the Notes are
convertible. Such factors include, without limitation, fluctuations in product
revenue and net income of the Company or its competitors, shortfalls in the
Company's operating results from levels forecast by securities analysts,
announcements concerning the Company, its competitors or customers,
announcements of technological innovations by the Company, its competitors or
its customers, the introduction of new products or changes in product pricing
policies by the Company, its competitors or its customers, market conditions in
the industry and the general state of the securities market. In addition, the
stock prices of many technology companies fluctuate significantly for reasons
that may be unrelated or disproportionate to operating results. These
fluctuations, as well as general economic, political and market conditions such
as recession or international instability, may adversely affect the market price
of the Notes and the Common Stock.
13
<PAGE>
USE OF PROCEEDS
The Company will receive no proceeds from the sale of Securities hereunder
by the Selling Holders.
DESCRIPTION OF NOTES
The Notes were issued under an indenture dated as of August 15, 1997 (the
"Indenture"), between the Company and State Street Bank and Trust Company of
California, N.A., as trustee (the "Trustee"). The terms of the Notes include
those stated in the Indenture and those stated in the Registration Rights
Agreement. The following summaries of certain provisions of the Notes, the
Indenture and the Registration Rights Agreement do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all the
provisions of the Notes, the Indenture and the Registration Rights Agreement,
including the definitions therein of certain terms which are not otherwise
defined in this Prospectus. Wherever particular provisions or defined terms of
the Indenture (or of the form of Note which is a part thereof) or the
Registration Rights Agreement are referred to, such provisions or defined terms
are incorporated herein by reference. Copies of the Indenture, form of Note and
Registration Rights Agreement are available from the Company upon request. As
used in this Description of Notes, the "Company" refers only to Level One
Communications, Incorporated and does not, unless the context otherwise
indicates, include any of its subsidiaries.
GENERAL
The Notes represent unsecured general obligations of the Company subordinate
in right of payment to certain other obligations of the Company as described
under " -- Subordination," and convertible into Common Stock as described under
" -- Conversion." The Notes are limited to $115,000,000 aggregate principal
amount, were issued in fully registered form only in denominations of $1,000 or
any multiple thereof and will mature on September 1, 2004 unless earlier
redeemed at the option of the Company or repurchased by the Company at the
option of the holder upon a Repurchase Event (as defined).
The Notes bear interest from August 27, 1997 at the rate of 4% per annum
payable semi-annually on March 1 and September 1, commencing on March 1, 1998,
to holders of record at the close of business on the preceding February 15 and
August 15, respectively (subject to certain exceptions in the case of
conversion, redemption or repurchase of such Notes prior to the applicable
interest payment date). Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Principal and premium, if any, will be payable, and the Notes may be presented
for conversion, registration of transfer and exchange, without service charge,
at the office of the Company maintained by the Company for such purposes in the
Borough of Manhattan, The City of New York, which shall initially be an office
or agency of the Trustee. In addition, interest may, at the Company's option, be
paid by check mailed to such holders, provided that a holder of Notes with an
aggregate principal amount in excess of $2,000,000 will be paid by wire transfer
in immediately available funds at the election of such holder.
The Indenture does not contain any financial covenants or any restrictions on
the payment of dividends, the repurchase of securities of the Company or the
incurrence of Senior Indebtedness or other indebtedness. The Indenture contains
no covenants or other provisions to afford protection to holders of Notes in the
event of a highly leveraged transaction or a change in control of the Company
except to the limited extent described under " -- Repurchase at Option of
Holders Upon a Repurchase Event" below.
No service charge will be made for any registration or transfer or exchange of
Notes, but the Company may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith. The Company is not
required to exchange or register the transfer of (i) any Note
14
<PAGE>
for a period of 15 days next preceding any selection of Notes to be redeemed,
(ii) any Note or portion thereof selected for redemption, (iii) any Note or
portion thereof surrendered for conversion, or (iv) any Note or portion thereof
surrendered for repurchase (and not withdrawn) in connection with a Repurchase
Event.
The Notes are currently eligible for trading in the Portal Market. Notes sold
pursuant to this Prospectus will not remain eligible for trading on the Portal
Market.
BOOK-ENTRY; DELIVERY AND FORM; GLOBAL CERTIFICATES
Upon the initial transfer pursuant to the Registration Statement of which this
Prospectus forms a part, the Notes may be represented by one or more fully
registered global notes (the "Global Note") as well as Notes in definitive form
registered in the name of individual purchasers or their nominees. Each such
Global Note will be deposited upon issuance with, or on behalf of, DTC and
registered in the name of DTC or its nominee (the "Global Note Registered
Owner") or will remain in the custody of the Trustee pursuant to a FAST Balance
Certificate Agreement between DTC and the Trustee. Except as set forth below,
the Global Note may be transferred, in whole and not in part, only to another
nominee of DTC or to a successor of DTC or its nominee.
DTC is a limited purpose trust company organized under the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its participant organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic book-
entry changes in accounts of its Participants. The Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Access to DTC's system is also available to
other entities such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly (collectively, the "Indirect Participants"). Persons who are not
Participants may beneficially own securities held by or on behalf of DTC only
through the Participants or the Indirect Participants. The ownership interest
and transfer of ownership interest of each actual purchaser of each security
held by or on behalf of DTC are recorded on the records of the Participants and
Indirect Participants. Pursuant to procedures established by DTC, (i) upon
deposit of the Global Note, DTC will credit the accounts of Participants with
portions of the principal amount of the Global Note and (ii) ownership of such
interests in the Global Note will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC (with respect
to the Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interests in the Global Note). 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 Notes
will be limited to that extent. Except as described below, owners of interests
in the Global Note will not have Notes registered in their names, will not
receive physical delivery of Notes in definitive form and will not be considered
the registered owners thereof under the Indenture for any purpose.
None of the Company, the Trustee, nor any agent of the Company or the Trustee
will have any responsibility or liability for (i) any aspect of DTC's records or
any Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Note, or for maintaining, supervising or
reviewing any of DTC's records or any Participant's records relating to the
beneficial ownership interests in the Global Note or (ii) any other matter
relating to the actions and practices of DTC or any of its Participants.
Payments in respect of the principal of, premium, if any, and interest on any
Notes registered in the name of the Global Note Registered Owner on any relevant
record date will be payable by the Trustee to the Global Note Registered Owner
in its capacity as the registered holder under the Indenture. Under the terms
of the Indenture, the Company and the Trustee will treat the person in whose
names the Notes, including the Global Note, are registered as the owners thereof
for
15
<PAGE>
the purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither the Company, the Trustee, nor any agent of
the Company or the Trustee has nor will have any responsibility or liability for
the payment of such amounts to beneficial owners of the Notes or for any other
matter relating to actions or practices of DTC or any of its Participants. The
Company understands that DTC's current practice, upon receipt of any payment in
respect of securities such as the Notes (including principal and interest), is
to credit the accounts of the relevant Participants with the payment on the
payment date, in amounts proportionate to their respective holdings in principal
amount of beneficial interests in the relevant security as shown on the records
of DTC (unless DTC has reason to believe it will not receive payment on such
payment date). Payments by the Participants and the Indirect Participants to
the beneficial owners of Notes will be governed by standing instructions and
customary practices and will be the responsibility of Participants or the
Indirect Participant, and the beneficial owners and not the responsibility of
the DTC, the Trustee or the Company. Neither the Company nor the Trustee will
be liable for any delay by DTC or any of its Participants in identifying the
beneficial owners of the Notes, and the Company and the Trustee may conclusively
rely on and will be protected in relying on instructions from the Global Note
Registered Owner for all purposes.
So long as DTC, or its nominee, is the registered owner or holder of a Global
Note, DTC or such nominee, as the case may be, will be considered the sole owner
or holder of the Notes represented by such Global Note for all purposes under
the Indenture and the Notes. No beneficial owner of an interest in a Global
Note will be able to transfer the interest except in accordance with DTC's
applicable procedures, in addition to those provided for under the Indenture.
Transfers between Participants in DTC will be effected in the ordinary way in
accordance with DTC rules.
The Company expects that DTC 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 the
DTC interests in a Global Note is 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.
Although the Company expects that DTC will agree to the foregoing procedures
in order to facilitate transfers of interests in a Global Note among
Participants of DTC, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. Neither
the Company nor the Trustee will have any responsibility for the performance by
DTC or its Participants or Indirect Participants of their respective obligations
under the rules and procedures governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for a
Global Note and a successor depositary is not obtained, the Company will issue
definitive certificated Notes in exchange for a Global Note. Such definitive
certificated Notes shall be registered in names of the owners of the beneficial
interests in the Global Note as provided by the Participants. Notes issued in
definitive certificated form will be fully registered, without coupons, in
minimum denominations of $1,000 and integral multiples of $1,000 above that
amount. Upon issuance of Notes in definitive certificated form, the Trustee is
required to register the Notes in the name of, and cause the Notes to be
delivered to, the person or persons (or the nominee thereof) identified as the
beneficial owner as DTC shall direct.
The information in this section concerning DTC and DTC's book-entry system has
been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
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<PAGE>
CONVERSION
The holders of Notes are entitled at any time through the close of business on
the final maturity date of the Notes, subject to prior redemption or repurchase,
to convert any Notes or portions thereof (in denominations of $1,000 or
multiples thereof) into Common Stock of the Company, at the conversion price of
$40.00 per share, subject to adjustment as described below. Except as described
below, no adjustment will be made on conversion of any Notes for interest
accrued thereon or for dividends on any Common Stock issued. If Notes are
converted after a record date for the payment of interest and prior to the next
succeeding interest payment date, such Notes, other than Notes called for
redemption pursuant to a redemption notice mailed to the holders by the Company
in accordance with the Indenture, must be accompanied by funds equal to the
interest payable on such succeeding interest payment date on the principal
amount so converted. The Company is not required to issue fractional shares of
Common Stock upon conversion of Notes and, in lieu thereof, will pay a cash
adjustment based upon the market price of the Common Stock on the last business
day prior to the date of conversion. In the case of Notes called for redemption,
conversion rights will expire at the close of business on the business day
preceding the date fixed for redemption, unless the Company defaults in payment
of the redemption price. A Note for which a holder has delivered a Repurchase
Event purchase notice exercising the option of such holder to require the
Company to repurchase such Note may be converted only if such notice is
withdrawn by a written notice of withdrawal delivered by the holder to the
Company prior to the close of business on the business day immediately preceding
the date fixed for repurchase.
The right of conversion attaching to any Note may be exercised by the holder
by delivering the Note at the specified office of a conversion agent,
accompanied by a duly signed and completed notice of conversion, together with
any funds that may be required as described in the preceding paragraph. The
conversion date shall be the date on which the Note, the duly signed and
completed notice of conversion, and any funds that may be required as described
in the preceding paragraph shall have been so delivered. A holder delivering a
Note for conversion will not be required to pay any taxes or duties payable in
respect of the issuance or delivery of Common Stock on conversion, but will be
required to pay any tax or duty which may be payable in respect of any transfer
involved in the issuance or delivery of the Common Stock in a name other than
that of the holder of the Note. Certificates representing shares of Common Stock
will not be issued or delivered unless all taxes and duties, if any, payable by
the holder have been paid. In the case of the conversion of any Note within two
years after the original issuance of the Note, the Common Stock issuable upon
such conversion will not be issued or delivered in a name other than that of the
holder of such Note unless the applicable restrictions on transfer have been
satisfied. See "Transfer Restrictions."
The initial conversion price of $40 per share of Common Stock is subject to
adjustment (under formulae set forth in the Indenture) in certain events,
including: (i) the issuance of Common Stock as a dividend or distribution on
Common Stock; (ii) certain subdivisions and combinations of the Common Stock;
(iii) the issuance to all holders of Common Stock of certain rights or warrants
to purchase Common Stock at less than the current market price of the Common
Stock; (iv) the dividend or other distribution to all holders of Common Stock of
shares of capital stock of the Company (other than Common Stock) or evidences of
indebtedness of the Company or assets (including securities, but excluding those
rights, warrants, dividends and distributions referred to above or paid
exclusively in cash); (v) dividends or other distributions consisting
exclusively of cash (excluding any cash portion of distributions referred to in
clause (iv)) to all holders of Common Stock to the extent that such
distributions, combined together with (A) all other such all-cash distributions
made within the preceding 12 months in respect of which no adjustment has been
made plus (B) any cash and the fair market value of other consideration payable
in respect of any tender offers by the Company or any of its subsidiaries for
Common Stock concluded within the preceding 12 months in respect of which no
adjustment has been made, exceeds 10% of the Company's market capitalization
(being the product of the then current market price of the Common Stock times
the number of shares of Common Stock then outstanding) on the record date for
such distribution; (vi) the purchase of Common Stock pursuant to a tender offer
made by the
17
<PAGE>
Company or any of its subsidiaries to the extent that the same involves an
aggregate consideration that, together with (X) any cash and the fair market
value of any other consideration payable in any other tender offer by the
Company or any of its subsidiaries for Common Stock expiring within the 12
months preceding such tender offer in respect of which no adjustment has been
made plus (Y) the aggregate amount of any such all-cash distributions referred
to in clause (v) 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; and (vii) payment in respect of a tender offer
or exchange offer by a person other than the Company or any subsidiary of the
Company in which, as the closing of the offer, the Board of Directors is not
recommending rejection of the offer. The adjustment referred to in clause (vii)
above will only be made if the tender offer or exchange offer is for an amount
which increases that person's ownership of Common Stock to more than 25% of the
total shares of Common Stock outstanding, and only if the cash and value of any
other consideration included in such payment per share of Common Stock exceeds
the current market price per share of Common Stock on the business day next
succeeding the last date on which tenders or exchanges may be made pursuant to
such tender or exchange. The adjustment referred to in clause (vii) above will
not be made, however, if, as of the closing of the offer, the offering documents
with respect to such offer disclose a plan or an intention to cause the Company
to engage in any transaction described below in " -- Consolidation, Merger or
Assumption."
The Indenture provides that if the Company implements a stockholders' rights
plan, such rights plan must provide that upon conversion of the Notes the
holders will receive, in addition to the Common Stock issuable upon such
conversion, such rights whether or not such rights have separated from the
Common Stock at the time of such conversion.
In the case of (i) any reclassification or change of the Common Stock (other
than changes in par value or resulting from a subdivision or combination) or
(ii) a consolidation, merger, or combination involving the Company or a sale or
conveyance to another corporation of the property and assets of the Company as
an entirety or substantially as an entirety, in each case as a result of which
holders of Common Stock shall be entitled to receive stock, other securities,
other property or assets (including cash) with respect to or in exchange for
such Common Stock, the holders of the Notes then outstanding will be entitled
thereafter to convert such Notes into the kind and amount of shares of stock,
other securities or other property or assets (including cash) which they would
have owned or been entitled to receive upon such reclassification, change,
consolidation, merger, combination, sale or conveyance had such Notes been
converted into Common Stock immediately prior to such reclassification, change,
consolidation, merger, combination, sale or conveyance (assuming, in a case in
which the Company's stockholders may exercise rights of election, that a holder
of Notes would not have exercised any rights of election as to the stock, other
securities or other property or assets (including cash) receivable in connection
therewith and received per share the kind and amount received per share by a
plurality of non-electing shares).
In the event of a taxable distribution to holders of Common Stock (or other
transaction) which results in any adjustment of the conversion price, the
holders of Notes may, in certain circumstances, be deemed to have received a
distribution subject to United States income tax as a dividend; in certain other
circumstances, the absence of such an adjustment may result in a taxable
dividend to the holders of Common Stock. See "Certain Federal Income Tax
Considerations."
The Company from time to time may, to the extent permitted by law, reduce the
conversion price of the Notes by any amount for any period of at least 20 days,
in which case the Company shall give at least 15 days' notice of such decrease,
if the Board of Directors has made a determination that such decrease would be
in the best interests of the Company, which determination shall be conclusive.
The Company may, at its option, make such reductions in the conversion price, in
addition to those set forth above, as the Board of Directors deems advisable to
avoid or diminish any income tax to holders of Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes. See "Certain Federal Income Tax
Considerations."
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<PAGE>
No adjustment in the conversion price will be required unless such adjustment
would require a change of at least l% in the conversion price then in effect;
provided that any adjustment that would otherwise be required to be made shall
be carried forward and taken into account in any subsequent adjustment. Except
as stated above, the conversion price will not be adjusted for the issuance of
Common Stock or any securities convertible into or exchangeable for Common Stock
or carrying the right to purchase any of the foregoing.
OPTIONAL REDEMPTION BY THE COMPANY
The Notes are not redeemable at the option of the Company prior to September
7, 2000. At any time on or after that date, the Notes may be redeemed at the
Company's option on at least 20 but not more than 60 days' notice, as a whole,
or from time to time in part, at the following prices (expressed in percentages
of the principal amount), together with accrued interest to, but excluding, the
date fixed for redemption; provided that if a redemption date is an interest
payment date, the semi-annual payment of interest becoming due on such date
shall be payable to the holder of record as of the relevant record date.
If redeemed during the 12-month period beginning September 1 (September 7,
2000 through August 31, 2001 in the case of the first such period):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- -----------
<S> <C>
2000............................ 102.286%
2001............................ 101.714
2002............................ 101.143
2003............................ 100.571
</TABLE>
and 100% at September 1, 2004.
If fewer than all the Notes are to be redeemed, the Trustee will select the
Notes to be redeemed in principal amounts of $1,000 or multiples thereof by lot
or, in its discretion, on a pro rata basis or by a method the Trustee considers
fair and appropriate (as long as such method is not prohibited by the rules of
any United States national securities exchange or of an established automated
over-the-counter trading market in the United States on which the Notes are then
listed). If any Note is to be redeemed in part only, a new Note or Notes in
principal amount equal to the unredeemed principal portion thereof will be
issued. If a portion of a holder's Notes is selected for partial redemption and
such holder converts a portion of such Notes, such converted portion shall be
deemed to be taken from the portion selected for redemption.
No sinking fund is provided for the Notes.
REPURCHASE AT OPTION OF HOLDERS UPON A REPURCHASE EVENT
The Indenture provides that if a Repurchase Event (as defined) occurs, each
holder of Notes shall have the right, at the holder's option, to require the
Company to repurchase all of such holder's Notes, or any portion thereof that is
an integral multiple of $1,000, on the date (the "repurchase date") that is 40
calendar days after the date of the Company Notice (as defined below), for cash
at a price equal to 105% of the principal amount of the Notes, together with
accrued interest, if any, to the repurchase date (the "repurchase price"),
provided, however, that if a repurchase date is an interest payment date, the
semi-annual payment of interest becoming due on such date shall be payable to
the holder of record as of the relevant record date.
The Company may, at its option, in lieu of paying the repurchase price in
cash, pay the repurchase price in Common Stock valued at 95% of the average of
the closing prices of the Common Stock for the five consecutive trading days
ending on and including the third trading day preceding the repurchase date.
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Payment may not be made in Common Stock unless the Company satisfies certain
conditions with respect to such payment as provided in the Indenture.
Within 15 calendar days after the occurrence of a Repurchase Event, the
Company is obligated to mail to all holders of record of the Notes a notice (the
"Company Notice") of the occurrence of such Repurchase Event and of the
repurchase right arising as a result thereof. The Company must deliver a copy of
the Company Notice to the Trustee and cause a copy or a summary of such notice
to be published in a newspaper of general circulation in the city of New York.
To exercise the repurchase right, a holder of such Notes must deliver, on or
before the 35th day after the Company Notice, written notice to the Company (or
an agent designated by the Company for such purpose) and the Trustee of the
holder's exercise of such right, together with the Notes with respect to which
the right is being exercised, duly endorsed for transfer.
"Repurchase Event" means a Change in Control (as defined) or a Termination of
Trading (as defined).
"Change in Control" will be deemed to have occurred when (i) any "person" or
"group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act) of shares representing more than 50% of the combined voting
power of the then outstanding securities entitled to vote generally in elections
of directors of the Company ("Voting Stock"); (ii) approval by stockholders of
the Company of any plan or proposal for the liquidation, dissolution or winding
up of the Company; (iii) the Company (A) consolidates with or merges into any
other corporation or any other corporation merges into the Company, and in the
case of any such transaction, the outstanding Common Stock of the Company is
changed or exchanged into or for other assets or securities as a result, unless
the stockholders of the Company immediately before such transaction own,
directly or indirectly immediately following such transaction, at least 51% of
the combined voting power of the outstanding voting securities of the
corporation resulting from such transaction in substantially the same proportion
as their ownership of the Voting Stock immediately before such transaction or
(B) conveys, transfers or leases all or substantially all of its assets to any
person; or (iv) any time Continuing Directors (as defined) do not constitute a
majority of the Board of Directors of the Company (or, if applicable, a
successor corporation to the Company); provided that a Change in Control shall
not be deemed to have occurred if either (x) the last sale price of the Common
Stock for any five trading days during the ten trading days immediately
preceding the Change in Control is at least equal to 105% of the conversion
price in effect on such day or (y) in the case of a merger or consolidation
otherwise constituting a Change in Control, all of the consideration (excluding
cash payments for fractional shares) in such merger or consolidation
constituting the Change in Control consists of common stock traded on a United
States national securities exchange or quoted on the Nasdaq National Market (or
which will be so traded or quoted when issued or exchanged in connection with
such Change in Control) and as a result of such transaction or transactions such
Notes become convertible solely into such common stock.
"Continuing Director" means at any date a member of the Company's Board of
Directors (i) who was a member of such board on August 27, 1997 or (ii) who was
nominated or elected by at least a majority of the directors who were Continuing
Directors at the time of such nomination or election or whose election to the
Company's Board of Directors was recommended or endorsed by at least a majority
of the directors who were Continuing Directors at the time of such nomination or
election or such lesser number comprising a majority of a nominating committee
if authority for such nominations or elections has been delegated to a
nominating committee whose authority and composition has been approved by at
least a majority of the directors who were continuing directors at the time such
committee was formed. (Under this definition, if the current Board of Directors
of the Company were to approve a new director or directors and then resign, no
Change in Control would occur even though the current Board of Directors would
thereafter cease to be in office.)
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The phrase "all or substantially all" of the assets of the Company, as
included in the definition of Change in Control, is likely to be interpreted by
reference to applicable state law at the relevant time, and will be dependent on
the facts and circumstances existing at such time. As a result, there may be a
degree of uncertainty in ascertaining whether a sale or transfer of "all or
substantially all" of the assets of the Company has occurred.
A "Termination of Trading" shall have occurred if the Common Stock (or other
common stock into which the Notes are then convertible) is neither listed for
trading on a United States national securities exchange nor approved for trading
on an established automated over-the-counter trading market in the United
States.
If a Repurchase Event were to occur, there can be no assurance that the
Company would have sufficient financial resources, or would be able to arrange
financing, to pay the repurchase price in cash for all Notes tendered by holders
thereof. The Company's ability to repurchase Notes with cash may also be limited
or prohibited by the terms of its then-existing borrowing arrangements.
Moreover, although under the Indenture the Company may elect, subject to
satisfaction of certain conditions, to pay the repurchase price for the Notes
using shares of Common Stock, any future credit agreements or other agreements
relating to other indebtedness (including other Senior Indebtedness) to which
the Company becomes a party may contain restrictions on or prohibitions of the
repurchase of the Notes by the Company that apply even if the purchase price is
paid with shares of capital stock. In the event a Repurchase Event occurs at a
time when the Company is prohibited from repurchasing Notes, the Company could
seek the consent of its lenders to the repurchase of the Notes or could attempt
to refinance the borrowings that contain such prohibition. If the Company does
not obtain such a consent or repay such borrowings, the Company would remain
prohibited from repurchasing Notes. In such case, the Company's failure to
repurchase the Notes would constitute an Event of Default under the Indenture
whether or not payment of the repurchase price is permitted by the subordination
provisions of the Indenture. Any such default may, in turn, cause a default
under Senior Indebtedness of the Company. Moreover, the occurrence of a
Repurchase Event may, in turn, cause a default under Senior Indebtedness of the
Company. As a result, in either case, payment of the repurchase price of the
Notes with cash would, absent a waiver, be prohibited under the subordination
provisions of the Indenture until the Senior Indebtedness is paid in full. See "
- -- Subordination" below and "Risk Factors -- Subordination."
No Notes may be redeemed at the option of holders upon a Repurchase Event if
there has occurred and is continuing an Event of Default described under " --
Events of Default and Remedies" below (other than a default in the payment of
the repurchase price with respect to such Notes on the repurchase date).
The foregoing provisions would not necessarily afford holders of the Notes
protection in the event of a highly leveraged transaction, a change in control
of the Company or other transactions involving the Company that may adversely
affect holders. The Company could, in the future, enter into certain
transactions, including certain recapitalizations of the Company, that would not
constitute a Change in Control but that would increase the amount of Senior
Indebtedness (or other indebtedness) outstanding at such time. There are no
restrictions in the Indenture or the Notes on the creation of additional Senior
Indebtedness (or any other indebtedness of the Company or any of its
subsidiaries) and the incurrence of significant amounts of additional
indebtedness could have an adverse impact on the Company's ability to service
its debt, including the Notes. The Notes are subordinate in right of payment to
all existing and future Senior Indebtedness as described under " --
Subordination" below.
Certain leveraged transactions sponsored by the Company's management or an
affiliate of the Company could constitute a Change in Control that would give
rise to the repurchase right. The Indenture does not provide the Company's Board
of Directors with the right to limit or waive the repurchase right in the event
of any such leveraged transaction. The right to require the Company to
repurchase Notes as a result of a Repurchase Event could have the effect of
delaying, deferring or preventing a Change in Control or other attempts to
acquire control of the Company unless arrangements have been made to
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enable the Company to repurchase all of the Notes at the repurchase date.
Consequently, the right may render more difficult or discourage a merger,
consolidation or tender offer (even if such transaction is supported by the
Company's Board of Directors or is favorable to the stockholders), the
assumption of control by a holder of a large block of the Company's shares and
the removal of incumbent management. The Repurchase Event repurchase right,
however, is not the result of management's knowledge of any specific effort to
accumulate shares of Common Stock or to obtain control of the Company by means
of a merger, tender offer, solicitation or otherwise. Instead, the Repurchase
Event repurchase right is a standard term contained in other similar debt
offerings and the terms of such feature have resulted from negotiations between
the Company and the Initial Purchasers.
Rule 13e-4 under the Exchange Act requires, among other things, 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.
SUBORDINATION
The indebtedness evidenced by the Notes is, to the extent provided in the
Indenture, subordinate to the prior payment in full of all Senior Indebtedness
(as defined) whether presently outstanding or hereafter incurred or created.
Upon any distribution of assets of the Company upon any dissolution, winding up,
liquidation or reorganization of the Company, the payment of the principal of,
or premium, if any, and interest on the Notes is to be subordinated to the
extent provided in the Indenture in right of payment to the prior payment in
full, in cash or in such other form of payment as may be acceptable to the
holders thereof, of all Senior Indebtedness. Moreover, in the event of any
acceleration of the Notes because of an Event of Default, the holders of any
Senior Indebtedness then outstanding would be entitled to payment in full of all
obligations in respect of such Senior Indebtedness before the holders of the
Notes are entitled to receive any payment or distribution in respect thereof.
The Company may also not make any payment upon or in respect of the Notes if
(i) a default in the payment of principal of, premium, if any, interest, or
other payment due on Senior Indebtedness occurs and is continuing beyond any
applicable period of grace or (ii) any other default occurs and is continuing
with respect to Designated Senior Indebtedness (as defined) that permits holders
of the Designated Senior Indebtedness as to which such default related to
accelerate its maturity and the Trustee and the Company receive a notice of such
default (a "Payment Blockage Notice") from a holder of Designated Senior
Indebtedness. Payments on the Notes may and shall be resumed (a) in case of
payment default, on the date on which such default is cured or waived or ceases
to exist and (b) in case of a nonpayment default with respect to Designated
Senior Indebtedness, on the earlier of the date on which such nonpayment default
is cured or waived or ceases to exist or 179 days after the date on which the
applicable Payment Blockage Notice is received. No new period of payment
blockage may be commenced pursuant to a Payment Blockage Notice unless (i) 365
days have elapsed since the first day of the effectiveness of the immediately
prior Payment Blockage Notice, and (ii) all scheduled payments of principal,
premium, if any, and interest on the Notes that have become due have been paid
in full in cash. No default (whether or not such event of default is on the same
issue of Designated Senior Indebtedness) that existed or was continuing on the
date of delivery of any Payment Blockage Notice shall be, or be made, the basis
for a subsequent Payment Blockage Notice.
The term "Senior Indebtedness" means the principal of, premium, if any,
interest on (including any interest accruing after the filing of a petition by
or against the Company under any bankruptcy law, whether or not allowed as a
claim after such filing in any proceeding under such bankruptcy law), and any
other payment due pursuant to, any of the following, whether outstanding on the
date of the Indenture or thereafter incurred or created: (a) all indebtedness of
the Company for money borrowed or evidenced by notes, debentures, bonds or other
securities (including, but not limited to, those which are convertible or
exchangeable for securities of the Company) and all other obligations of the
Company constituting the
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deferred purchase price of property or assets; (b) all indebtedness of the
Company due and owing with respect to letters of credit (including, but not
limited to, reimbursement obligations with respect thereto); (c) all
indebtedness or other obligations of the Company due and owing with respect to
interest rate and currency swap agreements, cap, floor and collar agreements,
currency spot and forward contracts and other similar agreements and
arrangements; (d) all indebtedness consisting of commitment or standby fees due
and payable to lending institutions with respect to credit facilities or letters
of credit available to the Company; (e) all obligations of the Company under
leases required or permitted to be capitalized under generally accepted
accounting principles or under any lease or related document (including a
purchase agreement) that provides that the Company is contractually obligated to
purchase or cause a third party to purchase and thereby guarantee a minimum
residual value of the lease property to the lessor and the obligations of the
Company under such lease or related document to purchase or to cause a third
party to purchase such leased property; (f) all indebtedness or obligations of
others of the kinds described in any of the preceding clauses (a), (b), (c), (d)
or (e) assumed by or guaranteed in any manner by the Company or in effect
guaranteed (directly or indirectly) by the Company through an agreement to
purchase, contingent or otherwise, and all obligations of the Company under any
such guarantee or other arrangements; and (g) all renewals, extensions,
refundings, deferrals, amendments or modifications of indebtedness or
obligations of the kinds described in any of the preceding clauses (a), (b),
(c), (d), (e) or (f); unless in the case of any particular indebtedness,
obligation, renewal, extension, refunding, amendment, modification or
supplement, the instrument or other document creating or evidencing the same or
the assumption or guarantee of the same expressly provides that such
indebtedness, obligation, renewal, extension, refunding, amendment, modification
or supplement is subordinate to, or is not superior to, or is pari passu with,
the Notes; provided that Senior Indebtedness shall not include (i) any
indebtedness of any kind of the Company to any subsidiary of the Company, a
majority of the voting stock of which is owned, directly or indirectly, by the
Company, (ii) indebtedness for trade payables or constituting the deferred
purchase price of assets or services incurred in the ordinary course of
business, or (iii) the Notes.
The term "Designated Senior Indebtedness" means any particular Senior
Indebtedness in which the instrument creating or evidencing the same or the
assumption or guarantee thereof (or related agreements or documents to which the
Company is a party) expressly provides that such Senior Indebtedness shall be
"Designated Senior Indebtedness" for purposes of the Indenture (provided that
such instrument, agreement or other document may place limitations and
conditions on the right of holders of such Senior Indebtedness to exercise the
rights of Designated Senior Indebtedness).
Notwithstanding the foregoing, in the event that the Trustee or any holder of
Notes receives any payment or distribution of assets of the Company of any kind
in contravention of any of the terms of the Indenture, whether in cash, property
or securities, including, without limitation, by way of set-off or otherwise, in
respect of the Notes before all Senior Indebtedness is paid in full, then such
payment or distribution will be held by the recipient in trust for the benefit
of the holders of Senior Indebtedness of the Company, and will be immediately
paid over or delivered to the holders of Senior Indebtedness of the Company or
their representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any Senior Indebtedness
may have been issued, as their respective interests may appear, as calculated by
the Company, for application to the payment of all Senior Indebtedness remaining
unpaid to the extent necessary to make payment in full of all Senior
Indebtedness of the Company remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to or for the holders
of Senior Indebtedness of the Company.
As of June 29, 1997, the Company had approximately $4.3 million of
indebtedness outstanding (excluding accrued interest) that would have
constituted Senior Indebtedness. The Indenture does not limit the amount of
additional indebtedness, including Senior Indebtedness, which the Company can
create, incur, assume or guarantee.
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No provision contained in the Indenture or the Notes affects the obligation of
the Company, which is absolute and unconditional, to pay, when due, principal
of, premium, if any, and interest on, the Notes. The subordination provisions of
the Indenture and the Notes will not prevent the occurrence of any default or
Event of Default or limit the rights of any holder of Notes to pursue any other
rights or remedies with respect to the Notes.
As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceedings or an assignment for the benefit of the creditors of the Company or
a marshaling of assets or liabilities of the Company and its subsidiaries,
holders of the Notes may receive ratably less than other creditors.
EVENTS OF DEFAULT AND REMEDIES
An Event of Default is defined in the Indenture as being: (i) a default in
payment of the principal of, or premium, if any, on the Notes (whether or not
such payment is prohibited by the subordination provisions of the Indenture);
(ii) default for 30 days in payment of any installment of interest on the Notes
(whether or not such payment is prohibited by the subordination provisions of
the Indenture); (iii) default by the Company for 45 days after notice given in
accordance with the Indenture in the observance or performance of any other
covenants in the Indenture; (iv) default in the payment of the repurchase price
in respect of the Note on the repurchase date therefor (whether or not such
payment in cash of the repurchase price is prohibited by the subordination
provisions of the Indenture); (v) failure to provide timely notice of a
Repurchase Event; (vi) failure of the Company or any Significant Subsidiary (as
defined) to make any payment at maturity, including any applicable grace period,
in respect of Indebtedness (which term as used in the Indenture means
obligations of, or guaranteed or assumed by, the Company or any Significant
Subsidiary for borrowed money), in an amount in excess of $5,000,000 and
continuance of such failure for 30 days after notice given in accordance with
the Indenture; (vii) default by the Company or any Significant Subsidiary with
respect to any Indebtedness, which default results in the acceleration of
Indebtedness in an amount in excess of $5,000,000 without such Indebtedness
having been discharged or such acceleration having been rescinded or annulled
for 30 days after notice given in accordance with the Indenture; or (viii)
certain events involving bankruptcy, insolvency or reorganization of the Company
or any Significant Subsidiary.
The Indenture provides that the Trustee shall, within 90 days after the
occurrence of a default, give to the registered holders of the Notes notice of
all uncured defaults known to it, but the Trustee shall be protected in
withholding such notice if it in good faith determines that the withholding of
such notice is in the best interest to such registered holders, except in the
case of a default in the payment of the principal of, or premium, if any, or
interest on, any of the Notes when due or in the payment of any redemption or
repurchase obligation.
The Indenture provides that if any Event of Default shall have occurred and be
continuing, the Trustee or the holders of not less than 25% in principal amount
of the Notes then outstanding may declare the principal of and premium, if any,
on the Notes to be due and payable immediately, but if the Company shall cure
all defaults (except the nonpayment of interest on, premium, if any, and
principal of any Notes which shall have become due by acceleration) and certain
other conditions are met, such declaration may be canceled and past defaults may
be waived by the holders of a majority in principal amount of Notes then
outstanding. If an Event of Default resulting from certain events of bankruptcy,
insolvency or reorganization were to occur, all unpaid principal of and accrued
interest on the outstanding Notes will become due and payable immediately
without any declaration or other act on the part of the Trustee or any holders
of Notes, subject to certain limitations.
The Indenture provides that the holders of a majority in principal amount of
the outstanding Notes may 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, subject to certain limitations specified
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in the Indenture. Before proceeding to exercise any right or power under the
Indenture at the direction of such holders, the Trustee shall be entitled to
receive from such holders reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in complying with any
such direction. The right of a holder to institute a proceeding with respect to
the Indenture is subject to certain conditions precedent, including the written
notice by such holder of an Event of Default and an offer to indemnify to the
Trustee, along with the written request by the holders of not less than 25% in
principal amount of the outstanding Notes that such a proceeding be instituted,
but the holder has an absolute right to institute suit for the enforcement of
payment of the principal of, and premium, if any, and interest on, such holder's
Notes when due and to convert such Notes.
The holders of not less than a majority in principal amount of the outstanding
Notes may on behalf of the holders of all Notes waive any past defaults, except
(i) a default in payment of the principal of, or premium, if any, or interest
on, any Note when due, (ii) a failure by the Company to convert any Notes into
Common Stock or (iii) in respect of certain provisions of the Indenture which
cannot be modified or amended without the consent of the holder of each
outstanding Note affected thereby.
The Company is required to furnish to the Trustee annually within 120 days of
the end of the fiscal year a statement of certain officers of the Company
stating whether or not to the best of their knowledge the Company is in default
in the performance and observation of certain terms of the Indenture and, if
they have knowledge that the Company is in default, specifying such default. The
Company is also required, upon becoming aware of any default or Event of
Default, to deliver to the Trustee a statement specifying such default or Event
of Default and the action the Company has taken, is taking or proposes to take
with respect thereto.
CONSOLIDATION, MERGER OR ASSUMPTION
The Indenture provides that the Company may not, directly or indirectly,
consolidate with or merge with or into another person or sell, lease, convey or
transfer all or substantially all of its assets, whether in a single transaction
or a series of related transactions, to another person or group of affiliated
persons, unless (i) either (a) in the case of a merger or consolidation that
does not involve a transfer of all or substantially all of the Company's assets,
the Company is the surviving entity or (b) the resulting, surviving or
transferee entity is a corporation organized under the laws of the United
States, any state thereof or the District of Columbia and expressly assumes by
written agreement all of the obligations of the Company in connection with the
Notes and the Indenture; (ii) no default or Event of Default shall exist or
shall occur immediately after giving effect on a pro forma basis to such
transaction; and (iii) certain other conditions are satisfied.
MODIFICATIONS OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee, with
the consent of the holders of not less than a majority in principal amount of
the Notes at the time outstanding, to modify the Indenture or any supplemental
indenture or the rights of the holders of the Notes, except that no such
modification shall (i) extend the fixed maturity of any Note, reduce the rate or
extend the time or payment of interest thereon, reduce the principal amount
thereof or premium, if any, thereon, reduce any amount payable upon redemption
or repurchase thereof, impair, or change in any respect adverse to the holders
of Notes, the obligation of the Company to repurchase any Note upon the
happening of a Repurchase Event, impair or adversely affect the right of a
holder to institute suit for the payment thereof, change the currency in which
the Notes are payable, or impair, or change in any respect adverse to the holder
of the Notes, the right to convert the Notes into Common Stock subject to the
terms set forth in the Indenture or modify the provisions of the Indenture with
respect to the subordination of the Notes in a manner adverse to the holders of
the Notes, without the consent of the holder of each Note so affected, or (ii)
reduce the aforesaid percentage of Notes, without the consent of the holders of
all of the Notes then outstanding.
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REGISTRATION RIGHTS AGREEMENT
The Company and the Initial Purchasers have entered into the Registration
Rights Agreement pursuant to which the Company, at its expense, has filed with
the Commission the Registration Statement of which this Prospectus is a part
(the "Registration Statement") covering resales of the Registrable Securities by
the holders thereof and has agreed to use its best efforts to cause such
registration statement to become effective as promptly as is practicable and to
keep the registration statement effective until the earlier of such date that is
two years after September 25, 1997 or until the Registration Statement is no
longer required for transfer of any Registrable Securities. For purposes of the
foregoing, "Registrable Securities" means each Note and share of Common Stock
issued upon conversion thereof until the date on which such Note or share of
Common Stock has been effectively registered under the Securities Act and
disposed of in accordance with the Registration Statement or the date on which
such Note or share of Common Stock is distributed to the public pursuant to Rule
144 under the Securities Act or is salable pursuant to Rule 144(k) under the
Securities Act (or any similar provisions then in force) or the date on which
such Note or share of Common Stock ceases to be outstanding, whichever date is
earliest.
The Registration Rights Agreement provides that (i) the Company file the
Registration Statement with the Commission on or prior to 60 days after August
27, 1997 (the "Closing Date") and (ii) the Company will cause the Registration
Statement to be declared effective by the Commission as promptly as practicable
but in no event later than 120 days after the Closing Date. If (i) the
Registration Statement is not filed with the Commission on or prior to 60 days
after the Closing Date, (ii) the Registration Statement has not been declared
effective by the Commission within 120 days after the Closing Date or (iii) the
Registration Statement is filed and declared effective but shall thereafter
cease to be effective or usable (without being succeeded immediately by an
additional Registration Statement filed and declared effective which is then
available for effecting resales of Registrable Securities) for a period of time
which shall exceed 90 days in the aggregate in any period of 365 consecutive
days (each such event referred to in clauses (i) through (iii), a "Registration
Default"), the Company will pay liquidated damages to each holder of Securities,
during the first 90-day period immediately following the occurrence of such
Registration Default in an amount equal to $0.05 per week per $1,000 principal
amount of Notes and, if applicable, on an equivalent basis per share (subject to
adjustment in the event of stock splits, stock recombinations, stock dividends
and the like) of Common Stock constituting Registrable Securities held by such
holder. The rate of accrual of the liquidated damages will increase by an
additional $0.05 per week per $1,000 principal amount of Notes and, if
applicable, by an equivalent amount per week per share (subject to adjustment as
set forth above) of Common Stock constituting Registrable Securities for each
subsequent 90-day period until the applicable Registration Statement is filed,
the applicable Registration Statement is declared effective and becomes
available for effecting sales of securities, or the Registration Statement again
becomes effective and becomes available for effecting sales of securities, as
the case may be, up to a maximum amount of liquidated damages of $0.25 per week
per $1,000 principal amount of Notes or if applicable, an equivalent amount per
week per share (subject to adjustment as set forth above) of Common Stock
constituting Restricted Securities. Following the cure of a Registration
Default, liquidated damages will cease to accrue with respect to such
Registration Default (without in any way limiting the effect of any subsequent
Registration Default). All accrued liquidated damages shall be paid to the
holders of Notes or shares of Common Stock (as applicable) in the same manner as
interest payments on the Notes on semiannual payment dates which correspond to
interest payment dates for the Notes. The use of the Registration Statement for
effecting resales of Registrable Securities may be suspended in certain
circumstances described in the Registration Rights Agreement upon notice by the
Company to the holders of the Registrable Securities, subject to the rights of
the holders of Registrable Securities to receive liquidated damages if the
aggregate number of days of such suspensions in any year exceeds the periods
described above.
The Company will provide to each registered holder copies of such prospectus,
notify each registered holder when the Registration Statement has become
effective and take certain other actions as are required to permit unrestricted
resales of the Registrable Securities. A holder who sells the Registrable
Securities
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pursuant to the Registration Statement generally will be required to be named as
a selling stockholder in the related prospectus and to deliver a prospectus to
purchasers and will be bound by the provisions of the Registration Rights
Agreement which are applicable to such holder (including certain indemnification
provisions). Holders of the Registrable Securities will be required to deliver
information to be used in connection with the Registration Statement in order to
have their Registrable Securities included in the Registration Statement.
TAXATION OF NOTES
See "Certain Federal Income Tax Considerations" for a discussion of certain
federal tax aspects which will apply to holders of Notes.
SATISFACTION AND DISCHARGE
The Company may discharge its obligations under the Indenture while Notes
remain outstanding if (i) all outstanding Notes will become due and payable at
their scheduled maturity within one year or (ii) all outstanding Notes are
scheduled for redemption within one year, and, in either case, the Company has
deposited with the Trustee an amount sufficient to pay and discharge all
outstanding Notes on the date of their scheduled maturity or the scheduled date
of redemption.
GOVERNING LAW
The Indenture, the Registration Rights Agreement and the Notes are governed by
and construed in accordance with the laws of the State of New York.
CONCERNING THE TRUSTEE
State Street Bank and Trust Company of California, N.A., the Trustee under the
Indenture, has been appointed by the Company as the initial paying agent,
conversion agent, registrar and custodian with regard to the Notes. The Company
may maintain deposit accounts and conduct other banking transactions with the
Trustee or its affiliates in the ordinary course of business, and the Trustee
and its affiliates may from time to time in the future provide banking and other
services to the Company in the ordinary course of their business.
The Indenture and the Trust Indenture Act of 1939, as amended (the "TIA"),
will contain certain limitations on the rights of the Trustee, should it become
a creditor of the Company, to obtain payment of claims in certain cases or to
realize on certain property received in respect of any such claim as security or
otherwise. Subject to the TIA, the Trustee will be permitted to engage in other
transactions, provided, however, that if it acquires any conflicting interest
(as described in the TIA), it must eliminate such conflict or resign.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 157,500,000 shares of
Common Stock and 10,000,000 shares of Preferred Stock. At June 29, 1997, there
were 20,233,058 shares of Common Stock outstanding held of record by
approximately 173 holders.
COMMON STOCK
Each share of Common Stock is entitled to participate pro rata in
distributions upon liquidation. The holders of Common Stock may receive
dividends as declared by the Board of Directors out of funds legally available
therefor. Holders of Common Stock have no pre-emptive, subscription, conversion,
redemption or similar rights. All outstanding shares of Common Stock are fully
paid and non-assessable.
27
<PAGE>
The holders of a majority of the outstanding shares of Common Stock have the
voting power to approve mergers, sales of substantially all of the Company's
assets and similar material corporate transactions. Holders of Common Stock are
entitled to one vote for each share of Common Stock on all matters submitted to
a vote of shareholders, except that for the election of directors each
shareholder has cumulative voting rights and is entitled to as many votes as
shall equal the number of shares held by such shareholder multiplied by the
number of directors to be elected, and such shareholder may cast all his or her
votes for a single candidate or distribute such votes among any or all of the
candidates as he or she chooses. However, no shareholder shall be entitled to
cumulate votes for a candidate (that is, to cast for any candidate a number of
votes greater than the number of shares of stock held by such shareholder)
unless such candidate's name has been placed in nomination prior to the voting
and the shareholder has given notice at the meeting prior to the voting of the
shareholder's intention to cumulate votes. The rights, privileges and
preferences of the holders of Common Stock are subject to the rights of the
holders of any shares of Preferred Stock that may be designated and issued by
the Company in the future.
PREFERRED STOCK
The Company's Board of directors, without the approval of the holders of the
Common Stock, is authorized to designate for issuance up to 10,000,000 shares of
Preferred Stock in such series and with such rights, privileges and preferences
as the Board of Directors may determine. Issuance of Preferred Stock may
adversely affect the rights, privileges and preferences afforded the holders of
Common Stock, including a decrease in the amounts available for distribution to
holders of the Common Stock in the event of a liquidation or payment of
preferred dividends. Issuance of shares of Preferred Stock may also have the
effect of preventing or delaying a change in control of the Company without
further action by the shareholders and could make removal of present management
of the Company more difficult. The Company currently has no plans to designate
and/or issue any shares of Preferred Stock.
WARRANTS
The Company has outstanding warrants to purchase up to 36,234 shares of its
Common Stock with exercise prices ranging from $1.55 to $14.00 per share.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Boston EquiServe LLP.
28
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
considerations relating to the purchase, ownership and disposition of the Notes
and Common Stock into which Notes may be converted, but does 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, 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, foreign persons or persons that will hold Notes as a position in a
hedging transaction, "straddle" or "conversion transaction" for tax purposes or
persons deemed to sell Notes or Common Stock under the constructive sale
provisions of the Code. 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 discuss the tax
considerations applicable to subsequent purchasers of the Notes. The Company has
not sought any ruling from the Internal Revenue Service (the "IRS") with respect
to the statements made and the conclusions reached in the following summary, and
there can be no assurance that the IRS will agree with such statements and
conclusions. In addition, the IRS is not precluded from successfully adopting a
contrary position. This summary does not consider the effect of any applicable
foreign, state, local or other tax laws.
INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED 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.
TAXATION OF INTEREST
Interest paid on the Notes will be included in the income of a holder as
ordinary income at the time it is treated as received or accrued, in accordance
with the holder's regular method of tax accounting. Failure of the Company to
file or cause to be declared effective a Shelf Registration Statement as
described under "Description of Notes--Registration Rights" will cause
additional interest to accrue on the Notes in the manner described therein.
According to Treasury Regulations, the possibility of a change in the interest
rate will not affect the amount of interest income recognized by a holder (or
the timing of such recognition) if the likelihood of the change, as of the date
the Notes are issued, is remote. The Company believes that the likelihood of a
change in the interest rate on the Notes is remote and does not intend to treat
the possibility of a change in the interest rate as affecting the yield to
maturity of any Note. Similarly, the Company intends to take the position that a
"Repurchase Event" is remote under the Treasury Regulations, and likewise does
not intend to treat the possibility of a "Repurchase Event" as affecting the
yield to maturity of any Note.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
Upon the sale, exchange or redemption of a Note, a 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 not previously included in income which is taxable as
ordinary income) and (ii) such holder's adjusted tax basis in the Note. A
holder's adjusted tax basis in a Note generally will equal the cost of the Note
to such holder. Such capital gain or loss will be long-term capital gain or loss
if the holder's holding period in the Note is more than one year at the time of
sale, exchange or redemption. On August 5, 1997, legislation was enacted which,
among other things, will reduce to 20% the maximum rate of tax on long-term
capital gains on property held by an individual for more than 18
29
<PAGE>
months. Gain on capital assets held by an individual more than one year and up
to 18 months is subject to tax at a maximum rate of 28%. Gain on capital assets
held by an individual for one year or less is generally taxed at ordinary income
rates. Holders are urged to consult their own tax advisors with respect to the
new legislation.
CONVERSION OF THE NOTES
A 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. A 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 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 a 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 holder's adjusted tax
basis in the fractional share).
DIVIDENDS; ADJUSTMENT TO CONVERSION PRICE
Dividends paid on the Common Stock generally will be includable in the income
of a holder as ordinary income to the extent of the Company's current or
accumulated earnings and profits.
Holders of convertible debt instruments such as the Notes may, in certain
circumstances, be deemed to have received constructive distributions where the
conversion ratio of such instruments is adjusted. Adjustments to the conversion
price made pursuant to a bona fide reasonable adjustment formula which has the
effect of preventing the dilution of the interest of the holders of the debt
instruments, however, will generally not be considered to result in a
constructive distribution of stock. Certain of the possible adjustments provided
in the Notes (including, without limitation, adjustments in respect of taxable
dividends to stockholders of the Company) will not qualify as being pursuant to
a bona fide reasonable adjustment formula. If such adjustments are made, the
holders of Notes might be deemed to have received constructive distributions
taxable as dividends.
SALE OF COMMON STOCK
Upon the sale or exchange of Common Stock, a 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 upon 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 holder's holding period in
Common Stock is more than one year at the time of the sale or exchange. On
August 5, 1997, legislation was enacted which, among other things, will reduce
to 20% the maximum rate of tax on long-term capital gains on property held by an
individual for more than 18 months. Gain on capital assets held by an individual
more than one year and up to 18 months is subject to tax at a maximum rate of
28%. Gain on capital assets held by an individual for one year or less is
generally taxed at ordinary income rates. Holders are urged to consult their own
tax advisors with respect to the new legislation. A 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."
30
<PAGE>
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, and a 31% backup withholding tax may apply
to such payments if the holder either (i) fails to demonstrate that the holder
comes within certain exempt categories of holders or (ii) fails to furnish or
certify his correct taxpayer identification number to the payor in the manner
required, is notified by the IRS that he has failed to report payments of
interest and dividends properly, or 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 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.
31
<PAGE>
SELLING SECURITYHOLDERS
The Notes offered hereby were originally issued by the Company and sold by the
Initial Purchasers, in a transaction exempt from the registration requirements
of the Securities act, to persons reasonably believed by such initial purchaser
to be "qualified institutional buyers" (as defined in Rule 144A under the
Securities Act), or other institutional "accredited investors" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act. The Selling Holders
(which term includes their transferees, pledgees, donees or their successors)
may from time to time offer and sell pursuant to this Prospectus any or all of
the Notes and Common Stock issued upon conversion of the Notes.
The following table sets forth information with respect to the Selling Holders
and the respective principal amounts of Notes beneficially owned by each Selling
Holder that may be offered pursuant to this Prospectus. Such information has
been obtained from the Selling Holders. None of the Selling Holders has, or
within the past three years has had, any position, office or other material
relationship with the Company or any of its predecessors or affiliates, except
as noted below. Because the Selling Holders may offer all or some portion of
the Notes or the Common Stock issuable upon conversion thereof pursuant to this
Prospectus, no estimate can be given as to the amount of the Notes or the Common
Stock issuable upon conversion thereof that will be held by the Selling Holders
upon termination of any such sales. In addition, the Selling Holders identified
below may have sold, transferred or otherwise disposed of all or a portion of
their Notes since the date on which they provided the information regarding
their Notes in transactions exempt from the registration requirements of the
Securities Act.
<TABLE>
<CAPTION>
================================================================================
Principal Amount of Number of Shares of
Notes Common Stock
Beneficially Owned and Beneficially Owned and
Name Offered Hereby Offered Hereby(1)(2)
================================================================================
<S> <C> <C>
United National Insurance $ 60,000 1,500
- -------------------------------------------------------------------------------
Lincoln National Life Insurance $ 1,665,000 41,625
- -------------------------------------------------------------------------------
Lincoln National Convertible
Securities Fund $ 1,225,000 30,625
- -------------------------------------------------------------------------------
Weirton Trust $ 380,000 9,500
- -------------------------------------------------------------------------------
Walker Art Center $ 140,000 3,500
- -------------------------------------------------------------------------------
Christian Science Trustees for
Gifts and Endowments $ 90,000 2,250
- -------------------------------------------------------------------------------
Declaration of Trust for the
Defined Benefit Plans of ICI
American Holdings Inc. $ 370,000 9,250
- -------------------------------------------------------------------------------
Declaration of Trust for the
Defined Benefit Plans of
ZENECA Holdings, Inc. $ 255,000 6,375
- -------------------------------------------------------------------------------
Delaware State Employees
Retirement Fund $ 1,250,000 31,250
- -------------------------------------------------------------------------------
First Church of Christ,
Scientist-Endowment $ 105,000 2,625
- -------------------------------------------------------------------------------
General Motors Employees
Domestic Group Trust $ 4,440,000 111,000
- -------------------------------------------------------------------------------
J.W. McConnell Family
Foundation $ 255,000 6,375
- -------------------------------------------------------------------------------
Summer Hill Global
Partners L.P. $ 35,000 875
- -------------------------------------------------------------------------------
Thermo Electron Balanced
Investment Fund $ 340,000 8,500
- -------------------------------------------------------------------------------
Hillside Capital Incorporated
Corporate Account $ 110,000 2,750
- -------------------------------------------------------------------------------
Argent Classic Convertible
Arbitrage Fund L.P. $ 1,700,000 42,500
- -------------------------------------------------------------------------------
Swiss Bank Corporation $ 4,250,000 106,250
- -------------------------------------------------------------------------------
Stark International $ 787,000 19,675
- -------------------------------------------------------------------------------
Sheperd Investments
International, Ltd. $ 1,463,000 36,575
- -------------------------------------------------------------------------------
OCM Convertible Limited
Partnership $ 150,000 3,750
- -------------------------------------------------------------------------------
Chrysler Corporation Master
Retirement Trust $ 1,850,000 46,250
- -------------------------------------------------------------------------------
R(2) Investment, Inc. $ 1,000,000 25,000
- -------------------------------------------------------------------------------
Husic Capital Management as a
Discretionary Asset Manager
for the Ameritech Pension Plan $ 750,000 18,750
- -------------------------------------------------------------------------------
Colonial Penn Insurance Co. $ 562,000 14,050
- -------------------------------------------------------------------------------
Colonial Penn Life Ins. Co. $ 563,000 14,075
- -------------------------------------------------------------------------------
Glen Eagles Fund Ltd. $ 725,000 18,125
- -------------------------------------------------------------------------------
(3)(4)
- -------------------------------------------------------------------------------
Total $24,520,000 613,000
===============================================================================
</TABLE>
(1) Includes shares of Common Stock issuable upon conversion of the Notes.
(2) Assumes a conversion price of $40 per share, and a cash payment in lieu of
any fractional share interest; such conversion price is subject to
adjustment as described under "Description of Notes --Conversion."
Accordingly, the number of shares of Common Stock issuable upon conversion
of the Notes may increase or decrease from time to time. Under the terms of
Indenture, fractional shares will not be issued upon conversion of the
Notes; cash will be paid in lieu of fractional shares, if any.
(3) Information concerning other Selling Holders will be set forth in Prospectus
Supplements from time to time, if required.
(4) Assumes that any other holders of Notes or any future transferee from any
such holder does not beneficially own any Common Stock other than the Common
Stock issuable upon conversion of the Notes at the initial conversion rate.
The Selling Holders identified above may have sold, transferred or otherwise
disposed of, in transactions exempt from the registration requirements of the
Securities Act, all or a portion of their Notes since the date on which the
information in the preceding table is presented. Because the Selling Holders
may offer all or some of the Notes that they hold and/or Conversion Shares
pursuant to the offering contemplated by this Prospectus, no estimate can be
given as to the amount of the Notes or Conversion Shares that will be held by
the Selling Holders upon the termination of this offering. See
32
<PAGE>
"Plan of Distribution."
Information concerning the Selling Holders may change from time to time and
any such changed information will be set forth in supplements to this prospectus
if and when necessary. In addition, the per share conversion price, and
therefore the number of shares issuable upon conversion of the Notes, is subject
to adjustment under certain circumstances. Accordingly, the aggregate principal
amount of Notes and the number of shares of Common Stock issuable upon
conversion thereof offered hereby may increase or decrease.
33
<PAGE>
PLAN OF DISTRIBUTION
The Notes and Common Stock offered hereby may be sold from time to time to
purchasers directly by the Selling Holders. Alternatively, the Selling Holders
may from time to time offer the Notes and Common Stock to or through
underwriters, broker/dealers or agents, who may receive compensation in the form
of underwriting discounts, concessions or commissions from the Selling Holders
or the purchasers of Notes and Common Stock for whom they may act as agents.
The Selling Holders and any underwriters, broker/dealers or agents that
participate in the distribution of Notes and Common Stock may be deemed to be
"underwriters" within the meaning of the Securities Act and any profit on the
sale of Notes and Common Stock by them and any discounts, commissions,
concessions or other compensation received by any such underwriter,
broker/dealer or agent may be deemed to be underwriting discounts and
commissions under the Securities Act.
The Notes and Common Stock offered hereby may be sold form time to time in one
or more transactions at fixed prices, at prevailing market prices at the time of
sale, any varying prices determined at the time of sale or at negotiated prices.
the sale of the Notes and the Common Stock issuable upon conversion thereof may
be effected in transactions (which may involve crosses or block transactions)
(i) on any national or international securities exchange or quotation service on
which the Notes or the Common Stock may be listed or quoted at the time of sale,
(ii) in the over-the-counter market, (iii) in transactions otherwise than on
such exchanges or in the over-the-counter market or (iv) through the writing of
options. At the time a particular offering of the Notes and the Common Stock is
made, a Prospectus Supplement, if required, will be distributed which will set
forth the aggregate amount and type of Notes and Common Stock being offered and
the terms of the offering, including the name or names of any underwriters,
broker/dealers or agents, 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 Notes and Common Stock will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the Notes and Common Stock 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 Notes and Common Stock by the
Selling Holders. The foregoing may affect the marketability of the Notes and
the Common Stock.
Pursuant to the Registration Agreement, all expenses of the registration of
the Notes and Common Stock will be paid by the Company, including, without
limitation, Commission filing fees and expenses of compliance with state
securities or "blue sky" laws; provided, however, that the Selling Holders will
pay all underwriting discounts and selling commissions, if any. The Selling
Holders will be indemnified by the Company against certain civil liabilities,
including certain liabilities under the Securities Act, or will be entitled to
contribution in connection therewith.
34
<PAGE>
LEGAL MATTERS
The validity of the Notes and the Common Stock has been passed upon for the
Company by Graham & James LLP, Sacramento, California.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of the Company for the years ended
December 29, 1996, December 30, 1995 and December 31, 1994 incorporated by
reference in this Prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto.
35
<PAGE>
================================================================================
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or any Selling Holder.
This Prospectus does not constitute an offer to sell or the solicitation of any
offer to buy any security other than the shares of Common Stock offered by this
Prospectus, nor does it constitute an offer to sell or a solicitation of any
offer to buy the shares of Common Stock by anyone in any jurisdiction in which
such offer or solicitation is not authorized, or in which the person making such
offer or solicitation is not qualified to do so, or to any person to whom it is
unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that information contained herein is correct as of any time
subsequent to the date hereof.
================================================================================
================================================================================
$115,000,000
4% Convertible Subordinated Notes Due 2004
LEVEL ONE
COMMUNICATIONS,
INCORPORATED
______________
PROSPECTUS
______________
===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
-------------------------------------------
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the issuance and distribution of the securities being registered hereunder.
All of the amounts shown are estimates (except for the SEC registration fee).
SEC registration fee
Printing and engraving expenses
Printing fees and expenses
Legal fees and expenses
Blue Sky fees and expenses
Miscellaneous
-----------------------------------
TOTAL
None of these expenses will be paid by the Selling Holders pursuant to the
terms of the agreements under which the shares of Common Stock to be sold hereby
were issued.
Item 15. Indemnification of Directors and Officers
-----------------------------------------
The Company has provisions in its Amended and Restated Articles of
Incorporation which eliminate the liability of the company's directors to the
Company and its shareholders for monetary damages to the fullest extent
permissible under California law and provisions which authorize the damages to
the fullest extent permissible under California law and provisions which
authorize the Company to indemnify its directors and agents by bylaws,
agreements or otherwise, to the fullest extent permitted by law. Such
limitation of liability does not affect the availability of equitable remedies
such as injunctive relief or rescission. The Company's Bylaws, as amended,
provide that the Company shall indemnify its directors and officers to the
fullest extent permitted by California law, including circumstances in which
indemnification is otherwise discretionary under California law. In addition,
the Company has entered into agreements with its directors and executive
officers that will require the Registrant, among other things, to indemnify them
against certain liabilities that may arise by reason of their status or service
as directors or executive officers to the fullest extent not prohibited by law.
II-1
<PAGE>
Item 16. Exhibits
--------
The following exhibits are filed herewith:
Exhibit
Number Description
- ------ -----------
4.1 Indenture dated as of August 15, 1997 among the Company and State Street
Bank and Trust Company of California (National Association), as Trustee.
4.2 Form of 4% Convertible Subordinated Note due 2004.
4.3 Registration Rights Agreement dated as of August 15, 1997 among the Company
and Robertson, Stephens & Company LLC, Alex. Brown & Sons Incorporated, and
Montgomery Securities.
5.1 Opinion of Graham & James LLP
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Graham & James LLP (included in Exhibit 5.1)
24.1 Power of Attorney (See page II-4).
25.1 Statement of Eligibility and Qualification Under the Trust Indenture Act of
1939 of a Corporation designated to act as Trustee on Form T-1.
II-2
<PAGE>
Item 17. Undertakings
------------
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 to include any
additional or changed material information with respect to the plan of
distribution.
(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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company 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 Company of expenses
incurred or paid by a director, officer or controlling person of the Company 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 Company 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-3
<PAGE>
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 Sacramento, and State of California, on this 15th day
of October, 1997.
LEVEL ONE COMMUNICATIONS, INCORPORATED
By: /s/ Robert S. Pepper
-------------------------------------
Robert S. Pepper, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Robert S. Pepper and John Kehoe, jointly and
severally, his attorneys-in-fact, each with the power of substitution, for him
in any and all capacities, to sign any amendments to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
- ------------------------ -------------- ----
/s/Robert S. Pepper President, Chief October 15, 1997
- ------------------------
(Robert S. Pepper) Executive Officer and
Director
(Principal Executive Officer)
/s/John Kehoe Vice President October 15, 1997
- ------------------------
(John Kehoe) Chief Financial
Officer and Secretary
(Principal Financial Officer)
/s/Thomas J. Connors Director October 15, 1997
- ------------------------
(Thomas J. Connors)
/s/Martin Jurick Director October 15, 1997
- ------------------------
(Martin Jurick)
II-4
<PAGE>
/s/Paul Gray Director October 15, 1997
- ------------------------
(Paul Gray)
/s/Henry Kressel Director October 15, 1997
- ------------------------
(Henry Kressel)
/s/Joseph P. Landy Director October 15, 1997
- ------------------------
(Joseph P. Landy)
II-5
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
- ------ ----------------------
The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<C> <S>
4.1 Indenture dated as of August 15, 1997 among the Company and State
Street Bank and Trust Company of California (National Association),
as Trustee.
4.2 Form of 4% Convertible Subordinated Note due 2004.
4.3 Registration Rights Agreement dated as of August 15, 1997 among the
Company and Robertson, Stephens & Company LLC, Alex. Brown & Sons
Incorporated, and Montgomery Securities.
5.1 Opinion of Graham & James LLP
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Graham & James LLP (included in Exhibit 5.1)
24.1 Power of Attorney (See page II-4).
25.1 Statement of Eligibility and Qualification Under the Trust Indenture
Act of 1939 of a Corporation designated to act as Trustee on Form
T-1.
</TABLE>
<PAGE>
EXHIBIT 4.1
INDENTURE dated as of August 15, 1997 between Level One Communications,
Incorporated, a California corporation (hereinafter sometimes called the
"Company", as more fully set forth in Section 1.1), and State Street Bank and
Trust Company of California, N.A., a national banking association, as trustee
(hereinafter sometimes called the "Trustee", as more fully set forth in Section
1.1).
W I T N E S S E T H:
WHEREAS, for its lawful corporate purposes, the Company has duly authorized
the issue of its 4% Convertible Subordinated Notes due 2004 (hereinafter
sometimes called the "Notes"), in an aggregate principal amount not to exceed
$115,000,000 and, to provide the terms and conditions upon which the Notes are
to be authenticated, issued and delivered, the Company has duly authorized the
execution and delivery of this Indenture; and
WHEREAS, the Notes, the certificate of authentication to be borne by the
Notes, a form of assignment, a form of option to elect repayment upon a
Repurchase Event, a form of conversion notice and a certificate of transfer to
be borne by the Notes are to be substantially in the forms hereinafter provided
for; and
WHEREAS, all acts and things necessary to make the Notes, when executed by
the Company and authenticated and delivered by the Trustee or a duly authorized
authenticating agent, as in this Indenture provided, the valid, binding and
legal obligations of the Company, and to constitute these presents a valid
agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Notes have in all
respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Notes are,
and are to be, authenticated, issued and delivered, and in consideration of the
premises and of the purchase and acceptance of the Notes by the holders thereof,
the Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time of the Notes
(except as otherwise provided below), as follows:
ARTICLE I
DEFINITIONS
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Section 1.1 Definitions. The terms defined in this Section 1.1 (except
----------- -----------
as herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section 1.1. All other
terms used in this Indenture, which are defined in the Trust Indenture Act or
which are by reference therein defined in the Securities Act (except as herein
otherwise expressly provided or unless the context otherwise requires) shall
have the meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in force at the date of the execution of this Indenture. The
words "herein," "hereof," "hereunder," and words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
Subdivision. The terms defined in this Article include the plural as well as
the singular.
Affiliate: The term "Affiliate" of any specified person shall mean any
---------
other person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified person. For the purposes of this
definition, "control," when used with respect to any specified person means the
power to direct or cause the direction of the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
Board of Directors: The term "Board of Directors" shall mean the Board of
------------------
Directors of the Company or a committee of such Board duly authorized to act for
it hereunder.
Board Resolution: The term "Board Resolution" means a copy of a resolution
----------------
certified by the Secretary or an Assistant Secretary of the Company to have been
duly adopted by the Board of Directors, or duly authorized committee thereof (to
the extent permitted by applicable law), and to be in full force and effect on
the date of such certification, and delivered to the Trustee.
Business Day: The term "Business Day" means each Monday, Tuesday,
------------
Wednesday, Thursday and Friday which is not a day on which the banking
institutions in The City of New York, Sacramento, California, or the city in
which the Corporate Trust Office is located are authorized or obligated by law
or executive order to close or be closed.
close of business: The term "close of business" means 5 p.m. (New York
-----------------
City time).
Commission: The term "Commission" shall mean the Securities and Exchange
----------
Commission.
Common Stock: The term "Common Stock" shall mean any stock of any class of
------------
the Company which has no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which is not subject to redemption by the Company.
Subject to the provisions of Section 15.6, however, shares issuable on
conversion of Notes shall include only shares of the class designated as common
stock of the Company at the date of this Indenture or shares of any class or
classes resulting from any reclassification or reclassifications thereof and
which have no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which are not subject to redemption by the Company; provided
--------
that if at any time there shall be more than one such resulting class, the
shares of each such class then so issuable shall be substantially in the
proportion which the total number of shares of such class resulting from all
such reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
Company: The term "Company" shall mean Level One Communications,
-------
Incorporated, a California corporation, and subject to the provisions of Article
XII, shall include its successors and assigns.
Conversion Price: The term "Conversion Price" shall have the meaning
----------------
specified in Section 15.4.
Corporate Trust Office: The term "Corporate Trust Office," or other
----------------------
similar term, shall mean the office of the Trustee at which at any particular
time its corporate trust business shall be principally administered, which
office is, at the date as of which this Indenture is dated, located at 725
Figueroa Street, Suite 3100, Los Angeles, California 90017, Attention:
Corporate Trust Department (Level One Communications, Incorporated 4%
Convertible Subordinated Notes due 2004).
Custodian: The term "Custodian" means State Street Bank and Trust Company
---------
of California N.A., as custodian with respect to the Notes in global form, or
any successor entity thereto.
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<PAGE>
default: The term "default" shall mean any event that is, or after notice
-------
or passage of time, or both, would be, an Event of Default.
Depositary: The term "Depositary" means, with respect to the Notes
----------
issuable or issued in whole or in part in global form, the person specified in
Section 2.5(d) as the Depositary with respect to such Notes, until a successor
shall have been appointed and become such pursuant to the applicable provisions
of this Indenture, and thereafter, "Depositary" shall mean or include such
successor.
Designated Senior Indebtedness: The term "Designated Senior Indebtedness"
------------------------------
means any particular Senior Indebtedness in which the instrument creating or
evidencing the same or the assumption or guarantee thereof (or related
agreements or documents to which the Company is a party) expressly provides that
such Senior Indebtedness shall be "Designated Senior Indebtedness" for purposes
of this Indenture (provided that such instrument, agreement or other document
may place limitations and conditions on the right of such Senior Indebtedness to
exercise the rights of Designated Senior Indebtedness).
Event of Default: The term "Event of Default" shall mean any event
----------------
specified in Section 7.1, continued for the period of time, if any, and after
the giving of notice, if any, therein designated.
Exchange Act: The term "Exchange Act" means the Securities Exchange Act of
------------
1934, as amended, and the rules and regulations promulgated thereunder.
Indebtedness: The term "Indebtedness" shall mean any obligations of, or
------------
guaranteed or assumed by, the Company or any Significant Subsidiary for borrowed
money.
Indenture: The term "Indenture" shall mean this instrument as originally
---------
executed or, if amended or supplemented as herein provided, as so amended or
supplemented.
Initial Purchasers: The term "Initial Purchasers" means Robertson,
------------------
Stephens & Company LLC, Alex. Brown & Sons Incorporated and Montgomery
Securities.
Liquidated Damages: The term "Liquidated Damages" means all liquidated
------------------
damages then owing pursuant to Section 3 of the Registration Rights Agreement.
Note or Notes: The terms "Note" or "Notes" shall mean any Note or Notes,
-------------
as the case may be, authenticated and delivered under this Indenture.
Noteholder; holder: The terms "Noteholder" or "holder" as applied to any
------------------
Note, or other similar terms (but excluding the term "beneficial holder"), shall
mean any person in whose name at the time a particular Note is registered on the
Note register.
Note register: The term "Note register" shall have the meaning specified
-------------
in Section 2.5.
Officers' Certificate: The term "Officers' Certificate", when used with
---------------------
respect to the Company, shall mean a certificate signed by (a) one of the
President, the Chief Executive Officer, Executive or Senior Vice President or
any Vice President (whether or not designated by a number or numbers or word
added before or after the title "Vice President") and (b) by one of the
Treasurer or any Assistant Treasurer, Secretary or any Assistant Secretary or
Controller of the Company, which is delivered to the Trustee. Each such
certificate shall include the statements provided for in Section 17.5 if and to
the extent required by the provisions of such Section.
Opinion of Counsel: The term "Opinion of Counsel" shall mean an opinion in
------------------
writing signed by legal counsel, who may be an employee of or counsel to the
Company, or other counsel acceptable to the Trustee, which is delivered to the
Trustee. Each such opinion shall include the statements provided for in Section
17.5 if and to the extent required by the provisions of such Section.
outstanding: The term "outstanding," when used with reference to Notes,
-----------
shall, subject to the provisions of Section 9.4, mean, as of any particular
time, all Notes authenticated and delivered by the Trustee under this Indenture,
except
(a) Notes theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(b) Notes, or portions thereof, for the payment, or redemption
of which monies in the necessary amount shall have been deposited in trust
with the Trustee or with any paying agent (other than the Company) or shall
have been set aside and segregated in trust by the Company (if the Company
shall act as its own paying agent); provided that if such Notes are to be
--------
redeemed, as the case may be, prior to the maturity thereof, notice of such
redemption shall have been given as provided in Section 3.2, or provision
satisfactory to the Trustee shall have been made for giving such notice;
(c) Notes in lieu of which, or in substitution for which, other
Notes shall have been authenticated and delivered pursuant to the terms of
Section 2.6 unless proof satisfactory to the Trustee is presented that any
such Notes are held by bona fide holders in due course; and
(d) Notes converted into Common Stock pursuant to Article XV
and Notes deemed not outstanding pursuant to Section 3.2.
person: The term "person" shall mean an individual, a corporation, a
------
limited liability company, an association, a partnership, an individual, a joint
venture, a joint stock company, a trust, an unincorporated organization or a
government or an agency or a political subdivision thereof.
Portal Market: The term "Portal Market" shall mean The Portal Market
-------------
operated by the National Association of Securities Dealers, Inc. or any
successor thereto.
Predecessor Note: The term "Predecessor Note" of any particular Note shall
----------------
mean every previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for the purposes of this definition, any
Note authenticated and delivered under Section 2.6 in lieu of a lost, destroyed
or stolen Note shall be deemed to evidence the same debt as the lost, destroyed
or stolen Note that it replaces.
QIB: The term "QIB" shall mean a "qualified institutional buyer" as
---
defined in Rule 144A.
Registration Rights Agreement: The term "Registration Rights Agreement"
-----------------------------
means that certain Registration Rights Agreement, dated as of August 27, 1997,
between the Company and the Initial Purchasers.
Regulation S: The term "Regulation S" shall mean Regulation S as
------------
promulgated under the Securities Act.
Repurchase Event: The term "Repurchase Event" shall have the meaning
----------------
specified in Section 16.4.
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<PAGE>
Repurchase Price: The term "Repurchase Price" has the meaning specified in
----------------
Section 16.1.
Responsible Officer: The term "Responsible Officer", when used with
-------------------
respect to the Trustee, shall mean an officer of the Trustee in the Corporate
Trust Office assigned and duly authorized by the Trustee to administer its
obligations under this Indenture.
Restricted Securities: The term "Restricted Securities" has the meaning
---------------------
specified in Section 2.5(d).
Rule 144A: The term "Rule 144A" shall mean Rule 144A as promulgated under
---------
the Securities Act.
Securities Act: The term "Securities Act" means the Securities Act of
--------------
1933, as amended, and the rules and regulations promulgated thereunder.
Senior Indebtedness: The term "Senior Indebtedness" means the principal
-------------------
of, premium, if any, interest on (including any interest accruing after the
filing of a petition by or against the Company under any bankruptcy law, whether
or not allowed as a claim after such filing in any proceeding under such
bankruptcy law) and any other payment due pursuant to, any of the following,
whether outstanding on the date of this Indenture or thereafter incurred or
created:
(a) All indebtedness of the Company for money borrowed or
evidenced by notes, debentures, bonds or other securities (including, but
not limited to, those which are convertible or exchangeable for securities
of the Company) and all other obligations of the Company constituting the
deferred purchase price of property or assets;
(b) All indebtedness of the Company due and owing with respect
to letters of credit (including, but not limited to, reimbursement
obligations with respect thereto);
(c) All indebtedness or other obligations of the Company due
and owing with respect to interest rate and currency swap agreements, cap,
floor and collar agreements, currency spot and forward contracts and other
similar agreements and arrangements;
(d) All indebtedness consisting of commitment or standby fees
due and payable to lending institutions with respect to credit facilities
or letters of credit available to the Company;
(e) All obligations of the Company under leases required or
permitted to be capitalized under generally accepted accounting principles
or under any lease or related document (including a purchase agreement)
that provides that the Company is contractually obligated to purchase or
cause a third party to purchase and thereby guarantee a minimum residual
value of the lease property to the lessor and the obligations of the
Company under such lease or related document to purchase or to cause a
third party to purchase such leased property;
(f) All indebtedness or obligations of others of the kinds
described in any of the preceding clauses (a), (b), (c), (d) or (e) assumed
by or guaranteed in any manner by the Company or in effect guaranteed
(directly or indirectly) by the Company through an agreement to purchase,
contingent or otherwise, and all obligations of the Company under any such
guarantee or other arrangements; and
(g) All renewals, extensions, refundings, deferrals, amendments
or modifications of indebtedness or obligations of the kinds described in
any of the preceding clauses (a), (b), (c), (d), (e) or (f);
unless in the case of any particular indebtedness, obligation, renewal,
extension, refunding, amendment, modification or supplement, the instrument or
other document creating or evidencing the same or the assumption or guarantee of
the same expressly provides that such indebtedness, obligation, renewal,
extension, refunding, amendment, modification or supplement is subordinate to,
or is not superior to, or is pari passu with, the Notes; provided that Senior
---- ----- --------
Indebtedness shall not include (i) any indebtedness of any kind of the Company
to any subsidiary of the Company, a majority of the voting stock of which is
owned, directly or indirectly, by the Company, (ii) indebtedness for trade
payables or constituting the deferred purchase price of assets or services
incurred in the ordinary course of business, or (iii) the Notes.
Significant Subsidiary: The term "Significant Subsidiary" means, with
----------------------
respect to any person, a Subsidiary of such person that would constitute a
"significant subsidiary" as such term is defined under Rule 1-02 of Regulation
S-X of the Securities and Exchange Commission.
Subsidiary: The term "Subsidiary" means a corporation more than 50% of the
----------
outstanding voting stock of which is owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries. For the purposes of this definition, "voting stock" means
stock which ordinarily has voting power for the election of directors, whether
at all times or only so long as no senior class of stock has such voting power
by reason of any contingency.
Trading Day: The term "Trading Day" has the meaning specified in Section
-----------
15.5(h)(5).
Trust Indenture Act: The term "Trust Indenture Act" shall mean the Trust
-------------------
Indenture Act of 1939, as amended, as it was in force at the date of execution
of this Indenture, except as provided in Sections 11.3 and 15.6; provided,
--------
however, that in the event the Trust Indenture Act of 1939 is amended after the
- -------
date hereof, the term "Trust Indenture Act" shall mean, to the extent required
by such amendment, the Trust Indenture Act of 1939 as so amended.
Trustee: The term "Trustee" shall mean State Street Bank and Trust Company
-------
of California, N.A., and its successors and any corporation resulting from or
surviving any consolidation or merger to which it or its successors may be a
party and any successor trustee at the time serving as successor trustee
hereunder.
The definitions of certain other terms are as specified in Article XV and
Article XVI.
ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES
Section 2.1 Designation, Amount and Issue of Notes. The Notes shall be
----------- --------------------------------------
designated as "4% Convertible Subordinated Notes due 2004". Notes not to exceed
the aggregate principal amount of $100,000,000 (or $115,000,000 if the over-
allotment option set forth in Section 7 of the Purchase Agreement dated August
19, 1997 (as amended from time to time by the parties thereto) by and between
the Company and the Initial Purchasers is exercised in full) (except pursuant to
Sections 2.5, 2.6, 3.3, 15.2 and 16.2) upon the execution of this Indenture, or
from time to time thereafter, may be executed by the Company and delivered to
the Trustee for authentication, and the Trustee shall thereupon authenticate and
deliver said Notes upon the written order of the Company, signed by the
Company's (a) President, Executive or Senior Vice President or any Vice
President (whether or not designated by a number or numbers or word or words
added before or after the title "Vice President") and (b) Treasurer or
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<PAGE>
Assistant Treasurer or its Secretary or any Assistant Secretary, without any
further action by the Company hereunder.
Section 2.2 Form of Notes. The Notes and the Trustee's certificate of
-------------
authentication to be borne by such Notes shall be substantially in the form set
forth in Exhibit A, which is incorporated in and made a part of this Indenture.
Any of the Notes may have such letters, numbers or other marks of
identification and such notations, legends and endorsements as the officers
executing the same may approve (execution thereof to be conclusive evidence of
such approval) and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Notes may be
listed or designated for issuance, or to conform to usage.
Any Note in global form shall represent such of the outstanding Notes as
shall be specified therein and shall provide that it shall represent the
aggregate amount of outstanding Notes from time to time endorsed thereon and
that the aggregate amount of outstanding Notes represented thereby may from time
to time be increased or reduced to reflect transfers or exchanges permitted
hereby. Any endorsement of a Note in global form to reflect the amount of any
increase or decrease in the amount of outstanding Notes represented thereby
shall be made by the Trustee or the Custodian, at the direction of the Trustee,
in such manner and upon instructions given by the holder of such Notes in
accordance with this Indenture. Payment of principal of and interest and
premium, if any (including any redemption price), on any Note in global form
shall be made to the holder of such Note.
The terms and provisions contained in the form of Note attached as Exhibit
A hereto shall constitute, and is hereby expressly made, a part of this
Indenture and to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Section 2.3 Date and Denomination of Notes; Payments of Interest. The
----------------------------------------------------
Notes shall be issuable in registered form without coupons in denominations of
$1,000 principal amount and integral multiples thereof. Every Note shall be
dated the date of its authentication, shall bear interest from the applicable
date and accrued interest shall be payable semiannually on each March 1 and
September 1, commencing March 1, 1998 as specified on the face of the form of
Note, attached as Exhibit A hereto.
The person in whose name any Note (or its Predecessor Note) is registered
at the close of business on any record date with respect to any interest payment
date (including any Note that is converted after the record date and on or
before the interest payment date) shall be entitled to receive the interest
payable on such interest payment date notwithstanding the cancellation of such
Note upon any transfer, exchange or conversion subsequent to the record date and
on or prior to such interest payment date; provided that, in the case of any
--------
Note, or portion thereof, called for redemption pursuant to Article III on a
redemption date, or repurchased by the Company pursuant to Article XVI on a
repurchase date, during the period from the close of business on the record date
to the close of business on the Business Day next preceding the following
interest payment date, interest shall not be paid to the person in whose name
the Note, or portion thereof, is registered on the close of business on such
record date, and the Company shall have no obligation to pay interest on such
Note or portion thereof except to the extent required to be paid upon such
redemption or repurchase in accordance with Article III or Article XVI. Interest
may, at the option of the Company, be paid by check mailed to the address of
such person on the registry kept for such purposes; provided that, with respect
--------
to any holder of Notes with an aggregate principal amount equal to or in excess
of $2,000,000, at the request of such holder in writing to the Company, interest
on such holder's Notes shall be paid by wire transfer in immediately available
funds in accordance with the wire transfer instruction supplied by such holder
from time to time to the Trustee and paying agent (if different from Trustee) at
least two days prior to the applicable record date. The term "record date" with
respect to any interest payment date shall mean the February 15 or August 15
preceding said March 1 or September 1.
Interest on the Notes shall be computed on the basis of a 360-day year
comprised of twelve 30-day months compounded semi-annually.
Any interest on any Note which is payable, but is not punctually paid or
duly provided for, on any said March 1 or September 1 (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Noteholder on the relevant
record date by virtue of his having been such Noteholder; and such Defaulted
Interest shall be paid by the Company, at its election in each case, as provided
in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a special
record date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest to be paid on each Note and the
date of the payment (which shall be not less than twenty-five (25) days
after the receipt by the Trustee of such notice, unless the Trustee shall
consent to an earlier date), and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a special record date for
the payment of such Defaulted Interest which shall be not more than fifteen
(15) days and not less than ten (10) days prior to the date of the proposed
payment and not less than ten (10) days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify the
Company of such special record date and, in the name and at the expense of
the Company, shall cause notice of the proposed payment of such Defaulted
Interest and the special record date therefor to be mailed, first-class
postage prepaid, to each Noteholder as of such special record date at his
address as it appears in the Note register, not less than ten (10) days
prior to such special record date. Notice of the proposed payment of such
Defaulted Interest and the special record date therefor having been so
mailed, such Defaulted Interest shall be paid to the persons in whose names
the Notes (or their respective Predecessor Notes) were registered at the
close of business on such special record date and shall no longer be
payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange or automated quotation system on which the Notes may be
listed or designated for issuance, and upon such notice as may be required
by such exchange or automated quotation system, if, after notice given by
the Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Section 2.4 Execution of Notes. The Notes shall be signed in the name
------------------
and on behalf of the Company by the facsimile signature of its President, its
Chief Executive Officer, any of its Executive or Senior Vice Presidents, or any
of its Vice Presidents (whether or not designated by a number or numbers or word
or words added before or after the title "Vice President") and attested by the
facsimile signature of its Secretary or any of its Assistant Secretaries (which
may be printed, engraved or otherwise reproduced thereon, by facsimile or
otherwise). Only such Notes as shall bear thereon a certificate of
authentication substantially in the form set forth on the form of Note attached
as Exhibit A hereto, manually executed by the Trustee (or an authenticating
agent appointed by the Trustee as provided by Section 17.11), shall be entitled
to the benefits of this Indenture or be valid or obligatory for any purpose.
Such certificate by the Trustee (or such an authenticating agent) upon any Note
executed by the Company shall be conclusive evidence that the Note so
authenticated has been duly authenticated and delivered hereunder and that the
holder is entitled to the benefits of this Indenture.
In case any officer of the Company who shall have signed any of the Notes
shall cease to be such officer before the Notes so signed shall have been
authenticated and delivered by the Trustee, or disposed of by the Company, such
Notes nevertheless may be authenticated and delivered or disposed of as though
the person
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<PAGE>
who signed such Notes had not ceased to be such officer of the Company; and any
Note may be signed on behalf of the Company by such persons as, at the actual
date of the execution of such Note, shall be the proper officers of the Company,
although at the date of the execution of this Indenture any such person was not
such an officer.
Section 2.5 Exchange and Registration of Transfer of Notes; Restrictions
------------------------------------------------------------
on Transfer; Depositary.
-----------------------
(a) The Company shall cause to be kept at the Corporate Trust
Office a register (the register maintained in such office and in any other
office or agency of the Company designated pursuant to Section 5.2 being
herein sometimes collectively referred to as the "Note register") in which,
subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Notes and of transfers of Notes. Such
register shall be in written form or in any form capable of being converted
into written form within a reasonable period of time. The Trustee is hereby
appointed "Note registrar" for the purpose of registering Notes and
transfers of Notes as herein provided. The Company may appoint one or more
co-registrars in accordance with Section 5.2.
Upon surrender for registration of transfer of any Note to the
Note registrar or any co-registrar, and satisfaction of the requirements
for such transfer set forth in this Section 2.5, the Company shall execute,
and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Notes of any
authorized denominations and of a like aggregate principal amount and
bearing such restrictive legends as may be required by this Indenture.
Notes may be exchanged for other Notes of any authorized
denominations and of a like aggregate principal amount, upon surrender of
the Notes to be exchanged at any such office or agency. Whenever any Notes
are so surrendered for exchange, the Company shall execute, and the Trustee
shall authenticate and deliver, the Notes which the Noteholder making the
exchange is entitled to receive, bearing registration numbers not
contemporaneously outstanding.
All Notes presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company, the Trustee,
the Note registrar or any co-registrar) be duly endorsed, or be accompanied
by a written instrument or instruments of transfer in form satisfactory to
the Company and duly executed, by the Noteholder thereof or his
attorney-in-fact duly authorized in writing.
No service charge shall be charged to the Noteholder for any
exchange or registration of transfer of Notes, but the Company may require
payment of a sum sufficient to cover any tax, assessments or other
governmental charges that may be imposed in connection therewith.
None of the Company, the Trustee, the Note registrar or any
co-registrar shall be required to exchange or register a transfer of (a)
any Notes for a period of fifteen (15) days next preceding any selection of
Notes to be redeemed or (b) any Notes called for redemption or, if a
portion of any Note is selected or called for redemption, such portion
thereof selected or called for redemption or (c) any Notes surrendered for
conversion or, if a portion of any Note is surrendered for conversion, such
portion thereof surrendered for conversion or (d) any Notes, or a portion
of any Note, surrendered for repurchase (and not withdrawn) in connection
with a Repurchase Event.
All Notes issued upon any transfer or exchange of Notes in
accordance with this Indenture shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the same benefits under
this Indenture as the Notes surrendered upon such registration of transfer
or exchange.
(b) So long as the Notes are eligible for book-entry
settlement with the Depositary, unless otherwise required by law, all Notes
(i) issued to QIBs pursuant to Rule 144A of the Securities Act to be traded
on The Portal Market or (ii) to a person who is not a U.S. Person (as
defined in Regulation S) who is acquiring the Note in an offshore
transaction (a "Non-U.S. Person") in accordance with Regulation S shall be
represented by a Note in global form registered in the name of the
Depositary or the nominee of the Depositary. The transfer and exchange of
beneficial interests in such Note in global form, which does not involve
the issuance of a definitive Note, shall be effected through the Depositary
(but not the Trustee or the Custodian) in accordance with this Indenture
(including the restrictions on transfer set forth herein) and the
procedures of the Depositary therefor.
Notes resold to persons who are neither QIBs nor Non-U.S.
Persons will be issued in definitive registered form and may not be
represented by a Note in global form. In addition, at any time at the
request of a QIB or a Non-U.S. Person that is a beneficial holder of an
interest in a Note in global form, such beneficial holder shall be entitled
to obtain a definitive Note upon written request to the Trustee and the
Custodian in accordance with the standing instructions and procedures
existing between the Depositary and the Custodian for the issuance thereof.
Upon receipt of any such request, the Trustee or the Custodian, at the
direction of the Trustee, will cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Custodian, the aggregate principal amount of the Note in global form to be
reduced by the principal amount of the definitive Note issued upon such
request to such beneficial holder and, following such reduction, the
Company will execute and the Trustee will authenticate and deliver to such
beneficial holder (or its nominee) a definitive Note or Notes in the
appropriate aggregate principal amount in the name of such beneficial
holder (or its nominee) and bearing such restrictive legends as may be
required by this Indenture.
Any transfer of a beneficial interest in a Note in global form
which cannot be effected through book-entry settlement must be effected by
the delivery to the transferee (or its nominee) of a definitive Note or
Notes registered in the name of the transferee (or its nominee) on the
books maintained by the Trustee in accordance with the transfer
restrictions set forth herein. With respect to any such transfer, the
Trustee or the Custodian, at the direction of the Trustee, will cause, in
accordance with the standing instructions and procedures existing between
the Depositary and the Custodian, the aggregate principal amount of the
Note in global form to be reduced by the principal amount of the beneficial
interest in the Note in global form being transferred and, following such
reduction, the Company will execute and the Trustee will authenticate and
deliver to the transferee (or such transferee's nominee, as the case may
be), a Note or Notes in the appropriate aggregate principal amount in the
name of such transferee (or its nominee) and bearing such restrictive
legends as may be required by this Indenture.
(c) So long as the Notes are eligible for book-entry
settlement, unless otherwise required by law, upon any transfer of a
definitive Note to a QIB in accordance with Rule 144A or a Non-U.S. Person
in accordance with Regulation S, unless otherwise requested by the
transferor, and upon receipt of the definitive Note or Notes being so
transferred, together with a certification from the transferor that the
transferee is a QIB or a Non-U.S. Person (or other evidence satisfactory to
the Trustee), the Trustee shall make or direct the Custodian to make, an
endorsement on the Note in global form to reflect an increase in the
aggregate principal amount of the Notes represented by the Note in global
form by the principal amount of the Note being transferred to the QIB or
the Non-U.S. Person, the Trustee shall cancel such definitive Note or Notes
and cause, or direct the Custodian to cause, in accordance with the
standing instructions and procedures existing between the Depositary and
the Custodian, the aggregate principal amount of Notes represented by the
Note in global form to be increased accordingly; provided that no
--------
definitive Note, or portion thereof, in respect of which the Company or an
Affiliate of the Company held any beneficial interest shall be included in
such Note in global form until such definitive Note is freely tradable in
accordance with Rule 144(k); provided further that the Trustee shall
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authenticate and deliver Notes in definitive form upon any transfer of a
beneficial interest in the Note in global form to the Company or any
Affiliate of the Company.
Any Note in global form may be endorsed with or have incorporated in the
text thereof such legends or recitals or changes not inconsistent with
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<PAGE>
the provisions of this Indenture as may be required by the Custodian, the
Depositary or by the National Association of Securities Dealers, Inc. in
order for the Notes to be tradeable on The Portal Market or as may be
required for the Notes to be tradeable on any other market developed for
trading of securities pursuant to Rule 144A or required to comply with any
applicable law or any regulation thereunder or with the rules and
regulations of any securities exchange or automated quotation system upon
which the Notes may be listed or traded or designated for issuance or to
conform with any usage with respect thereto, or to indicate any special
limitations or restrictions to which any particular Notes are subject.
(d) Every Note that bears or is required under this Section
2.5(d) to bear the legend set forth in this Section 2.5(d) (together with
any Common Stock issued upon conversion of the Notes and required to bear
the legend set forth in Section 2.5(e), collectively, the "Restricted
Securities") shall be subject to the restrictions on transfer set forth in
this Section 2.5(d) (including the legend set forth below), unless such
restrictions on transfer shall be waived by written consent of the Company,
and the holder of each such Restricted Security, by such holder's
acceptance thereof, agrees to be bound by all such restrictions on
transfer. As used in Sections 2.5(d) and 2.5(e), the term "transfer"
encompasses any sale, pledge, transfer or other disposition whatsoever of
any Restricted Security.
Until two (2) years after the original issuance date of any
Note, any certificate evidencing such Note (and all securities issued in
exchange therefor or substitution thereof, other than Common Stock, if any,
issued upon conversion thereof which shall bear the legend set forth in
Section 2.5(e), if applicable) shall bear a legend in substantially the
following form (unless such Notes have been transferred pursuant to a
registration statement that has been declared effective under the
Securities Act (and which continues to be effective at the time of such
transfer) or unless otherwise agreed by the Company in writing, with notice
thereof to the Trustee):
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT
OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN
OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT WITHIN TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY
RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE
COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A)
TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A., AS TRUSTEE, A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE), (D)
OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND
WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER);
AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE
NOTE EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER
PURSUANT TO CLAUSE 2(F) ABOVE) A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE
NOTE EVIDENCED HEREBY WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF SUCH NOTE (OTHER THAN A TRANSFER PURSUANT TO
CLAUSE 2(F) ABOVE), THE HOLDER MUST CHECK THE APPROPRIATE BOX
SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO STATE STREET BANK AND
TRUST COMPANY OF CALIFORNIA, N.A., AS TRUSTEE. IF THE PROPOSED
TRANSFER IS PURSUANT TO CLAUSE 2(C) OR 2(E) ABOVE, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO STATE STREET BANK AND
TRUST COMPANY OF CALIFORNIA, N.A., AS TRUSTEE, SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE
COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE
EARLIER OF THE TRANSFER OF THE NOTE EVIDENCED HEREBY PURSUANT
TO CLAUSE 2(F) ABOVE OR THE EXPIRATION OF TWO YEARS FROM THE
ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT.
Any Note (or security issued in exchange or substitution
therefor) as to which such restrictions on transfer shall have expired in
accordance with their terms may, upon surrender of such Note for exchange
to the Note registrar in accordance with the provisions of this Section
2.5, be exchanged for a new Note or Notes, of like tenor and aggregate
principal amount, which shall not bear the restrictive legend required by
this Section 2.5(d).
Notwithstanding any other provisions of this Indenture (other
than the provisions set forth in this Section 2.5(d)), a Note in global
form may not be transferred as a whole or in part except by the Depositary
to a nominee of the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary.
The Depositary shall be a clearing agency registered under the
Exchange Act. The Company initially appoints The Depository Trust Company
to act as Depositary with respect to the Notes in global form. Initially,
the global Note shall be issued to the Depositary, registered in the name
of Cede & Co., as the nominee of the Depositary, and deposited with the
Trustee as custodian for Cede & Co.
If at any time the Depositary for the Note in global form
notifies the Company that it is unwilling or unable to continue as
Depositary for such Note, the Company may appoint a successor Depositary
with respect to such Note. If a successor Depositary for the Note is not
appointed by the Company within ninety (90) days after the Company receives
such notice, the Company will execute, and the Trustee, upon receipt of an
Officers' Certificate for the authentication and delivery of Notes, will
authenticate and deliver, Notes in definitive form, in an aggregate
principal amount equal to the principal amount of the Note in global form,
in exchange for such Note in global form and upon delivery of such Note in
global form to the Trustee such Note in global form shall be canceled.
Definitive Notes issued in exchange for all or a part of a
Note in global form pursuant to this Section 2.5(d) shall be registered in
such names and
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<PAGE>
in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. Upon execution and authentication, the Trustee shall
deliver such definitive Notes to the persons in whose names such definitive
Notes are so registered.
At such time as all interests in a Note in global form have
been redeemed, converted, canceled, repurchased or transferred, such Note
in global form shall be, upon receipt thereof, canceled by the Trustee in
accordance with standing procedures and instructions existing between the
Depositary and the Custodian. At any time prior to such cancellation, if
any interest in a global Note is exchanged for definitive Notes, redeemed,
converted, canceled, repurchased or transferred to a transferee who
receives definitive Notes therefor or any definitive Note is exchanged or
transferred for part of a Note in global form, the principal amount of such
Note in global form shall, in accordance with the standing procedures and
instructions existing between the Depositary and the Custodian, be
appropriately reduced or increased, as the case may be, and an endorsement
shall be made on such Note in global form, by the Trustee or the Custodian,
at the direction of the Trustee, to reflect such reduction or increase.
(c) Until two (2) years after the original issuance date of
any Note, any stock certificate representing Common Stock issued upon
conversion of such Note shall bear a legend in substantially the following
form (unless such Common Stock has been sold pursuant to a registration
statement that has been declared effective under the Securities Act (and
which continues to be effective at the time of such transfer) or such
Common Stock has been issued upon conversion of Notes that have been
transferred pursuant to a registration statement that has been declared
effective under the Securities Act or unless otherwise agreed by the
Company with written notice thereof to the Trustee and any transfer agent
for the Common Stock):
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS, AND MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES THAT UNTIL THE
EXPIRATION OF TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE
NOTE UPON THE CONVERSION OF WHICH THE COMMON STOCK EVIDENCED
HEREBY WAS ISSUED, (1) IT WILL NOT RESELL OR OTHERWISE
TRANSFER THE COMMON STOCK EVIDENCED HEREBY EXCEPT (A) TO THE
COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN COMPLIANCE WITH RULE
144A, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3)
OR (7) UNDER THE SECURITIES ACT) THAT PRIOR TO SUCH TRANSFER,
FURNISHES TO BOSTON EQUISERVE LLP, AS TRANSFER AGENT, A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THE COMMON STOCK
EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM SUCH TRANSFER AGENT), (D) OUTSIDE THE UNITED STATES IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT
TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE
AT THE TIME OF SUCH TRANSFER); (2) PRIOR TO ANY SUCH TRANSFER
(OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(F) ABOVE), IT WILL
FURNISH TO BOSTON EQUISERVE LLP, AS TRANSFER AGENT, SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE
COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT; AND (3) IT WILL DELIVER TO EACH PERSON TO
WHOM THE COMMON STOCK EVIDENCED HEREBY IS TRANSFERRED (OTHER
THAN A TRANSFER PURSUANT TO CLAUSE 1(F) ABOVE) A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND WILL
BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE COMMON
STOCK EVIDENCED HEREBY PURSUANT TO CLAUSE 1(F) ABOVE OR THE
EXPIRATION OF TWO YEARS FROM THE ORIGINAL ISSUANCE OF THE NOTE
UPON THE CONVERSION OF WHICH THE COMMON STOCK EVIDENCED HEREBY
WAS ISSUED OR UPON THE EARLIER SATISFACTION OF BOSTON
EQUISERVE LLP, AS TRANSFER AGENT, THAT THE COMMON STOCK HAS
BEEN OR IS BEING OFFERED AND SOLD IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT. AS USED HEREIN, THE TERMS "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
Any such Common Stock as to which such restrictions on
transfer shall have expired in accordance with their terms may, upon
surrender of the certificates representing such shares of Common Stock for
exchange in accordance with the procedures of the transfer agent for the
Common Stock, be exchanged for a new certificate or certificates for a like
aggregate number of shares of Common Stock, which shall not bear the
restrictive legend required by this Section 2.5(e).
(f) Any Note or Common Stock issued upon the conversion or
exchange of a Note that, prior to the expiration of the holding period to
sales thereof under Rule 144(k) under the Securities Act (or any successor
provision), is purchased or owned by the Company or any Affiliate thereof
may not be resold by the Company or such Affiliate unless registered under
the Securities Act or resold pursuant to an exemption from the registration
requirements of the Securities Act in a transaction that results in such
Notes or Common Stock, as the case may be, no longer being "restricted
securities" (as defined under Rule 144).
(g) Notwithstanding any provision of Section 2.5 to the
contrary, in the event Rule 144(k) as promulgated under the Securities Act
(or any successor rule) is amended to change the two-year period under Rule
144(k) (or the corresponding period under any successor rule), from and
after receipt by the Trustee of the Officers' Certificate and Opinion of
Counsel provided for in this Section 2.5(g), (i) the references in the
first sentence of the second paragraph of Section 2.5(d) to "two (2) years"
and in the restrictive legend set forth in such paragraph to "TWO YEARS"
shall be deemed for all purposes hereof to be references to such changed
period, (ii) the references in the first paragraph of Section 2.5(e) to
"two (2) years" and in the restrictive legend set forth in such paragraph
to "TWO YEARS" shall be deemed for all purposes hereof to be references to
such changed period and (iii) all corresponding references in the Notes and
the restrictive legends thereon shall be deemed for all purposes hereof to
be references to such changed period, provided that such changes shall not
become effective if they are otherwise prohibited by, or would otherwise
cause a violation of, the then-applicable federal securities laws. As soon
as practicable after the Company has knowledge of the effectiveness of any
such amendment to change the two-year period under Rule 144(k) (or the
corresponding period under any successor rule), unless such changes would
otherwise be prohibited by, or would otherwise cause a violation of, the
then-applicable securities law, the Company shall provide to the Trustee an
Officers' Certificate and Opinion of Counsel informing the Trustee of the
effectiveness of such amendment and the effectiveness of the foregoing
changes to Sections 2.5(d) and 2.5(e) and the Notes. The provisions of this
Section 2.5(g) will not be effective until such time as the Opinion of
Counsel and Officers' Certificate have been received by the Trustee
hereunder. This Section 2.5(g) shall apply to successive amendments to Rule
144(k) (or any successor rule) changing the holding period thereunder.
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Section 2.6 Mutilated, Destroyed, Lost or Stolen Notes. In case any
------------------------------------------
Note shall become mutilated or be destroyed, lost or stolen, the Company in its
discretion may execute, and upon its request the Trustee or an authenticating
agent appointed by the Trustee shall authenticate and deliver, a new Note,
bearing a number not contemporaneously outstanding, in exchange and substitution
for the mutilated Note, or in lieu of and in substitution for the Note so
destroyed, lost or stolen. In every case the applicant for a substituted Note
shall furnish to the Company, to the Trustee and, if applicable, to such
authenticating agent such security or indemnity as may be required by them to
save each of them harmless for any loss, liability, cost or expense caused by or
connected with such substitution, and, in every case of destruction, loss or
theft, the applicant shall also furnish to the Company, to the Trustee and, if
applicable, to such authenticating agent evidence to their satisfaction of the
destruction, loss or theft of such Note and of the ownership thereof.
The Trustee or such authenticating agent may authenticate any such
substituted Note and deliver the same upon the receipt of such security or
indemnity as the Trustee, the Company and, if applicable, such authenticating
agent may require. Upon the issuance of any substituted Note, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith. In case any Note which has matured or is about to mature or has been
called for redemption or is about to be converted into Common Stock shall become
mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a
substitute Note, pay or authorize the payment of or convert or authorize the
conversion of the same (without surrender thereof except in the case of a
mutilated Note), as the case may be, if the applicant for such payment or
conversion shall furnish to the Company, to the Trustee and, if applicable, to
such authenticating agent such security or indemnity as may be required by them
to save each of them harmless for any loss, liability, cost or expense caused by
or connected with such substitution, and, in case of destruction, loss or theft,
evidence satisfactory to the Company, the Trustee and, if applicable, any paying
agent or conversion agent of the destruction, loss or theft of such Note and of
the ownership thereof.
Every substitute Note issued pursuant to the provisions of this Section
2.6 by virtue of the fact that any Note is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Note shall be found at any time, and shall be
entitled to all the benefits of (but shall be subject to all the limitations set
forth in) this Indenture equally and proportionately with any and all other
Notes duly issued hereunder. To the extent permitted by law, all Notes shall be
held and owned upon the express condition that the foregoing provisions are
exclusive with respect to the replacement or payment or conversion of mutilated,
destroyed, lost or stolen Notes and shall preclude any and all other rights or
remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment or conversion of negotiable
instruments or other securities without their surrender.
Section 2.7 Temporary Notes. Pending the preparation of definitive
---------------
Notes, the Company may execute and the Trustee or an authenticating agent
appointed by the Trustee shall, upon written request of the Company,
authenticate and deliver temporary Notes (printed or lithographed). Temporary
Notes shall be issuable in any authorized denomination, and substantially in the
form of the definitive Notes but with such omissions, insertions and variations
as may be appropriate for temporary Notes, all as may be determined by the
Company. Every such temporary Note shall be executed by the Company and
authenticated by the Trustee or such authenticating agent upon the same
conditions and in substantially the same manner, and with the same effect, as
the definitive Notes. Without unreasonable delay the Company will execute and
deliver to the Trustee or such authenticating agent definitive Notes (other than
in the case of Notes in global form) and thereupon any or all temporary Notes
(other than any such Note in global form) may be surrendered in exchange
therefor, at each office or agency maintained by the Company pursuant to Section
5.2 and the Trustee or such authenticating agent shall authenticate and deliver
in exchange for such temporary Notes an equal aggregate principal amount of
definitive Notes. Such exchange shall be made by the Company at its own expense
and without any charge therefor. Until so exchanged, the temporary Notes shall
in all respects be entitled to the same benefits and subject to the same
limitations under this Indenture as definitive Notes authenticated and delivered
hereunder.
Section 2.8 Cancellation of Notes Paid, Etc. All Notes surrendered for
--------------------------------
the purpose of payment, redemption, repurchase, conversion, exchange or
registration of transfer, shall, if surrendered to the Company or any paying
agent or any Note registrar or any conversion agent, be surrendered to the
Trustee and promptly canceled by it, or, if surrendered to the Trustee, shall be
promptly canceled by it, and no Notes shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Indenture. Upon written
instructions of the Company, the Trustee shall destroy canceled Notes and, after
such destruction, shall deliver a certificate of such destruction to the
Company. If the Company shall acquire any of the Notes, such acquisition shall
not operate as a redemption or satisfaction of the indebtedness represented by
such Notes unless and until the same are delivered to the Trustee for
cancellation.
ARTICLE III
REDEMPTION OF NOTES
-------------------
Section 3.1 Redemption Prices. The Company may, at its option, redeem
-----------------
all or from time to time any part of the Notes on any date prior to maturity,
upon notice as set forth in Section 3.2, and at the optional redemption prices
set forth in the form of Note attached as Exhibit A hereto, together with
accrued interest, if any, to, but excluding, the date fixed for redemption,
provided, however, that no such redemption shall be effected before September 7,
- -------- -------
2000.
Section 3.2 Notice of Redemption; Selection of Notes. In case the
----------------------------------------
Company shall desire to exercise the right to redeem all or, as the case may be,
any part of the Notes pursuant to Section 3.1, it shall fix a date for
redemption, and it, or at its request (which must be received by the Trustee at
least ten (10) Business Days prior to the date the Trustee is requested to give
notice as described below unless a shorter period is agreed to by the Trustee),
the Trustee in the name of and at the expense of the Company, shall mail or
cause to be mailed a notice of such redemption at least twenty (20) and not more
than sixty (60) days prior to the date fixed for redemption to the holders of
Notes so to be redeemed as a whole or in part at their last addresses as the
same appear on the Note register (provided that if the Company shall give such
--------
notice, it shall also give such notice, and notice of the Notes to be redeemed,
to the Trustee). Such mailing shall be by first class mail. The notice if
mailed in the manner herein provided shall be conclusively presumed to have been
duly given, whether or not the holder receives such notice. In any case,
failure to give such notice by mail or any defect in the notice to the holder of
any Note designated for redemption as a whole or in part shall not affect the
validity of the proceedings for the redemption of any other Note.
Each such notice of redemption shall specify the aggregate principal amount
of Notes to be redeemed, the date fixed for redemption, the redemption price at
which Notes are to be redeemed, the place or places of payment, that payment
will be made upon presentation and surrender of such Notes, that interest
accrued to, but excluding, the date fixed for redemption will be paid as
specified in said notice, and that on and after said date interest thereon or on
the portion thereof to be redeemed will cease to accrue. Such notice shall also
state the current Conversion Price and the date on which the right to convert
such Notes or portions thereof into Common Stock will expire. If fewer than all
the Notes are to be redeemed, the notice of redemption shall identify the Notes
to be redeemed. In case any Note is to be redeemed in part only, the notice of
redemption shall state the portion of the principal amount thereof to be
redeemed and shall state that on and after the date fixed for redemption, upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion thereof will be issued.
On or prior to the redemption date specified in the notice of redemption
given as provided in this Section, the Company will deposit with the Trustee or
with one or more paying agents (or, if the Company is acting as its own paying
agent, set aside, segregate and hold in trust as provided in Section 5.4) an
amount of money sufficient to redeem on the redemption date all the Notes (or
portions thereof) so called for redemption (other than those theretofore
surrendered for conversion into Common Stock) at the appropriate redemption
price, together with accrued interest to, but excluding, the date fixed for
redemption; provided that if such payment is made on the redemption date it
--------
must be received by the Trustee or paying agent, as the case may be, by 10:00
a.m. New York City time, on such date. If any Note called for redemption is
converted pursuant hereto, any money deposited with the Trustee or any paying
agent or so segregated and held in trust for the redemption of such Note shall
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be paid to the Company upon its request, or, if then held by the Company shall
be discharged from such trust.
If fewer than all the Notes are to be redeemed, the Company will give the
Trustee written notice in the form of an Officers' Certificate not fewer than
thirty-five (35) days (or such shorter period of time as may be acceptable to
the Trustee) prior to the redemption date as to the aggregate principal amount
of Notes to be redeemed. If fewer than all the Notes are to be redeemed, the
Trustee shall select the Notes or portions thereof to be redeemed (in principal
amounts of $1,000 or integral multiples thereof), by lot, or by a method the
Trustee considers fair and appropriate (as long as such method is not prohibited
by the rules of any United States national securities exchange or of an
established automated over-the-counter trading market in the United States on
which the Notes are then listed). If any Note selected for partial redemption
is converted in part after such selection, the converted portion of such Note
shall be deemed (so far as may be) to be the portion to be selected for
redemption. The Notes (or portions thereof) so selected shall be deemed duly
selected for redemption for all purposes hereof, notwithstanding that any such
Note is converted as a whole or in part before the mailing of the notice of
redemption.
Upon any redemption of less than all Notes, the Company and the Trustee may
(but need not) treat as outstanding any Notes surrendered for conversion during
the period of fifteen (15) days next preceding the mailing of a notice of
redemption and may (but need not) treat as not outstanding any Note
authenticated and delivered during such period in exchange for the unconverted
portion of any Note converted in part during such period.
Section 3.3 Payment of Notes Called for Redemption. If notice of
--------------------------------------
redemption has been given as above provided, the Notes or portion of Notes with
respect to which such notice has been given shall, unless converted into Common
Stock pursuant to the terms hereof, become due and payable on the date and at
the place or places stated in such notice at the applicable redemption price,
together with interest accrued to, but excluding, the date fixed for redemption,
and on and after said date (unless the Company shall default in the payment of
such Notes at the redemption price, together with interest accrued to, but
excluding, said date) interest on the Notes or portion of Notes so called for
redemption shall cease to accrue and such Notes shall cease after the close of
business on the Business Day next preceding the date fixed for redemption to be
convertible into Common Stock and, except as provided in Sections 8.5 and 13.4,
to be entitled to any benefit or security under this Indenture, and the holders
thereof shall have no right in respect of such Notes except the right to receive
the redemption price thereof and unpaid interest to, but excluding, the date
fixed for redemption. On presentation and surrender of such Notes at a place of
payment in said notice specified, the said Notes or the specified portions
thereof to be redeemed shall be paid and redeemed by the Company at the
applicable redemption price, together with interest accrued thereon to, but
excluding, the date fixed for redemption; provided that, if the applicable
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redemption date is an interest payment date, the semi-annual payment of interest
becoming due on such date shall be payable to the holders of such Notes
registered as such on the relevant record date subject to the terms and
provisions of Section 2.3 hereof.
Upon presentation of any Note redeemed in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the holder thereof, at
the expense of the Company, a new Note or Notes, of authorized denominations, in
principal amount equal to the unredeemed portion of the Notes so presented.
Notwithstanding the foregoing, the Trustee shall not redeem any Notes or
mail any notice of optional redemption during the continuance of a default in
payment of interest or premium on the Notes or of any Event of Default of which,
in the case of any Event of Default other than under Section 7.1(a), (b) or (c),
a Responsible Officer of the Trustee has knowledge. If any Note called for
redemption shall not be so paid upon surrender thereof for redemption, the
principal and premium, if any, shall, until paid or duly provided for, bear
interest from the date fixed for redemption at the rate borne by the Note and
such Note shall remain convertible into Common Stock until the principal and
premium, if any, shall have been paid or duly provided for.
Section 3.4 Conversion Arrangement on Call for Redemption. In
---------------------------------------------
connection with any redemption of Notes, the Company may arrange for the
purchase and conversion of any Notes by an agreement with one or more investment
bankers or other purchasers to purchase such Notes by paying to the Trustee in
trust for the Noteholders, on or before the date fixed for redemption, an amount
not less than the applicable redemption price, together with interest accrued to
the date fixed for redemption, of such Notes. Notwithstanding anything to the
contrary contained in this Article III, the obligation of the Company to pay the
redemption price of such Notes, together with interest accrued to, but
excluding, the date fixed for redemption, shall be deemed to be satisfied and
discharged to the extent such amount is so paid by such purchasers. If such an
agreement is entered into, a copy of which, certified as true and correct by the
Secretary or Assistant Secretary of the Company will be filed with the Trustee
prior to the date fixed for redemption, any Notes not duly surrendered for
conversion by the holders thereof may, at the option of the Company, be deemed,
to the fullest extent permitted by law, acquired by such purchasers from such
holders and (notwithstanding anything to the contrary contained in Article XV)
surrendered by such purchasers for conversion, all as of immediately prior to
the close of business on the date fixed for redemption (and the right to convert
any such Notes shall be deemed to have been extended through such time), subject
to payment of the above amount as aforesaid. At the direction of the Company,
the Trustee shall hold and dispose of any such amount paid to it in the same
manner as it would monies deposited with it by the Company for the redemption of
Notes. Without the Trustee's prior written consent, no arrangement between the
Company and such purchasers for the purchase and conversion of any Notes shall
increase or otherwise affect any of the powers, duties, responsibilities or
obligations of the Trustee as set forth in this Indenture, and the Company
agrees to indemnify the Trustee from, and hold it harmless against, any loss,
liability or expense arising out of or in connection with any such arrangement
for the purchase and conversion of any Notes between the Company and such
purchasers to which the Trustee has not consented in writing, including the
costs and expenses incurred by the Trustee in the defense of any claim or
liability arising out of or in connection with the exercise or performance of
any of its powers, duties, responsibilities or obligations under this Indenture.
ARTICLE IV
SUBORDINATION OF NOTES
----------------------
Section 4.1 Agreement of Subordination. The Company covenants and
--------------------------
agrees, and each holder of Notes issued hereunder by his acceptance thereof
likewise covenants and agrees, that all Notes shall be issued subject to the
provisions of this Article IV; and each person holding any Note, whether upon
original issue or upon transfer, assignment or exchange thereof, accepts and
agrees to be bound by such provisions.
The payment of the principal of, premium, if any, and interest on all Notes
(including, but not limited to, the redemption price or repurchase price with
respect to the Notes to be redeemed or repurchased, as provided in this
Indenture) issued hereunder shall, to the extent and in the manner hereinafter
set forth, be subordinated to the prior payment in full, in cash or in such
other form of payment as may be acceptable to the holders of Senior
Indebtedness, of all Senior Indebtedness, whether outstanding at the date of
this Indenture or thereafter incurred or created.
No provision of this Article IV shall prevent the occurrence of any default
or Event of Default hereunder.
Section 4.2 Payments to Noteholders. No payment (including pursuant to
-----------------------
any redemption or repurchase of Notes) shall be made with respect to the
principal of, or premium, if any, or interest (including Liquidated Damages, if
any) on the Notes, except payments and distributions made by the Trustee as
permitted by Section 4.6, if:
(1) a default in the payment of principal, premium, if any,
or interest or other payment due on Senior Indebtedness occurs and is
continuing beyond any applicable period of grace; or
(2) any other default occurs and is continuing with respect
to Designated Senior Indebtedness that then permits holders of the
Designated Senior Indebtedness as to which such default related to
accelerate its maturity and the Trustee and the Company receive a notice of
such default (a
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<PAGE>
"Payment Blockage Notice") from a representative of Designated Senior
Indebtedness or a holder of Designated Senior Indebtedness or the Company.
The Company may and shall resume payments on the Notes (1) in the case of a
payment default, on the date upon which such default is cured or waived or
ceases to exist, and (2) in the case of a nonpayment default with respect to
Designated Senior Indebtedness, on the earlier of the date on which the
nonpayment default is cured or waived or ceases to exist or 179 days pass after
the date on which the applicable Payment Blockage Notice is received.
No new period of payment blockage may be commenced pursuant to a Payment
Blockage Notice unless (A) at least 365 days shall have elapsed since the first
day of effectiveness of the immediately prior Payment Blockage Notice and (B)
all scheduled payments of principal, premium, if any, and interest on the Notes
that have come due have been paid in full in cash, or in such other form of
payment as may be acceptable to the holders of the Notes. No default (whether
or not such event of default is on the same issue of Designated Senior
Indebtedness) that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice.
In addition, in the event of any acceleration of the Notes because of an
Event of Default, no payment or distribution (including with respect to any
redemption or repurchase of the Notes) shall be made to the Trustee or any
holder of Notes with respect to the principal of, premium, if any, or interest
(including Liquidated Damages, if any) on the Notes, except payments and
distributions made by the Trustee as permitted by Section 4.6, until all Senior
Indebtedness has been paid in full in cash or other payment satisfactory to the
holders of Senior Indebtedness or such acceleration is rescinded in accordance
with the terms of this Indenture. If payment of the Notes is accelerated because
of an Event of Default, the Company shall promptly notify holders of Senior
Indebtedness of the acceleration.
Notwithstanding the foregoing, in the event that the Trustee or any holder
of Notes receives any payment or distribution of assets of the Company of any
kind in contravention of any term of this Indenture, whether in cash, property
or securities, including, without limitation, by way of setoff or otherwise,
before all Senior Indebtedness is paid in full, in cash or such other form of
payment as may be acceptable to the holders of Senior Indebtedness, then such
payment or distribution shall be held by the recipient or recipients in trust
for the benefit of, and shall immediately be paid over or delivered to, the
holders of Senior Indebtedness or their respective representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Senior Indebtedness may have been issued,
as their respective interests may appear, as calculated by the Company, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to make payment in full, in cash or such other form of payment
as may be acceptable to the holders of Senior Indebtedness, of all Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution, or provision therefor, to or for the holders of such Senior
Indebtedness.
Nothing in this Section 4.2 shall apply to claims of, or payments to, the
Trustee pursuant to Section 8.6. This Section 4.2 shall be subject to the
further provisions of Section 4.6.
Section 4.3 Bankruptcy and Dissolution, Etc. Upon any payment by the
--------------------------------
Company, or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to creditors upon any dissolution,
winding-up, liquidation or reorganization of the Company, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
amounts due or to become due upon all Senior Indebtedness shall first be paid in
full, in cash or in such other form of payment as may be acceptable to the
holders of Senior Indebtedness, before any payment is made on account of the
principal or premium, if any, and interest on the Notes (except payments made
pursuant to Article XIII from monies deposited with the Trustee pursuant thereto
prior to the happening of such dissolution, winding-up, liquidation or
reorganization or bankruptcy, insolvency, receivership or other such
proceedings); and upon any such dissolution, winding-up, liquidation or
reorganization or bankruptcy, insolvency, receivership or other such
proceedings, any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the holders of the Notes or the Trustee under this Indenture would be
entitled, except for the provision of this Article IV, shall (except as
aforesaid) be paid by the Company or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or distribution,
or by the holders of the Notes or by the Trustee under this Indenture if
received by them or it, directly to the holders of Senior Indebtedness (pro rata
to such holders on the basis of the respective amounts of Senior Indebtedness
held by such holders, or as otherwise required by law or a court order) or their
respective representative or representatives, or to the trustee or trustees
under any indenture pursuant to which any instruments evidencing any Senior
Indebtedness may have been issued, as their respective interests may appear, to
the extent necessary to pay all Senior Indebtedness in full in cash or in such
other form of payment as may be acceptable to the holders of Senior Indebtedness
after giving effect to any concurrent payment or distribution to or for the
holders of Senior Indebtedness, before any payment or distribution is made to
the holders of the Notes or to the Trustee under this Indenture.
Notwithstanding the foregoing, in the event that the Trustee or any holder
of Notes receives any payment or distribution of assets of the Company of any
kind in contravention of any term of this Indenture, whether in cash, property
or securities, including, without limitation, by way of setoff or otherwise,
before all Senior Indebtedness is paid in full, in cash or such other form of
payment as may be acceptable to the holders of Senior Indebtedness, then such
payment or distribution shall be held by the recipient or recipients in trust
for the benefit of, and shall immediately be paid over or delivered to, the
holders of Senior Indebtedness or their respective representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Senior Indebtedness may have been issued,
as their respective interests may appear, as calculated by the Company, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to make payment in full, in cash or such other form of payment
as may be acceptable to the holders of Senior Indebtedness, of all Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution, or provision therefor, to or for the holders of such Senior
Indebtedness.
For purposes of this Section 4.3, the words "cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment, the payment of which is
subordinated (at least to the extent provided in this Article IV with respect to
the Notes) to the payment of all Senior Indebtedness which may at the time be
outstanding; provided that (i) the Senior Indebtedness is assumed by the new
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corporation, if any, resulting from such reorganization or adjustment, and (ii)
the rights of the holders of Senior Indebtedness (other than leases which are
not assumed by the Company or by the new corporation, as the case may be) are
not, without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided for in Article XII shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section 4.3
if such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in Article XII.
Nothing in this Section 4.3 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 8.6. This Section 4.3 shall be subject to
the further provisions of Section 4.6.
Section 4.4 Subrogation of Notes. Subject to the payment in full in cash
--------------------
or in such other form of payment as may be acceptable to the holders of Senior
Indebtedness of all Senior Indebtedness, the rights of the holders of the Notes
shall be subrogated to the extent of the payments or distributions made to the
holders of such Senior Indebtedness pursuant to the provisions of this Article
IV (equally and ratably with the holders of all indebtedness of the Company
which by its express terms is subordinated to other indebtedness of the Company
to substantially the same extent as the Notes are subordinated and is entitled
to like rights of subrogation) to the rights of the holders of Senior
Indebtedness to receive payments or distributions of cash, property or
securities of the Company applicable to the Senior Indebtedness until the
principal of, and premium, if any, and interest on the Notes shall be paid in
full; and, for the purposes of such subrogation, no payments or distributions to
the holders of the Senior Indebtedness of any cash, property or securities to
which the holders of the Notes or the Trustee would be entitled except for the
provisions of this Article IV, and no payment over pursuant to the provisions of
this Article IV, to or for the benefit of the holders of Senior Indebtedness by
holders of the Notes or the Trustee, shall, as
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<PAGE>
between the Company, its creditors other than holders of Senior Indebtedness,
and the holders of the Notes, be deemed to be a payment by the Company to or on
account of the Senior Indebtedness; and no payments or distributions of cash,
property or securities to or for the benefit of the holders of the Notes
pursuant to the subrogation provisions of this Article IV, which would otherwise
have been paid to the holders of Senior Indebtedness shall be deemed to be a
payment by the Company to or for the account of the Notes. It is understood that
the provisions of this Article IV are and are intended solely for the purposes
of defining the relative rights of the holders of the Notes, on the one hand,
and the holders of the Senior Indebtedness, on the other hand.
Nothing contained in this Article IV or elsewhere in this Indenture or in
the Notes is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the holders of the Notes, the
obligation of the Company, which is absolute and unconditional, to pay to the
holders of the Notes the principal of, and premium, if any, and interest on the
Notes as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of the holders of
the Notes and creditors of the Company other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or the
holder of any Note from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article IV of the holders of Senior Indebtedness in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy.
Upon any payment or distribution of assets of the Company referred to in
this Article IV, the Trustee, subject to the provisions of Section 8.1, and the
holders of the Notes shall be entitled to rely upon any order or decree made by
any court of competent jurisdiction in which such bankruptcy, dissolution,
winding-up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other person making such payment or distribution, delivered to the Trustee or
to the holders of the Notes, for the purpose of ascertaining the persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article IV.
Section 4.5 Authorization by Noteholders. Each holder of a Note by his
----------------------------
acceptance thereof authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Article IV and appoints the Trustee his attorney-in-fact for
any and all such purposes.
Section 4.6 Notice to Trustee. The Company shall give written notice to
-----------------
the Trustee of the issuance of any Designated Senior Indebtedness. In addition,
the Company shall give prompt written notice in the form of an Officers'
Certificate to a Responsible Officer of the Trustee and to any paying agent of
any fact known to the Company which would prohibit the making of any payment of
monies to or by the Trustee or any paying agent in respect of the Notes pursuant
to the provisions of this Article IV. Notwithstanding the provisions of this
Article IV or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any Senior Indebtedness or of any
default or event of default with respect to any Senior Indebtedness or of any
other facts which would prohibit the making of any payment of monies to or by
the Trustee in respect of the Notes pursuant to the provisions of this Article
IV, unless and until a Responsible Officer of the Trustee shall have received
written notice thereof at the Corporate Trust Office from the Company (in the
form of an Officers' Certificate) or a holder or holders of Senior Indebtedness
or from any trustee thereof who shall have been certified by the Company or
otherwise established to the reasonable satisfaction of the Trustee to be such
holder or trustee; and before the receipt of any such written notice, the
Trustee, subject to the provisions of Section 8.1, shall be entitled in all
respects to assume that no such facts exist; provided that if on a date at least
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two (2) Business Days prior to the date upon which by the terms hereof any such
monies may become payable for any purpose (including, without limitation, the
payment of the principal of, or premium, if any, or interest on any Note), the
Trustee shall not have received with respect to such monies the notice provided
for in this Section 4.6, then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive such
monies and to apply the same to the purpose for which they were received, and
shall not be affected by any notice to the contrary which may be received by it
on or after such prior date.
Notwithstanding anything to the contrary hereinbefore set forth, nothing
shall prevent (a) any payment by the Company or the Trustee to the Noteholders
of amounts in connection with a redemption of Notes if (i) notice of such
redemption has been given to the Noteholders pursuant to Article III prior to
the receipt by the Trustee of written notice as aforesaid, and (ii) such notice
of redemption is given not earlier than sixty (60) days before the redemption
date, (b) any payment by the Company or the Trustee to the Noteholders of
amounts in connection with a repurchase of Notes if (i) notice of such
repurchase has been given pursuant to Article XVI prior to the receipt by the
Trustee of written notice as aforesaid, and (ii) such notice of repurchase is
given not earlier than forty (40) days before the repurchase date, or (c) any
payment by the Trustee to the Noteholders of monies deposited with it pursuant
to Section 13.1.
The Trustee, subject to the provisions of Section 8.1, shall be entitled to
rely on the delivery to it of a written notice by a person representing himself
to be a holder of Senior Indebtedness (or a trustee on behalf of such holder) to
establish that such notice has been given by a holder of Senior Indebtedness or
a trustee on behalf of any such holder or holders. In the event that the Trustee
determines in good faith that further evidence is required with respect to the
right of any person as a holder of Senior Indebtedness to participate in any
payment or distribution pursuant to this Article IV, the Trustee may request
such person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of Senior Indebtedness held by such person, the extent to which
such person is entitled to participate in such payment or distribution and any
other facts pertinent to the rights of such person under this Article IV, and if
such evidence is not furnished the Trustee may defer any payment to such person
pending judicial determination as to the right of such person to receive such
payment.
Section 4.7 Trustee's Relation to Senior Indebtedness. The Trustee and
-----------------------------------------
any agent of the Company or the Trustee in its individual capacity shall be
entitled to all the rights set forth in this Article IV in respect of any Senior
Indebtedness at any time held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in Section 8.13 or elsewhere in this Indenture
shall deprive the Trustee or any such agent of any of its rights as such holder.
Nothing in this Article IV shall apply to claims of, or payments to, the Trustee
under or pursuant to Section 8.6.
With respect to the holders of Senior Indebtedness, the Trustee undertakes
to perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article IV, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and, subject to the
provisions of Section 4.2 and Section 8.1, the Trustee shall not be liable to
any holder of Senior Indebtedness if it shall pay over or deliver to holders of
Notes, the Company or any other person money or assets to which any holder of
Senior Indebtedness shall be entitled by virtue of this Article IV or otherwise.
Section 4.8 No Impairment of Subordination. No right of any present or
------------------------------
future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.
Section 4.9 Certain Conversions Deemed Payment. For the purposes of this
----------------------------------
Article only, (1) the issuance and delivery of junior securities upon conversion
of Notes in accordance with Article XV shall not be deemed to constitute a
payment or distribution on account of the principal of (or premium, if any) or
interest on Notes or on account of the purchase or other acquisition of Notes,
and (2) the payment, issuance or delivery of cash (except in satisfaction of
fractional shares pursuant to Section 15.3), property or securities (other than
junior securities) upon conversion of a Note shall be deemed to constitute
payment on account of the principal of such Note. For the purposes of this
Section, the term "junior securities" means (a) shares of any stock of any class
of the Company and (b) securities of the Company which are subordinated in right
of payment to all Senior Indebtedness which may be outstanding at the time of
issuance or delivery of such securities to substantially the same extent as, or
to a greater extent than, the Notes are so subordinated as provided in this
Article. Nothing contained in this Article or elsewhere in this Indenture or in
the Notes is intended to or shall impair, as among the Company, its creditors
other than holders of Senior Indebtedness and the holders of the Notes, the
right, which is absolute and unconditional, of the
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<PAGE>
holder of any Note to convert such Note in accordance with Article XV.
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
Section 5.1 Payment of Principal, Premium and Interest. The Company
------------------------------------------
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any, and interest on each of the Notes at the
places, at the respective times and in the manner provided herein and in the
Notes.
Section 5.2 Maintenance of Office or Agency. The Company will maintain
-------------------------------
in the Borough of Manhattan, The City of New York, an office or agency where the
Notes may be surrendered for registration of transfer or exchange or for
presentation for payment or for conversion, redemption or repurchase and where
notices and demands to or upon the Company in respect of the Notes and this
Indenture may be served. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency not designated or appointed by the Trustee. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office or the
office or agency of the Trustee in the Borough of Manhattan, The City of New
York.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided that no
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such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, The City
of New York, for such purposes. The Company will give prompt written notice to
the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.
The Company hereby initially designates the Trustee as paying agent, Note
registrar, Custodian and conversion agent and the Corporate Trust Office and the
office or agency of the Trustee in the Borough of Manhattan, The City of New
York (which initially shall be State Street Bank and Trust Company, an Affiliate
of the Trustee located at 61 Broadway, Concourse Level, Corporate Trust Window,
New York, New York 10006) as one such office or agency of the Company for each
of the aforesaid purposes.
So long as the Trustee is the Note registrar, the Trustee agrees to mail,
or cause to be mailed, the notices set forth in Section 8.10(a) and the third
paragraph of Section 8.11.
Section 5.3 Appointments to Fill Vacancies in Trustee's Office. The
--------------------------------------------------
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 8.10, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 5.4 Provisions as to Paying Agent.
-----------------------------
(a) If the Company shall appoint a paying agent other than
the Trustee or if the Trustee shall appoint such a paying agent, it will
cause such paying agent to execute and deliver to the Trustee an instrument
in which such agent shall agree with the Trustee, subject to the provisions
of this Section 5.4:
(1) that it will hold all sums held by it as such agent
for the payment of the principal of and premium, if any, or
interest on the Notes (whether such sums have been paid to it
by the Company or by any other obligor on the Notes) in trust
for the benefit of the holders of the Notes;
(2) that it will give the Trustee notice of any failure
by the Company (or by any other obligor on the Notes) to make
any payment of the principal of and premium, if any, or
interest on the Notes when the same shall be due and payable;
and
(3) that at any time during the continuance of an Event
of Default, upon request of the Trustee, it will forthwith pay
to the Trustee all sums so held in trust.
The Company shall, on or before each due date of the principal
of, premium, if any, or interest on the Notes, deposit with the paying
agent a sum sufficient to pay such principal, premium, if any, or interest,
and (unless such paying agent is the Trustee) the Company will promptly
notify the Trustee of any failure to take such action, provided that if
such deposit is made on the due date, such deposit must be received by the
paying agent by 10:00 a.m., New York City time, on such date.
(b) If the Company shall act as its own paying agent, it
will, on or before each due date of the principal of, premium, if any, or
interest on the Notes, set aside, segregate and hold in trust for the
benefit of the holders of the Notes a sum sufficient to pay such principal,
premium, if any, or interest so becoming due and will notify the Trustee of
any failure to take such action and of any failure by the Company (or any
other obligor under the Notes) to make any payment of the principal of,
premium, if any, or interest on the Notes when the same shall become due
and payable.
(c) Anything in this Section 5.4 to the contrary
notwithstanding, the Company may, at any time, for the purpose of obtaining
a satisfaction and discharge of this Indenture, or for any other reason,
pay or cause to be paid to the Trustee all sums held in trust by the
Company or any paying agent hereunder as required by this Section 5.4, such
sums to be held by the Trustee upon the trusts herein contained and upon
such payment by the Company or any paying agent to the Trustee, the Company
or such paying agent shall be released from all further liability with
respect to such sums.
(d) Anything in this Section 5.4 to the contrary
notwithstanding, the agreement to hold sums in trust as provided in this
Section 5.4 is subject to Sections 13.3 and 13.4.
Section 5.5 Existence. Subject to Article XII, the Company will do or
---------
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence.
Section 5.6 Rule 144A Information Requirement. Within the period prior
---------------------------------
to the expiration of the holding period applicable to sales thereof under Rule
144(k) under the Securities Act (or any successor provision), the Company
covenants and agrees that it shall, during any period in which it is not subject
to Section 13 or 15(d) under the Exchange Act, make available to any holder or
beneficial holder of Notes or any Common Stock issued upon conversion thereof,
in each case which continue to be Restricted Securities, in connection with any
sale thereof and any prospective purchaser of Notes or such Common Stock from
such holder or beneficial holder, the information required pursuant to Rule
144A(d)(4) under the Securities Act upon the request of any holder or beneficial
holder of the Notes or such Common Stock and it will take such further action as
any holder or beneficial holder of such Notes or such Common Stock may
reasonably request, all to the extent required from time to time to
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<PAGE>
enable such holder or beneficial holder to sell its Notes or Common Stock
without registration under the Securities Act within the limitation of the
exemption provided by Rule 144A, as such rule may be amended from time to time.
Upon the request of any holder or any beneficial holder of the Notes or such
Common Stock, the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.
Section 5.7 Stay, Extension and Usury Laws. The Company covenants (to the
------------------------------
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law or other law which would prohibit or forgive
the Company from paying all or any portion of the principal of or interest on
the Notes as contemplated herein, wherever enacted, now or at any time hereafter
in force, or which may affect the covenants or the performance of this
Indenture; and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law has been enacted.
Section 5.8 Compliance Certificate. The Company shall deliver to the
----------------------
Trustee within 120 days after the end of each fiscal year of the Company
(beginning with the fiscal year ending on December 31, 1997) an Officers'
Certificate stating whether or not to the best of their knowledge the signers
know of any default or Event of Default that occurred during such period. If
they do, such Officers' Certificate shall describe the default or Event of
Default and its status.
Section 5.9 Further Instruments and Acts. Upon request of the Trustee,
----------------------------
the Company will execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.
ARTICLE VI
NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
Section 6.1 Noteholders' Lists. The Company covenants and agrees that it
------------------
will furnish or cause to be furnished to the Trustee, semi-annually, not more
than fifteen (15) days after each February 15 and August 15 in each year
beginning with February 15, 1998, and at such other times as the Trustee may
request in writing, within thirty (30) days after receipt by the Company of any
such request (or such lesser time as the Trustee may reasonably request in order
to enable it to timely provide any notice to be provided by it hereunder), a
list in such form as the Trustee may reasonably require of the names and
addresses of the holders of Notes as of a date not more than fifteen (15) days
(or such other date as the Trustee may reasonably request in order to so provide
any such notices) prior to the time such information is furnished, except that
no such list need be furnished so long as the Trustee is acting as Note
registrar.
Section 6.2 Preservation and Disclosure of Lists.
------------------------------------
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of the
holders of Notes contained in the most recent list furnished to it as provided
in Section 6.1 or maintained by the Trustee in its capacity as Note registrar,
if so acting. The Trustee may destroy any list furnished to it as provided in
Section 6.1 upon receipt of a new list so furnished.
(b) The rights of Noteholders to communicate with other
holders of Notes with respect to their rights under this Indenture or under the
Notes and the corresponding rights and duties of the Trustee, shall be as
provided by the Trust Indenture Act.
(c) Every Noteholder, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of holders of Notes made
pursuant to the Trust Indenture Act.
Section 6.3 Reports by Trustee.
------------------
(a) After this Indenture has been qualified under the Trust
Indenture Act, the Trustee shall transmit to holders of Notes such reports
concerning the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto.
(b) A copy of such report shall, at the time of such
transmission to holders of Notes, be filed by the Trustee with each stock
exchange and automated quotation system upon which the Notes are listed and with
the Company. The Company will notify the Trustee when the Notes are listed on
any stock exchange or automated quotation system and when any such listing is
discontinued.
Section 6.4 Reports by Company.
------------------
(a) After this Indenture has been qualified under the Trust
Indenture Act, the Company shall file with the Trustee and the Commission, and
transmit to holders of Notes, such information, documents and other reports and
such summaries thereof, as may be required pursuant to the Trust Indenture Act
at the times and in the manner provided pursuant to such Act; provided that any
--------
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission.
(b) The Company will deliver to the Trustee (a) as soon as
available and in any event within ninety (90) days after the end of each fiscal
year of the Company (i) a consolidated balance sheet of the Company and its
subsidiaries as of the end of such fiscal year and the related consolidated
statements of operations, stockholders' equity and cash flows for such fiscal
year, all reported on by an independent public accountant of nationally
recognized standing and (ii) a report containing a management's discussion and
analysis of the financial condition and results of operations and a description
of the business and properties of the Company and (b) as soon as available and
in any event within forty five (45) days after the end of each of the first
three quarters of each fiscal year of the Company (i) an unaudited consolidated
management's discussion and analysis of the financial condition and results of
operations of the Company for such quarter; provided that the foregoing
statements and reports shall not be required for any fiscal year or quarter, as
the case may be, with respect to which the Company files or expects to file with
the Trustee an annual report or quarterly report, as the case may be, pursuant
to the preceding paragraph of this Section 6.4. The Trustee shall have no
liability as regards the substance of the information provided by the Company or
its agents pursuant to this Section 6.4.
ARTICLE VII
DEFAULTS AND REMEDIES
Section 7.1 Events of Default. In case one or more of the following
-----------------
Events of Default (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body) shall have occurred and be
continuing:
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<PAGE>
(a) default in the payment of the principal of and premium,
if any, on any of the Notes as and when the same shall become due and
payable either at maturity or in connection with any redemption, by
declaration or otherwise, whether or not such payment is prohibited by the
provisions of Article IV; or
(b) default for thirty (30) days in the payment of any
installment of interest or Liquidated Damages, if any, upon any of the
Notes as and when the same shall become due and payable, whether or not
such payment is prohibited by the provisions of Article IV; or
(c) failure on the part of the Company duly to observe or
perform any other of the covenants on the part of the Company in the Notes
or in this Indenture (other than a covenant a default in whose performance
or whose breach is elsewhere in this Section specifically dealt with) and
the continuance of such failure for a period of forty-five (45) days after
the date on which written notice of such failure, requiring the Company to
remedy the same, shall have been given to the Company by the Trustee, or to
the Company and a Responsible Officer of the Trustee by the holders of at
least 25% in aggregate principal amount of the outstanding Notes at the
time outstanding determined in accordance with Section 9.4; or
(d) a default in the payment of the Repurchase Price in
respect of any Note on the repurchase date therefor in accordance with the
provisions of Article XVI, whether or not such payment in cash of the
Repurchase Price is prohibited by the provisions of Article IV; or
(e) failure on the part of the Company to provide a written
notice of a Repurchase Event in accordance with Section 16.2; or
(f) failure on the part of the Company or any Significant
Subsidiary to make any payment at maturity, including any applicable grace
period, in respect of Indebtedness of, or guaranteed or assumed by, the
Company or any Significant Subsidiary, in a principal amount then
outstanding in excess of U.S. $5,000,000, and the continuance of such
failure for a period of thirty (30) days after there shall have been given,
by registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding, a written notice specifying
such default and requiring the Company to cause such default to be cured or
waived and stating that such notice is a "Notice of Default" hereunder; or
(g) default on the part of the Company or any Significant
Subsidiary with respect to any Indebtedness of, or guaranteed or assumed
by, the Company or any Significant Subsidiary, which default results in the
acceleration of Indebtedness in a principal amount then outstanding in
excess of U.S. $5,000,000, and such Indebtedness shall not have been
discharged or such acceleration shall not have been rescinded or annulled
for a period of thirty (30) days after there shall have been given, by
registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding, a written notice specifying
such default and requiring the Company to cause such Indebtedness to be
discharged or cause such default to be cured or waived or such acceleration
to be rescinded or annulled and stating that such notice is a "Notice of
Default" hereunder; or
(h) the Company or any Significant Subsidiary shall commence
a voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become due; or
(i) an involuntary case or other proceeding shall be
commenced against the Company or any Significant Subsidiary seeking
liquidation, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of ninety (90) consecutive days;
then, and in each and every such case (other than an Event of Default specified
in Section 7.1(h) or (i)), unless the principal of all of the Notes shall have
already become due and payable, either the Trustee or the holders of not less
than 25% in aggregate principal amount of the Notes then outstanding hereunder
determined in accordance with Section 9.4, by notice in writing to the Company
(and to the Trustee if given by Noteholders), may declare the principal of and
premium, if any, on all the Notes and the interest accrued thereon to be due and
payable immediately, and upon any such declaration the same shall become and
shall be immediately due and payable, anything in this Indenture or in the Notes
contained to the contrary notwithstanding. If an Event of Default specified in
Section 7.1(h) or (i) occurs and is continuing, the principal of all the Notes
and the interest accrued thereon shall be immediately due and payable. This
provision, however, is subject to the conditions that if, at any time after the
principal of the Notes shall have been so declared due and payable, and before
any judgment or decree for the payment of the monies due shall have been
obtained or entered as hereinafter provided, the Company shall pay or shall
deposit with the Trustee a sum sufficient to pay all matured installments of
interest upon all Notes and the principal of and premium, if any, on any and all
Notes which shall have become due otherwise than by acceleration (with interest
on overdue installments of interest (to the extent that payment of such interest
is enforceable under applicable law) and on such principal and premium, if any,
at the rate borne by the Notes, to the date of such payment or deposit) and
amounts due to the Trustee pursuant to Section 8.6, and if any and all defaults
under this Indenture, other than the nonpayment of principal of and premium, if
any, and accrued interest on Notes which shall have become due by acceleration,
shall have been cured or waived pursuant to Section 7.7, then and in every such
case the holders of a majority in aggregate principal amount of the Notes then
outstanding, by written notice to the Company and to the Trustee, may waive all
defaults or Events of Default and rescind and annul such declaration and its
consequences; but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent default or Event of Default, or shall impair any
right consequent thereon. The Company shall notify the Responsible Officer of
the Trustee, promptly upon becoming aware thereof, of any default or Event of
Default and shall deliver to the Trustee a statement specifying such default or
Event of Default and the action the Company has taken, is taking or proposes to
take with respect thereto.
In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such waiver or rescission and annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company, the holders of Notes, and the Trustee shall be restored respectively to
their several positions and rights hereunder, and all rights, remedies and
powers of the Company, the holders of Notes, and the Trustee shall continue as
though no such proceeding had been instituted.
Section 7.2 Payments of Notes on Default; Suit Therefor. The Company
-------------------------------------------
covenants that (a) in case default shall be made in the payment by the Company
of any installment of interest upon any of the Notes as and when the same shall
become due and payable, and such default shall have continued for a period of
thirty (30) days, or (b) in case default shall be made in the payment of the
principal of or premium, if any, on any of the Notes as and when the same shall
have become due and payable, whether at maturity of the Notes or in connection
with any redemption or repurchase, by declaration under this Indenture or
otherwise, then, upon demand of the Trustee, the Company will pay to the
Trustee, for the benefit of the holders of the Notes, the whole amount that then
shall have become due and payable on all such Notes for principal and premium,
if any, or interest, or both, as the case may be, with interest upon the overdue
principal and premium, if any, and (to the extent that payment of such interest
is enforceable under applicable law) upon the overdue installments of interest
at the rate borne by the Notes; and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
any expenses or liabilities incurred by the Trustee hereunder other than through
its negligence or bad faith. Until such demand by the Trustee, the Company may
pay the principal of and
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<PAGE>
premium, if any, and interest on the Notes to the registered holders, whether or
not the Notes are overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Notes
and collect in the manner provided by law out of the property of the Company or
any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable.
In the case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Notes under Title
11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the Company or
such other obligor, or in the case of any other judicial proceedings relative to
the Company or such other obligor upon the Notes, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 7.2, shall
be entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of principal, premium, if
any, and interest owing and unpaid in respect of the Notes, and, in case of any
judicial proceedings, to file such proofs of claim and other papers or documents
and to take such other actions as it may deem necessary or advisable in order to
have the claims of the Trustee and of the Noteholders allowed in such judicial
proceedings relative to the Company or any other obligor on the Notes, its or
their creditors, or its or their property, and to collect and receive any monies
or other property payable or deliverable on any such claims, and to distribute
the same after the deduction of any amounts due the Trustee under Section 8.6;
and any receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, custodian or similar official is hereby authorized by each of the
Noteholders to make such payments to the Trustee, and, in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due it for reasonable
compensation, expenses, advances and disbursements, including agents and counsel
fees incurred by it up to the date of such distribution. To the extent that such
payment of reasonable compensation, expenses, advances and disbursements out of
the estate in any such proceedings shall be denied for any reason, payment of
the same shall be secured by a lien on, and shall be paid out of, any and all
distributions, dividends, monies, securities and other property which the
holders of the Notes may be entitled to receive in such proceedings, whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
All rights of action and of asserting claims under this Indenture, or under
any of the Notes, may be enforced by the Trustee without the possession of any
of the Notes, or the production thereof on any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the holders of the Notes.
In any proceedings brought by the Trustee (and in any proceedings involving
the interpretation of any provision of this Indenture to which the Trustee shall
be a party) the Trustee shall be held to represent all the holders of the Notes,
and it shall not be necessary to make any holders of the Notes parties to any
such proceedings.
Section 7.3 Application of Monies Collected by Trustee. Any monies
------------------------------------------
collected by the Trustee pursuant to this Article VII shall be applied in the
order following, at the date or dates fixed by the Trustee for the distribution
of such monies, upon presentation of the several Notes, and stamping thereon the
payment, if only partially paid, and upon surrender thereof, if fully paid:
First: To the payment of all amounts due the Trustee under
Section 8.6;
Second: Subject to the provisions of Article IV, in case the
principal of the outstanding Notes shall not have become due and be unpaid,
to the payment of interest on the Notes in default in the order of the
maturity of the installments of such interest, with interest (to the extent
that such interest has been collected by the Trustee) upon the overdue
installments of interest at the rate borne by the Notes, such payments to
be made ratably to the persons entitled thereto;
Third: Subject to the provisions of Article IV, in case the
principal of the outstanding Notes shall have become due, by declaration or
otherwise, and be unpaid, to the payment of the whole amount then owing and
unpaid upon the Notes for principal and premium, if any, and interest, with
interest on the overdue principal and premium, if any, and (to the extent
that such interest has been collected by the Trustee) upon overdue
installments of interest at the rate borne by the Notes; and in case such
monies shall be insufficient to pay in full the whole amounts so due and
unpaid upon the Notes, then to the payment of such principal and premium,
if any, and interest without preference or priority of principal and
premium, if any, over interest, or of interest over principal and premium,
if any, or of any installment of interest over any other installment of
interest, or of any Note over any other Note, ratably to the aggregate of
such principal and premium, if any, and accrued and unpaid interest; and
Fourth: Subject to the provisions of Article IV, to the payment
of the remainder, if any, to the Company or any other person lawfully
entitled thereto.
Section 7.4 Proceedings by Noteholder. No holder of any Note shall have
-------------------------
any right by virtue of or by availing of any provision of this Indenture to
institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture, or for the appointment of a receiver, trustee,
liquidator, custodian or other similar official, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee written
notice of an Event of Default and of the continuance thereof, as hereinbefore
provided, and unless also the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding shall have made written request
upon the Trustee to institute such action, suit or proceeding in its own name as
Trustee hereunder and shall have offered to the Trustee such indemnity as may be
reasonably satisfactory to the Trustee against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee for sixty (60)
days after its receipt of such notice, request and offer of indemnity, shall
have neglected or refused to institute any such action, suit or proceeding and
no direction inconsistent with such written request shall have been given to the
Trustee pursuant to Section 7.7; it being understood and intended, and being
expressly covenanted by the taker and holder of every Note with every other
taker and holder and the Trustee, that no one or more holders of Notes shall
have any right in any manner whatever by virtue of or by availing of any
provision of this Indenture to affect, disturb or prejudice the rights of any
other holder of Notes, or to obtain or seek to obtain priority over or
preference to any other such holder, or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all holders of Notes (except as otherwise provided herein).
For the protection and enforcement of this Section 7.4, each and every
Noteholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
Notwithstanding any other provision of this Indenture and any provision of
any Note, the right of any holder of any Note to receive payment of the
principal of and premium, if any, and interest on such Note, on or after the
respective due dates expressed in such Note, or to institute suit for the
enforcement of any such payment on or after such respective dates against the
Company shall not be impaired or affected without the consent of such holder.
Anything in this Indenture or the Notes to the contrary notwithstanding,
the holder of any Note, without the consent of either the Trustee or the holder
of any other Note, in his own behalf and for his own benefit, may enforce, and
may institute and maintain any proceeding suitable to enforce, his rights of
conversion as provided herein.
Section 7.5 Proceedings by Trustee. In case of an Event of Default the
----------------------
Trustee may in its discretion proceed to protect and enforce the rights
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<PAGE>
vested in it by this Indenture by such appropriate judicial proceedings as the
Trustee shall deem most effectual to protect and enforce any of such rights,
either by suit in equity or by action at law or by proceeding in bankruptcy or
otherwise, whether for the specific enforcement of any covenant or agreement
contained in this Indenture or in aid of the exercise of any power granted in
this Indenture, or to enforce any other legal or equitable right vested in the
Trustee by this Indenture or by law.
Section 7.6 Remedies Cumulative and Continuing. Except as provided in
----------------------------------
Section 2.6, all powers and remedies given by this Article VII to the Trustee or
to the Noteholders shall, to the extent permitted by law, be deemed cumulative
and not exclusive of any thereof or of any other powers and remedies available
to the Trustee or the holders of the Notes, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained in this Indenture, and no delay or omission of the Trustee
or of any holder of any of the Notes to exercise any right or power accruing
upon any default or Event of Default occurring and continuing as aforesaid shall
impair any such right or power, or shall be construed to be a waiver of any such
default or any acquiescence therein; and, subject to the provisions of Section
7.4, every power and remedy given by this Article VII or by law to the Trustee
or to the Noteholders may be exercised from time to time, and as often as shall
be deemed expedient, by the Trustee or by the Noteholders.
Section 7.7 Direction of Proceedings and Waiver of Defaults by Majority
-----------------------------------------------------------
of Noteholders. The holders of a majority in aggregate principal amount of the
- --------------
Notes at the time outstanding determined in accordance with Section 9.4 shall
have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee; provided, however, that (a) such direction shall
-------- -------
not be in conflict with any rule of law or with this Indenture, and (b) the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction. The holders of a majority in aggregate
principal amount of the Notes at the time outstanding determined in accordance
with Section 9.4 may on behalf of the holders of all of the Notes waive any past
default or Event of Default hereunder and its consequences except (i) a default
in the payment of interest or premium, if any, on, or the principal of, the
Notes when due, (ii) a failure by the Company to convert any Notes into Common
Stock or (iii) a default in respect of a covenant or provisions hereof which
under Article XI cannot be modified or amended without the consent of the
holders of all Notes then outstanding. Upon any such waiver the Company, the
Trustee and the holders of the Notes shall be restored to their former positions
and rights hereunder; but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon. Whenever
any default or Event of Default hereunder shall have been waived as permitted by
this Section 7.7, said default or Event of Default shall for all purposes of the
Notes and this Indenture be deemed to have been cured and to be not continuing;
but no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon.
Section 7.8 Notice of Defaults. The Trustee shall, within ninety (90)
------------------
days after the occurrence of a default, mail to all Noteholders, as the names
and addresses of such holders appear upon the Note register, notice of all
defaults known to a Responsible Officer, unless such defaults shall have been
cured or waived before the giving of such notice; and provided that, except in
--------
the case of default in the payment of the principal of, or premium, if any, or
interest on any of the Notes, the Trustee shall be protected in withholding such
notice if and so long as a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determine that the withholding of such
notice is in the interests of the Noteholders.
Section 7.9 Undertaking to Pay Costs. All parties to this Indenture
------------------------
agree, and each holder of any Note by his acceptance thereof shall be deemed to
have agreed, that any court may, in its discretion, require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken or omitted by it as Trustee, the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit, having due
regard to the merits and good faith of the claims or defenses made by such party
litigant; provided that the provisions of this Section 7.9 shall not apply to
--------
any suit instituted by the Trustee, to any suit instituted by any Noteholder, or
group of Noteholders, holding in the aggregate more than 10% in principal amount
of the Notes at the time outstanding determined in accordance with Section 9.4,
or to any suit instituted by any Noteholder for the enforcement of the payment
of the principal of or premium, if any, or interest on any Note (including, but
not limited to, the redemption price or repurchase price with respect to the
Notes being redeemed or repurchased as provided in this Indenture) on or after
the due date expressed in such Note or to any suit for the enforcement of the
right to convert any Note in accordance with the provisions of Article XV.
Section 7.10 Delay or Omission Not Waiver. No delay or omission of the
----------------------------
Trustee or of any holder of any Note to exercise any right or remedy accruing
upon any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or any acquiescence therein. Every right and
remedy given by this Article or by law to the Trustee or to the holders of Notes
may be exercised from time to time, and as often as may be deemed expedient, by
the Trustee or by the holders of Notes, as the case may be.
ARTICLE VIII
CONCERNING THE TRUSTEE
----------------------
Section 8.1 Duties and Responsibilities of Trustee. The Trustee, prior
--------------------------------------
to the occurrence of an Event of Default and after the curing of all Events of
Default which may have occurred, undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture. In case an Event of
Default has occurred (which has not been cured or waived) the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct, except that
(a) prior to the occurrence of an Event of Default and after
the curing or waiving of all Events of Default which may have occurred:
(1) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture
and the Trust Indenture Act, and the Trustee shall not be
liable except for the performance of such duties and
obligations as are specifically set forth in this Indenture
and no implied covenants or obligations shall be read into
this Indenture and the Trust Indenture Act against the
Trustee; and
(2) in the absence of bad faith and willful misconduct
on the part of the Trustee, the Trustee may conclusively rely,
as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Trustee and conforming to the requirements of
this Indenture; but, in the case of any such certificates or
opinions which by any provisions hereof are specifically
required to be furnished to the Trustee, the Trustee shall be
under a duty to examine the same to determine whether or not
they conform to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Officers of the Trustee,
unless it shall be provided that the Trustee was negligent in ascertaining
the pertinent facts;
(c) the Trustee shall not be liable to any Noteholder with
respect to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the holders of not less than a majority in
principal amount of the Notes at the time outstanding determined as
provided in
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<PAGE>
Section 9.4 relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Indenture; and
(d) whether or not therein provided, every provision of this
Indenture relating to the conduct or affecting the liability of, or
affording protection to, the Trustee shall be subject to the provisions of
this Section.
None of the provisions contained in this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if there is reasonable ground for believing that
the repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
Section 8.2 Reliance on Documents, Opinions, Etc. Except as otherwise
-------------------------------------
provided in Section 8.1:
(a) the Trustee may rely and shall be protected in acting
upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, note, coupon or other paper or
document believed by it in good faith to be genuine and to have been signed
or presented by the proper party or parties;
(b) any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officers'
Certificate (unless other evidence in respect thereof be herein
specifically prescribed); and any resolution of the Board of Directors may
be evidenced to the Trustee by a copy thereof certified by the Secretary or
an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel and any advice or
Opinion of Counsel shall be full and complete authorization and protection
in respect of any action taken or omitted by it hereunder in good faith and
in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Noteholders pursuant to the provisions of
this Indenture, unless such Noteholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby;
(e) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney; provided, however, that if the payment within a reasonable
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time to the Trustee of the costs, expenses or liabilities likely to be
incurred by it in the making of such investigation is, in the opinion of
the Trustee, not reasonably assured to the Trustee by the security afforded
to it by the terms of this Indenture, the Trustee may require indemnity
reasonably satisfactory to the Trustee from the Noteholders against such
expenses or liability as a condition to so proceeding; the reasonable
expenses of every such examination shall be paid by the Company or, if paid
by the Trustee or any predecessor Trustee, shall be repaid by the Company
upon demand; and
(f) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed by
it with due care hereunder.
In no event shall the Trustee be liable for any consequential loss or damage of
any kind whatsoever (including but not limited to lost profits), even if the
Trustee has been advised of the likelihood of such loss or damage and regardless
of the form of action other than through the Trustee's willful misconduct or
gross negligence.
Section 8.3 No Responsibility for Recitals, Etc. The recitals contained
------------------------------------
herein and in the Notes (except in the Trustee's certificate of authentication)
shall be taken as the statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes. The Trustee shall not be accountable for the use or application by the
Company of any Notes or the proceeds of any Notes authenticated and delivered by
the Trustee in conformity with the provisions of this Indenture.
Section 8.4 Trustee, Paying Agents, Conversion Agents or Registrar May Own
--------------------------------------------------------------
Notes. The Trustee, any paying agent, any conversion agent or Note registrar, in
- -----
its individual or any other capacity, may become the owner or pledgee of Notes
with the same rights it would have if it were not Trustee, paying agent,
conversion agent or Note registrar.
Section 8.5 Monies to Be Held in Trust. Subject to the provisions of
--------------------------
Section 13.4, all monies received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received.
Money held by the Trustee in trust hereunder need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as may be
agreed from time to time by the Company and the Trustee.
Section 8.6 Compensation and Expenses of Trustee. The Company covenants
------------------------------------
and agrees to pay to the Trustee from time to time, and the Trustee shall be
entitled to, reasonable compensation for all services rendered by it hereunder
in any capacity (which shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust), and the Company will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances reasonably incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its agents and
counsel and of all persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence or willful misconduct.
The Company also covenants to indemnify the Trustee in any capacity under this
Indenture and its agents and any authenticating agent for, and to hold them
harmless against, any loss, liability or expense incurred without negligence or
willful misconduct on the part of the Trustee or such agent or authenticating
agent, as the case may be, and arising out of or in connection with the
acceptance or administration of this trust or in any other capacity hereunder,
including the costs and expenses of defending themselves against any claim of
liability in the premises. The obligations of the Company under this Section 8.6
to compensate or indemnify the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall be secured by a lien prior to that of
the Notes upon all property and funds held or collected by the Trustee as such,
except, subject to the effect of Sections 4.3 and 7.6, funds held in trust
herewith for the benefit of the holders of particular Notes prior to the date of
the accrual of such unpaid compensation or indemnifiable claim. The obligation
of the Company under this Section shall survive the satisfaction and discharge
of this Indenture. The indemnification provided in this Section 8.6 shall extend
to the officers, directors, agents and employees of the Trustee.
When the Trustee and its agents and any authenticating agent incur expenses
or render services after an Event of Default specified in Section 7.1(h) or (i)
occurs, the expenses and the compensation for the services are intended to
constitute expenses of administration under any bankruptcy, insolvency or
similar laws.
Section 8.7 Officers' Certificate as Evidence. Except as otherwise
---------------------------------
provided in Section 8.1, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or omitting any action hereunder, such
matter (unless
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<PAGE>
other evidence in respect thereof be herein specifically prescribed) may, in the
absence of negligence, willful misconduct, recklessness and bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such Officers' Certificate,
in the absence of negligence, willful misconduct, recklessness and bad faith on
the part of the Trustee, shall be full warrant to the Trustee for any action
taken or omitted by it under the provisions of this Indenture upon the faith
thereof.
Section 8.8 Conflicting Interests of Trustee. If the Trustee has or shall
--------------------------------
acquire a conflicting interest within the meaning of the Trust Indenture Act,
the Trustee shall either eliminate such interest or resign, to the extent and in
the manner provided by, and subject to the provisions of, the Trust Indenture
Act and this Indenture.
Section 8.9 Eligibility of Trustee. There shall at all times be a Trustee
----------------------
hereunder which shall be a person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus (together
with its corporate parent) of at least $50,000,000. If such person publishes
reports of condition at least annually, pursuant to law or to the requirements
of any supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect hereinafter specified in this Article.
Section 8.10 Resignation or Removal of Trustee.
---------------------------------
(a) The Trustee may at any time resign by giving written
notice of such resignation to the Company and by mailing notice thereof to
the holders of Notes at their addresses as they shall appear on the Note
register. Upon receiving such notice of resignation, the Company shall
promptly appoint a successor trustee by written instrument, in duplicate,
executed by order of the Board of Directors, one copy of which instrument
shall be delivered to the resigning Trustee and one copy to the successor
trustee. If no successor trustee shall have been so appointed and have
accepted appointment sixty (60) days after the mailing of such notice of
resignation to the Noteholders, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor trustee,
or any Noteholder who has been a bona fide holder of a Note or Notes for at
least six months may, subject to the provisions of Section 7.9, on behalf
of himself and all others similarly situated, petition any such court for
the appointment of a successor trustee. Such court may thereupon, after
such notice, if any, as it may deem proper and prescribe, appoint a
successor trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with Section 8.8
within a reasonable time after written request therefor by the
Company or by any Noteholder who has been a bona fide holder
of a Note or Notes for at least six months, or
(2) the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.9 and shall fail to resign
after written request therefor by the Company or by any such
Noteholder, or
(3) the Trustee shall become incapable of acting, or
shall be adjudged a bankrupt or insolvent, or a receiver of
the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of
the Board of Directors, one copy of which instrument shall be delivered to
the Trustee so removed and one copy to the successor trustee, or, subject
to the provisions of Section 7.9, any Noteholder who has been a bona fide
holder of a Note or Notes for at least six months may, on behalf of himself
and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a
successor trustee. Such court may thereupon, after such notice, if any, as
it may deem proper and prescribe, remove the Trustee and appoint a
successor trustee.
(c) The holders of a majority in aggregate principal amount
of the Notes at the time outstanding may at any time remove the Trustee and
nominate a successor trustee which shall be deemed appointed as successor
trustee unless within ten (10) days after notice to the Company of such
nomination the Company objects thereto, in which case the Trustee so
removed or any Noteholder, upon the terms and conditions and otherwise as
in Section 8.10(a) provided, may petition any court of competent
jurisdiction for an appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment
of a successor trustee pursuant to any of the provisions of this Section
8.10 shall become effective upon acceptance of appointment by the successor
trustee as provided in Section 8.11.
Section 8.11 Acceptance by Successor Trustee. Any successor trustee
-------------------------------
appointed as provided in Section 8.10 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written request
of the Company or of the successor trustee, the trustee ceasing to act shall,
upon payment of any amounts then due it pursuant to the provisions of Section
8.6, execute and deliver an instrument transferring to such successor trustee
all the rights and powers of the trustee so ceasing to act. Upon request of any
such successor trustee, the Company shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such successor
trustee all such rights and powers. Any trustee ceasing to act shall,
nevertheless, retain a lien upon all property and funds held or collected by
such trustee as such, except for funds held in trust for the benefit of holders
of particular Notes, to secure any amounts then due it pursuant to the
provisions of Section 8.6.
No successor trustee shall accept appointment as provided in this Section
8.11 unless at the time of such acceptance such successor trustee shall be
qualified under the provisions of Section 8.8 and be eligible under the
provisions of Section 8.9.
Upon acceptance of appointment by a successor trustee as provided in this
Section 8.11, each of the Company and the former trustee shall mail or cause to
be mailed notice of the succession of such trustee hereunder to the holders of
Notes at their addresses as they shall appear on the Note register. If the
Company fails to mail such notice within ten (10) days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Company.
Section 8.12 Succession by Merger, Etc. Any corporation or other entity
-------------------------
into which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation or other
entity succeeding to all or substantially all of the trust business of the
Trustee, shall be the successor to the Trustee hereunder without the execution
or filing of any paper or any further act on the part of any of the parties
hereto, provided that in the case of any corporation succeeding to all or
substantially all of the trust business of the Trustee such corporation shall be
qualified under the provisions of Section 8.8 and eligible under the provisions
of Section 8.9.
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<PAGE>
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture, any of the Notes shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the certificate
of authentication of any predecessor trustee or authenticating agent appointed
by such predecessor trustee, and deliver such Notes so authenticated; and in
case at that time any of the Notes shall not have been authenticated, any
successor to the Trustee or an authenticating agent appointed by such successor
trustee may authenticate such Notes either in the name of any predecessor
trustee hereunder or in the name of the successor trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have;
provided, however, that the right to adopt the certificate of authentication of
- -------- -------
any predecessor Trustee or to authenticate Notes in the name of any predecessor
Trustee shall apply only to its successor or successors by merger, conversion or
consolidation.
Section 8.13 Limitation on Rights of Trustee as Creditor. If and when the
-------------------------------------------
Trustee shall be or become a creditor of the Company (or any other obligor upon
the Notes), the Trustee shall be subject to the provisions of the Trust
Indenture Act regarding the collection of the claims against the Company (or any
such other obligor).
ARTICLE IX
CONCERNING THE NOTEHOLDERS
Section 9.1 Action by Noteholders. Whenever in this Indenture it is
---------------------
provided that the holders of a specified percentage in aggregate principal
amount of the Notes may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action, the holders of
such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by Noteholders
in person or by agent or proxy appointed in writing, or (b) by the record of the
holders of Notes voting in favor thereof at any meeting of Noteholders duly
called and held in accordance with the provisions of Article X, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of Noteholders. Whenever the Company or the Trustee solicits the taking
of any action by the holders of the Notes, the Company or the Trustee may fix in
advance of such solicitation, a date as the record date for determining holders
entitled to take such action. The record date shall be not more than fifteen
(15) days prior to the date of commencement of solicitation of such action.
Section 9.2 Proof of Execution by Noteholders. Subject to the provisions
---------------------------------
of Sections 8.1, 8.2 and 10.5, proof of the execution of any instrument by a
Noteholder or his agent or proxy shall be sufficient if made in accordance with
such reasonable rules and regulations as may be prescribed by the Trustee or in
such manner as shall be satisfactory to the Trustee. The holding of Notes shall
be proved by the Note register or by a certificate of the Note registrar. The
record of any Noteholders' meeting shall be proved in the manner provided in
Section 10.6.
Section 9.3 Who Are Deemed Absolute Owners. The Company, the Trustee, any
------------------------------
authenticating agent, any paying agent, any conversion agent and any Note
registrar may deem the person in whose name such Note shall be registered upon
the Note register to be, and may treat him as, the absolute owner of such Note
(whether or not such Note shall be overdue and notwithstanding any notation of
ownership or other writing thereon) for the purpose of receiving payment of or
on account of the principal of, premium, if any, and interest on such Note, for
conversion of such Note and for all other purposes; and neither the Company nor
the Trustee nor any paying agent nor any conversion agent nor any Note registrar
shall be affected by any notice to the contrary. All such payments so made to
any holder for the time being, or upon his order, shall be valid, and, to the
extent of the sum or sums so paid, effectual to satisfy and discharge the
liability for monies payable upon any such Note.
Section 9.4 Company-Owned Notes Disregarded. In determining whether the
-------------------------------
holders of the requisite aggregate principal amount of Notes have concurred in
any direction, consent, waiver or other action under this Indenture, Notes which
are owned by the Company or any other obligor on the Notes or by any person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company or any other obligor on the Notes shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination; provided that for the purposes of determining whether the Trustee
--------
shall be protected in relying on any such direction, consent, waiver or other
action only Notes which a Responsible Officer knows are so owned shall be so
disregarded. Notes so owned which have been pledged in good faith may be
regarded as outstanding for the purposes of this Section 9.4 if the pledgee
shall establish to the satisfaction of the Trustee the pledgee's right to vote
such Notes and that the pledgee is not the Company, any other obligor on the
Notes or a person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any such other obligor. In
the case of a dispute as to such right, any decision by the Trustee taken upon
the advice of counsel shall be full protection to the Trustee. Upon request of
the Trustee, the Company shall furnish to the Trustee promptly an Officers'
Certificate listing and identifying all Notes, if any, known by the Company to
be owned or held by or for the account of any of the above described persons;
and, subject to Section 8.1, the Trustee shall be entitled to accept such
Officers' Certificate as conclusive evidence of the facts therein set forth and
of the fact that all Notes not listed therein are outstanding for the purpose of
any such determination.
Section 9.5 Revocation of Consents; Future Holders Bound. At any time
--------------------------------------------
prior to (but not after) the evidencing to the Trustee, as provided in Section
9.1, of the taking of any action by the holders of the percentage in aggregate
principal amount of the Notes specified in this Indenture in connection with
such action, any holder of a Note which is shown by the evidence to be included
in the Notes the holders of which have consented to such action may, by filing
written notice with the Trustee at its Corporate Trust Office and upon proof of
holding as provided in Section 9.2, revoke such action so far as concerns such
Note. Except as aforesaid, any such action taken by the holder of any Note shall
be conclusive and binding upon such holder and upon all future holders and
owners of such Note and of any Notes issued in exchange or substitution
therefor, irrespective of whether any notation in regard thereto is made upon
such Note or any Note issued in exchange or substitution therefor.
ARTICLE X
NOTEHOLDERS' MEETINGS
Section 10.1 Purpose of Meetings. A meeting of Noteholders may be called
-------------------
at any time and from time to time pursuant to the provisions of this Article X
for any of the following purposes:
(1) to give any notice to the Company or to the Trustee or to
give any directions to the Trustee permitted under this Indenture, or to
consent to the waiving of any default or Event of Default hereunder and its
consequences, or to take any other action authorized to be taken by
Noteholders pursuant to any of the provisions of Article VII;
(2) to remove the Trustee and nominate a successor trustee
pursuant to the provisions of Article VIII;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 11.2;
(4) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of the
Notes under any other provision of this Indenture or under applicable law;
or
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<PAGE>
(5) to take any other action authorized by this Indenture or
under applicable law.
Section 10.2 Call of Meetings by Trustee. The Trustee may at any time
---------------------------
call a meeting of Noteholders to take any action specified in Section 10.1, to
be held at such time and at such place in the Borough of Manhattan, The City of
New York, as the Trustee shall determine. Notice of every meeting of the
Noteholders, setting forth the time and the place of such meeting and in general
terms the action proposed to be taken at such meeting and the establishment of
any record date pursuant to Section 9.1, shall be mailed to holders of Notes at
their addresses as they shall appear on the Note register. Such notice shall
also be mailed to the Company. Such notices shall be mailed not less than twenty
(20) nor more than ninety (90) days prior to the date fixed for the meeting.
Any meeting of Noteholders shall be valid without notice if the holders of
all Notes then outstanding are present in person or by proxy or if notice is
waived before or after the meeting by the holders of all Notes outstanding, and
if the Company and the Trustee are either present by duly authorized
representatives or have, before or after the meeting, waived notice.
Section 10.3 Call of Meetings by Company or Noteholders. In case at any
------------------------------------------
time the Company, pursuant to a resolution of its Board of Directors, or the
holders of at least 10% in aggregate principal amount of the Notes then
outstanding, shall have requested the Trustee to call a meeting of Noteholders,
by written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have mailed the notice of such
meeting within twenty (20) days after receipt of such request, then the Company
or such Noteholders may determine the time and the place for such meeting and
may call such meeting to take any action authorized in Section 10.1, by mailing
notice thereof as provided in Section 10.2.
Section 10.4 Qualifications for Voting. To be entitled to vote at any
-------------------------
meeting of Noteholders a person shall (a) be a holder of one or more Notes on
the record date pertaining to such meeting or (b) be a person appointed by an
instrument in writing as proxy by a holder of one or more Notes. The only
persons who shall be entitled to be present or to speak at any meeting of
Noteholders shall be the persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
Section 10.5 Regulations. Notwithstanding any other provisions of this
-----------
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Noteholders, in regard to proof of the holding of
Notes and of the appointment of proxies, and in regard to the appointment and
duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Noteholders as provided in Section 10.3, in which case the Company
or the Noteholders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the holders of a majority in principal
amount of the Notes represented at the meeting and entitled to vote at the
meeting.
Subject to the provisions of Section 9.4, at any meeting each Noteholder or
proxyholder shall be entitled to one vote for each $1,000 principal amount of
Notes held or represented by him; provided, however, that no vote shall be cast
-------- -------
or counted at any meeting in respect of any Note challenged as not outstanding
and ruled by the chairman of the meeting to be not outstanding. The chairman of
the meeting shall have no right to vote other than by virtue of Notes held by
him or instruments in writing as aforesaid duly designating him as the proxy to
vote on behalf of other Noteholders. Any meeting of Noteholders duly called
pursuant to the provisions of Section 10.2 or 10.3 may be adjourned from time to
time by the holders of a majority of the aggregate principal amount of Notes
represented at the meeting, whether or not constituting a quorum, and the
meeting may be held as so adjourned without further notice.
Section 10.6 Voting. The vote upon any resolution submitted to any
------
meeting of Noteholders shall be by written ballot on which shall be subscribed
the signatures of the holders of Notes or of their representatives by proxy and
the principal amount of the Notes held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Noteholders shall be prepared by the secretary of
the meeting and there shall be attached to said record the original reports of
the inspectors of votes on any vote by ballot taken thereat and affidavits by
one or more persons having knowledge of the facts setting forth a copy of the
notice of the meeting and showing that said notice was mailed as provided in
Section 10.2. The record shall show the principal amount of the Notes voting in
favor of or against any resolution. The record shall be signed and verified by
the affidavits of the permanent chairman and secretary of the meeting and one of
the duplicates shall be delivered to the Company and the other to the Trustee to
be preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 10.7 No Delay of Rights by Meeting. Nothing in this Article X
-----------------------------
contained shall be deemed or construed to authorize or permit, by reason of any
call of a meeting of Noteholders or any rights expressly or impliedly conferred
hereunder to make such call, any hindrance or delay in the exercise of any right
or rights conferred upon or reserved to the Trustee or to the Noteholders under
any of the provisions of this Indenture or of the Notes.
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.1 Supplemental Indentures Without Consent of Noteholders. The
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Company, when authorized by the resolutions of the Board of Directors, and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
(a) to make provision with respect to the conversion rights
of the holders of Notes pursuant to the requirements of Section 15.6;
(b) subject to Article IV, to convey, transfer, assign,
mortgage or pledge to the Trustee as security for the Notes, any property
or assets;
(c) to evidence the succession of another corporation to the
Company, or successive successions, and the assumption by the successor
corporation of the covenants, agreements and obligations of the Company
pursuant to Article XII;
(d) to add to the covenants of the Company such further
covenants, restrictions or conditions for the benefit of the holders of
Notes, and to make the occurrence, or the occurrence and continuance, of a
default in any such additional covenants, restrictions or conditions a
default or an Event of Default permitting the enforcement of all or any of
the several remedies provided in this Indenture as herein set forth;
provided, however, that in respect of any such additional covenant,
-------- -------
restriction or condition such supplemental indenture may provide for a
particular period of grace after default (which period may be
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shorter or longer than that allowed in the case of other defaults) or may
provide for an immediate enforcement upon such default or may limit the
remedies available to the Trustee upon such default;
(e) to provide for the issuance under this Indenture of Notes
in coupon form (including Notes registrable as to principal only) and to
provide for exchangeability of such Notes with the Notes issued hereunder
in fully registered form and to make all appropriate changes for such
purpose;
(f) to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture which may be
defective or inconsistent with any other provision contained herein or in
any supplemental indenture, or to make such other provisions in regard to
matters or questions arising under this Indenture which shall not
materially adversely affect the interests of the holders of the Notes;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes; or
(h) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the qualifications
of this Indenture under the Trust Indenture Act, or under any similar
federal statute hereafter enacted.
The Trustee is hereby authorized to join with the Company in the execution
of any such supplemental indenture, to make any further appropriate agreements
and stipulations which may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in its discretion, enter into any supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section
11.1 may be executed by the Company and the Trustee without the consent of the
holders of any of the Notes at the time outstanding, notwithstanding any of the
provisions of Section 11.2.
Section 11.2 Supplemental Indentures With Consent of Noteholders. With the
---------------------------------------------------
consent (evidenced as provided in Article IX) of the holders of not less than a
majority in aggregate principal amount of the Notes at the time outstanding
(determined in accordance with Section 9.4), the Company, when authorized by the
resolutions of the Board of Directors, and the Trustee may from time to time and
at any time enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or any supplemental indenture or of
modifying in any manner the rights of the holders of the Notes; provided,
--------
however, that no such supplemental indenture shall (i) extend the fixed maturity
- -------
of any Note, or reduce the rate or extend the time of payment of interest
thereon, or reduce the principal amount thereof or premium, if any, thereon, or
reduce any amount payable on redemption or repurchase thereof, impair, or change
in any respect adverse to the holder of Notes, the obligation of the Company to
repurchase any Note at the option of the holder upon the happening of a
Repurchase Event, or impair or adversely affect the right of any Noteholder to
institute suit for the payment thereof, or change the currency in which the
Notes are payable, or impair or change in any respect adverse to the Noteholders
the right to convert the Notes into Common Stock subject to the terms set forth
herein, including Section 15.6, or modify the provisions of this Indenture with
respect to the subordination of the Notes in a manner adverse to the
Noteholders, without the consent of the holder of each Note so affected, or (ii)
reduce the aforesaid percentage of Notes, the holders of which are required to
consent to any such supplemental indenture, without the consent of the holders
of all Notes then outstanding.
Upon the request of the Company, accompanied by a copy of the resolutions
of the Board of Directors certified by its Secretary or Assistant Secretary
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Noteholders as aforesaid,
the Trustee shall join with the Company in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in is discretion, but shall not be obligated to, enter into such
supplemental indenture.
It shall not be necessary for the consent of the Noteholders under this
Section 11.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Section 11.3 Effect of Supplemental Indentures. Any supplemental indenture
---------------------------------
executed pursuant to the provisions of this Article XI shall comply with the
Trust Indenture Act, as then in effect. Upon the execution of any supplemental
indenture pursuant to the provisions of this Article XI, this Indenture shall be
and be deemed to be modified and amended in accordance therewith and the
respective rights, limitation of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Company and the holders of Notes shall
thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
Section 11.4 Notation on Notes. Notes authenticated and delivered after
-----------------
the execution of any supplemental indenture pursuant to the provisions of this
Article XI may bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company or the Trustee
shall so determine, new Notes so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may, at the Company's expense, be
prepared and executed by the Company, authenticated by the Trustee (or an
authenticating agent duly appointed by the Trustee pursuant to Section 17.11)
and delivered in exchange for the Notes then outstanding, upon surrender of such
Notes then outstanding.
Section 11.5 Evidence of Compliance of Supplemental Indenture to Be
------------------------------------------------------
Furnished Trustee. The Trustee, subject to the provisions of Sections 8.1 and
- -----------------
8.2, may receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Article XI.
ARTICLE XII
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 12.1 Company May Consolidate, Etc. on Certain Terms. The Company
----------------------------------------------
shall not, directly or indirectly, consolidate with or merge with or into any
other Person or sell, lease, convey or transfer all its properties and assets
substantially as an entirety, whether in a single transaction or a series of
related transactions, to any Person or group of affiliated Persons unless:
(a) either (i) in the case of a merger or consolidation that
does not involve a transfer of all or substantially all of the Company's
properties and assets, the Company is the surviving entity or (ii) in case the
Company shall consolidate with or merge into another Person or sell, lease,
convey or transfer all its properties and assets substantially as an entirety,
whether in a single transaction or a series of related transactions, to any
Person, the Person formed by such consolidation or into which the Company is
merged, or the Person which acquires by sale, conveyance or transfer, or which
leases the properties and assets of the Company substantially as an entirety,
shall be a corporation, limited liability company, partnership or trust, shall
be organized and validly existing under the laws of the United States of
America, any state thereof or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and punctual payment of
the principal of, premium, if any, and interest (including Liquidated Damages,
if any) on all of the Notes as applicable, and the performance or observance of
every covenant of this Indenture on the part of the Company to be performed or
observed and shall have provided for the applicable
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conversion rights set forth in Section 15.6 and the repurchase rights set forth
in Article XVI;
(b) immediately after giving effect to such transaction, no
Event of Default, and no event that after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing; and
(c) the Company has delivered to the Trustee an Officers
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture comply
with this Article and that all conditions precedent herein provided for relating
to such transaction have been complied with, together with any documents
required under Article IX.
Section 12.2 Successor Corporation to Be Substituted. In case of any such
---------------------------------------
consolidation, merger, sale, conveyance or lease in accordance with Section
12.1, and, where required in accordance with Section 12.1(a) upon the assumption
by the successor corporation, by supplemental indenture, executed and delivered
to the Trustee and satisfactory in form to the Trustee, of the due and punctual
payment of the principal of and premium, if any, and interest on all of the
Notes and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, such successor
corporation shall succeed to and be substituted for the Company, with the same
effect as if it had been named herein as the party of the first part. Such
successor corporation thereupon may cause to be signed, and may issue either in
its own name or in the name of Level One Communications, Incorporated any or all
of the Notes issuable hereunder which theretofore shall not have been signed by
the Company and delivered to the Trustee; and, upon the order of such successor
corporation instead of the Company and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver, or cause to be authenticated and delivered, any Notes which
previously shall have been signed and delivered by the officers of the Company
to the Trustee for authentication, and any Notes which such successor
corporation thereafter shall cause to be signed and delivered to the Trustee for
that purpose. All the Notes so issued shall in all respects have the same legal
rank and benefit under this Indenture as the Notes theretofore or thereafter
issued in accordance with the terms of this Indenture as though all of such
Notes had been issued at the date of the execution hereof. In the event of any
such consolidation, merger, sale, conveyance or lease, the person named as the
"Company" in the first paragraph of this Indenture or any successor which shall
thereafter have become such in the manner prescribed in this Article XII may be
dissolved, wound up and liquidated at any time thereafter and such person shall
be released from its liabilities as obligor and maker of the Notes and from its
obligations under this Indenture.
In case of any such consolidation, merger, sale, conveyance or lease, such
changes in phraseology and form (but not in substance) may be made in the Notes
thereafter to be issued as may be appropriate.
Section 12.3 Opinion of Counsel to Be Given Trustee. The Trustee, subject
--------------------------------------
to Sections 8.1 and 8.2, shall receive an Officers' Certificate and an Opinion
of Counsel as conclusive evidence that any such consolidation, merger, sale,
conveyance or lease and any such assumption complies with the provisions of this
Article XII.
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE
Section 13.1 Discharge of Indenture. When (a) the Company shall deliver
----------------------
to the Trustee for cancellation all Notes theretofore authenticated (other than
any Notes which have been destroyed, lost or stolen and in lieu of or in
substitution for which other Notes shall have been authenticated and delivered)
and not theretofore canceled, or (b) all the Notes not theretofore canceled or
delivered to the Trustee for cancellation shall have become due and payable, or
are by their terms to become due and payable within one year or are to be called
for redemption within one year under arrangements satisfactory to the Trustee
for the giving of notice of redemption, and the Company shall deposit with the
Trustee, in trust, funds sufficient to pay at maturity or upon redemption of all
of the Notes (other than any Notes which shall have been mutilated, destroyed,
lost or stolen and in lieu of or in substitution for which other Notes shall
have been authenticated and delivered) not theretofore canceled or delivered to
the Trustee for cancellation, including principal and premium, if any, and
interest due or to become due to such date of maturity or redemption date, as
the case may be, and if in either case the Company shall also pay or cause to be
paid all other sums payable hereunder by the Company, then this Indenture shall
cease to be of further effect (except as to (i) remaining rights of registration
of transfer, substitution and exchange and conversion of Notes, (ii) rights
hereunder of Noteholders to receive payments of principal of and premium, if
any, and interest on, the Notes and the other rights, duties and obligations of
Noteholders, as beneficiaries hereof with respect to the amounts, if any, so
deposited with the Trustee and (iii) the rights, obligations and immunities of
the Trustee hereunder), and the Trustee, on demand of the Company accompanied by
an Officers' Certificate and an Opinion of Counsel as required by Section 17.5
and at the cost and expense of the Company, shall execute proper instruments
acknowledging satisfaction of and discharging this Indenture; the Company,
however, hereby agreeing to reimburse the Trustee for any costs or expenses
thereafter reasonably and properly incurred by the Trustee and to compensate the
Trustee for any services thereafter reasonably and properly rendered by the
Trustee in connection with this Indenture or the Notes.
Section 13.2 Deposited Monies to Be Held in Trust by Trustee. Subject to
-----------------------------------------------
Section 13.4, all monies deposited with the Trustee pursuant to Section 13.1
shall be held in trust and applied by it to the payment, notwithstanding the
provisions of Article IV, either directly or through any paying agent (including
the Company if acting as its own paying agent), to the holders of the particular
Notes for the payment or redemption of which such monies have been deposited
with the Trustee, of all sums due and to become due thereon for principal and
interest and premium, if any.
Section 13.3 Paying Agent to Repay Monies Held. Upon the satisfaction and
---------------------------------
discharge of this Indenture, all monies then held by any paying agent of the
Notes (other than the Trustee) shall, upon demand of the Company, be repaid to
it or paid to the Trustee, and thereupon such paying agent shall be released
from all further liability with respect to such monies.
Section 13.4 Return of Unclaimed Monies. Subject to the requirements of
--------------------------
applicable law, any monies deposited with or paid to the Trustee for payment of
the principal of, premium, if any, or interest on Notes and not applied but
remaining unclaimed by the holders of Notes for two years after the date upon
which the principal of, premium, if any, or interest on such Notes, as the case
may be, shall have become due and payable, shall be repaid to the Company by the
Trustee on demand and all liability of the Trustee shall thereupon cease with
respect to such monies; and the holder of any of the Notes shall thereafter look
only to the Company for any payment which such holder may be entitled to collect
unless an applicable abandoned property law designates another person.
Section 13.5 Reinstatement. If (i) the Trustee or the paying agent is
-------------
unable to apply any money in accordance with Section 13.2 by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application and (ii) the holders of at least a
majority in principal amount of the then outstanding Notes so request by written
notice to the Trustee, the Company's obligations under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred pursuant
to Section 13.1 until such time as the Trustee or the paying agent is permitted
to apply all such money in accordance with Section 13.2; provided, however, that
-------- -------
if the Company makes any payment of interest on or principal of any Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the holders of such Notes to receive such payment from the
money held by the Trustee or paying agent.
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ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 14 Indenture and Notes Solely Corporate Obligations. No
------------------------------------------------
recourse for the payment of the principal of or premium, if any, or interest on
any Note, or for any claim based thereon or otherwise in respect thereof, and no
recourse under or upon any obligation, covenant or agreement of the Company in
this Indenture or in any supplemental indenture or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, employee, agent, officer or director or subsidiary,
as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Notes.
ARTICLE XV
CONVERSION OF NOTES
Section 15.1 Right to Convert. Subject to and upon compliance with the
----------------
provisions of this Indenture, the holder of any Note shall have the right, at
his option, at any time following the date of original issuance of the Notes and
prior to the close of business on September 1, 2004 (except that, with respect
to any Note or portion of a Note which shall be called for redemption, such
right shall terminate, except as provided in the fifth paragraph of Section
15.2, at the close of business on the Business Day next preceding the date fixed
for redemption of such Note or portion of a Note unless the Company shall
default in payment due upon redemption thereof) to convert the principal amount
of any such Note, or any portion of such principal amount which is $1,000 or an
integral multiple thereof, into that number of fully paid and non-assessable
shares of Common Stock (as such shares shall then be constituted) obtained by
dividing the principal amount of the Note or portion thereof surrendered for
conversion by the Conversion Price in effect at such time, by surrender of the
Note so to be converted in whole or in part in the manner provided in Section
15.2. A holder of Notes is not entitled to any rights of a holder of Common
Stock until such holder has converted his Notes to Common Stock, and only to the
extent such Notes are deemed to have been converted to Common Stock under this
Article XV. A Note with respect to which a holder has delivered a notice in
accordance with Section 16.2 regarding such holder's election to require the
Company to repurchase such holder's Notes following the occurrence of a
Repurchase Event may be converted in accordance with this Article XV only if
such holder withdraws such notice by delivering a written notice of withdrawal
to the Company prior to the close of business on last Business Day prior to the
day fixed for repurchase.
Section 15.2 Exercise of Conversion Privilege; Issuance of Common Stock on
-------------------------------------------------------------
Conversion; No Adjustment for Interest or Dividends. In order to exercise the
- ---------------------------------------------------
conversion privilege with respect to any Note in definitive form, the holder of
any such Note to be converted in whole or in part shall surrender such Note,
duly endorsed, at an office or agency maintained by the Company pursuant to
Section 5.2, accompanied by the funds, if any, required by the penultimate
paragraph of this Section 15.2, and shall give written notice of conversion in
the form provided on the Notes (or such other notice which is acceptable to the
Company) to the office or agency that the holder elects to convert such Note or
such portion thereof specified in said notice. Such notice shall also state the
name or names (with address) in which the certificate or certificates for shares
of Common Stock which shall be issuable on such conversion shall be issued, and
shall be accompanied by transfer taxes, if required pursuant to Section 15.7.
Each such Note surrendered for conversion shall, unless the shares issuable on
conversion are to be issued in the same name as the registration of such Note,
be duly endorsed by, or be accompanied by instruments of transfer in form
satisfactory to the Company duly executed by, the holder or his duly authorized
attorney.
In order to exercise the conversion privilege with respect to any interest
in a Note in global form, the beneficial holder must complete the appropriate
instruction form for conversion pursuant to the Depositary's book-entry
conversion program, deliver by book-entry delivery an interest in such Note in
global form, furnish appropriate endorsements and transfer documents if required
by the Company or the Trustee or conversion agent, and pay the funds, if any,
required by the penultimate paragraph of this Section 15.2 and any transfer
taxes, if required pursuant to Section 15.7.
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, subject to compliance with any restrictions on
transfer if shares issuable on conversion are to be issued in a name other than
that of the Noteholder (as if such transfer were a transfer of the Note or Notes
(or portion thereof) so converted), the Company shall issue and shall deliver to
such holder at the office or agency maintained by the Company for such purpose
pursuant to Section 5.2, a certificate or certificates for the number of full
shares of Common Stock issuable upon the conversion of such Note or portion
thereof in accordance with the provisions of this Article and a check or cash in
respect of any fractional interest in respect of a share of Common Stock arising
upon such conversion, as provided in Section 15.3 (which payment, if any, shall
be paid no later than five Business Days after satisfaction of the requirements
for conversion set forth above). In case any Note of a denomination greater than
$1,000 shall be surrendered for partial conversion, and subject to Section 2.3,
the Company shall execute and the Trustee shall authenticate and deliver to the
holder of the Note so surrendered, without charge to him, a new Note or Notes in
authorized denominations in an aggregate principal amount equal to the
unconverted portion of the surrendered Note.
Each conversion shall be deemed to have been effected as to any such Note
(or portion thereof) on the date on which the requirements set forth above in
this Section 15.2 have been satisfied as to such Note (or portion thereof), and
the person in whose name any certificate or certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have become on
said date the holder of record of the shares represented thereby; provided,
--------
however, that any such surrender on any date when the stock transfer books of
- -------
the Company shall be closed shall constitute the person in whose name the
certificates are to be issued as the record holder thereof for all purposes on
the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such Note shall be surrendered.
Any Note or portion thereof surrendered for conversion during the period
from the close of business on the record date for any interest payment date
through the close of business on the Business Day next preceding such interest
payment date shall (unless such Note or portion thereof being converted shall
have been called for redemption pursuant to a redemption notice mailed to the
Noteholders in accordance with Section 3.2) be accompanied by payment, in New
York Clearing House funds or other funds acceptable to the Company, of an amount
equal to the interest otherwise payable on such interest payment date on the
principal amount being converted; provided, however, that no such payment need
-------- -------
be made if there shall exist at the time of conversion a default in the payment
of interest on the Notes. Except as provided above in this Section 15.2, no
adjustment shall be made for interest accrued on any Note converted or for
dividends on any shares issued upon the conversion of such Note as provided in
this Article.
Upon the conversion of an interest in a Note in global form, the Trustee,
or the Custodian at the direction of the Trustee, shall make a notation on such
Note in global form as to the reduction in the principal amount represented
thereby.
Section 15.3 Cash Payments in Lieu of Fractional Shares. No fractional
------------------------------------------
shares of Common Stock or scrip representing fractional shares shall be
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issued upon conversion of Notes. If more than one Note shall be surrendered for
conversion at one time by the same holder, the number of full shares which shall
be issuable upon conversion shall be computed on the basis of the aggregate
principal amount of the Notes (or specified portions thereof to the extent
permitted hereby) so surrendered for conversion. If any fractional share of
stock otherwise would be issuable upon the conversion of any Note or Notes, the
Company shall make an adjustment therefor in cash at the current market value
thereof to the holder of Notes. The current market value of a share of Common
Stock shall be the Closing Price on the first Trading Day immediately preceding
the day on which the Notes (or specified portions thereof) are deemed to have
been converted and such Closing Price shall be determined as provided in Section
15.5(h).
Section 15.4 Conversion Price. The conversion price shall be as specified
----------------
in the form of Note (herein called the "Conversion Price") attached as Exhibit A
hereto, subject to adjustment as provided in this Article XV. Such Conversion
Price is initially $40 per share of Common Stock and, notwithstanding any
provision of the Indenture or the Note to the contrary, shall not be subject to
adjustment with respect to the Company's 3-for-2 stock split which was effected
on August 26, 1997 (such initial Conversion Price having been set taking into
account such stock split).
Section 15.3 Adjustment of Conversion Price. The Conversion Price shall be
------------------------------
adjusted from time to time by the Company as follows:
(a) In case the Company shall hereafter pay a dividend or
make a distribution to all holders of the outstanding Common Stock in
shares of Common Stock, the Conversion Price in effect at the opening of
business on the date following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution shall
be reduced by multiplying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the
close of business on the Record Date (as defined in Section 15.5(h)) fixed
for such determination and the denominator shall be the sum of such number
of shares and the total number of shares constituting such dividend or
other distribution, such reduction to become effective immediately after
the opening of business on the day following the Record Date. If any
dividend or distribution of the type described in this Section 15.5(a) is
declared but not so paid or made, the Conversion Price shall again be
adjusted to the Conversion Price which would then be in effect if such
dividend or distribution had not been declared.
(b) In case the Company shall issue rights or warrants to all
holders of its outstanding shares of Common Stock entitling them (for a
period expiring within forty-five (45) days after the date fixed for the
determination of stockholders entitled to receive such rights or warrants)
to subscribe for or purchase shares of Common Stock at a price per share
less than the Current Market Price (as defined in Section 15.5(h)) on the
Record Date fixed for the determination of stockholders entitled to receive
such rights or warrants, the Conversion Price shall be adjusted so that the
same shall equal the price determined by multiplying the Conversion Price
in effect at the opening of business on the date after such Record Date by
a fraction of which the numerator shall be the number of shares of Common
Stock outstanding at the close of business on the Record Date plus the
number of shares which the aggregate offering price of the total number of
shares so offered for subscription or purchase would purchase at such
Current Market Price, and of which the denominator shall be the number of
shares of Common Stock outstanding on the close of business on the Record
Date plus the total number of additional shares of Common Stock so offered
for subscription or purchase. Such adjustment shall become effective
immediately after the opening of business on the day following the Record
Date fixed for determination of stockholders entitled to receive such
rights or warrants. To the extent that shares of Common Stock are not
delivered pursuant to such rights or warrants, upon the expiration or
termination of such rights or warrants the Conversion Price shall be
readjusted to the Conversion Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made on
the basis of delivery of only the number of shares of Common Stock actually
delivered. In the event that such rights or warrants are not so issued, the
Conversion Price shall again be adjusted to be the Conversion Price which
would then be in effect if such date fixed for the determination of
stockholders entitled to receive such rights or warrants had not been
fixed. In determining whether any rights or warrants entitle the holders to
subscribe for or purchase shares of Common Stock at less than such Current
Market Price, and in determining the aggregate offering price of such
shares of Common Stock, there shall be taken into account any consideration
received for such rights or warrants, the value of such consideration, if
other than cash, to be determined by the Board of Directors.
(c) In case the outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the Conversion
Price in effect at the opening of business on the day following the day
upon which such subdivision becomes effective shall be proportionately
reduced, and conversely, in case outstanding shares of Common Stock shall
be combined into a smaller number of shares of Common Stock, the Conversion
Price in effect at the opening of business on the day following the day
upon which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to become
effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
(d) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock shares of any class of
capital stock of the Company (other than any dividends or distributions to
which Section 15.5(a) applies) or evidences of its indebtedness, cash or
other assets (including securities, but excluding (1) any rights or
warrants referred to in Section 15.5(b) and, (2) dividends and
distributions (A) in connection with the liquidation, dissolution or
winding up of the Company or paid (B) exclusively in cash and (3) excluding
any capital stock, evidences of indebtedness, cash or assets distributed
upon a merger or consolidation to which Section 15.6 applies) (the
foregoing hereinafter in this Section 15.5(d) called the "Securities")),
(unless the Company elects to reserve such Securities for distribution to
the Noteholders upon conversion of the Notes so that any such holder
converting Notes will receive upon such conversion, in addition to the
shares of Common Stock to which such holder is entitled, the amount and
kind of such Securities which such holder would have received if such
holder had converted its Notes into Common Stock immediately prior to the
Record Date (as defined in Section 15.5(h) for such distribution of the
Securities) then, in each such case, the Conversion Price shall be reduced
so that the same shall be equal to the price determined by multiplying the
Conversion Price in effect immediately prior to the close of business on
the Record Date (as defined in Section 15.5(h)) with respect to such
distribution by a fraction of which the numerator shall be the Current
Market Price (determined as provided in Section 15.5(h)) on such date less
the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) on
such date of the portion of the Securities so distributed applicable to one
share of Common Stock and the denominator shall be such Current Market
Price, such reduction to become effective immediately prior to the opening
of business on the day following the Record Date; provided, however, that
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in the event the then fair market value (as so determined) of the portion
of the Securities so distributed applicable to one share of Common Stock is
equal to or greater than the Current Market Price on the Record Date, in
lieu of the foregoing adjustment, adequate provision shall be made so that
each Noteholder shall have the right to receive upon conversion of a Note
(or any portion thereof) the amount of Securities such holder would have
received had such holder converted such Note (or portion thereof)
immediately prior to such Record Date. In the event that such dividend or
distribution is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
dividend or distribution had not been declared. If the Board of Directors
determines the fair market value of any distribution for purposes of this
Section 15.5(d) by reference to the actual or when issued trading market
for any securities comprising all or part of such distribution, it must in
doing so consider the prices in such market over the same period (the
"Reference Period") used in computing the Current Market Price pursuant to
Section 15.5(h) to the extent possible, unless the Board of Directors in a
board resolution determines in good faith that determining the fair market
value during the Reference Period would not be in the best interest of the
Noteholder.
In the event that the Company implements a stockholder rights
plan, such rights plan shall provide that upon conversion of the Notes the
holders will receive, in addition to the Common Stock issuable upon such
conversion, the rights issued under such rights plan (notwithstanding the
occurrence of an event causing such rights to separate from the Common
Stock at or prior to the time of conversion). Any distribution of rights or
warrants pursuant to a stockholder rights plan complying with the
requirements set forth in the immediately preceding sentence of this
paragraph shall not constitute a distribution of
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rights or warrants for the purposes of this Section 15.5(d).
Rights or warrants distributed by the Company to all holders
of Common Stock entitling the holders thereof to subscribe for or purchase
shares of the Company's capital stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a
specified event or events ("Trigger Event"): (i) are deemed to be
transferred with such shares of Common Stock; (ii) are not exercisable; and
(iii) are also issued in respect of future issuances of Common Stock, shall
be deemed not to have been distributed for purposes of this Section 15.5(d)
(and no adjustment to the Conversion Price under this Section 15.5(d) will
be required) until the occurrence of the earliest Trigger Event. If such
right or warrant is subject to subsequent events, upon the occurrence of
which such right or warrant shall become exercisable to purchase different
securities, evidences of indebtedness or other assets or entitle the holder
to purchase a different number or amount of the foregoing or to purchase
any of the foregoing at a different purchase price, then the occurrence of
each such event shall be deemed to be the date of issuance and record date
with respect to a new right or warrant (and a termination or expiration of
the existing right or warrant without exercise by the holder thereof). In
addition, in the event of any distribution (or deemed distribution) of
rights or warrants, or any Trigger Event or other event (of the type
described in the preceding sentence) with respect thereto, that resulted in
an adjustment to the Conversion Price under this Section 15.5(d), (1) in
the case of any such rights or warrants which shall all have been redeemed
or repurchased without exercise by any holders thereof, the Conversion
Price shall be readjusted upon such final redemption or repurchase to give
effect to such distribution or Trigger Event, as the case may be, as though
it were a cash distribution, equal to the per share redemption or
repurchase price received by a holder of Common Stock with respect to such
rights or warrants (assuming such holder had retained such rights or
warrants), made to all holders of Common Stock as of the date of such
redemption or repurchase, and (2) in the case of such rights or warrants
all of which shall have expired or been terminated without exercise, the
Conversion Price shall be readjusted as if such rights and warrants had
never been issued.
For purposes of this Section 15.5(d) and Sections 15.5(a) and
(b), any dividend or distribution to which this Section 15.5(d) is
applicable that also includes shares of Common Stock, or rights or warrants
to subscribe for or purchase shares of Common Stock to which Section
15.5(b) applies (or both), shall be deemed instead to be (1) a dividend or
distribution of the evidences of indebtedness, assets, shares of capital
stock, rights or warrants other than such shares of Common Stock or rights
or warrants to which Section 15.5(b) applies (and any Conversion Price
reduction required by this Section 15.5(d) with respect to such dividend or
distribution shall then be made) immediately followed by (2) a dividend or
distribution of such shares of Common Stock or such rights or warrants (and
any further Conversion Price reduction required by Sections 15.5(a) and (b)
with respect to such dividend or distribution shall then be made, except
(A) the Record Date of such dividend or distribution shall be substituted
as "the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution", "Record Date fixed for such
determination" and "Record Date" within the meaning of Section 15.5(a) and
as "the date fixed for the determination of stockholders entitled to
receive such rights or warrants", "the Record Date fixed for the
determination of the stockholders entitled to receive such rights or
warrants" and "such Record Date" within the meaning of Section 15.5(b) and
(B) any shares of Common Stock included in such dividend or distribution
shall not be deemed "outstanding at the close of business on the date fixed
for such determination" within the meaning of Section 15.5(a).
(e) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding any cash that
is distributed upon a merger or consolidation to which Section 15.6 applies
or as part of a distribution referred to in Section 15.5(d)), in an
aggregate amount that, combined together with (1) the aggregate amount of
any other such distributions to all holders of its Common Stock made
exclusively in cash within the twelve (12) months preceding the date of
payment of such distribution, and in respect of which no adjustment
pursuant to this Section 15.5(e) has been made, and (2) the aggregate of
any cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution) of consideration payable in respect of any tender offer by the
Company or any of its subsidiaries for all or any portion of the Common
Stock concluded within the twelve (12) months preceding the date of payment
of such distribution, and in respect of which no adjustment pursuant to
Section 15.5(f) has been made, exceeds 10% of the product of the Current
Market Price (determined as provided in Section 15.5(h)) on the Record Date
with respect to such distribution times the number of shares of Common
Stock outstanding on such date, then, and in each such case, immediately
after the close of business on such date, the Conversion Price shall be
reduced so that the same shall equal the price determined by multiplying
the Conversion Price in effect immediately prior to the close of business
on such Record Date by a fraction (i) the numerator of which shall be equal
to the Current Market Price on the Record Date less an amount equal to the
quotient of (x) the excess of such combined amount over such 10% and (y)
the number of shares of Common Stock outstanding on the Record Date and
(ii) the denominator of which shall be equal to the Current Market Price on
such date, provided, however, that in the event the portion of the cash so
distributed applicable to one share of Common Stock is equal to or greater
than the Current Market Price of the Common Stock on the Record Date, in
lieu of the foregoing adjustment, adequate provision shall be made so that
each Noteholder shall have the right to receive upon conversion of a Note
(or any portion thereof) the amount of cash such holder would have received
had such holder converted such Note (or portion thereof) immediately prior
to such Record Date. In the event that such dividend or distribution is not
so paid or made, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such dividend or
distribution had not been declared. Any cash distribution to all holders of
Common Stock as to which the Company makes the election permitted by
Section 15.5(n) and as to which the Company has complied with the
requirements of such Section shall be treated as not having been made for
all purposes of this Section 15.5(e)).
(f) In case a tender offer made by the Company or any of its
subsidiaries for all or any portion of the Common Stock shall expire and
such tender offer (as amended upon the expiration thereof) shall require
the payment to stockholders (based on the acceptance (up to any maximum
specified in the terms of the tender offer) of Purchased Shares (as defined
below)) of an aggregate consideration having a fair market value (as
determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution) that combined together with
(1) the aggregate of the cash plus the fair market value (as determined by
the Board of Directors, whose determination shall be conclusive and
described in a Board Resolution), as of the expiration of such tender
offer, of consideration payable in respect of any other tender offers, by
the Company or any of its subsidiaries for all or any portion of the Common
Stock expiring within the twelve (12) months preceding the expiration of
such tender offer and in respect of which no adjustment pursuant to this
Section 15.5(f) has been made and (2) the aggregate amount of any
distributions to all holders of the Company's Common Stock made exclusively
in cash within twelve (12) months preceding the expiration of such tender
offer and in respect of which no adjustment pursuant to Section 15.5(e) has
been made, exceeds 10% of the product of the Current Market Price
(determined as provided in Section 15.5(h)) as of the last time (the
"Expiration Time") tenders could have been made pursuant to such tender
offer (as it may be amended) times the number of shares of Common Stock
outstanding (including any tendered shares) on the Expiration Time, then,
and in each such case, immediately prior to the opening of business on the
day after the date of the Expiration Time, the Conversion Price shall be
adjusted so that the same shall equal the price determined by multiplying
the Conversion Price in effect immediately prior to close of business on
the date of the Expiration Time by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding (including any tendered
shares) on the Expiration Time multiplied by the Current Market Price of
the Common Stock on the Trading Day next succeeding the Expiration Time and
the denominator shall be the sum of (x) the fair market value (determined
as aforesaid) of the aggregate consideration payable to stockholders based
on the acceptance (up to any maximum specified in the terms of the tender
offer) of all shares validly tendered and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum,
being referred to as the "Purchased Shares") and (y) the product of the
number of shares of Common Stock outstanding (less any Purchased Shares) on
the Expiration Time and the Current Market Price of the Common Stock on the
Trading Day next succeeding the Expiration Time, such reduction (if any) to
become effective immediately prior to the opening of business on the day
following the Expiration Time. In the event that the Company is obligated
to purchase shares pursuant to any such tender offer, but the Company is
permanently prevented by applicable law from effecting any such purchases
or all such purchases are rescinded, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
tender offer had not been made. If the application of this Section 15.5(f)
to any tender offer would result in an increase in the Conversion Price, no
adjustment shall be made for such tender offer under this Section 15.5(f).
Any cash distribution to all holders of Common Stock as to which the
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Company has made the election permitted by Section 15.5(n) and as to which
the Company has complied with the requirements of such Section shall be
treated as not having been made for all purposes of this Section 15.5(f).
(g) In case of a tender or exchange offer made by a person
other than the Company or any Subsidiary for an amount which increases the
offeror's ownership of Common Stock to more than 25% of the Common Stock
outstanding and shall involve the payment by such person of consideration
per share of Common Stock having a fair market value (as determined by the
Board of Directors), whose determination shall be conclusive, and described
in a resolution of the Board of Directors at the last time (the "Expiration
Time") tenders or exchanges may be made pursuant to such tender or exchange
offer (as it shall have been amended) that exceeds the Current Market Price
of the Common Stock on the Trading Day next succeeding the Expiration Time,
and in which, as of the Expiration Time the Board of Directors is not
recommending rejection of the offer, the Conversion Price shall be reduced
so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the Expiration Time by a
fraction of which the numerator shall be the number of shares of Common
Stock outstanding (including any tendered or exchanged shares) on the
Expiration Time multiplied by the current Market Price of the Common Stock
on the Trading Day next succeeding the Expiration Time and the denominator
shall be the sum of (x) the fair market value (determined as aforesaid) of
the aggregate consideration payable to stockholders based on the acceptance
(up to any maximum specified in the terms of the tender or exchange offer)
of all shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum,
being referred to as the "Purchased Shares") and (y) the product of the
number of shares of Common Stock outstanding (less any Purchased Shares) on
the Expiration Time and the Current Market Price of the Common Stock on the
Trading Day next succeeding the Expiration Time, such reduction to become
effective immediately prior to the opening of business on the day following
the Expiration Time. In the event that such person is obligated to purchase
shares pursuant to any such tender or exchange offer, but such person is
permanently prevented by applicable law from effecting any such purchases
or all such purchases are rescinded, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
tender or exchange offer had not been made. Notwithstanding the foregoing,
the adjustment described in this Section 15.5(g) shall not be made if, as
of the Expiration Time, the offering documents with respect to such offer
disclose a plan or intention to cause the Company to engage in any
transaction described in Article XII.
(h) For purposes of this Section 15.5, the following terms
shall have the meaning indicated:
(1) "Closing Price" with respect to any securities on
any day shall mean the closing sale price regular way on such
day or, in case no such sale takes place on such day, the
average of the reported closing bid and asked prices, regular
way, in each case on the Nasdaq National Market or New York
Stock Exchange, as applicable, or, if such security is not
listed or admitted to trading on such National Market or
Exchange, on the principal national security exchange or
quotation system on which such security is quoted or listed or
admitted to trading, or, if not quoted or listed or admitted
to trading on any national securities exchange or quotation
system, the average of the closing bid and asked prices of
such security on the over-the-counter market on the day in
question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting
service, or if not so available, in such manner as furnished
by any New York Stock Exchange member firm selected from time
to time by the Board of Directors for that purpose, or a price
determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a Board
Resolution.
(2) "Current Market Price" shall mean the average of the
daily Closing Prices per share of Common Stock for the ten
(10) consecutive Trading Days immediately prior to the date in
question; provided, however, that (1) if the "ex" date (as
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hereinafter defined) for any event (other than the issuance or
distribution pursuant to Section 15.5(a), (b), (c), (d), (e),
(f) or (g) occurs during such ten (10) consecutive Trading
Days, th Closing Price for each Trading Day prior to to the
"ex" date for such other event shall be adjusted by
multiplying such Closing Price by the same fraction by which
the Conversion Price is so required to be adjusted as a result
of such other event, (2) if the "ex" date for any requires an
adjustment to the Conversion Price pursuant to Section
15.5(a), (b), distribution requiring such computation and
prior to the day in question, the event shall be adjusted by
multiplying such Closing Price by the reciprocal of result of
such other event, and (3) if the "ex" date for the issuance or
taking into account any adjustment required pursuant to clause
(1) or (2) of this proviso, the Closing Price for each Trading
Day on or after such "ex" date shall be adjusted by adding
thereto the amount of any cash and the fair market value (as
determined by the Board of Directors in a manner consistent
with any determination of such value for purposes of Section
15.5(d), (f) or (g), whose determination shall be conclusive
and described in a Board Resolution) of the evidences of
indebtedness, shares of capital stock or assets being
distributed applicable to one share of Common Stock as of the
close of business on the day before such "ex" date. For
purposes of any computation under Sections 15.5(f) or (g), the
Current Market Price of the Common Stock on any date shall be
deemed to be the average of the daily Closing Prices per share
of Common Stock for such day and the next two succeeding
Trading Days; provided, however, that if the "ex" date for
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any event (other than the tender offer requiring such
computation) that requires an adjustment to the Conversion
Price pursuant to Section 15.5(a), (b), (c), (d), (e), (f) and
(g) occurs on or after the Expiration Time for the tender or
exchange offer requiring such computation and prior to the day
in question, the Closing Price for each Trading Day on and
after the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the
fraction by which the Conversion Price is so required to be
adjusted as a result of such other event. For purposes of this
paragraph, the term "ex" date, (1) when used with respect to
any issuance or distribution, means the first date on which
the Common Stock trades regular way on the relevant exchange
or in the relevant market from which the Closing Price was
obtained without the right to receive such issuance or
distribution, (2) when used with respect to any subdivision or
combination of shares of Common Stock, means the first date on
which the Common Stock trades regular way on such exchange or
in such market after the time at which such subdivision or
combination becomes effective, and (3) when used with respect
to any tender or exchange offer means the first date on which
the Common Stock trades regular way on such exchange or in
such market after the Expiration Time of such offer.
Notwithstanding the foregoing, whenever successive adjustments
to the Conversion Price are called for pursuant to this
Section 15.5, such adjustments shall be made to the Current
Market Price as may be necessary or appropriate to effectuate
the intent of this Section 15.5 and to avoid unjust or
inequitable results as determined in good faith by the Board
of Directors.
(3) "fair market value" shall mean the amount which a
willing buyer would pay a willing seller in an arm's length
transaction.
(4) "Record Date" shall mean, with respect to any
dividend, distribution or other transaction or event in which
the holders of Common Stock have the right to receive any
cash, securities or other property or in which the Common
Stock (or other applicable security) is exchanged for or
converted into any combination of cash, securities or other
property, the date fixed for determination of stockholders
entitled to receive such cash, securities or other property
(whether such date is fixed by the Board of Directors or by
statute, contract or otherwise).
(5) "Trading Day" shall mean (x) if the applicable
security is listed or admitted for trading on the New York
Stock Exchange or another national security exchange, a day on
which the New York Stock Exchange or another national security
exchange is open for business or (y) if the applicable
security is quoted on the Nasdaq National Market, a day on
which trades may be made thereon or (z) if the
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applicable security is not so listed, admitted for trading or
quoted, any day other than a Saturday or Sunday or a day on
which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
(i) The Company may make such reductions in the Conversion
Price, in addition to those required by Sections 15.5(a), (b), (c), (d),
(e), (f) and (g), as the Board of Directors considers to be advisable to
avoid or diminish any income tax to holders of Common Stock or rights to
purchase Common Stock resulting from any dividend or distribution of stock
(or rights to acquire stock) or from any event treated as such for income
tax purposes.
To the extent permitted by applicable law, the Company from
time to time may reduce the Conversion Price by any amount for any period
of time if the period is at least twenty (20) days, the reduction is
irrevocable during the period and the Board of Directors shall have made a
determination that such reduction would be in the best interests of the
Company, which determination shall be conclusive and described in a Board
Resolution. Whenever the Conversion Price is reduced pursuant to the
preceding sentence, the Company shall mail to the holder of each Note at
his last address appearing on the Note register provided for in Section 2.5
a notice of the reduction at least fifteen (15) days prior to the date the
reduced Conversion Price takes effect, and such notice shall state the
reduced Conversion Price and the period during which it will be in effect.
(j) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least 1%
in such price; provided, however, that any adjustments which by reason of
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this Section 15.5(j) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under
this Article XV shall be made by the Company and shall be made to the
nearest cent or to the nearest one hundredth of a share, as the case may
be. No adjustment need be made for a change in the par value or no par
value of the Common Stock.
(k) Whenever the Conversion Price is adjusted as herein
provided, the Company shall promptly file with the Trustee and any
conversion agent other than the Trustee an Officers' Certificate setting
forth the Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. Promptly after delivery
of such certificate, the Company shall prepare a notice of such adjustment
of the Conversion Price setting forth the adjusted Conversion Price and the
date on which each adjustment becomes effective and shall mail such notice
of such adjustment of the Conversion Price to the holder of each Note at
his last address appearing on the Note register provided for in Section
2.5, within twenty (20) days of the effective date of such adjustment.
Failure to deliver such notice shall not effect the legality or validity of
any such adjustment.
(l) In any case in which this Section 15.5 provides that an
adjustment shall become effective immediately after a Record Date for an
event, the Company may defer until the occurrence of such event (i) issuing
to the holder of any Note converted after such Record Date and before the
occurrence of such event the additional shares of Common Stock issuable
upon such conversion by reason of the adjustment required by such event
over and above the Common Stock issuable upon such conversion before giving
effect to such adjustment and (ii) paying to such holder any amount in cash
in lieu of any fraction pursuant to Section 15.3.
(m) For purposes of this Section 15.5, the number of shares
of Common Stock at any time outstanding shall not include shares held in
the treasury of the Company but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of shares of Common Stock.
The Company will not pay any dividend or make any distribution on shares of
Common Stock held in the treasury of the Company.
(n) In lieu of making any adjustment to the Conversion Price
pursuant to Section 15.5(e), the Company may elect to reserve an amount of
cash for distribution to the holders of the Notes upon the conversion of
the Notes so that any such holder converting Notes will receive upon such
conversion, in addition to the shares of Common Stock and other items to
which such holder is entitled, the full amount of cash which such holder
would have received if such holder had, immediately prior to the Record
Date for such distribution of cash, converted its Notes into Common Stock,
together with any interest accrued with respect to such amount, in
accordance with this Section 15.5(n). The Company may make such election by
providing an Officers' Certificate to the Trustee to such effect on or
prior to the payment date for any such distribution and depositing with the
Trustee on or prior to such date an amount of cash equal to the aggregate
amount the holders of the Notes would have received if such holders had,
immediately prior to the Record Date for such distribution, converted all
of the Notes into Common Stock. Any such funds so deposited by the Company
with the Trustee shall be invested by the Trustee in marketable obligations
issued or fully guaranteed by the United States government with a maturity
not more than three (3) months from the date of issuance. Upon conversion
of Notes by a holder, the holder will be entitled to receive, in addition
to the Common Stock issuable upon conversion, an amount of cash equal to
the amount such holder would have received if such holder had, immediately
prior to the Record Date for such distribution, converted its Note into
Common Stock, along with such holder's pro rata share of any accrued
interest earned as a consequence of the investment of such funds. Promptly
after making an election pursuant to this Section 15.5(n), the Company
shall give or shall cause to be given notice to all Noteholders of such
election, which notice shall state the amount of cash per $1,000 principal
amount of Notes such holders shall be entitled to receive (excluding
interest) upon conversion of the Notes as a consequence of the Company
having made such election.
Section 15.6 Effect of Reclassification, Consolidation, Merger or Sale. If
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any of the following events occur, namely (i) any reclassification or change of
the outstanding shares of Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation as a result of which
holders of Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, then the Company or the successor or purchasing corporation, as
the case may be, shall execute with the Trustee a supplemental indenture (which
shall comply with the Trust Indenture Act as in force at the date of execution
of such supplemental indenture if such supplemental indenture is then required
to so comply) providing that such Note shall be convertible into the kind and
amount of shares of stock and other securities or property or assets (including
cash) receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance by a holder of a number of shares of Common
Stock issuable upon conversion of such Notes (assuming, for such purposes, a
sufficient number of authorized shares of Common Stock available to convert all
such Notes) immediately prior to such reclassification, change, consolidation,
merger, combination, sale or conveyance assuming such holder of Common Stock did
not exercise his rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon such consolidation, merger,
statutory exchange, sale or conveyance (provided that, if the kind or amount of
securities, cash or other property receivable upon such consolidation, merger,
statutory exchange, sale or conveyance is not the same for each share of Common
Stock in respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purposes of this Section 15.6 the kind and
amount of securities, cash or other property receivable upon such consolidation,
merger, statutory exchange, sale or conveyance for each non-electing share shall
be deemed to be the kind and amount so receivable per share by a plurality of
the non-electing shares). Such supplemental indenture shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article. If, in the case of any such
reclassification, change, consolidation, merger, combination, sale or
conveyance, the stock or other securities and assets receivable thereupon by a
holder of shares of Common Stock includes shares of stock or other securities
and assets of a corporation other than the successor or purchasing corporation,
as the case may be, in such reclassification, change, consolidation, merger,
combination, sale or conveyance, then such supplemental indenture shall also be
executed by such other corporation and shall contain such additional provisions
to protect the interests of the holders of the Notes as the Board of Directors
shall reasonably consider necessary by reason of the foregoing, including to the
extent practicable the provisions providing for the repurchase rights set forth
in Article XVI herein.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Notes, at his address appearing on the
Note register provided for in Section 2.5 of this Indenture, within twenty (20)
days after execution thereof. Failure to deliver such notice shall not affect
the legality or validity of
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<PAGE>
such supplemental indenture.
The above provisions of this Section shall similarly apply to successive
reclassifications, changes, consolidations, mergers, combinations, sales and
conveyances.
If this Section 15.6 applies to any event or occurrence, Section 15.5 shall
not apply.
Section 15.7 Taxes on Shares Issued. The issue of stock certificates on
----------------------
conversions of Notes shall be made without charge to the converting Noteholder
for any tax in respect of the issue thereof. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery of stock in any name other than that of the holder of
any Note converted, and the Company shall not be required to issue or deliver
any such stock certificate unless and until the person or persons requesting the
issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
Section 15.8 Reservation of Shares; Shares to Be Fully Paid; Listing of
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Common Stock. The Company shall provide, free from preemptive rights, out of its
- ------------
authorized but unissued shares or shares held in treasury, sufficient shares to
provide for the conversion of the Notes from time to time as such Notes are
presented for conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Notes, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted Conversion Price.
The Company covenants that all shares of Common Stock issued upon
conversion of Notes will be fully paid and non-assessable by the Company and
free from all taxes, liens and charges with respect to the issue thereof.
The Company further covenants that if at any time the Common Stock shall be
listed on the Nasdaq National Market or any other national securities exchange
or automated quotation system the Company will, if permitted by the rules of
such exchange or automated quotation system, list and keep listed, so long as
the Common Stock shall be so listed on such exchange or automated quotation
system, all Common Stock issuable upon conversion of the Notes.
Section 15.9 Responsibility of Trustee. The Trustee and any other
-------------------------
conversion agent shall not at any time be under any duty or responsibility to
any holder of Notes to determine whether any facts exist which may require any
adjustment of the Conversion Price, or with respect to the nature or extent or
calculation of any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to be employed, in
making the same. The Trustee and any other conversion agent shall not be
accountable with respect to the validity or value (or the kind or amount) of any
shares of Common Stock, or of any securities or property, which may at any time
be issued or delivered upon the conversion of any Note; and the Trustee and any
other conversion agent make no representations with respect thereto. Subject to
the provisions of Section 8.1, neither the Trustee nor any conversion agent
shall be responsible for any failure of the Company to issue, transfer or
deliver any shares of Common Stock or stock certificates or other securities or
property or cash upon the surrender of any note for the purpose of conversion or
to comply with any of the duties, responsibilities or covenants of the Company
contained in this Article. Without limiting the generality of the foregoing,
neither the Trustee nor any conversion agent shall be under any responsibility
to determine the correctness of any provisions contained in any supplemental
indenture entered into pursuant to Section 15.6 relating either to the kind or
amount of shares of stock or securities or property (including cash) receivable
by Noteholders upon the conversion of their Notes after any event referred to in
such Section 15.6 or to any adjustment to be made with respect thereto, but,
subject to the provisions of Section 8.1, may accept as conclusive evidence of
the correctness of any such provisions, and shall be protected in relying upon,
the Officers' Certificate (which the Company shall be obligated to file with the
Trustee prior to the execution of any such supplemental indenture) with respect
thereto.
Section 15.10 Notice to Holders Prior to Certain Actions. In case:
------------------------------------------
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock (that would require an adjustment in the
Conversion Price pursuant to Section 15.5); or
(b) the Company shall authorize the granting to the holders
of its Common Stock of rights or warrants to subscribe for or purchase any
share of any class or any other rights or warrants; or
(c) of any reclassification of the Common Stock of the
Company (other than a subdivision or combination of its outstanding Common
Stock, or a change in par value, or from par value to no par value, or from
no par value to par value), or of any consolidation or merger to which the
Company is a party and for which approval of any shareholders of the
Company is required, or of the sale or transfer of all or substantially all
of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding-up of the Company;
the Company shall cause to be filed with the Trustee and to be mailed to each
holder of Notes at his address appearing on the Note register, provided for in
Section 2.5 of this Indenture, as promptly as possible but in any event at least
fifteen days prior to the applicable date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up is expected to become effective or occur,
and the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of such
dividend, distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.
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ARTICLE XVI
REPURCHASE UPON A REPURCHASE EVENT
Section 16.1 Repurchase Right.
----------------
(a) If, at any time prior to September 1, 2004 there shall
occur a Repurchase Event, then each Noteholder shall have the right, at
such holder's option, to require the Company to repurchase all of such
holder's Notes, or any portion thereof (in principal amounts of $1,000 or
integral multiples thereof), on the date (the "repurchase date") that is
forty (40) calendar days after the date of the Company Notice (as defined
in Section 16.2 below) of such Repurchase Event (or, if such 40th day is
not a Business Day, the next succeeding Business Day). Such repurchase
shall be made in cash at a price equal to 105% of the principal amount of
Notes such holder elects to require the Company to repurchase, together
with accrued interest, if any, to the repurchase date (the "Repurchase
Price") (or, at the option of the Company, by delivery of Common Stock in
accordance with the provisions of Section 16.3); provided, however, that if
-------- -------
such repurchase date is March 1 or September 1, then the interest payable
on such date shall be paid to the holder of record of the Note on the next
preceding February 15 or August 15, respectively. No Notes may be redeemed
at the option of holders upon a Repurchase Event if there has occurred and
is continuing an Event of Default, other than a default in the payment of
the Repurchase Price with respect to such Notes on the repurchase date.
Section 16.2 Notices; Method of Exercising Repurchase Right, Etc.
----------------------------------------------------
(a) Unless the Company shall have theretofore called for
redemption all of the outstanding Notes, on or before the fifteenth (15th)
calendar day after the occurrence of a Repurchase Event, the Company or, at
the written request of the Company, the Trustee, shall mail to all holders
of record of the Notes a notice (the "Company Notice") in the form as
prepared by the Company of the occurrence of the Repurchase Event and of
the repurchase right set forth herein arising as a result thereof. The
Company shall also deliver a copy of such notice of a repurchase right to
the Trustee and cause a copy of such notice of a repurchase right, or a
summary of the information contained therein, to be published once in a
newspaper of general circulation in The City of New York. The Company
Notice shall contain the following information:
(1) the repurchase date,
(2) the date by which the repurchase right must be
exercised,
(3) the last date by which the election to require
repurchase, if submitted, must be revoked;
(4) the Repurchase Price and whether the Repurchase
Price shall be payable in cash or Common Stock and, if
payable in Common Stock, the method of calculating the amount
of the Common Stock to be delivered upon the repurchase as
provided in Section 16.3(a);
(5) a description of the procedure which a holder must
follow to exercise a repurchase right, and
(6) the Conversion Price then in effect, the date on
which the right to convert the principal amount of the Notes
to be repurchased will terminate and the place or places
where Notes may be surrendered for conversion.
No failure of the Company to give the foregoing notices or
defect therein shall limit any holder's right to exercise a repurchase
right or affect the validity of the proceedings for the repurchase of
Notes.
If any of the foregoing provisions are inconsistent with
applicable law, such law shall govern.
(b) To exercise a repurchase right, a holder shall deliver
to the Trustee on or before the thirty-fifth (35th) day after the Company
Notice was delivered (i) written notice to the Company (or agent designated
by the Company for such purpose) of the holder's exercise of such right,
which notice shall set forth the name of the holder, the principal amount
of the Notes to be repurchased, a statement that an election to exercise
the repurchase right is being made thereby, and, in the event that the
Repurchase Price shall be paid in shares of Common Stock, the name or names
(with addresses) in which the certificate or certificates for shares of
Common Stock shall be issued, and (ii) the Notes with respect to which the
repurchase right is being exercised, duly endorsed for transfer to the
Company. Election of repurchase by a holder shall be revocable at any time
prior to, but excluding, the repurchase date, by delivering written notice
to that effect to the Trustee prior to the close of business on the
Business Day prior to the repurchase date.
(c) If the Company fails to repurchase on the repurchase
date any Notes (or portions thereof) as to which the repurchase right has
been properly exercised, then the principal of such Notes shall, until
paid, bear interest to the extent permitted by applicable law from the
repurchase date at the rate borne by the Note and each such Note shall be
convertible into Common Stock in accordance with this Indenture (without
giving effect to Section 16.2(b)) until the principal of such Note shall
have been paid or duly provided for.
(d) Any Note which is to be repurchased only in part shall
be surrendered to the Trustee duly endorsed for transfer to the Company and
accompanied by appropriate evidence of genuineness and authority
satisfactory to the Company and the Trustee duly executed by, the holder
thereof or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and deliver to the holder of
such Note without service charge, a new Note or Notes, containing identical
terms and conditions, of any authorized denomination as requested by such
holder in aggregate principal amount equal to and in exchange for the
unrepurchased portion of the principal of the Note so surrendered.
(e) On or prior to the repurchase date, the Company shall
deposit with the Trustee or with a paying agent (or, if the Company is
acting as its own paying agent, segregate and hold in trust as provided in
Section 5.4) the Repurchase Price in cash for payment to the holder on the
repurchase date; provided that if payment is to be made in cash, such cash
--------
payment is made on the repurchase date it must be received by the Trustee
or paying agent, as the case may be, by 10:00 a.m., New York City time, on
such date; provided further that if the Repurchase Price is to be paid in
-------- -------
shares of Common Stock, such shares of Common Stock are to be paid as
promptly after the repurchase date as practicable.
(f) Any issuance of shares of Common Stock in respect of the
Repurchase Price shall be deemed to have been effected immediately prior to
the close of business on the repurchase date and the person or persons in
whose name or names any certificate or certificates for shares of Common
Stock shall be issuable upon such repurchase shall be deemed to have become
on the repurchase date the holder or holders of record of the shares
represented thereby; provided, however, that any surrender for repurchase
on a date when the stock transfer books of the Company shall be closed
shall constitute the person or persons in whose name or names the
certificate or certificates for such shares are to be issued as the record
holder or holders thereof for all purposes at the opening of business on
the next succeeding day on which such stock transfer books are open. No
payment or adjustment shall be made for dividends or
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<PAGE>
distributions on any Common Stock issued upon repurchase of any Security
declared prior to the repurchase date.
(g) No fractions of shares shall be issued upon repurchase
of Notes. If more than one Note shall be repurchased from the same holder
and the Repurchase Price shall be payable in shares of Common Stock, the
number of full shares which shall be issuable upon such repurchase shall be
computed on the basis of the aggregate principal amount of the Notes so
repurchased. Instead of any fractional share of Common Stock which would
otherwise be issuable on the repurchase of any Note or Notes, the Company
will deliver to the applicable holder its check for the current market
value of such fractional share. The current market value of a fraction of a
share is determined by multiplying the current market price of a full share
by the fraction, and rounding the result to the nearest cent. For purposes
of this Section, the current market price of a share of Common Stock is the
Closing Price of the Common Stock on the Trading Day immediately preceding
the repurchase date.
(h) Any issuance and delivery of certificates for shares of
Common Stock on repurchase of Notes shall be made without charge to the
holder of Notes being repurchased for such certificates or for any tax or
duty in respect of the issuance or delivery of such certificates or the
securities represented thereby; provided, however, that the Company shall
not be required to pay any tax or duty which may be payable in respect of
(i) income of the holder or (ii) any transfer involved in the issuance or
delivery of certificates for shares of Common Stock in a name other than
that of the holder of the Notes being repurchased, and no such issuance or
delivery shall be made unless and until the person requesting such issuance
or delivery 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.
(i) All Notes delivered for repurchase shall be delivered to
the Trustee to be canceled in accordance with the provisions of Section
2.8.
Section 16.3 Conditions to the Company's Election to Pay the Repurchase
----------------------------------------------------------
Price in Common Stock.
- ---------------------
The Company may elect to pay the Repurchase Price by delivery of
shares of Common Stock pursuant to Section 16.1 if and only if the following
conditions shall have been satisfied:
(a) The shares of Common Stock deliverable in payment of the Repurchase
Price shall have a fair market value as of the repurchase date of not less than
the Repurchase Price. For purposes of Section 16.1 and this Section 16.3, 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 of the Common
Stock for the five consecutive Trading Days immediately preceding and including
the third Trading Day prior to the repurchase date;
(b) The Repurchase Price shall be paid only in cash in the event any
shares of Common Stock to be issued upon repurchase of Notes hereunder (i)
require registration under any federal securities law before such shares may be
freely transferrable without being subject to any transfer restrictions under
the Securities Act upon repurchase and if such registration is not completed or
does not become effective prior to the repurchase date, and/or (ii) require
registration with or approval of any governmental authority under any state law
or any other federal law before such shares may be validly issued or delivered
upon repurchase and if such registration is not completed or does not become
effective or such approval is not obtained prior to the repurchase date;
(c) Payment of the Repurchase Price may not be made in Common Stock unless
such stock is, or shall have been, approved for quotation on the Nasdaq National
Market or listed on a national securities exchange, in either case, prior to the
repurchase date; and
(d) All shares of Common Stock which may be issued upon repurchase of the
Notes will be issued out of the Company's authorized but unissued Common Stock
and, will upon issue, be duly and validly issued and fully paid and non-
assessable and free of any preemptive rights.
If all of the conditions set forth in this Section 16.3 are not satisfied
in accordance with the terms thereof, the Repurchase Price shall be paid by the
Company only in cash.
Section 16.4 Certain Definitions. For purposes of this Article XVI:
-------------------
(a) the term "beneficial owner" shall be determined in accordance
with Rule 13d-3 and 13d-5, as in effect on the date of the original
execution of this Indenture, promulgated by the Securities and Exchange
Commission pursuant to the Exchange Act;
(b) the term "person" or "group" shall include any syndicate or group
which would be deemed to be a "person" under Section 13(d) and 14(d) of the
Exchange Act as in effect on the date of the original execution of this
Indenture; and
(c) the term "Continuing Director" means at any date a member of the
Company's Board of Directors (i) who was a member of such board on August
27, 1997 or (ii) who was nominated or elected by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election or whose election to the Company's Board of Directors was
recommended or endorsed by at least a majority of the directors who were
Continuing Directors at the time of such nomination or election or such
lesser number comprising a majority of a nominating committee if authority
for such nominations or elections has been delegated to a nominating
committee whose authority and composition have been approved by at least a
majority of the directors who were continuing directors at the time such
committee was formed. (Under this definition, if the Board of Directors of
the Company as of the date of this Indenture were to approve a new director
or directors and then resign, no Change in Control would occur even though
the current Board of Directors would thereafter cease to be in office).
(d) the term "Repurchase Event" means a Change in Control or a
Termination of Trading.
(e) a "Change in Control" shall be deemed to have occurred when (i)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in
Rules 13-d3 and 13-d5 under the Exchange Act) of shares representing more
than 50% of the combined voting power of the then outstanding securities
entitled to vote generally in elections of directors of the Company (the
"Voting Stock"); (ii) approval by stockholders of the Company of any plan
or proposal for the liquidation, dissolution or winding up of the Company;
(iii) the Company (A) consolidates with or merges into any other
corporation or any other corporation merges into the Company, and in the
case of any such transaction, the outstanding Common Stock of the Company
is changed or exchanged into other assets or securities as a result, unless
the stockholders of the Company immediately before such transaction own,
directly or indirectly immediately following such transaction, at least 51%
of the combined voting power of the outstanding voting securities of the
corporation resulting from such transaction in substantially the same
proportion as their ownership of the Voting Stock immediately before such
transaction, or (B) conveys, transfers or leases all or substantially all
of its assets to any person; or (iv) any time Continuing Directors do not
constitute a majority of the Board of Directors of the Company (or, if
applicable, a successor corporation to the Company); provided that a Change
--------
in Control shall not be deemed to have occurred if either (x) the Closing
Price (as defined in Section 15.5(h)(1) hereof) of the Common Stock for any
five (5) Trading Days during the ten (10) Trading Days immediately
preceding the Change in Control is at least equal to 105% of the Conversion
Price in effect on the date on which the Change in Control occurs or (y) in
the case of a merger or consolidation otherwise constituting a Change in
Control, all of the consideration (excluding cash payments for fractional
shares) in such merger or consolidation constituting the Change in Control
consists of common stock traded on a United States national securities
exchange or quoted on the Nasdaq National Market (or which will be so
traded or quoted when issued or exchanged in connection
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<PAGE>
with such Change in Control) and as a result of such transaction or
transactions such Notes become convertible solely into such common stock.
(f) a "Termination of Trading" shall have occurred if the Common
Stock (or other common stock into which the Notes are then convertible) is
neither listed for trading on a United States national securities exchange
nor approved for trading on an established automated over-the-counter
trading market in the United States.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
Section 17.1 Provisions Binding on Company's Successors. All the
------------------------------------------
covenants, stipulations, promises and agreements of the Company in this
Indenture contained shall bind its successors and assigns whether so expressed
or not.
Section 17.2 Official Acts by Successor Corporation. Any act or
--------------------------------------
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
Section 17.3 Addresses for Notices, Etc. Any notice or demand which by
---------------------------
any provision of this Indenture is required or permitted to be given or served
by the Trustee or by the holders of Notes on the Company shall be deemed to have
been sufficiently given or made, for all purposes if given or served by being
deposited postage prepaid by registered or certified mail in a post office
letter box addressed (until another address is filed by the Company with the
Trustee) to Level One Communications, Incorporated, 9750 Goethe Road,
Sacramento, California 95827, Attention: Bruce Dravis. Any notice, direction,
request or demand hereunder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or served by being
deposited postage prepaid by registered or certified mail in a post office
letter box addressed to the Corporate Trust Office, which office is, at the date
as of which this Indenture is dated, located at 725 South Figueroa Street, Suite
3100, Los Angeles, California 90017, Attention: Corporate Trust Department
(Level One Communications, Incorporated 4% Convertible Subordinated Notes due
2004).
The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed to a Noteholder shall be mailed to
him by first class mail, postage prepaid, at his address as it appears on the
Note register and shall be sufficiently given to him if so mailed within the
time prescribed.
Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
If a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Section 17.4 Governing Law. This Indenture and each Note shall be deemed
-------------
to be a contract made under the laws of New York, and for all purposes shall be
construed in accordance with the laws of New York (without regard to the
conflict of laws provisions thereof).
Section 17.5 Evidence of Compliance with Conditions Precedent;
-------------------------------------------------
Certificates to Trustee. Upon any application or demand by the Company to the
- -----------------------
Trustee to take any action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, and an Opinion of Counsel stating that,
in the opinion of such counsel, all such conditions precedent have been complied
with.
Each certificate or opinion provided for by or on behalf of the Company in
this Indenture and delivered to the Trustee with respect to compliance with a
condition or covenant provided for in this Indenture shall include (1) a
statement that the person making such certificate or opinion has read such
covenant or condition; (2) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion contained in
such certificate or opinion is based; (3) a statement that, in the opinion of
such person, he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and (4) a statement as to whether or not, in
the opinion of such person, such condition or covenant has been complied with.
Section 17.6 Legal Holidays. In any case where the date of maturity of
--------------
interest on or principal of the Notes or the date fixed for redemption of any
Note will not be a Business Day, then payment of such interest on or principal
of the Notes need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the date of
maturity or the date fixed for redemption, and no interest shall accrue for the
period from and after such date.
Section 17.7 No Security Interest Created. Nothing in this Indenture or
----------------------------
in the Notes, expressed or implied, shall be construed to constitute a security
interest under the Uniform Commercial Code or similar legislation, as now or
hereafter enacted and in effect, in any jurisdiction.
Section 17.8 Trust Indenture Act. This Indenture is hereby made subject
-------------------
to, and shall be governed by, the provisions of the Trust Indenture Act required
to be part of and to govern indentures qualified under the Trust Indenture Act;
provided, however, that, unless otherwise required by law, notwithstanding the
- -------- -------
foregoing, this Indenture and the Notes issued hereunder shall not be subject to
the provisions of subsections (a)(1), (a)(2), and (a)(3) of Section 314 of the
Trust Indenture Act as now in effect as hereafter amended or modified; provided
--------
further that this Section 17.8 shall not require that this Indenture or the
- -------
Trustee be qualified under the Trust Indenture Act prior to the time such
qualification is in fact required under the terms of the Trust Indenture Act,
nor shall it constitute any admission or acknowledgment by any party hereto that
any such qualification is required prior to the time such qualification is in
fact required under the terms of the Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision hereof which is
required to be included in an indenture qualified under the Trust Indenture Act,
such required provision shall control.
Section 17.9 Benefits of Indenture. Nothing in this Indenture or in the
---------------------
Notes, expressed or implied, shall give to any person, other than the parties
hereto, any paying agent, any authenticating agent, any Note registrar and their
successors hereunder, the holders of Notes and the holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
Section 17.10 Table of Contents, Headings, Etc. The table of contents and
---------------------------------
the titles and headings of the articles and sections of this Indenture have been
inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 17.11 Authenticating Agent. The Trustee may appoint an
--------------------
authenticating agent which shall be authorized to act on its behalf and subject
to its direction in the authentication and delivery of Notes in connection with
the original issuance thereof and transfers and exchanges of Notes hereunder,
including under Sections 2.4, 2.5, 2.6, 2.7 and 3.3, as fully to all intents and
purposes as though the authenticating agent had been expressly authorized by
this Indenture and those Sections to
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<PAGE>
authenticate and deliver Notes. For all purposes of this Indenture, the
authentication and delivery of Notes by the authenticating agent shall be deemed
to be authentication and delivery of such Notes "by the Trustee" and a
certificate of authentication executed on behalf of the Trustee by an
authenticating agent shall be deemed to satisfy any requirement hereunder or in
the Notes for the Trustee's certificate of authentication. Such authenticating
agent shall at all times be a person eligible to serve as trustee hereunder
pursuant to Section 8.9.
Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section, without the execution or filing of any paper or any further act on the
part of the parties hereto or the authenticating agent or such successor
corporation.
Any authenticating agent may at any time resign by giving written notice of
resignation to the Trustee and to the Company. The Trustee may at any time
terminate the agency of any authenticating agent by giving written notice of
termination to such authenticating agent and to the Company. Upon receiving such
a notice of resignation or upon such a termination, or in case at any time any
authenticating agent shall cease to be eligible under this Section, the Trustee
shall promptly appoint a successor authenticating agent (which may be the
Trustee), shall give written notice of such appointment to the Company and shall
mail notice of such appointment to all holders of Notes as the names and
addresses of such holders appear on the Note register.
The Trustee agrees to pay to the authenticating agent from time to time
reasonable compensation for its services (to the extent pre-approved by the
Company in writing), and the Trustee shall be entitled to be reimbursed for such
pre-approved payments, subject to Section 8.6.
The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this Section 17.11 shall
be applicable to any authenticating agent.
Section 17.12 Execution in Counterparts. This Indenture may be executed
-------------------------
in any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
State Street Bank and Trust Company of California, N.A. hereby accepts the
trusts in this Indenture declared and provided, upon the terms and conditions
hereinabove set forth.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly signed, and their respective corporate seals to be hereunto affixed and
attested, all as of the date first written above.
LEVEL ONE COMMUNICATIONS,
INCORPORATED
By: /s/ Robert S. Pepper
----------------------------
Name: Robert S. Pepper
Title: Chairman of the Board, President
and Chief Executive Officer
Attest:
/s/ Joh Kehoe
- --------------------------
Name: John Kehoe
Title: Vice President, Chief Financial Officer
[seal] and Secretary
STATE STREET BANK AND TRUST COMPANY OF
CALIFORNIA, N.A., as Trustee
By: /s/ Jeanie Mar
----------------------------
Name: Jeanie Mar
Title: Assistant Vice President
Attest:
/s/ Mark Henson
- --------------------------
Name: Mark Henson
Title: Assistant Vice President
[seal]
<PAGE>
EXHIBIT 4.2
EXHIBIT A - FORM OF NOTE
[FORM OF FACE OF NOTE]
FORM OF LEGEND FOR GLOBAL NOTE: UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS, AND MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B)
IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR
(C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN
OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY RESELL OR OTHERWISE TRANSFER THE
NOTE EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE
EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A., AS TRUSTEE, A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE
NOTE EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH
TRUSTEE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO
A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS
TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(F) ABOVE) A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THE NOTE EVIDENCED HEREBY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE
NOTE (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(F) ABOVE), THE HOLDER MUST
CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER
OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A., AS TRUSTEE. IF THE PROPOSED TRANSFER IS PURSUANT
TO CLAUSE 2(C) OR 2(E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH
TO STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., AS TRUSTEE, SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE
EARLIER OF THE TRANSFER OF THE NOTE EVIDENCED HEREBY PURSUANT TO CLAUSE 2(F)
ABOVE OR THE EXPIRATION OF TWO YEARS FROM THE ORIGINAL ISSUANCE OF THE NOTE
EVIDENCED HEREBY. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT.
<PAGE>
No. ____________ $_______________
LEVEL ONE COMMUNICATIONS, INCORPORATED
4% Convertible Subordinated Note due 2004
Level One Communications, Incorporated, a corporation duly organized and
validly existing under the laws of the State of California (herein called the
"Company", which term includes any successor corporation under the Indenture
referred to on the reverse hereof), for value received hereby promises to pay to
____________________, or registered assigns, the principal sum of
________________________________________________________________________________
__ Dollars on September 1, 2004, and to pay interest on said principal sum semi-
annually on March 1 and September 1 of each year, commencing March 1, 1998, at
the rate per annum specified in the title of this Note, accrued from the March 1
or September 1, as the case may be, next preceding the date of this Note to
which interest has been paid or duly provided for, unless the date of this Note
is a date to which interest has been paid or duly provided for, in which case
interest shall accrue from the date of this Note, or unless no interest has been
paid or duly provided for, in which case interest shall accrue from August 27,
1997, until payment of said principal sum has been made or duly provided for.
Notwithstanding the foregoing, if the date hereof is after February 15 or August
15, as the case may be, and before the following March 1 or September 1, this
Note shall bear interest from such March 1 or September 1, respectively;
provided, however, that if the Company shall default in the payment of interest
- -------- -------
due on such March 1 or September 1, then this Note shall bear interest from the
next preceding March 1 or September 1 to which interest has been paid or duly
provided for or, if no interest has been paid or duly provided for on this Note,
from August 27, 1997. The interest so payable on any March 1 or September 1
will be paid to the person in whose name this Note (or one or more Predecessor
Notes) is registered at the close of business on the record date, which shall be
the February 15 or August 15 (whether or not a Business Day) next preceding such
March 1 or September 1, respectively; provided that any such interest not
-------- ----
punctually paid or duly provided for shall be payable as provided in the
Indenture. Payment of the principal of and interest accrued on this Note shall
be made at the office or agency of the Company maintained for that purpose in
the Borough of Manhattan, The City of New York, or, at the option of the holder
of this Note, at the Corporate Trust Office, in such lawful money of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts; provided, however, that at the option of
-----------------
the Company, payment of interest may be made by check mailed to the registered
address of the person entitled thereto; provided, further, that, with respect to
-------- -------
any holder of Notes with an aggregate principal amount equal to or in excess of
$2,000,000, at the request of such holder in writing to the Company, interest on
such holder's Notes shall be paid by wire transfer in immediately available
funds in accordance with the wire transfer instruction supplied by such holder
from time to time to the Trustee and paying agent (if different from Trustee) at
least two days prior to the applicable record date.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, including, without limitation, provisions subordinating the
payment of principal of and premium, if any, and interest on, this Note to the
prior payment in full of all Senior Indebtedness as defined in the Indenture and
provisions giving the holder of this Note the right to convert this Note into
Common Stock of the Company on the terms and subject to the limitations referred
to on the reverse hereof and as more fully specified in the Indenture. Such
further provisions shall for all purposes have the same effect as though fully
set forth at this place.
This Note shall be deemed to be a contract made under the laws of the State
of New York, and for all purposes shall be construed in accordance with and
governed by the laws of said State (without regard to the conflict of laws
provisions thereof).
This Note shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been manually signed by the
Trustee or a duly authorized authenticating agent under the Indenture.
-2-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
under its corporate seal.
LEVEL ONE COMMUNICATIONS,
INCORPORATED
Dated: _________________ By:__________________________________
Title:
Attest:
_____________________________________
Secretary
[FORM OF CERTIFICATE OF AUTHENTICATION]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-named Indenture.
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, N.A., as Trustee
By:_______________________________
Title:
-3-
<PAGE>
[FORM OF REVERSE OF NOTE]
4% Convertible Subordinated Note due 2004
This Note is one of a duly authorized issue of Notes of the Company,
designated as its 4% Convertible Subordinated Notes due 2004 (herein called the
"Notes"), limited to the aggregate principal amount of $115,000,000 all issued
or to be issued under and pursuant to an Indenture dated as of August 15, 1997
(herein called the "Indenture"), between the Company and State Street Bank and
Trust Company of California, N.A., a national banking association, as trustee
(herein called the "Trustee"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the holders of the Notes.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of, or premium, if any, and accrued
interest on all Notes may be declared, and upon said declaration shall become,
due and payable, in the manner, with the effect and subject to the conditions
provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee in
certain limited circumstances, without the consent of the holders of the Notes,
and in other circumstances, with the consent of the holders of not less than a
majority of the aggregate principal amount of the Notes at the time outstanding,
evidenced as in the Indenture provided, to execute supplemental indentures
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of any supplemental indenture or modifying in any
manner the rights of the holders of the Notes; provided, however, that no such
-------- -------
supplemental indenture shall (i) extend the fixed maturity of any Note, or
reduce the rate or extend the time of payment of interest thereon, or reduce the
principal amount thereof or premium, if any, thereon, or reduce any amount
payable on redemption or repurchase thereof, impair, or change in any respect
adverse to the holder of Notes, the obligation of the Company to repurchase any
Note at the option of the holder upon the happening of a Repurchase Event, or
impair or adversely affect the right of any Noteholder to institute suit for the
payment thereof, or change the currency in which the Notes are payable, or
impair or change in any respect adverse to the holders of the Notes, the right
to convert the Notes into Common Stock subject to the terms set forth in the
Indenture, including Section 15.6 thereof, or modify the provisions of the
Indenture with respect to the subordination of the Notes in a manner adverse to
the Noteholders, without the consent of the holder of each Note so affected or
(ii) reduce the aforesaid percentage of Notes, the holders of which are required
to consent to any such supplemental indenture, without the consent of the
holders of all Notes then outstanding. It is also provided in the Indenture
that, prior to any declaration accelerating the maturity of the Notes, the
holders of a majority in aggregate principal amount of the Notes at the time
outstanding may on behalf of the holders of all of the Notes waive any past
default or Event of Default under the Indenture and its consequences except a
default in the payment of interest or any premium on or the principal of any of
the Notes or a failure by the Company to convert any Notes into Common Stock of
the Company or a default in respect of a covenant or provisions of the Indenture
which under Article XI thereof cannot be modified or amended without the consent
of the holders of all Notes then outstanding. Any such consent or waiver by the
holder of this Note (unless revoked as provided in the Indenture) shall be
conclusive and binding upon such holder and upon all future holders and owners
of this Note and any Notes which may be issued in exchange or substitution
hereof, irrespective of whether or not any notation thereof is made upon this
Note or such other Notes.
The indebtedness evidenced by the Notes is, to the extent and in the manner
provided in the Indenture, expressly subordinate and subject in right of payment
to the prior payment in full of all Senior Indebtedness of the Company, as
defined in the Indenture, whether outstanding at the date of the Indenture or
thereafter incurred, and this Note is issued subject to the provisions of the
Indenture with respect to such subordination. Each holder of this Note, by
accepting the same, agrees to and shall be bound by such provisions and
authorizes the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and appoints the Trustee
his attorney in fact for such purpose.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Note at the place, at the respective times, at the rate and in the coin
or currency herein prescribed.
Interest on the Notes shall be computed on the basis of a 360-day year
comprised of twelve 30-day months compounded semi-annually.
The Notes are issuable in registered form without coupons in denominations
of $1,000 principal amount and integral multiples thereof. At the office or
agency of the Company referred to on the face hereof, and in the manner and
subject to the limitations provided in the Indenture, without payment of any
service charge but with payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration or
exchange of Notes, Notes may be exchanged for a like aggregate principal amount
of Notes of other authorized denominations.
The Notes will not be redeemable at the option of the Company prior to
September 7, 2000. At any time on or after such date and prior to maturity, the
Notes may be redeemed at the option of the Company as a whole, or from time to
time in part, upon mailing a notice of such redemption not less than 20 nor more
than 60 days before the date fixed for redemption to the holders of Notes at
their last registered addresses, all as provided in the Indenture, at the
following redemption prices (expressed as percentages of the principal amount),
together in each case with accrued interest to, but excluding, the date fixed
for redemption; provided that if a redemption date is an interest payment date,
the semi-annual interest payment becoming due on such date shall be payable to
the holder of record of this Note as of the relevant record date.
If redeemed during the 12-month period beginning September 1 (September 7,
2000 through August 31, 2001 in the case of the first such period):
<TABLE>
<CAPTION>
Year Percentage Year Percentage
- ------- ----------- ---- -----------
<S> <C> <C> <C>
2000 102.286% 2002 101.143%
2001 101.714% 2003 100.571%
</TABLE>
and 100% at September 1, 2004.
The Notes are not subject to redemption through the operation of any
sinking fund.
Upon the occurrence of a "Repurchase Event", the Noteholder has the right,
at such holder's option, to require the Company to repurchase all or any portion
of such holder's Notes on the 40th calendar day (or, if such 40th day is not a
Business Day, the next succeeding Business Day) after notice of such Repurchase
Event at a price equal to 105% of the principal amount of the Notes, together in
each case with accrued interest to the repurchase date; provided that if such
--------
repurchase date is March 1 or September 1, then the interest payable on such
date shall be paid to the holder of record of the Note on the next preceding
February 15 or August 15, respectively. The Company or, at the request of the
Company, the Trustee shall mail to all holders of record of the Notes a notice
of the occurrence of a Repurchase Event and of the repurchase right arising as a
result thereof on or before 15 calendar days after the occurrence of such
Repurchase Event. Payment of the repurchase price may be made in shares of the
Company's Common Stock under certain circumstances, as provided in Section 16.3
of the Indenture.
-4-
<PAGE>
Subject to the provisions of the Indenture, the holder hereof has the
right, at its option, at any time following the date of original issuance of the
Notes and prior to the close of business on September 1, 2004, or, as to all or
any portion hereof called for redemption, prior to the close of business on the
Business Day next preceding the date fixed for redemption (unless the Company
shall default in payment due upon redemption), to convert the principal hereof
or any portion of such principal which is $1,000 or an integral multiple
thereof, into that number of fully paid and non-assessable shares of Company's
Common Stock, as said shares shall be constituted at the date of conversion,
obtained by dividing the principal amount of this Note or portion thereof to be
converted by the conversion price of $40 or such conversion price as adjusted
from time to time as provided in the Indenture, upon surrender of this Note,
together with a conversion notice as provided in the Indenture and this Note, to
the Company at the office or agency of the Company maintained for that purpose
in the Borough of Manhattan, The City of New York, or at the option of such
holder, the Corporate Trust Office, and, unless the shares issuable on
conversion are to be issued in the same name as this Note, duly endorsed by, or
accompanied by instruments of transfer in form satisfactory to the Company duly
executed by, the holder or by his duly authorized attorney. Nothwithstanding
any provision of the Indenture or the Note to the contrary, such initial
conversion price of $40 per share of Common Stock shall not be subject to
adjustment with respect to the Company's 3-for-2 stock split which was effected
on August 26, 1997 (such initial conversion price having been set taking into
account such stock split). No adjustment in respect of interest or dividends
will be made upon any conversion; provided, however, that if this Note shall be
-------- -------
surrendered for conversion during the period from the close of business on any
record date for the payment of interest through the close of business on the
Business Day next preceding the following interest payment date, this Note
(unless such Note or portion thereof being converted shall have been called for
redemption pursuant to a redemption notice mailed to the Noteholders in
accordance with Section 3.2 of the Indenture) must be accompanied by an amount,
in funds acceptable to the Company, equal to the interest otherwise payable on
such interest payment date on the principal amount being converted. No
fractional shares of Common Stock will be issued upon any conversion, but an
adjustment in cash will be paid to the holder, as provided in the Indenture, in
respect of any fraction of a share which would otherwise be issuable upon the
surrender of any Note or Notes for conversion.
Any Notes called for redemption, unless surrendered for conversion on or
before the close of business on the date fixed for redemption, may be deemed to
be purchased from the holder of such Notes at an amount not less than the
applicable redemption price, together with accrued interest to the date fixed
for redemption, by one or more investment bankers or other purchasers who may
agree with the Company to purchase such Notes from the holders thereof and
convert them into Common Stock of the Company and to make payment for such Notes
as aforesaid to the Trustee in trust for such holders.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, or at the option of the holder of this Note, at the Corporate Trust
Office, a new Note or Notes of authorized denominations for an equal aggregate
principal amount will be issued to the transferee in exchange thereof, subject
to the limitations provided in the Indenture, without charge except for any tax
or other governmental charge imposed in connection therewith.
The Company, the Trustee, any authenticating agent, any paying agent, any
conversion agent and any Note registrar may deem and treat the registered holder
hereof as the absolute owner of this Note (whether or not this Note shall be
overdue and notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Note registrar), for the purpose of
receiving payment hereof, or on account hereof, for the conversion hereof and
for all other purposes, and neither the Company nor the Trustee nor any other
authenticating agent nor any paying agent nor any other conversion agent nor any
Note registrar shall be affected by any notice to the contrary. All payments
made to or upon the order of such registered holder shall, to the extent of the
sum or sums paid, satisfy and discharge liability for monies payable on this
Note.
No recourse for the payment of the principal of or any premium or interest
on this Note, or for any claim based hereon or otherwise in respect hereof, and
no recourse under or upon any obligation, covenant or agreement of the Company
in the Indenture or any indenture supplemental thereto or in any Note, or
because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, employee, agent, officer, director or
subsidiary, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
Terms used in this Note and defined in the Indenture are used herein as
therein defined.
-5-
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face of
this Note, shall be construed as though they were written out in full according
to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ______________________ Custodian-_____________________
(Cust) (Minor)
TENANT - as tenants by the
entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with Act______________________________________________________________________
right of survivorship (State)
and not as tenants in
common.
Additional abbreviations may also be used
though not in the above list.
</TABLE>
-6-
<PAGE>
[FORM OF CONVERSION NOTICE]
CONVERSION NOTICE
To: State Street Bank and Trust Company of California, N.A.
The undersigned registered owner of this Note hereby irrevocably exercises
the option to convert this Note, or the portion hereof (which is $1,000
principal amount or an integral multiple thereof) below designated, into shares
of Common Stock in accordance with the terms of the Indenture referred to in
this Note, and directs that the shares issuable and deliverable upon such
conversion, together with any check in payment for fractional shares and any
Notes representing any unconverted principal amount hereof, be issued and
delivered to the registered holder hereof unless a different name has been
indicated below. If shares or any portion of this Note not converted are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto. Any amount required to be
paid to the undersigned on account of interest accompanies this Note.
Dated: ________________________
________________________________
________________________________
Signature(s)
Signature(s) must be guaranteed by
an eligible Guarantor Institution
(banks, stock brokers, savings and
loan associations and credit unions)
with membership in an approved signature
guarantee medallion program pursuant to
Securities and Exchange Commission
Rule 17Ad-15 if shares of Common Stock
are to be issued, or Notes to be
delivered, other than to and in the name
of the registered holder.
_______________________________
Signature Guarantee
Fill in for registration of shares
if to be issued, and Notes if to be
delivered, other than to and in the
name of the registered holder:
_______________________________
(Name)
_______________________________
(Street Address)
_______________________________
(City, State and Zip Code)
Please print name and address
Principal amount to be converted (if less
than all): $______,000
Social Security or Other Taxpayer
Identification Number
-7-
<PAGE>
[FORM OF OPTION TO ELECT REPAYMENT
UPON A REPURCHASE EVENT]
To: State Street Bank and Trust Company of California, N.A.
The undersigned registered owner of this Note hereby acknowledges receipt
of a notice from Level One Communications, Incorporated (the "Company") as to
the occurrence of a Repurchase Event with respect to the Company and requests
and instructs the Company to repay the entire principal amount of this Note, or
the portion thereof (which is $1,000 principal amount or an integral multiple
thereof) below designated, in accordance with the terms of the Indenture
referred to in this Note, together with accrued interest to such date, to the
registered holder hereof.
Dated: ________________________
Signature(s)
Social Security or Other Taxpayer
Identification Number
Principal amount to be repaid (if less than
all): $______,000
NOTICE: The above signatures of the
holder(s) hereof must correspond with the
name as written upon the face of the Note in
every particular without alteration or
enlargement or any change whatever.
-8-
<PAGE>
[FORM OF ASSIGNMENT]
For value received ____________________________ hereby sell(s), assign(s)
and transfer(s) unto ___________________________ (Please insert social security
or Taxpayer Identification Number of assignee) the within Note, and hereby
irrevocably constitutes and appoints ___________________ attorney to transfer
the said Note on the books of the Company, with full power of substitution in
the premises.
In connection with any transfer of the within Note occurring within two
years of the original issuance of such Note (unless such Note is being
transferred pursuant to a registration statement that has been declared
effective under the Securities Act), the undersigned confirms that such Note is
being transferred:
[_] To Level One Communications, Incorporated or a subsidiary thereof; or
[_] Pursuant to and in compliance with Rule 144A under
the Securities Act of 1933, as amended; or
[_] To an Institutional Accredited Investor pursuant to
and in compliance with the Securities Act of 1933,
as amended; or
[_] Pursuant to and in compliance with Regulation S under
the Securities Act of 1933, as amended; or
[_] Pursuant to and in compliance with Rule 144 under
the Securities Act of 1933, as amended;
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
[_] The transferee is an Affiliate of the Company.
Dated:____________________________
Signature(s)
Signature(s) must be guaranteed by an eligible
Guarantor Institution (banks, stock brokers,
savings and loan associations and credit unions)
with membership in an approved signature
guarantee medallion program pursuant to
Securities and Exchange Commission
Rule 17Ad-15 if shares of Common Stock
are to be issued, or Notes to be delivered,
other than to and in the name of the
required holder.
Signature Guarantee
NOTICE: The signature on the conversion notice, the option to elect repurchase
upon a Repurchase Event or the assignment must correspond with the name as
written upon the face of the Note in every particular without alteration or
enlargement or any change whatever.
-9-
<PAGE>
EXHIBIT 4.3
This Registration Rights Agreement is made and entered into as of August 15,
1997, by and among Level One Communications, Incorporated, a California
corporation (the "Company"), and Robertson, Stephens & Company LLC, Alex.
Brown & Sons Incorporated and Montgomery Securities(the "Purchasers") who have
purchased or have the right to purchase up to $100,000,000 in aggregate
principal amount of 4% Convertible Subordinated Notes due 2004 (the "Notes") of
the Company pursuant to the Purchase Agreement (as such term is defined below).
This Agreement is made pursuant to the Purchase Agreement, dated August 21,
1997, among the Company and the Purchasers (the "Purchase Agreement"). In order
to induce the Purchasers to enter into the Purchase Agreement, the Company has
agreed to provide the registration rights provided for in this Agreement to the
Purchasers and their respective direct and indirect transferees (i) for the
benefit of the Purchasers, (ii) for the benefit of the holders from time to time
of the Notes (including the Purchasers) and the holders from time to time of the
Common Stock issuable or issued upon conversion of the Notes and (iii) for the
benefit of the securities constituting the Transfer Restricted Securities. The
execution of this Agreement is a condition to the closing of the transactions
contemplated by the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have
-----------
the following meanings:
Accredited Investor Notes: Notes initially resold by the Purchasers
-------------------------
pursuant to the Purchase Agreement to institutional "accredited investors"
(within the meaning of Rule 501(a)(1), (2), (3) or (7) promulgated by the SEC
under the Securities Act) (it being understood and agreed that such Notes shall
not include any Notes initially resold outside the United States to certain
persons in offshore transactions in reliance on Regulation S under the
Securities Act) and all Notes issued upon registration of transfer of or in
exchange for such Notes.
Act: As defined in this Section 1.
---
Advice: As defined in the last paragraph of Section 2(d) hereof.
------
Affiliate: An affiliate of any specified person shall mean any other
---------
person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person. For the purposes of this
definition, "control," when used with respect to any person, means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise and
the terms "affiliated," "controlling" and "controlled" have meanings correlative
to the foregoing.
Agreement: This Registration Rights Agreement, as the same may be
---------
amended, supplemented or modified from time to time in accordance with the terms
hereof.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday
------------
that is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
Closing Date: August 27, 1997.
------------
Common Stock: Common Stock, no par value per share, of the Company and
------------
any other shares of common stock as may constitute "Common Stock" for purposes
of the Indenture, in each case, as issuable or issued upon conversion of the
Notes.
Company: Level One Communications, Incorporated, a California
-------
corporation, and any successor corporation thereto.
controlling person: As defined in Section 6(a) hereof.
------------------
Damages Payment Date: Each of the semi-annual interest payment dates
--------------------
provided in the Indenture.
Effectiveness Period: As defined in Section 2(a) hereof.
--------------------
Effectiveness Target Date: The 120th day following the Closing Date.
-------------------------
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
------------
rules and regulations promulgated by the SEC thereunder.
Filing Date: The 60th day after the Closing Date.
-----------
Holder: Each owner of any Transfer Restricted Securities.
------
Indemnified Person: As defined in Section 6(a) hereof.
------------------
Indenture: The Indenture, dated as of the date hereof, between the
---------
Company and the Trustee, pursuant to which the Notes are being issued, as the
same may be amended, modified or supplemented from time to time in accordance
with the terms thereof.
Liquidated Damages: As defined in Section 3(a) hereof.
------------------
Purchasers: As defined in the first paragraph hereof.
----------
Notes: The $100,000,000 aggregate principal amount of 4% Convertible
-----
Subordinated Notes due 2004 of the Company being issued pursuant to the
Indenture (together with up to $15,000,000 aggregate principal amount of such
Notes, if, and to the extent, the Purchasers' over-allotment option is
exercised).
Proceeding: An action, claim, suit or proceeding (including, without
----------
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed in reliance upon Rule 430A), as
amended or supplemented by any prospectus supplement, with respect to the resale
of any of the Transfer Restricted Securities covered by such Registration
Statement, and all other amendments and supplements to any such prospectus,
including post-effective amendments, and all materials incorporated by reference
or deemed to be incorporated by reference, if any, in such prospectus.
-1-
<PAGE>
Purchase Agreement: As defined in the second paragraph hereof.
------------------
Record Holder: (i) with respect to any Damages Payment Date relating to
-------------
any Note as to which any such Liquidated Damages have accrued, the registered
Holder of such Note on the record date with respect to the interest payment date
under the Indenture on which such Damages Payment Date shall occur and (ii) with
respect to any Damages Payment Date relating to any shares of Common Stock as to
which any such Liquidated Damages have accrued, the registered Holder of such
shares 15 days prior to the next succeeding Damages Payment Date.
Registration Default: As defined in Section 3(a) hereof.
--------------------
Registration Statement: Any registration statement of the Company
----------------------
filed with the SEC pursuant to the Securities Act that covers the resale of any
of the Transfer Restricted Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference, if any, in such registration statement.
Regulation S: Regulation S promulgated by the SEC pursuant to the
------------
Securities Act, as such Regulation may be amended from time to time, or any
successor rule or regulation.
Regulation S Notes: Notes initially resold by the Purchasers pursuant
------------------
to the Purchase Agreement outside the United States to certain persons in
offshore transactions in reliance on Regulation S under the Securities Act and
all Notes issued upon registration of transfer of or in exchange for such Notes.
Requisite Information: As defined in Section 2(c) hereof.
---------------------
Rule 144: Rule 144 promulgated by the SEC pursuant to the Securities
--------
Act, as such Rule may be amended from time to time, or any successor rule or
regulation.
Rule 144A: Rule 144A promulgated by the SEC pursuant to the Securities
---------
Act, as such Rule may be amended from time to time, or any successor rule or
regulation.
Rule 144A Notes: Notes initially resold by the Purchasers pursuant to
---------------
the Purchase Agreement to "qualified institutional buyers" (as such time is
defined in Rule 144A) (it being understood and agreed that such Notes shall not
include any Notes initially resold outside the United States to certain persons
in offshore transactions in reliance on Regulation S under the Securities Act)
and all Notes issued upon registration of transfer of or in exchange for such
Notes.
Rule 158: Rule 158 promulgated by the SEC pursuant to the Securities
--------
Act, as such Rule may be amended from time to time, or any successor rule or
regulation.
Rule 415: Rule 415 promulgated by the SEC pursuant to the Securities
--------
Act, as such Rule may be amended from time to time, or any successor rule or
regulation.
Rule 424: Rule 424 promulgated by the SEC pursuant to the Securities
--------
Act, as such Rule may be amended from time to time, or any successor rule or
regulation.
Rule 430A: Rule 430A promulgated by the SEC pursuant to the Securities
---------
Act, as such Rule may be amended from time to time, or any successor rule or
regulation.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations promulgated by the SEC thereunder.
Shelf Registration Statement: As defined in Section 2 hereof.
----------------------------
Special Counsel: The special counsel to the Holders.
---------------
TIA: The Trust Indenture Act of 1939, as amended, and the rules and
---
regulations promulgated by the SEC thereunder.
Transfer Restricted Securities: The Accredited Investor Notes, the Rule
------------------------------
144A Notes and the Regulation S Notes, and the shares of Common Stock into which
such Notes are converted or convertible (including any shares of Common Stock
issued or issuable thereon upon any stock split, stock combination, stock
dividend or the like), upon original issuance thereof, and at all times
subsequent thereto, and associated related rights, if any, until, in the case of
any such Note or share (and associated rights) (i) the date on which the resale
thereof has been effectively registered under the Securities Act and disposed of
in accordance with the Registration Statement relating thereto, (ii) the date on
which such security has been distributed to the public pursuant to Rule 144 or
is saleable pursuant to paragraph (k) of Rule 144 or (iii) the date on which it
ceases to be outstanding, whichever date is earliest.
Trustee: The trustee under the Indenture.
-------
underwritten registration or underwritten offering: A registration in
--------------------------------------------------
connection with which securities of the Company are sold to one or more
underwriters for reoffering to the public pursuant to an effective Registration
Statement.
References herein to the term "Holders of a majority in aggregate
principal amount of Transfer Restricted Securities" or words to a similar effect
shall mean, with respect to any request, notice, demand, objection or other
action by the Holders hereunder or pursuant hereto (each, an "Act"), registered
Holders of a number of shares of then-outstanding Common Stock constituting
Transfer Restricted Securities and an aggregate principal amount of then
outstanding Notes constituting Transfer Restricted Securities, such that the sum
of such shares of Common Stock and the shares of Common Stock issuable upon
conversion of such Notes constitutes in excess of 50% of the sum of all of the
then-outstanding shares of Common Stock constituting Transfer Restricted
Securities and the number of shares of Common Stock issuable upon conversion of
then-outstanding Notes constituting Transfer Restricted Securities. For purposes
of the preceding sentence, Transfer Restricted Securities owned, directly or
indirectly, by the Company or its Affiliates shall be deemed not to be
outstanding.
2. Shelf Registration Statement
----------------------------
(a) The Company agrees to file with the SEC as soon as reasonably
practicable after the Closing Date, but in no event later than the
-2-
<PAGE>
Filing Date, a Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415 covering all of the Transfer Restricted Securities or
separate Registration Statements for an offering to be made on a continuous
basis pursuant to Rule 415 covering all of the Notes constituting Transfer
Restricted Securities and all of the Common Stock constituting Transfer
Restricted Securities, respectively (such Registration Statement or Statements,
collectively, the "Shelf Registration Statement"). Each Shelf Registration
Statement shall be on Form S-3 under the Securities Act or another appropriate
form selected by the Company permitting registration of such Transfer Restricted
Securities for resale by the Holders in the manner or manners reasonably
designated by Holders of a majority in aggregate principal amount of Transfer
Restricted Securities being sold (including, without limitation, up to three
underwritten offerings). The Company shall not permit any securities other than
the Transfer Restricted Securities to be included in any Shelf Registration
Statement. The Company shall use its best efforts to cause each Shelf
Registration Statement to be declared effective pursuant to the Securities Act
as soon as reasonably practicable following the filing thereof and to keep each
Shelf Registration Statement continuously effective under the Securities Act for
two years after the date on which all the Notes are sold (including those sold
pursuant to the over-allotment option granted to the Purchasers in the Purchase
Agreement) to the Purchasers (subject to extension pursuant to Sections 2(d)
hereof) (the "Effectiveness Period"), or such shorter period ending when there
cease to be any Transfer Restricted Securities outstanding.
(b) Supplements and Amendments. The Company shall use its best efforts to
--------------------------
keep each Shelf Registration Statement continuously effective by supplementing
and amending the Shelf Registration Statement if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration Statement, if required by the Securities Act or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Transfer Restricted Securities or by any underwriter of such Transfer Restricted
Securities; provided, however, that the Effectiveness Period shall be extended
as provided in Section 2(d) hereof.
(c) Selling Securityholder Information. Each Holder shall furnish to the
----------------------------------
Company such information regarding the distribution of its Transfer Restricted
Securities as is required by law to be disclosed in the applicable Registration
Statement (the "Requisite Information") prior to effecting any sale pursuant to
such Registration Statement.
The Company shall file, within five Business Days after the receipt of
notice from any Holder which includes the Requisite Information with respect to
such Holder, a Prospectus supplement pursuant to Rule 424 or otherwise amend or
supplement such Registration Statement to include in the Prospectus the
Requisite Information as to such Holder (and the Transfer Restricted Securities
held by such Holder), and the Company shall provide such Holder and the Special
Counsel within two Business Days after receipt of such notice with a copy of
such Prospectus as so amended or supplemented containing the Requisite
Information in order to permit such Holder to comply with the Prospectus
delivery requirements of the Securities Act in a timely manner with respect to
any proposed disposition of such Holder's Transfer Restricted Securities.
If any such Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require, in the event that such reference to such Holder by
name or otherwise is not required by the Securities Act or any similar Federal
statute then in force, the deletion of the reference to such Holder in such
Registration Statement at any time subsequent to the time that such reference
ceases to be required.
(d) Certain Notices; Suspension of Sales. Each Holder agrees by
------------------------------------
acquisition of such Transfer Restricted Securities that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 4(c)(ii), 4(c)(iii), 4(c)(v) or 4(c)(vi) hereof, such Holder will
forthwith discontinue disposition of such Transfer Restricted Securities covered
by such Registration Statement and Prospectus (other than in transactions exempt
from the registration requirements under the Securities Act) until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Sections 4(c)(i) and 4(k) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus. If the Company shall give any such notice, the
Effectiveness Period shall be extended by the number of days during such period
from and including the date of the giving of such notice to and including the
date when each Holder shall have received (x) the copies of the supplemented or
amended Prospectus contemplated by Sections 4(c)(i) and 4(k) hereof or (y) the
Advice, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus.
3. Liquidated Damages
------------------
(a) The Company and the Purchasers agree that the Holders will suffer
damages if the Company fails to fulfill its obligations pursuant to Section 2
hereof and that it would not be possible to ascertain the extent of such
damages. Accordingly, the Company hereby agrees to pay liquidated damages
("Liquidated Damages") to each Holder under the circumstances and to the extent
set forth below:
(i) if the Shelf Registration Statement has not been filed
with the SEC on or prior to the Filing Date; or
(ii) if each Shelf Registration Statement is not declared effective
by the SEC on or prior to the applicable Effectiveness Target
Date; or
(iii) any Shelf Registration Statement ceases to be effective or
usable at any time during the Effectiveness Period (without
being succeeded on the same day immediately by a post-effective
amendment or supplement to such Registration Statement that
cures such failure and that is itself, in the case of post-
effective amendment, immediately declared effective) for a
period of time which shall exceed 90 days in the aggregate in
any period of 365 consecutive days;
(any of the foregoing, a "Registration Default"); provided that the fact that a
Shelf Registration Statement is not usable by a particular Holder at any given
time solely as a result of the failure of such Holder to provide Requisite
Information with respect to it shall not be relevant for purposes of clause
(iii) above unless such Holder shall have provided such information to the
Company and the Company shall have failed to file an appropriate Prospectus
supplement pursuant to Section 2(c) hereof. In the event of any such
Registration Default, the Company shall accrue Liquidated Damages to each Holder
during the first 90-day period immediately in an amount equal to $.05 per week
per $1,000 principal amount of Notes held by such Holder and, if applicable, on
an equivalent basis per share (subject to adjustment in the event of any stock
split, stock combination, stock dividends and the like) of Common Stock
constituting Transfer Restricted Securities held by such Holder for each week or
portion thereof that the Registration Default continues. The weekly rate at
which such Liquidated Damages accrue shall increase by an additional $.05 per
$1,000 principal amount of Notes and, if applicable, an equivalent amount per
week per share (subject to adjustment as set forth above) of Common Stock
constituting Transfer Restricted Securities for each subsequent continuing 90-
day period following the occurrence of such Registration Default until all
Registration Defaults have been cured; provided, however, that Liquidated
-------- -------
Damages shall not at any time exceed $.25 per week per $1,000 principal amount
of Notes or, as applicable, an equivalent amount per week per share (subject to
adjustment as set forth above) of Common Stock constituting Transfer Restricted
Securities. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages shall cease (without in any way limiting the effect of any
subsequent Registration Default). A Registration Default under clause (i) above
shall be cured on the date that the applicable Shelf Registration Statement is
filed with the SEC; a Registration Default under clause (ii) above shall be
cured on the date that the applicable Shelf Registration Statement is declared
effective by the SEC; and a Registration Default under clause (iii) above shall
be cured on the date the applicable Shelf Registration Statement is declared
effective or otherwise usable.
(b) The Company shall notify the Trustee within one Business Day after
each and every date on which a Registration Default occurs. Liquidated Damages
shall be paid by the Company to the Record Holders on each Damages Payment Date
in the same manner as interest is paid under the Indenture, in the
-3-
<PAGE>
case of the Notes, and by mailing checks to their registered addresses in the
register of the Company for the Common Stock, in the case of shares of Common
Stock; provided, however, that any Liquidated Damages accrued with respect to
-------- -------
any Note or portion thereof called for redemption on a redemption date,
repurchased in connection with a Repurchase Event (as defined in the Indenture)
on a repurchase date, or converted into shares of Common Stock on a conversion
date prior to the Damages Payment Date, shall, in any such event, be paid
instead to the Holder who submitted such Note or portion thereof for redemption,
repurchase or conversion on the applicable redemption date, repurchase date or
conversion date, as the case may be, on such date (promptly following the
conversion date, in the case of conversion of a Note). In no event shall the
Company be required to pay Liquidated Damages in excess of the applicable
maximum weekly amount set forth above, regardless of whether one or multiple
Registration Defaults shall exist.
(c) All of the Company's obligations set forth in this Section 3
which are unsatisfied to any extent with respect to any Transfer Restricted
Securities at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
security have been satisfied in full (notwithstanding the earlier termination of
this Agreement).
(d) Any payments due and payable pursuant to this Section 3 with
respect to any Notes shall be subject to the provisions of Article IV of the
Indenture as if such payments were additional interest on the Notes.
4. Registration Procedures. In connection with the Company's
-----------------------
registration obligations hereunder, the Company shall effect such registrations
on the appropriate form selected by the Company to permit the resale of Transfer
Restricted Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall as expeditiously as
reasonably possible:
(a) No fewer than five Business Days prior to the initial filing of a
Registration Statement or Prospectus and no fewer than two Business Days prior
to the filing of any amendment or supplement thereto (excluding, unless
requested, any document that would be incorporated or deemed to be incorporated
therein by reference), furnish to the registered (as of the most recent
reasonably practicable date which shall not be more than two Business Days prior
to the date such document is personally delivered, delivered to a next-day
courier, deposited in the mail or telecopied, as the case may be) Holders,
Special Counsel and the managing underwriters, if any, copies of all such
documents proposed to be filed (excluding, unless requested, those incorporated
or deemed to be incorporated by reference) and cause the officers and directors
of the Company, counsel to the Company and independent certified public
accountants to the Company to respond to such inquiries as shall be necessary in
connection with such Registration Statement, in the opinion of Special Counsel
and counsel to such underwriters, to conduct a reasonable investigation within
the meaning of the Securities Act. The Company shall not file any such
Registration Statement or related Prospectus or any amendments or supplements
thereto to which the Holders of a majority in aggregate principal amount of the
Transfer Restricted Securities, Special Counsel, or the managing underwriters,
if any, shall reasonably object on a timely basis;
(b) Prepare and file with the SEC such amendments, including post-
effective amendments, to each Registration Statement as may be necessary to keep
such Registration Statement continuously effective for the applicable time
period set forth in Section 2(a) hereof; cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Securities Act and the Exchange Act with
respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended method or methods
of disposition by the Holder set forth in such Registration Statement as so
amended or in such Prospectus as so supplemented (including, without limitation,
the filing of any Prospectus supplement pursuant to Rule 424 in order to add or
change any selling security holder information (including any such supplements
or amendments pursuant to Section 2(c) hereof, provided such Holder to which
--------
such change applies complies with the Requisite Information requirements of
Section 2(c) hereof));
(c) Notify the registered (as of the most recent reasonably
practicable date which shall not be more than two Business Days prior to the
date such notice is personally delivered, delivered to a next-day courier,
deposited in the mail or telecopied, as the case may be) Holders, Special
Counsel and the managing underwriters, if any, promptly (and in the case of an
event specified by clause (i)(A) of this paragraph in no event fewer than two
Business Days prior to such filing), and (if requested by any such person),
confirm such notice in writing, (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment is proposed to be filed, and, (B) with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request of the SEC or any other Federal
or state governmental authority for amendments or supplements to such
Registration Statement or related Prospectus or for additional information
related thereto, (iii) of the issuance by the SEC, any state securities
commission, any other governmental agency or any court of any stop order, order
or injunction suspending or enjoining the use or the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose,
(iv) if at any time any of the representations and warranties of the Company
contained in any agreement (including any underwriting agreement) contemplated
by Section 4(m) hereof are not true and correct in all material respects, (v) of
the receipt by the Company of any notification with respect to the suspension of
the qualification or exemption from qualification of any of the Transfer
Restricted Securities for sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, and (vi) of the existence of any
fact and the happening of any event that makes any statement made in such
Registration Statement or related Prospectus untrue in any material respect, or
that requires the making of any changes in such Registration Statement or
Prospectus so that in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and that, in the case of the Prospectus, such Prospectus will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of any stop order or order enjoining or suspending the use
or effectiveness of a Registration Statement or the lifting of any suspension of
the qualification (or exemption from qualification) of any of the Transfer
Restricted Securities for sale in any jurisdiction, at the earliest practicable
moment;
(e) If requested by the Special Counsel, the managing underwriters, if
any, or the Holders of a majority in aggregate principal amount of the Transfer
Restricted Securities being sold in connection with such offering, (i) promptly
include in a Prospectus supplement or post-effective amendment such information
as the Special Counsel, the managing underwriters, if any, and such Holders
agree should be included therein, and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as reasonably
practicable after the Company has received notification of the matters to be
included in such Prospectus supplement or post-effective amendment; provided,
--------
however, that the Company shall not be required to take any action pursuant to
- -------
this Section 4(e) that would, in the opinion of counsel for the Company, violate
applicable law or which is not reasonably required to comply with applicable
securities laws;
(f) Furnish to each Holder who so requests, Special Counsel and each
managing underwriter, if any, without charge, at least one conformed copy of
each Registration Statement and each amendment thereto, including financial
statements (but excluding schedules, all documents incorporated or deemed to be
incorporated therein by reference and all exhibits, unless requested in writing
by such Holder, Special Counsel or managing underwriter);
(g) Deliver to each Holder, the Special Counsel, and the underwriters,
if any, without charge, as many copies of the Prospectus or Prospectuses
(including each form of Prospectus) and each amendment or supplement thereto to
as such persons may reasonably request; and, unless the Company shall have given
notice to such Holder pursuant to Section 4(c)(vi), the Company hereby consents
to the use of such Prospectus and each amendment or supplement thereto by each
of the selling Holders of Transfer Restricted Securities and the underwriters,
if any, in connection with the offering and sale of the Transfer Restricted
Securities covered by such Prospectus and any amendment or supplement thereto,
provided, however, that no Holder shall be entitled to use the Prospectus unless
- -------- -------
and until such Holder shall have furnished to the Company any and all Requisite
Information pursuant to Section 2(c) hereof;
-4-
<PAGE>
(h) Use its best efforts to register or qualify, or cooperate with the
Holders of Transfer Restricted Securities to be sold or tendered for, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of, such Transfer Restricted Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions within the United States
as any Holder or underwriter reasonably requests in writing, keep each such
registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things necessary legally to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the applicable
Registration Statement; provided, however, that the Company shall not be
-------- -------
required to qualify generally to do business in any jurisdiction where it is not
then so qualified, take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or subject the
Company to any tax in any such jurisdiction where it is not then so subject;
(i) In connection with any sale or transfer of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the Holders and the managing underwriters,
if any, to (A) facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold, which certificates shall
not bear any restrictive legends, shall bear a CUSIP number different from the
CUSIP number for the Transfer Restricted Securities and shall be in a form
eligible for deposit with The Depository Trust Company and (B) enable such
Transfer Restricted Securities to be in such denominations and registered in
such names as the managing underwriters, if any, or Holders may reasonably
request at least two Business Days prior to any sale of Transfer Restricted
Securities;
(j) Use its best efforts to cause the offering of the Transfer
Restricted Securities covered by the Registration Statement to be registered
with or approved by such other governmental agencies or authorities within the
United States, except as may be reasonably required as a consequence of the
nature of a Holder's business, in which case the Company will cooperate in all
reasonable respects with the filing of such Registration Statement and the
granting of such approvals as may be reasonably necessary to enable the seller
or sellers thereof or the underwriters, if any, to consummate the disposition of
such Transfer Restricted Securities; provided, however, that the Company shall
-------- -------
not be required to register the Transfer Restricted Securities in any
jurisdiction that would require the Company to qualify to do business in any
jurisdiction where it is not then so qualified, subject it to general service of
process in any such jurisdiction where it is not then so subject or subject the
Company to any tax in any such jurisdiction where it is not then so subject or
to;
(k) Upon the occurrence of any event contemplated by Section 4(c)(vi)
hereof, as promptly as reasonably practicable, prepare a supplement or
amendment, including, if appropriate, a post-effective amendment, to each
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, such Prospectus will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
(l) Prior to the effective date of the first Registration Statement
relating to the Transfer Restricted Securities, to provide a CUSIP number for
the Transfer Restricted Securities to be sold pursuant to the Registration
Statement;
(m) Enter into such agreements (including an underwriting agreements
in form, scope and substance as are customary in underwritten offerings)
reasonably satisfactory to the Company and take all such other reasonable
actions in connection therewith (including those reasonably requested by the
managing underwriters, if any, or the Holders of a majority in aggregate
principal amount of the Transfer Restricted Securities being sold) in order to
expedite or facilitate the sale of such Transfer Restricted Securities;
provided, however, that the Company is required to facilitate no more than two
- -------- -------
underwritten offerings. In such connection, whether or not an underwriting
agreement is entered into and whether or not the registration is an underwritten
registration, (i) make such representations and warranties to the Holders of
such Transfer Restricted Securities and the underwriters, if any, with respect
to the business of the Company and its subsidiaries (including with respect to
businesses or assets acquired or to be acquired by any of them), and the
Registration Statement, Prospectus and documents, if any, incorporated or deemed
to be incorporated by reference therein, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in underwritten
offerings and reasonably acceptable to the Company, and confirm the same if and
when requested; (ii) seek to obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions (in form, scope and substance) shall
be reasonably satisfactory to the managing underwriters, if any, and Special
Counsel to the Holders of the Transfer Restricted Securities being sold,
addressed to each selling Holder of Transfer Restricted Securities and each of
the underwriters, if any, covering the matters customarily covered in opinions
requested in underwritten offerings (including any such matters as may be
reasonably requested by such Special Counsel and underwriters); (iii) use all
reasonable efforts to obtain customary "cold comfort" letters and updates
thereof from the independent certified public accountants of the Company (and,
if necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for which
financial statements and financial data is, or is required to be, included in
the Registration Statement), addressed (where reasonably possible) to each
selling Holder of Transfer Restricted Securities and each of the underwriters,
if any, such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with underwritten
offerings; (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable to the
selling Holders of Transfer Restricted Securities and the underwriters, if any,
than those set forth in Section 6 hereof (or such other provisions and
procedures acceptable to Holders of a majority in aggregate principal amount of
the Transfer Restricted Securities covered by such Registration Statement and
the managing underwriters); and (v) deliver such documents and certificates as
may be reasonably requested by the Holders of majority in aggregate principal
amount of the Transfer Restricted Securities being sold, their Special Counsel
or the managing underwriters, if any, to evidence the continued validity of the
representations and warranties made pursuant to clause (i) of this Section 4(m)
and to evidence compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company;
(n) Make available for inspection by a representative of the Holders
of Transfer Restricted Securities being sold, any underwriter participating in
any such disposition of Transfer Restricted Securities, if any, and any
attorney, consultant or accountant retained by such selling Holders or
underwriter, at the offices where normally kept, during reasonable business
hours, all financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries as they may reasonably request,
and cause the officers, directors, agents and employees of the Company and its
subsidiaries to supply all information in each case reasonably requested by any
such representative, underwriter, attorney, consultant or accountant in
connection with such Registration Statement, provided, however, that such
-------- -------
persons shall first agree in writing with the Company that any information that
is reasonably and in good faith designated by the Company in writing as
confidential at the time of delivery or inspection (as the case may be) of such
information shall be kept confidential by such persons, unless (i) disclosure of
such information is required by court or administrative order or is necessary to
respond to inquiries of regulatory authorities, (ii) disclosure of such
information is required by law (including any disclosure requirements pursuant
to Federal securities laws in connection with the filing of any Registration
Statement or the use of any Prospectus), (iii) such information becomes
generally available to the public other than as a result of a disclosure or
failure to safeguard by any such person or (iv) such information becomes
available to any such person from a source other than the Company and such
source is not bound by a confidentiality agreement.
(o) Cause the Indenture to be qualified under the TIA not later than
the effective date of the first Registration Statement relating to the Transfer
Restricted Securities; and in connection therewith, cooperate with the Trustee
and the Holders of Notes constituting Transfer Restricted Securities to effect
such changes to the Indenture, if any, as may be required for such Indenture to
be so qualified in accordance with the terms of the TIA; and execute, and use
its best efforts to cause the Trustee to execute, all customary documents as may
be required to effect such changes, and all other forms and documents (including
Form T-1) required to be filed with the SEC to enable the Indenture to be so
qualified under the TIA in a timely manner.
(p) Comply with applicable rules and regulations of the SEC and make
generally available to its security holders earning statements
-5-
<PAGE>
satisfying the provisions of Section 11(a) of the Securities Act or Rule 158 (or
any similar rule promulgated under the Securities Act), no later than 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Transfer Restricted Securities are sold to underwriters in a
firm commitment or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter after the effective date of a Registration Statement, which
statement shall cover said period, consistent with the requirements of Rule 158;
and
(q) (i) list all shares of Common Stock covered by such Registration
Statement on any securities exchange on which the Common Stock is then listed or
(ii) authorize for quotation on the National Association of Securities Dealers
Automated Quotation System ("Nasdaq") or the National Market of Nasdaq all
Common Stock covered by such Registration Statement if the Common Stock is then
so authorized for quotation.
5. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by it whether or not any
Registration Statement is filed or becomes effective and whether or not any
securities are offered or sold pursuant to any Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filings fees (including, without
limitation, fees and expenses (A) with respect to filings required to be made
with the National Association of Securities Dealers, Inc. and (B) in compliance
with securities or Blue Sky laws (including, without limitation and in addition
to that provided for in (b) below, reasonable fees and disbursements of counsel
for the underwriters or the Special Counsel in connection with Blue Sky
qualifications of the Transfer Restricted Securities and determination of the
eligibility of the Transfer Restricted Securities for investment under the laws
of such jurisdictions as the managing underwriters, if any, or Holders of a
majority in aggregate principal amount of Transfer Restricted Securities, may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Transfer Restricted Securities in a form eligible for
deposit with The Depository Trust Company and of printing Prospectuses if the
printing of Prospectuses is required by the managing underwriters, if any, or by
the Holders of a majority in aggregate principal amount of the Transfer
Restricted Securities included), (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Company and the Special
Counsel (plus any local counsel deemed appropriate by the Holders of a majority
in aggregate principal amount of the Transfer Restricted Securities) in
accordance with the provisions of Section 5(b) hereof, (v) fees and
disbursements of all independent certified public accountants referred to in
Section 4(m)(iii) (including, without limitation, the expenses of any special
audit and "comfort" letters required by or incident to such performance), (vi)
Securities Act liability insurance, if the Company so desires such insurance,
and (vii) fees and expenses of all other persons retained by the Company. In
addition, the Company shall pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of an annual audit and the fees and
expenses incurred in connection with the listing of the securities to be
registered on any securities exchange or the Nasdaq or the Nasdaq National
Market. Notwithstanding anything in this Agreement to the contrary, each Holder
shall pay all underwriting discounts and brokerage commissions with respect to
any Transfer Restricted Securities sold by it.
(b) In connection with any registration hereunder, the Company shall
reimburse the Holders of the Transfer Restricted Securities being registered or
tendered for in such registration for the reasonable fees and disbursements of
not more than one firm of attorneys representing the selling Holders (in
addition to any local counsel), which firm shall be chosen by the Holders of a
majority in aggregate principal amount of the Transfer Restricted Securities.
Wilson Sonsini Goodrich & Rosati shall be Special Counsel for all purposes
hereof unless and until another Special Counsel shall have been selected by a
majority in aggregate principal amount of the Transfer Restricted Securities and
notice hereof shall have been given to the Company.
6. Indemnification
---------------
(a) The Company agrees to indemnify and hold harmless (i) each of the
Purchasers, (ii) each Holder, (iii) each person, if any, who controls (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) any of the foregoing (any of the persons referred to in this clause (iii)
being hereinafter referred to as a "controlling person"), and (iv) the
respective officers, directors, partners, employees, representatives and agents
of the Purchasers, the Holders (including predecessor Holders), or any
controlling person (any person referred to in clause (i), (ii), (iii) or (iv)
may hereinafter be referred to as an "Indemnified Person"), from and against any
and all losses, claims, damages, liabilities, expenses and judgments caused by
any untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement or Prospectus or in any amendment or supplement
thereto or in any preliminary Prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except insofar as such losses, claims, damages, liabilities,
expenses or judgments are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to any
Indemnified Person furnished to the Company by or on behalf of such Indemnified
Person expressly for use therein; provided, however, that the foregoing
-------- -------
indemnity with respect to any preliminary Prospectus shall not inure to the
benefit of any Indemnified Person from whom the person asserting such losses,
claims, damages, liabilities, expenses and judgments purchased securities if
such untrue statement or omission or alleged untrue statement or omission made
in such preliminary Prospectus is eliminated or remedied in the Prospectus and a
copy of the Prospectus shall not have been furnished to such person in a timely
manner due to the wrongful action or wrongful inaction of such Indemnified
Person, whether as a result of negligence or otherwise.
(b) In case any action shall be brought against any Indemnified
Person, based upon any Registration Statement or any such Prospectus or any
amendment or supplement thereto and with respect to which indemnity may be
sought against the Company, such Indemnified Person shall promptly notify the
Company in writing and the Company shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Person and
payment of all fees and expenses. Any Indemnified Person shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person, unless (i) the employment of such counsel shall have
been specifically authorized in writing by the Company, (ii) the Company shall
have failed to assume the defense and employ counsel or (iii) such Indemnified
Person or Persons shall have been advised by counsel that there may be a
conflict between the positions of the indemnifying party or parties and of the
indemnified party or parties in conducting the defense of such action or
proceeding or that there may be legal defenses available to such Indemnified
Person or Persons different from or in addition to those available to the
indemnifying party or parties (in which case the Company shall not have the
right to assume the defense of such action on behalf of such Indemnified Person,
it being understood, however, that the Company shall not, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) for all such Indemnified Persons, which firm
shall be designated in writing by such Indemnified Persons, and that all such
fees and expenses shall be reimbursed as they are incurred). The Company shall
not be liable for any settlement of any such action effected without its written
consent but if settled with the written consent of the Company, the Company
agrees to indemnify and hold harmless any Indemnified Person from and against
any loss or liability by reason of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(c) In connection with any Registration Statement pursuant to which
any Holder (or predecessor Holder) sold or offered for resale Transfer
Restricted Securities, such Holder (or predecessor Holder) agrees, severally and
not jointly, to indemnify and hold harmless the Company, its directors, its
officers and any person controlling the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, to the same extent as
the foregoing indemnity from the Company to each Indemnified Person but only
with reference to information relating to such Indemnified Person furnished by
or on behalf of such Indemnified Person expressly for use in such Registration
Statement. In case any action shall be brought against the Company, any of its
directors, any such officer or any
-6-
<PAGE>
person controlling the Company based on such Registration Statement and in
respect of which indemnity may be sought against any Indemnified Person, the
Indemnified Person shall have the rights and duties given to the Company (except
that if the Company shall have assumed the defense thereof, such Indemnified
Person shall not be required to do so, but may employ separate counsel therein
and participate in defense thereof but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person), and the Company, its
directors, any such officers and any person controlling the Company shall have
the rights and duties given to the Indemnified Person by Section 6(b) hereof.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities, expenses or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities, expenses and judgments (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and each Indemnified Person on the other hand pursuant tot he Purchase
Agreement or from the offering for resale of the Transfer Restricted Securities
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and each such Indemnified Person in connection with the statements
or omissions which resulted in such losses, claims, damages, liabilities,
expenses or judgments, as well as any other relevant equitable considerations.
The relative fault of the Company and each such Indemnified Person shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Company or such Indemnified Person and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Company, the Holders and the Purchasers agree that it would not be
just and equitable if contribution pursuant to this Section 6(d) were determined
by pro rata allocation (even if the Indemnified Person were treated as one
--- ----
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities, expenses or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 6, no Indemnified Person shall be required to contribute any amount in
excess of the amount by which the total net profit received by it in connection
with the sale of the Transfer Restricted Securities pursuant to this Agreement
exceeds the amount of any damages which such Indemnified Person has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Indemnified Persons' obligations to contribute pursuant
to this Section 6(d) are several in proportion to the respective amount of
Transfer Restricted Securities included in and sold pursuant to any such
Registration Statement by each Indemnified Person and not joint.
7. Rules 144 and 144A
------------------
The Company shall to file the reports required to be filed by it under
the Securities Act and the Exchange Act in a timely manner and, if at any time
it is not required to file such reports but in the past had been required to or
did file such reports, it will, upon the request of any Holder, make available
other information as required by, and so long as necessary to permit sales of,
its Transfer Restricted Securities pursuant to Rule 144 and Rule 144A .
Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
8. Underwritten Registrations
--------------------------
If any of the Transfer Restricted Securities covered by any Shelf
Registration Statement are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be investment bankers of recognized national
standing selected by the Holders of a majority in aggregate principal amount of
such Transfer Restricted Securities included in such offering, subject to the
consent of the Company (which will not be unreasonably withheld or delayed).
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities
underwriting agreements, lock-up agreements and other documents reasonably
required under the terms of such underwriting arrangements.
9. Miscellaneous
-------------
(a) Remedies. In the event of a breach by the Company or by a Holder
--------
of any of their respective obligations under this Agreement, each Holder or the
Company, in addition to being entitled to exercise all rights granted by law,
including, without limitation, recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company and each Holder
agree that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of any of the provisions of this Agreement
and hereby further agree that, in the event of any action for specific
performance in respect of such breach, they shall waive the defense that a
remedy at law would be adequate. This Section 9(a) shall not apply to any
breach for which Liquidated Damages have been specifically provided hereunder.
(b) No Inconsistent Agreements. The Company shall not enter into any
--------------------------
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. The Company is not currently a party to any agreement
granting any registration rights with respect to any of its securities to any
person which conflicts with the Company's obligations hereunder or gives any
other party the right to include any securities in any Registration Statement
filed pursuant hereto, except for such rights and conflicts as have been
irrevocably waived. Without limiting the generality of the foregoing, without
the written consent of the Holders of a majority in aggregate principal amount
of the Transfer Restricted Securities, the Company shall not grant to any person
the right to request it to register any of its securities under the Securities
Act unless the rights so granted are subject in all respect to the prior rights
of the Holders set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement.
(c) No Adverse Action Affecting the Transfer Restricted Securities.
--------------------------------------------------------------
The Company will not take any action with respect to the Transfer Restricted
Securities which would adversely affect the ability of any of the Holders to
include such Transfer Restricted Securities in a registration undertaken
pursuant to this Agreement.
(d) No Piggyback on Registrations. After the date hereof, the Company
-----------------------------
shall not grant to any of its security holders (other than the Holders in such
capacity) the right to include any of its securities in any Shelf Registration
Statement.
(e) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof,
may not be given, without the written consent of the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities; provided,
--------
however, that, for the purposes of this Agreement, Transfer Restricted
- -------
Securities that are owned, directly or indirectly, by either the Company or an
Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from
-7-
<PAGE>
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders whose Transfer Restricted Securities are being sold pursuant
to an underwritten offering and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of a majority in aggregate
principal amount of the Transfer Restricted Securities being sold by such
Holders pursuant to such an underwritten offering; provided, however, that the
-------- -------
provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding sentence.
(f) Notices. All notices and other communications provided for herein
-------
shall be made in writing by hand-delivery, next day air courier, certified
first-class mail, return receipt requested or telecopy:
(i) if to a Holder, to the address of such Holder as it appears
in the Note or Common Stock register of the Company, as
applicable;
(ii) if to the Company, to:
Level One Communications, Incorporated
9750 Goethe Road
Sacramento, California 95827
Attn: General Counsel
Telecopy No.: (916) 854-1101
with a copy to:
Graham & James LLP
400 Capitol Mall, Suite 2400
Sacramento, California 95014
Attn: Gilles S. Attia, Esq.
Telecopy No.: (916) 441-6700
(iii) if to the Special Counsel, to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attn: John A. Fore, Esq.
Telecopy No.: (650) 493-6811
or such other Special Counsel at such other address and
telecopy number as a majority in aggregate principal amount
of the Transfer Restricted Securities shall have given
notice to the Company as contemplated by Section 5(b)
hereof.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given, when delivered by hand,
if personally delivered; one Business Day after being timely delivered to a
next-day air courier, five Business Days after being deposited in the mail,
postage prepaid, if mailed; and when receipt is acknowledged by the recipient's
telecopier machine, if telecopied.
(g) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each existing and future Holder. The
Company may not assign its rights or obligations hereunder without the prior
written consent of the Holders of a majority in aggregate principal amount of
the Transfer Restricted Securities, other than by operation of law pursuant to a
merger or consolidation to which the Company is a party. In the event the Notes
constituting Transfer Restricted Securities become convertible into common stock
of another person pursuant to Section 15.6 of the Indenture, the Company shall
cause such person to assume the Company's obligations hereunder.
(h) Counterparts. This Agreement may be executed in any number of
------------
counterparts by the parties hereto, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
-------------
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
(j) Severability. The remedies provided herein are cumulative and not
------------
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(k) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof. All
references made in this Agreement to "Section" and "paragraph" refer to such
Section or paragraph of this Agreement, unless expressly stated otherwise.
(l) Attorneys' Fees. In any action or proceeding brought to enforce
---------------
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the prevailing party, as determined by the court, shall
be entitled to recover its reasonable attorneys' fees in addition to any other
available remedy.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first written above.
LEVEL ONE COMMUNICATIONS, INCORPORATED
By: /s/ Robert S. Pepper
-------------------------
Name: Robert S. Pepper
----------------------
Title: Chairman of the Board,
President and Chief Executive Officer
-------------------------------------
The foregoing Registration Rights Agreement
is hereby confirmed and agreed to as of the date
first written above:
ROBERTSON, STEPHENS & COMPANY LLC
ALEX. BROWN & SONS INCORPORATED
MONTGOMERY SECURITIES
By: ROBERTSON, STEPHENS & COMPANY LLC
Acting on behalf of itself and the other Purchaser
By: ROBERTSON, STEPHENS & COMPANY, GROUP, L.L.C.
By: /s/Sanford R. Robertson
---------------------------
Authorized Signatory
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF GRAHAM & JAMES]
October 15, 1997
Level One Communications, Incorporated
9750 Goethe Road
Sacramento, CA 95827
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed by
Level One Communications, Incorporated (the "Company") with the Securities and
Exchange Commission on October 15, 1997 (the "Registration Statement") in
connection with the registration under the Securities Act of 1933, as amended,
$115,000,000 aggregate principal amount of 4% Convertible Subordinated Notes
(the "Registrable Notes") of the Company due September 1, 2004 and 2,875,000
shares of Common Stock issuable upon conversion of the Registrable Notes, as the
same may be adjusted from time to time.
We have also been furnished with and have examined originals or copies,
certified or otherwise identified to our satisfaction, of all such records of
the Company, agreements and other instruments, certificates of officers and
representatives of the Company, certificates of public officials and other
documents as we have deemed it necessary to require as a basis for the opinions
hereafter expressed. As to questions of fact material to such opinions, we
have, where relevant facts were not independently established, relied upon
certificates by principal officers of the Company. We have made such further
legal and factual examination and investigation as we deem necessary for
purposes of rendering the following opinions.
In our examination we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the correctness of facts set forth in
certificates, the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
certificated or photostatic copies, as the authenticity of the originals of such
copies. We have also assumed that such documents have each been duly
authorized, properly executed and delivered by each of the parties thereto other
than the Company.
We are members of the bar of the State of California. Our opinions below
are
<PAGE>
limited to the laws of the State of California and the federal law of the United
States.
It is our opinion that, upon completion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of
Shares, and upon the completion of the proceedings being taken in order to
permit such transactions to be carried out in accordance with securities laws of
various states, where required, the Shares, when issued and sold in the manner
referred to in the Registration Statement, will be legally and validly issued,
fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendment thereto.
Very truly yours,
/s/ GRAHAM & JAMES LLP
<PAGE>
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Summary Consolidated Financial Data
(in thousands)
<TABLE>
<CAPTION>
Six Months
Years Ended December 31, Ended June 29
------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earning to Fixed Charges
Earnings before taxes and fixed charges (1) 2,027 4,242 9,328 11,801 17,968 9,718 10,986
Fixed Charges:
Interest expense 102 226 222 142 351 179 295
Operating rent lease payments 195 357 521 1,166 2,464 1,232 1,297
------- ------- ------- ------- ------- ------- --------
297 583 743 1,308 2,815 1,411 1,592
Income available for fixed charges 2,324 4,825 10,071 13,109 20,783 11,129 12,578
Pro forma interest on debentures 4,600 2,300 2,300
------- ------- --------
Pro forma earnings plus fixed charges 25,383 13,429 14,878
Ratio of earnings to fixed charges 7.83 8.27 13.56 10.03 7.38 7.89 7.90
Pro forma ratio of earnings to fixed charges 3.42 3.62 3.82
</TABLE>
(1) Net income before taxes and fixed charges, including interest and other
----------------------------
income.
------
Page 1
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 28, 1997
included in Level One Communications, Incorporated's Form 10-K for the year
ended December 29, 1996 and to all references to our firm included in the
registration statement.
/s/ ARTHUR ANDERSEN LLP
- -----------------------------
ARTHUR ANDERSEN LLP
Sacramento, California
October 15, 1997
<PAGE>
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b)(2) ____
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
United States 06-1143380
(Jurisdiction of incorporation (I.R.S. Employee
or organization if not a U.S. Identification No.)
national bank)
725 S. Figueroa Street, Suite 3100, Los Angeles, CA 90017
(Address of principal executive offices) (Zip Code)
State Street Bank and Trust Company of California, N.A.
725 S. Figueroa Street, Suite 3100
Los Angeles, CA 90017
Tel: (213) 362-7338
(Name, address and telephone number of agent for service)
___________________
LEVEL ONE COMMUNICATIONS, INCORPORATED
(Exact name of obligor as specified in its charter)
CALIFORNIA 33-0128224
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
9750 Goethe Road
Sacramento, CA 95827
(408) 945-8600
(Address of principal executive offices)
___________________
4% Convertible Subordinated Notes due 2004
(Title of Indenture Securities)
<PAGE>
GENERAL
Item 1. General Information.
(a) Comptroller of Currency, Western District Office, 50 Fremont
Street, Suite 3900, San Francisco, California, 94105-2292.
(b) Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor.
The trustee is not affiliated with the obligor.
Item 3. through Item 15.
No responses are included for Items 3-15 of this form T-1 because the
obligor is not in default on securities issued under indentures under
which State Street Bank and Trust Company of California, N.A. is
trustee.
Item 16. List of Exhibits.
1. Articles of Association of State Street Bank and Trust Company
of California, National Association.*
2. Certificate of Corporate Existence (with fiduciary powers) from
the Comptroller of the Currency, Administrator of National
Banks.*
3. Authorization of the Trustee to exercise fiduciary powers
(included in Exhibits 1 and 2; no separate instrument).
4. By-laws of State Street Bank and Trust Company of California,
National Association.*
5. Consent of State Street Bank and Trust Company of California,
National Association required by Section 321(b) of the Act.*
6. Consolidated Report of Income for the period January 1, 1996 -
September 30, 1996, Federal Financial Institutions Examination
Council, Consolidated Reports of Condition and Income for A Bank
With Domestic Offices Only and Total Assets of Less Than $100
Million -FFIEC 034.*
* The indicated documents have been filed as exhibits with
corresponding exhibit numbers to the Form T-1 of Oasis
Residential, Inc., filed pursuant to Section 305(b)(2) of the
Act, filed with the Securities and Exchange Commission on
November 18, 1996 (Registration No. 033-90488), and are
incorporated herein by reference.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the trustee,
State Street Bank and Trust Company of California, National Association
organized and existing under the laws of the United States of America, has duly
caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Los Angeles, and
State of California, on the ___ day of October, 1997.
STATE STREET BANK AND TRUST COMPANY OF
CALIFORNIA, NATIONAL ASSOCIATION
By: /s/ Jeanie Mar
---------------------------------
Jeanie Mar
Assistant Vice President
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