<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 21, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
ADVANCED ENERGY INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 84-0846841
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
</TABLE>
------------------
1625 SHARP POINT DRIVE
FORT COLLINS, COLORADO 80525
(970) 221-4670
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------
RICHARD P. BECK
ADVANCED ENERGY INDUSTRIES, INC.
1625 SHARP POINT DRIVE
FORT COLLINS, COLORADO 80525
(970) 221-4670
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------
WITH COPIES TO:
<TABLE>
<S> <C>
MICHELLE L. JOHNSON BARRY L. DASTIN
CARISSA C. W. COZE RUSS A. CASHDAN
THELEN REID & PRIEST LLP KAYE, SCHOLER, FIERMAN, HAYS & HANDLER, LLP
TWO EMBARCADERO CENTER, SUITE 2100 1999 AVENUE OF THE STARS, SUITE 1600
SAN FRANCISCO, CALIFORNIA 94111-3995 LOS ANGELES, CALIFORNIA 90067
</TABLE>
------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable 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. / /
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 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 the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
% Convertible Subordinated Notes due 2006...... $115,000,000 100% $115,000,000 $31,970
Common Stock, $0.001 par value.................... (2) 0 0 (3)
</TABLE>
- ------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933, as amended.
(2) Includes the shares of common stock initially issuable upon conversion of
the convertible notes at the rate of shares of common stock per $1,000
principal amount of convertible notes. Pursuant to Rule 416 under the
Securities Act, such number of shares of common stock registered hereby
shall also include an indeterminate number of additional shares of common
stock that may be issued from time to time upon conversion of the
convertible notes by reason of adjustment of the conversion price in certain
circumstances.
(3) Pursuant to Rule 457(i) under the Securities Act, there is no filing fee
with respect to the shares of common stock issuable upon conversion of the
convertible notes, because no additional consideration will be received in
connection with the exercise of the conversion privilege.
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION. DATED SEPTEMBER 20, 1999.
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.
<PAGE>
$100,000,000
[LOGO]
% Convertible Subordinated Notes due 2006
-------------
Advanced Energy Industries, Inc. is offering $100,000,000 of %
convertible subordinated notes due 2006. You may convert your convertible notes
into shares of common stock of Advanced Energy at any time prior to maturity or
their redemption by Advanced Energy. The convertible notes will mature on
, 2006. The conversion rate is shares per each $1,000 principal
amount of convertible notes, subject to adjustment in certain circumstances.
This is equivalent to a conversion price of $ per share. The common stock is
quoted on the Nasdaq National Market under the symbol "AEIS". The last reported
bid price for the common stock on September 17, 1999, was $38.00 per share.
Advanced Energy will pay interest on the convertible notes on
and of each year. The first interest payment will be made on
, 2000. The convertible notes are subordinated in right of payment
to all senior debt of Advanced Energy and indebtedness of its subsidiaries. The
convertible notes will be issued only in denominations of $1,000 and integral
multiples of $1,000.
On or after , 2002, Advanced Energy has the option to redeem all
or a portion of the convertible notes which have not previously been converted
at the redemption prices set forth in this prospectus. You have the option,
subject to certain conditions, to require Advanced Energy to repurchase any
convertible notes held by you in the event of a "change in control", as
described in this prospectus, at a price equal to 100% of the principal amount
of the convertible notes plus accrued interest to the date of repurchase.
Concurrently with this convertible notes offering and by a separate
prospectus, Advanced Energy is offering 1,000,000 shares of common stock, and
six of its stockholders are offering an additional 2,000,000 shares of their
common stock. The selling stockholders also may sell up to an additional 450,000
shares of their common stock to the underwriters for that offering to cover
over-allotments. The completion of this convertible notes offering and the
common stock offering are not dependent on one another.
SEE "RISK FACTORS" BEGINNING ON PAGE 12 OF THIS PROSPECTUS TO READ ABOUT
IMPORTANT FACTORS YOU SHOULD CONSIDER BEFORE PURCHASING THE CONVERTIBLE NOTES.
------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
--------------------
<TABLE>
<CAPTION>
Per
Convertible Note Total
------------------- -------------
<S> <C> <C>
Initial public offering price....................................... % $
Underwriting discount............................................... % $
Proceeds, before expenses, to Advanced Energy....................... % $
</TABLE>
The initial public offering price set forth above does not include accrued
interest, if any. Interest on the convertible notes will accrue from
, 1999 and must be paid by the purchaser if the convertible notes
are delivered after , 1999.
To the extent that the underwriters sell more than $100,000,000 principal
amount of convertible notes, the underwriters have the option to purchase up to
an additional $15,000,000 principal amount of convertible notes from Advanced
Energy at the initial public offering price less the underwriting discount.
--------------------
The underwriters expect to deliver the convertible notes in book-entry form
only through the facilities of The Depository Trust Company against payment in
New York, New York, on , 1999.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
BANC OF AMERICA SECURITIES LLC
--------------------
Prospectus dated , 1999.
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY MAY NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO
YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS AS WELL AS THE INFORMATION
INCORPORATED BY REFERENCE IN THIS PROSPECTUS BEFORE MAKING AN INVESTMENT
DECISION. REFERENCES IN THE PROSPECTUS TO "WE", "US", "OUR" OR "ADVANCED ENERGY"
ARE TO ADVANCED ENERGY INDUSTRIES, INC. AND ITS SUBSIDIARIES, UNLESS THE CONTEXT
REQUIRES OTHERWISE. ALL INFORMATION IN THIS PROSPECTUS ASSUMES THE UNDERWRITERS'
OVER-ALLOTMENT OPTIONS WITH RESPECT TO THE CONVERTIBLE NOTES OFFERING AND THE
COMMON STOCK OFFERING ARE NOT EXERCISED, UNLESS OTHERWISE STATED.
ABOUT ADVANCED ENERGY
OVERVIEW
We design, manufacture and support power conversion and control systems.
These systems are important components of industrial manufacturing equipment
that modifies surfaces or deposits or etches thin film layers on computer chips,
CDs, flat panel displays such as computer screens, DVDs, windows, eyeglasses,
solar panels and other products. Our systems refine, modify and control the raw
electrical power from a utility and convert it into power that is uniform and
predictable. This allows manufacturing equipment to produce and deposit very
thin films at an even thickness on a mass scale.
The ongoing demand for improvements in the performance, capacity and speed
of computer chips, flat panel displays and other products drives manufacturers
to develop more advanced technology to produce thinner, more consistent and more
precise layers of film. Thin film production processes enable manufacturers to
control and alter the electrical, magnetic, optical and mechanical
characteristics of materials. Our systems are used primarily in plasma-based
thin film production processes. Plasma is commonly created by applying enough
electrical force to a gas at reduced pressure to separate electrons from their
parent atoms. Plasma-based process technology was developed to address the
limitations of wet chemistry and thermal process technologies and to enable new
applications. Plasma-based processes are inherently more controllable and more
accurate for many applications than other thin film production processes because
of the electrical characteristics of plasma.
We market and sell our systems primarily to large, global original equipment
manufacturers of semiconductor, flat panel display, data storage and other
industrial thin film manufacturing equipment. We have sold our systems worldwide
to more than 100 OEMs and directly to more than 500 end-users. Our principal
customers include Applied Materials, Balzers, Eaton, Lam Research, Novellus,
Singulus and ULVAC. The semiconductor capital equipment industry accounted for
approximately 59% of our total sales in 1997, 49% in 1998 and 59% in the first
six months of 1999.
STRATEGY
We have achieved a market leadership position by applying our large base of
expertise in the interaction between plasma-based processes and power conversion
and control systems to design highly precise, customized power conversion and
control systems that provide a wide range of power frequencies for plasma-based
thin film processes. Our strategy is to continue to build upon our leadership
positions in the semiconductor capital equipment, flat panel display and data
storage industries while exploring other emerging markets. We believe our five
key growth opportunities are:
EXPANDING LEADERSHIP IN OUR CORE MARKETS. We are the market share leader in
the semiconductor capital equipment, data storage and flat panel display
markets. We plan to continue to increase our penetration in these three markets
by introducing new products and solutions for our existing customers and
targeting new customers, but our primary focus will continue to be on
4
<PAGE>
the semiconductor capital equipment market. For example, in the semiconductor
capital equipment market we believe that significant opportunities exist for us
to introduce new products for processes or applications such as:
- etch applications using radio frequency power;
- gas abatement;
- on-line measurement of power characteristics; and
- copper electroplating.
PROVIDING INTEGRATED SOLUTIONS FOR CUSTOMERS. We believe that customers
want solutions that improve process control and yield, and decrease their total
cost and time to market. We are developing integrated systems to provide more
complete solutions that meet our customers' plasma-based process requirements.
We are identifying currently fragmented applications of technology involving
significant power, measurement and control content, and developing integrated,
high performance, robust and cost-effective solutions for these applications.
TARGETING EMERGING APPLICATIONS. We are targeting emerging applications
that have the potential to benefit from more efficient and reliable use of power
in manufacturing processes for telecommunications networking equipment,
automotive parts, tools, architectural glass and other industrial products.
PURSUING ACQUISITIONS TO FUEL GROWTH. We actively seek complementary
technologies and companies as a means to expand our presence in existing and
emerging markets and to provide integrated solutions for customers and potential
customers. We have acquired and integrated four companies in the last two years.
We continually evaluate companies whose products and technologies could enhance
our system level capabilities.
CAPITALIZING ON WORLDWIDE INFRASTRUCTURE. Our principal customers are
large, global OEMs that require that their suppliers have a well-developed
worldwide infrastructure. We plan to continue to take advantage of and expand
our established global infrastructure, operating skills and comprehensive
product portfolio to better serve these customers and to attract new customers
with international support needs.
SALES AND MARKETING
We sell our systems primarily through direct sales personnel to customers in
the United States, Europe and Asia, and through distributors in China, France,
Israel, Italy, Singapore, Sweden and Taiwan. Sales outside the United States
represented 23% of our total sales during 1997, 28% in 1998 and 28% in the first
six months of 1999. We maintain sales and service offices across the United
States in California, Colorado, Massachusetts, New Jersey and Texas. We maintain
sales and service offices outside the United States in Germany, Japan, South
Korea and the United Kingdom.
RF POWER PRODUCTS ACQUISITION
In October 1998, we acquired RF Power Products, which designs, manufactures
and supports radio frequency (RF) power conversion and control systems
consisting of generators and matching networks. Generators provide RF power and
matching networks provide control over power flow to the customers' equipment.
We believe our ability to offer an expanded line of RF systems to our existing
customer base has strengthened those relationships. We sell these products
principally to semiconductor capital equipment manufacturers. We also sell
similar systems to capital equipment
5
<PAGE>
manufacturers in the thin film data storage and flat panel display industries
and are exploring applications for these systems in other industries.
--------------
We incorporated in Colorado in 1981 and reincorporated in Delaware in 1995.
Our main offices are located at 1625 Sharp Point Drive, Fort Collins, Colorado
80525, and our telephone number is 970-221-4670.
THE OFFERING
<TABLE>
<S> <C>
Securities offered................ $100,000,000 principal amount of % convertible
subordinated notes due 2006. We also have granted the
underwriters an over-allotment option to purchase up to
an additional $15,000,000 principal amount of
convertible notes.
Offering price.................... % of the principal amount of the convertible notes plus
accrued interest, if any, from , 1999.
Interest.......................... Interest on the convertible notes is payable
semiannually on , and of each
year, starting , 2000.
Conversion........................ You may convert your convertible notes into shares of
common stock at the rate of shares of common stock
per $1,000 principal amount of convertible notes. This
is equivalent to a conversion price of $ per share.
The conversion rate may be adjusted in certain events.
You will be able to convert the convertible notes at any
time before the close of business on ,
2006, unless we have previously repurchased the
convertible notes from you. If we notify you that we
intend to repurchase your convertible notes, you will
still be able to convert your convertible notes up to
the close of business on the day immediately preceding
the date fixed for repurchase. See "Description of
Convertible Notes-- Conversion Rights".
Subordination..................... The convertible notes are subordinated to any present
and future senior debt that we may incur. The
convertible notes are also effectively subordinated to
all indebtedness and other liabilities of our
subsidiaries. As of August 31, 1999, our senior debt and
indebtedness of our subsidiaries totalled $1.4 million.
The indenture under which the convertible notes will be
issued will not prevent us from incurring senior debt
nor will it prevent our subsidiaries from incurring any
indebtedness or liabilities. See "Description of
Convertible Notes--Subordination".
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Global note; Book-entry system.... We will issue the convertible notes only in fully
registered form without coupons and in minimum
denominations of $1,000. Purchasers will not receive
individually certificated notes. Instead, the
convertible notes will be evidenced only by a global
note, in fully registered form and without coupons,
deposited with the trustee for the convertible notes, as
custodian for DTC. Your interest in the global note will
be shown on, and transfers of your interest will be
effected only through, records maintained by DTC and its
participants and indirect participants. See "Description
of Convertible Notes--Form, Denomination, Transfer,
Exchange and Book-Entry Procedures".
Optional repurchase by us......... Starting , 2002, we have the right at any
time to repurchase some or all of your convertible notes
at the prices listed on page 63 plus accrued and unpaid
interest, unless you have previously converted your
convertible notes.
Repurchase at your option if we
have a change in control........ If we experience a change in control, you will have the
right, subject to certain conditions and restrictions,
to require us to repurchase some or all of your
convertible notes at a price equal to 100% of the
principal amount, plus accrued and unpaid interest to
the repurchase date. The repurchase price is payable in
cash or, at our choice but subject to certain
conditions, in shares of common stock, valued at 95% of
the average closing sales prices of the common stock for
the five trading days preceding and including the third
trading day prior to the repurchase date. See
"Description of Convertible Notes--Repurchase at Option
of Holders Upon a Change in Control".
Use of proceeds................... For general corporate purposes, including acquisitions,
and working capital requirements. See "Use of Proceeds".
Events of default................. Events of default include:
(1) we fail for any reason to pay principal or any
premium on any convertible note when due, even if we are
prohibited from making the payment by the subordination
provisions of the convertible notes and the indenture;
(2) we fail for any reason to pay any interest on any
convertible note within 30 days after the interest
payment becomes due, even if we are prohibited from
making the payment by the subordination provisions of
the convertible notes and the indenture;
(3) we fail to act in accordance with any other covenant
in the indenture and we do not cure the failure within
60 days after we are provided notice of such failure;
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
(4) we or one of our subsidiaries fail to pay when due,
or the acceleration of the due date of, more than $10
million of indebtedness under any bonds, debentures,
notes or other borrowings, and the failure continues for
30 days after we receive notice as provided in the
indenture;
(5) we or one of our subsidiaries are party to certain
bankruptcy, insolvency or reorganization proceedings;
and
(6) we fail to provide the required notice of any change
in control, whether or not prohibited by the
subordination provisions of the convertible notes and
the indenture.
See "Description of Convertible Notes--Events of
Default".
Listing of convertible notes...... The convertible notes will not be listed on any
securities exchange or quoted on the Nasdaq National
Market. The underwriters have advised us that they
currently intend to make a market in the convertible
notes. However, the underwriters are not obligated to do
so, and any such market making may be discontinued at
any time at the sole discretion of the underwriters
without notice. See "Underwriting".
Governing law..................... The indenture and the convertible notes are governed by
the laws of the State of New York.
Risk factors...................... You should read the "Risk Factors" section, beginning on
page 12, as well as the other cautionary statements,
risks and uncertainties described in this prospectus and
in the documents incorporated by reference, so that you
understand the risks associated with an investment in
the convertible notes.
Concurrent common stock
offering........................ Concurrently with this convertible notes offering and by
means of a separate prospectus, we are offering to sell
1,000,000 shares of common stock and six of our officers
and directors are offering to sell 2,000,000 shares of
common stock. The selling stockholders also have granted
the underwriters of the common stock offering an over-
allotment option to purchase up to an additional 450,000
shares of common stock. The proceeds we receive from our
sale of shares will be used for general corporate
purposes, including acquisitions, and working capital
requirements. The proceeds from the sale of shares by
the selling stockholders will go only to the selling
stockholders. The completion of this convertible notes
offering and the common stock offering are not dependent
on one another.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
DESCRIPTION OF COMMON STOCK
Shares outstanding (1)............ As of September 16, 1999, there were 27,065,355 shares
of common stock outstanding.
Shares outstanding if all
convertible notes are converted
(1)............................. If all of the convertible notes were converted into
common stock as of September 16, 1999, there would be
shares of common stock outstanding ( shares,
assuming that the concurrent common stock offering is
completed).
Listing of common stock........... The common stock is traded on the Nasdaq National Market
under the symbol "AEIS".
</TABLE>
- --------------
(1) Excludes 1,993,961 shares of common stock issuable upon exercise of options
outstanding as of September 16, 1999, at a weighted average exercise price
of $13.32, 3,135,257 shares reserved for issuance under our 1995 Stock
Option Plan, 102,461 shares reserved for issuance under the RF Power stock
option plans we assumed in connection with our acquisition of RF Power in
October 1998, 94,500 shares reserved for issuance under our 1995
Non-Employee Director Stock Option Plan and 171,550 shares reserved for
issuance under our Employee Stock Purchase Plan.
9
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The summary consolidated financial data in this chart for the years ended
December 31, 1994 to 1998 and as of December 31 of those years are derived from
our audited financial statements.
The summary consolidated statement of operations data for the year ended
December 31, 1998 and the related consolidated balance sheet and other data as
of and for the year ended December 31, 1998 were derived from consolidated
financial statements audited by Arthur Andersen LLP, independent accountants,
whose related audit report is included in our annual report on Form 10-K.
The summary consolidated statement of operations data for the years ended
December 31, 1996 and 1997 and the related consolidated balance sheet and other
data as of and for the year ended December 31, 1997 were derived from
consolidated financial statements audited in part by Arthur Andersen LLP and in
part by KPMG LLP, whose audit reports are included in our annual report on Form
10-K. KPMG LLP's audit report pertains to Advanced Energy Voorhees, Inc.,
formerly named RF Power Products, Inc., whose fiscal year end was November 30.
As such, the balance sheet and other data and the statement of operations data
of the Company for fiscal 1996 and 1997 includes the balance sheet of Advanced
Energy Voorhees, Inc. as of November 30, 1996 and 1997, and the statement of
operations for each of the two years in the period ended November 30, 1997,
respectively.
The summary consolidated statements of operations data for the years ended
December 31, 1994 and 1995, and the related consolidated balance sheet and other
data as of December 31, 1996 were restated from our audited consolidated
financial statements and from audited consolidated financial statements of
Advanced Energy Voorhees. The Advanced Energy Voorhees financial statements are
not included in our annual reports on Form 10-K.
The summary consolidated financial data in this chart for the six months
ended June 30, 1998 and 1999 and as of June 30, 1999 are derived from our
unaudited financial statements, which are included in our quarterly report on
Form 10-Q for the quarter ended June 30, 1999. The unaudited financial data has
been prepared on the same basis as the audited financial data and, in our
opinion, includes all normal recurring adjustments necessary for a fair
statement of the results for the periods covered.
The following data should be read in conjunction with the financial
statements and related notes incorporated by reference in this prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operation".
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------- --------------------
1994 1995 1996 1997 1998 1998 1999
------- -------- -------- -------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales................................... $68,159 $121,075 $129,931 $175,758 $124,698 $75,850 $ 74,243
Cost of sales........................... 36,183 65,003 82,685 108,802 87,985 53,729 42,852
------- -------- -------- -------- -------- ------- --------
Gross profit............................ 31,976 56,072 47,246 66,956 36,713 22,121 31,391
------- -------- -------- -------- -------- ------- --------
Operating expenses
Research and development.............. 7,190 12,865 17,288 19,336 23,849 12,229 12,610
Sales and marketing................... 5,982 8,256 10,723 11,646 13,531 7,076 7,284
General and administrative............ 6,989 10,612 8,865 10,480 9,483 5,627 5,958
Other expenses (1).................... -- -- -- 5,780 2,625 -- --
------- -------- -------- -------- -------- ------- --------
Total operating expenses................ 20,161 31,733 36,876 47,242 49,488 24,932 25,852
------- -------- -------- -------- -------- ------- --------
Income (loss) from operations........... 11,815 24,339 10,370 19,714 (12,775) (2,811) 5,539
Other (expense) income.................. (96) (452) (39) (191) 358 227 17
------- -------- -------- -------- -------- ------- --------
Net income (loss) before income taxes... 11,719 23,887 10,331 19,523 (12,417) (2,584) 5,556
Provision (benefit) for income taxes.... 4,386 9,089 3,960 7,467 (2,900) (333) 2,252
------- -------- -------- -------- -------- ------- --------
Net income (loss)....................... $ 7,333 $ 14,798 $ 6,371 $ 12,056 $ (9,517) $(2,251) $ 3,304
------- -------- -------- -------- -------- ------- --------
------- -------- -------- -------- -------- ------- --------
Basic earnings (loss) per share......... $ 0.36 $ 0.67 $ 0.25 $ 0.47 $ (0.36) $ (0.08) $ 0.12
------- -------- -------- -------- -------- ------- --------
------- -------- -------- -------- -------- ------- --------
Diluted earnings (loss) per share....... $ 0.32 $ 0.63 $ 0.25 $ 0.46 $ (0.36) $ (0.08) $ 0.12
------- -------- -------- -------- -------- ------- --------
------- -------- -------- -------- -------- ------- --------
OTHER DATA:
Ratio of earnings to fixed charges
(2)................................... 17.4x 36.5x 37.4x 41.6x --(3) --(3) 155.3x
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, 1999
DECEMBER 31, ------------------------------------------
------------------------------- AS FURTHER
1996 1997 1998 ACTUAL AS ADJUSTED(4) ADJUSTED(4)(5)
--------- --------- --------- --------- --------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents/marketable
securities.............................. $ 11,778 $ 32,215 $ 28,134 $ 25,498 $ 122,223 $ 158,048
Working capital........................... 41,638 74,342 62,059 66,964 163,689 199,514
Total assets.............................. 68,078 130,064 101,035 113,383 213,383 249,208
Total debt................................ 3,741 6,518 537 1,766 101,766 101,766
Stockholders' equity...................... 54,927 97,527 89,133 93,389 93,389 129,214
</TABLE>
- ------------------
Notes:
(1) Other operating expenses represent a restructuring charge, merger costs,
storm damages and recoveries and a write-off of purchased in-process
research and development expenses.
(2) The ratio of earnings to fixed charges represents, on a pre-tax basis, the
number of times earnings cover fixed charges. Earnings consist of net income
to which has been added interest expense on capital leases and long-term
debt. Fixed charges consist of interest expense on capital leases and
long-term debt.
(3) The losses for 1998 and the six months ended June 30, 1998 are not
sufficient to cover fixed charges by a total of approximately $12.2 million
for 1998 and $2.5 million for the six months ended June 30, 1998. As a
result, the ratio of earnings to fixed charges has not been computed for
either 1998 or the six months ended June 30, 1998.
(4) Reflects net proceeds of approximately $96,725,000 from the sale of the
convertible notes (assuming an offering price of 100% of the principal
amount), after deducting underwriters' discounts and commissions and
estimated offering expenses relating to the convertible notes offering.
(5) Reflects net proceeds of approximately $35,825,000 from our sale of
1,000,000 shares of common stock in the concurrent common stock offering
(assuming an offering price of $38.00 per share), after deducting
underwriters' discounts and commissions and estimated offering expenses
relating to the common stock offering.
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RISK FACTORS
INVESTING IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE OTHER
INFORMATION IN THIS PROSPECTUS AND IN THE DOCUMENTS INCORPORATED BY REFERENCE
BEFORE DECIDING WHETHER TO PURCHASE OUR SECURITIES.
RISKS RELATED TO OUR BUSINESS
OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS, WHICH
COULD NEGATIVELY IMPACT OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS AND STOCK
PRICE.
Our quarterly operating results have fluctuated significantly and we expect
them to continue to experience significant fluctuations. Downward fluctuations
in our quarterly results have historically resulted in decreases in the price of
our common stock. Quarterly operating results are affected by a variety of
factors, many of which are beyond our control. These factors include:
- changes or slowdowns in economic conditions in the semiconductor and
semiconductor capital equipment industries and other industries in which
our customers operate;
- the timing and nature of orders placed by major customers;
- customer cancellations of previously placed orders and shipment delays;
- pricing competition from our competitors;
- component shortages resulting in manufacturing delays;
- changes in customers' inventory management practices;
- the introduction of new products by us or our competitors; and
- costs incurred by responding to specific feature requests by customers.
In addition, companies in the semiconductor capital equipment industry and
other electronics companies experience pressure to reduce costs. Our customers
exert pressure on us to reduce our prices, shorten delivery times and extend
payment terms. These pressures could lead to significant changes in our
operating results from quarter to quarter.
In the past, we have incurred charges and costs related to events such as
acquisitions, restructuring and storm damages. The occurrence of similar events
in the future could adversely affect our operating results in the applicable
quarter.
Our operating results in one or more future quarters may fall below the
expectations of analysts and investors. In those circumstances, the trading
price of our common stock would likely decrease and, as a result, any trading
price of the convertible notes may decrease.
THE SEMICONDUCTOR AND SEMICONDUCTOR CAPITAL EQUIPMENT INDUSTRIES ARE HIGHLY
VOLATILE AND OUR OPERATING RESULTS ARE AFFECTED TO A LARGE EXTENT BY EVENTS IN
THOSE INDUSTRIES.
The semiconductor industry historically has been highly volatile and has
experienced periods of oversupply resulting in significantly reduced demand for
semiconductor fabrication equipment, which includes our systems. During
downturns, some of our customers have drastically reduced their orders to us and
have implemented substantial cost reduction programs. Sales to customers in the
semiconductor capital equipment industry accounted for 59% of our total sales in
1997, 49% in 1998 and 59% in the first six months of 1999. We expect that we
will continue to depend significantly on the semiconductor and semiconductor
capital equipment industries for the foreseeable future.
A rapid decrease in demand for our products can occur with limited advance
notice because we supply subsystems to equipment manufacturers and make a
substantial and increasing
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proportion of our shipments on a just-in-time basis. This decrease in demand can
adversely impact our business and financial results disproportionately because
of its unanticipated nature.
A SIGNIFICANT PORTION OF OUR SALES ARE CONCENTRATED AMONG A FEW CUSTOMERS.
Our four largest customers accounted for 54% of our total sales in 1997, 47%
in 1998 and 52% in the first six months of 1999. Our largest customer accounted
for 31% of our total sales in 1997, 23% in 1998 and 31% in the first six months
of 1999. The loss of any of these customers or a material reduction in any of
their purchase orders would have a material adverse effect on our business,
financial condition and results of operations.
THE MARKETS IN WHICH WE OPERATE ARE HIGHLY COMPETITIVE.
We face substantial competition, primarily from established companies, some
of which have greater financial, marketing and technical resources than we do.
Our primary competitors are ENI, a subsidiary of Astec (BSR) plc, Applied
Science and Technology (ASTeX), Huettinger, Shindingen, Kyosan, Comdel and
Daihen. We expect that our competitors will continue to develop new products in
direct competition with ours, improve the design and performance of their
systems and introduce new systems with enhanced performance characteristics.
To remain competitive, we need to continue to improve and expand our systems
and system offerings. In addition, we need to maintain a high level of
investment in research and development and expand our sales and marketing
efforts, particularly outside of the United States. We may not be able to make
the technological advances and investments necessary to remain competitive.
New products developed by competitors or more efficient production of their
products could increase pressure on the pricing of our systems. In addition,
electronics companies, including companies in the semiconductor capital
equipment industry, have been facing pressure to reduce costs. Either of these
factors may require us to make significant price reductions to avoid losing
orders. Further, our current and prospective customers consistently exert
pressure on us to lower prices, shorten delivery times and improve the
capability of our systems. Failure to respond adequately to such pressures could
result in a loss of customers or orders.
WE MAY NOT BE ABLE TO INTEGRATE OUR ACQUISITIONS.
We have experienced significant growth through acquisitions and continue to
actively pursue acquisition opportunities. Our acquisitions to date generally
have been in markets in which we have limited experience. We may not be able to
compete successfully in these markets or might not be able to operate the
acquired businesses efficiently. Our business and results of operations could be
adversely affected if integrating these acquisitions results in substantial
costs, delays or other operational or financial problems.
Future acquisitions could place additional strain on our operations and
management. Our ability to manage future acquisitions will depend on our success
in:
- evaluating new markets and investments;
- monitoring operations;
- controlling costs;
- integrating acquired operations and personnel;
- maintaining effective quality controls; and
- expanding our internal management, technical and accounting systems.
Also, in connection with future acquisitions we may issue equity securities
which could be dilutive, incur debt, recognize substantial one-time expenses or
create goodwill or other intangible assets that could result in significant
amortization expense.
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WE ARE GROWING AND MAY BE UNABLE TO MANAGE OUR GROWTH EFFECTIVELY.
We have been experiencing a period of growth and expansion. This growth and
expansion is placing significant demands on our management and our operating
systems. We need to continue to improve and expand our management, operational
and financial systems, procedures and controls, including accounting and other
internal management systems, quality control, delivery and service capabilities.
In order to manage our growth, we may also need to spend significant amounts
of cash to:
- fund increases in expenses;
- take advantage of unanticipated opportunities, such as major strategic
alliances or other special marketing opportunities, acquisitions of
complementary businesses or assets, or the development of new products; or
- otherwise respond to unanticipated developments or competitive pressures.
If we do not have enough cash on hand, cash generated from our operations or
cash available under our credit facility to meet these cash requirements, we
will need to seek alternative sources of financing to carry out our growth and
operating strategies. We may not be able to raise needed cash on terms
acceptable to us, or at all. Financings may be on terms that are dilutive or
potentially dilutive. If alternative sources of financing are required but are
insufficient or unavailable, we will be required to modify our growth and
operating plans to the extent of available funding.
SHORTAGES OF COMPONENTS NECESSARY FOR OUR PRODUCT ASSEMBLY CAN DELAY OUR
SHIPMENTS.
Manufacturing our power conversion and control systems requires numerous
electronic components. Dramatic growth in the electronics industry has
significantly increased demand for these components. This demand has resulted in
periodic shortages and allocations of needed components, and we expect to
experience additional shortages and allocations from time to time. Shortages and
allocations could cause shipping delays for our systems, adversely affecting our
results of operations. Shipping delays also could damage our relationships with
current and prospective customers.
We consider the inability to obtain electronic components from our suppliers
to be our most reasonably likely worst case year 2000 scenario. See "--The year
2000 issue could have an adverse impact on our business".
OUR DEPENDENCE ON SOLE AND LIMITED SOURCE SUPPLIERS COULD AFFECT OUR ABILITY TO
MANUFACTURE PRODUCTS AND SYSTEMS.
We rely on sole and limited source suppliers for some of our components and
subassemblies that are critical to the manufacturing of our systems. This
reliance involves several risks, including the following:
- the potential inability to obtain an adequate supply of required
components;
- reduced control over pricing and timing of delivery of components; and
- the potential inability of our suppliers to develop technologically
advanced products to support our growth and development of new systems.
We believe that in time we could obtain and qualify alternative sources for
most sole and limited source parts or could manufacture the parts ourselves.
Seeking alternative sources or commencing internal manufacture of the parts
could require us to redesign our systems, resulting in increased costs and
likely shipping delays. We may be unable to manufacture the parts internally or
redesign our systems, which could result in further costs and shipping delays.
These increased costs would decrease our profit margins if we could not pass the
costs to our customers. Further,
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shipping delays could damage our relationships with current and potential
customers and have a material adverse effect on our business and results of
operations.
WE ARE HIGHLY DEPENDENT ON OUR INTELLECTUAL PROPERTY BUT MAY NOT BE ABLE TO
PROTECT IT ADEQUATELY.
Our success depends in part on our proprietary technology. We attempt to
protect our intellectual property rights through patents and non-disclosure
agreements. However, we might not be able to protect our technology, and
competitors might be able to develop similar technology independently. In
addition, the laws of certain foreign countries might not afford our
intellectual property the same protection as do the laws of the United States.
For example, our intellectual property is not protected by patents in several
countries in which we do business, and we have limited patent protection in
certain other countries. The costs of applying for patents in foreign countries
and translating the applications into foreign languages require us to select
carefully the inventions for which we apply for patent protection and the
countries in which we seek such protection. Generally, we have concentrated our
efforts to obtain international patents in the United Kingdom, Germany, France,
Italy and Japan because there are other manufacturers and developers of power
conversion and control systems in those countries, as well as customers for
those systems. Our inability or failure to obtain adequate patent protection in
a particular country could have a material adverse effect on our ability to
compete effectively in that country.
Our patents also might not be sufficiently broad to protect our technology,
and any existing or future patents might be challenged, invalidated or
circumvented. Additionally, our rights under our patents may not provide
meaningful competitive advantages.
We do not believe that any of our products are infringing any patents or
proprietary rights of others, although infringements may exist or might occur in
the future. Litigation may be necessary to enforce patents issued to us, to
protect our trade secrets or know-how, to defend ourselves against claimed
infringement of the rights of others or to determine the scope and validity of
the proprietary rights of others. Litigation could result in substantial cost
and diversion of our efforts. Moreover, an adverse determination in any
litigation could cause us to lose proprietary rights, subject us to significant
liabilities to third parties, require us to seek licenses or alternative
technologies from third parties or prevent us from manufacturing or selling our
products. Any of these events could have a material adverse effect on our
business, financial condition and results of operations.
WE MUST CONSTANTLY DEVELOP AND SELL NEW SYSTEMS IN ORDER TO KEEP UP WITH RAPID
TECHNOLOGICAL CHANGES.
The markets for our systems and the markets in which our customers compete
are characterized by ongoing technological developments and changing customer
requirements. We must continue to improve existing systems and to develop new
systems that keep pace with technological advances and meet the needs of our
customers in order to succeed. We might not be able to continue to improve our
systems or develop new systems. The systems we do develop might not be
cost-effective or introduced in a timely manner. Developing and introducing new
systems may involve significant and uncertain costs. Our business, financial
condition and results of operations, as well as our customer relationships,
could be adversely affected if we fail to develop or introduce improved systems
and new systems in a timely manner.
WE MUST ACHIEVE DESIGN WINS TO RETAIN OUR EXISTING CUSTOMERS AND TO OBTAIN NEW
CUSTOMERS.
The constantly changing nature of semiconductor fabrication technology
causes equipment manufacturers to continually design new systems. We often must
work with these manufacturers early in their design cycles to modify our
equipment to meet the requirements of the new systems. Manufacturers typically
choose one or two vendors to provide the power conversion equipment for
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use with the early system shipments. Selection as one of these vendors is called
a design win. It is critical that we achieve these design wins in order to
retain existing customers and to obtain new customers.
We typically must customize our systems for particular customers to use in
their equipment to achieve design wins. This customization increases our
research and development expenses and can strain our engineering and management
resources. These investments do not always result in design wins.
Once a manufacturer chooses a power conversion and control system for use in
a particular product, it is likely to retain that system for the life of that
product. Our sales and growth could experience material and prolonged adverse
effects if we fail to achieve design wins. In addition, design wins do not
always result in substantial sales or profits.
We believe that equipment manufacturers often select their suppliers based
on factors such as long-term relationships. Accordingly, we may have difficulty
achieving design wins from equipment manufacturers who are not currently
customers. In addition, we must compete for design wins for new systems and
products of our existing customers, including those with whom we have had
long-term relationships.
OUR EFFORTS TO BE RESPONSIVE TO CUSTOMERS MAY LEAD TO THE INCURRENCE OF COSTS
THAT ARE NOT READILY RECOVERABLE.
We may incur manufacturing overhead and other costs, many of which are
fixed, to meet anticipated customer demand. Accordingly, operating results could
be adversely affected if orders or revenues in a particular period or for a
particular system do not meet expectations.
We often require long lead times for development of our systems during which
times we must expend substantial funds and management effort. We may incur
significant development and other expenses as we develop our systems without
realizing corresponding revenue in the same period, or at all.
OUR SUCCESS DEPENDS UPON OUR ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL.
Our success depends upon the continued efforts of our senior management team
and our technical, marketing and sales personnel. These employees may
voluntarily terminate their employment with us at any time. Our success also
depends on our ability to attract and retain additional highly qualified
management, technical, marketing and sales personnel. The process of hiring
employees with the combination of skills and attributes required to carry out
our strategy can be extremely competitive and time-consuming. We may not be able
to successfully retain existing personnel or identify, hire and integrate new
personnel. If we lose the services of key personnel for any reason, including
retirement, or are unable to attract additional qualified personnel, our
business, financial condition and results of operations could be materially and
adversely affected.
WE CONDUCT MANUFACTURING AT ONLY A FEW SITES.
We conduct the majority of our manufacturing at our facilities in Fort
Collins, Colorado and in Voorhees, New Jersey. We also conduct manufacturing for
one customer in Austin, Texas. Tower Electronics, a subsidiary, conducts
manufacturing only at its facility in Fridley, Minnesota. Each facility
generally manufactures different systems. In July 1997, a severe rainstorm in
Fort Collins caused substantial damage to our Fort Collins facilities and to
some equipment and inventory. The damage caused us to stop manufacturing at that
facility temporarily and prevented us from resuming full production there until
mid-September 1997. Our insurance policies did not cover all of the costs that
we incurred in connection with the rainstorm. Future natural or other
uncontrollable occurrences at any of our primary manufacturing facilities that
negatively impact our manufacturing
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processes may not be fully covered by insurance and could have a material
adverse effect on our operations and results of operations.
WE HAVE LIMITED EXPERIENCE IN MAINTAINING MULTIPLE MANUFACTURING FACILITIES.
The acquisitions of Tower Electronics in 1997 and RF Power Products in 1998
provided us with manufacturing facilities located outside of our facilities in
Fort Collins, Colorado. Accordingly, we have limited experience in maintaining
multiple manufacturing locations. Substantial costs and delays could result if
we fail to effectively manage and integrate our geographically separate
facilities.
WE MIGHT NOT BE ABLE TO COMPETE SUCCESSFULLY IN INTERNATIONAL MARKETS OR TO MEET
THE SERVICE AND SUPPORT NEEDS OF OUR INTERNATIONAL CUSTOMERS.
Our customers increasingly require service and support on a worldwide basis
as the markets in which we compete become increasingly globalized. We maintain
sales and service offices in Germany, Japan, South Korea and the United Kingdom.
Sales to customers outside the United States accounted for 23% of our total
sales in 1997, 28% in 1998 and 28% in the first six months of 1999, and we
expect international sales to continue to represent a significant portion of our
future sales. International sales are subject to various risks, including:
- currency fluctuations;
- governmental controls;
- political and economic instability;
- barriers to entry;
- trade restrictions;
- changes in tariffs and taxes; and
- longer payment cycles.
In particular, the Japanese market has historically been difficult for
non-Japanese companies, including us, to penetrate.
Providing support services for our systems on a worldwide basis also is
subject to various risks, including:
- our ability to hire qualified support personnel;
- maintenance of our standard level of support; and
- differences in local customers and practices.
Our international activities are also subject to the difficulties of
managing overseas distributors and representatives and managing foreign
subsidiary operations.
We cannot assure you that we will be successful in addressing any of these
risks.
FLUCTUATIONS IN THE CURRENCY EXCHANGE RATE BETWEEN THE U.S. DOLLAR AND FOREIGN
CURRENCIES COULD ADVERSELY AFFECT OUR OPERATING RESULTS.
A portion of our sales is subject to currency exchange risks as a result of
our international operations. We have experienced fluctuations in foreign
currency exchange rates, particularly against the Japanese yen. Beginning in
1997, we entered into various forward foreign exchange contracts as a hedge
against currency fluctuations in the yen. We have not employed hedging
techniques with respect to any other currencies. Our current or any future
hedging techniques might not protect us adequately against substantial currency
fluctuations.
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WE MUST MAINTAIN MINIMUM LEVELS OF CUSTOMIZED INVENTORY TO SUPPORT CERTAIN
CUSTOMER DELIVERY REQUIREMENTS.
We must keep a relatively large number and variety of customized systems in
our inventory to meet client delivery requirements because a substantial
proportion of our business involves the just-in-time shipment of systems. Our
inventory may become obsolete as we develop new systems and as our customers
develop new systems. Inventory obsolescence could have a material adverse effect
on our financial condition and results of operations.
WE ARE SUBJECT TO NUMEROUS GOVERNMENTAL REGULATIONS.
We are subject to federal, state, local and foreign regulations, including
environmental regulations and regulations relating to the design and operation
of our power conversion and control systems. We must ensure that our systems
meet certain safety and emissions standards, many of which vary across the
states and countries in which our systems are used. For example, the European
Union has published directives specifically relating to power supplies. We must
comply with these directives in order to ship our systems into countries that
are members of the European Union. In the past, we have invested significant
resources to redesign our systems to comply with these directives. We believe we
are in compliance with current applicable regulations, directives and standards
and have obtained all necessary permits, approvals and authorizations to conduct
our business. However, compliance with future regulations, directives and
standards could require us to modify or redesign certain systems, make capital
expenditures or incur substantial costs. If we do not comply with current or
future regulations, directives and standards:
- we could be subject to fines;
- our production could be suspended; or
- we could be prohibited from offering particular systems in specified
markets.
WE MAY INVEST IN START-UP COMPANIES AND COULD LOSE OUR ENTIRE INVESTMENT.
We have a majority interest in a start-up company and may invest in other
start-up companies that develop products and technologies which we believe may
provide us with future benefits. These investments may not provide us with any
benefit, and we may not achieve any economic return on any of these investments.
Our investments in these start-up companies are subject to all of the risks
inherent in investing in companies that are not established. We could lose all
or any part of our investments in these companies.
WE LEASE OUR FORT COLLINS, COLORADO FACILITIES AND A CONDOMINIUM FROM ENTITIES
IN WHICH TWO INDIVIDUALS WHO ARE INSIDERS AND MAJOR STOCKHOLDERS HAVE FINANCIAL
INTERESTS.
We lease our executive offices and manufacturing facilities in Fort Collins,
Colorado from Prospect Park East Partnership and from Sharp Point Properties,
LLC. Douglas S. Schatz, our Chairman and Chief Executive Officer, holds a 26.7%
interest in each of the leasing entities. G. Brent Backman, a member of our
board of directors, holds a 6.6% interest in each of the leasing entities.
Aggregate rental payments under such leases for 1998 totaled approximately $1.4
million. We also lease a condominium in Breckenridge, Colorado to provide
rewards and incentives to our customers, suppliers and employees. We lease the
condominium from AEI Properties, a partnership in which Mr. Schatz holds a 60%
interest and Mr. Backman holds a 40% interest. Aggregate rental payments under
the condominium lease for 1998 totaled approximately $36,000. Mr. Schatz owns
approximately 45.0% of our common stock, and Mr. Backman owns approximately 7.8%
of our common stock. Each of Messrs. Schatz and Backman is offering to sell
875,000 shares in the concurrent common stock offering and has granted the
underwriters of that offering an over-allotment option to purchase an additional
131,250 shares.
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THE YEAR 2000 ISSUE COULD HAVE AN ADVERSE IMPACT ON OUR BUSINESS.
The year 2000 issue is the result of computer programs that rely on
two-digit date codes, instead of four-digit date codes, to indicate the year.
Computer programs which are unable to interpret the date code "00" as the year
2000 may not be able to perform computations and decision-making functions after
December 31, 1999 and could cause computer systems to malfunction. We have
developed a multi-phase program for year 2000 information systems compliance. In
what we believe to be the most reasonably likely worst case year 2000 scenario,
we would be unable to obtain electronic components from one or more of our
suppliers because of the suppliers' failure to timely become year 2000
compliant, and we would be unable to obtain the necessary components from
another source, manufacture the necessary components internally or to redesign
our systems to accommodate different components without substantial costs or
delays, or at all. We may not be able to respond fully and efficiently to those
concerns.
We estimate that the costs to remedy and test the year 2000 matters will be
immaterial. Our cost estimates do not include costs and time that may be
incurred as a result of any vendor's or customer's failures to become year 2000
compliant on a timely basis. In addition, we cannot predict whether any
litigation will be brought against us as a result of any supplier's or
customer's failure to become year 2000 compliant on a timely basis or claiming
that our products are not year 2000 compliant or otherwise.
RISKS RELATED TO THE CONVERTIBLE NOTES
THE MARKET PRICE OF OUR STOCK HAS BEEN AND WILL LIKELY CONTINUE TO BE HIGHLY
VOLATILE.
The stock market generally and the market for technology stocks in
particular have experienced significant price and volume fluctuations, which
often have been unrelated or disproportionate to the operating performance of
such companies. From our IPO in November 1995 through September 17, 1999, the
closing prices of our common stock on the Nasdaq National Market have ranged
from $3.50 to $44.97. The market for our common stock likely will continue to be
subject to similar fluctuations. Many factors could cause the trading price of
our common stock to fluctuate substantially, including the following:
- future announcements concerning our business, our customers or our
competitors;
- variations in our operating results;
- announcements of technological innovations;
- the introduction of new products or changes in product pricing policies by
us, our competitors or our customers;
- changes in earnings estimates by securities analysts or announcements of
operating results that are not aligned with the expectations of analysts
and investors;
- the economic and competitive conditions in the industries in which our
customers operate; and
- general stock market trends.
THERE MAY BE NO PUBLIC MARKET FOR THE CONVERTIBLE NOTES.
The convertible notes will be a new issue of securities with no established
trading market. Although the underwriters for this convertible notes offering
have advised us that they currently intend to make a market in the convertible
notes, they have no obligation to do so and may discontinue any market making at
any time and without notice. In addition, any market making activity will be
subject to the limits imposed by the Securities Act of 1933 and the Securities
Exchange Act of 1934. Accordingly, we cannot assure you that any market for the
convertible notes will develop or, if it does develop, that it will be
maintained. Various factors could have a material
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adverse effect on the trading price of the convertible notes, if any, including
the failure of an active market to develop, fluctuations in the prevailing
interest rates, changes in the market for convertible securities and changes in
the market price of our common stock.
WE MAY BE UNABLE TO REPAY OR REPURCHASE THE CONVERTIBLE NOTES.
There is no sinking fund with respect to the convertible notes, and at
maturity the entire outstanding principal amount of the convertible notes will
become due and payable. If we experience a change in control you may require us
to repurchase all or a portion of your convertible notes prior to maturity. See
"Description of Convertible Notes". We cannot assure you that we will have
sufficient funds or will be able to arrange for additional financing to repay
the convertible notes at maturity or to repurchase convertible notes tendered to
us following a change in control. Under the terms of the convertible notes
indenture, we may elect, subject to certain conditions, to pay the repurchase
price with shares of common stock.
Borrowing arrangements or agreements relating to senior debt to which we
become a party, including any refinancings of our existing credit facility, may
contain restrictions on or prohibitions against our repurchase of the
convertible notes. If we are prohibited from repurchasing the convertible notes
and cannot obtain the necessary waivers or refinance the applicable borrowings,
we will be unable to repurchase the convertible notes. Our failure to repurchase
any tendered convertible notes or convertible notes due upon maturity would
constitute an event of default of the convertible notes and, upon acceleration
of the convertible notes in accordance with the indenture, would cause a default
under the terms of our credit facility. In this type of situation, the
subordination provisions of the convertible notes indenture would prohibit any
repurchase of the convertible notes until we pay in full the senior debt.
THE CONVERTIBLE NOTES WILL BE SUBORDINATED TO OTHER DEBT.
We may be required to repay our present and any future senior debt and
indebtedness of our subsidiaries before we can repay the convertible notes. As
of August 31, 1999, our senior debt and indebtedness of our subsidiaries
totalled $1.4 million. The indenture under which the convertible notes will be
issued will not prevent us or our subsidiaries from incurring additional debt.
If we are party to a bankruptcy, liquidation or reorganization, or if we default
on any senior debt, our assets will be used to satisfy the holders of our senior
debt before we will be able to make additional payments on the convertible
notes. Further, the assets of each of our subsidiaries must be used to satisfy
the holders of the subsidiary's indebtedness before we can use the subsidiary's
assets to make payments on the convertible notes.
OUR MANAGEMENT HAS BROAD DISCRETION TO DETERMINE HOW TO USE THE FUNDS RAISED
FROM THE SALE OF THE CONVERTIBLE NOTES AND THE COMMON STOCK, AND MAY USE THOSE
FUNDS IN WAYS THAT MAY NOT INCREASE OUR OPERATING RESULTS OR MARKET VALUE.
The net proceeds from the sale of the convertible notes and our net proceeds
from the sale of shares in the concurrent common stock offering have not been
allocated for a particular purpose. We intend to use the net proceeds for
general corporate purposes, including acquisitions, and working capital
requirements. We may use some or all of the net proceeds for acquisitions,
although no agreement or understanding with respect to any future acquisition
has been reached. Our management will have significant discretion as to the use
of the net proceeds of the offerings and you will not have the opportunity, as
part of your investment decision, to assess whether the proceeds are being used
appropriately. The net proceeds from this offering and our net proceeds from the
concurrent common stock offering may be applied to uses that ultimately may not
increase our operating results or our market value.
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OUR EXECUTIVE OFFICERS AND DIRECTORS OWN A MAJORITY OF OUR OUTSTANDING COMMON
STOCK, WHICH COULD ENABLE THEM TO CONTROL OUR BUSINESS AND AFFAIRS.
Our executive officers and directors own approximately 55.84% of our common
stock outstanding as of September 16, 1999. Assuming the sale of common stock in
the concurrent common stock offering, and without giving effect to conversion of
any convertible notes, our executive officers and directors will own
approximately 46.87% of our outstanding common stock. Douglas S. Schatz, our
Chairman and Chief Executive Officer, owns approximately 44.11% of our common
stock outstanding as of September 16, 1999 and, assuming the sale of common
stock in the common stock offering, will own 39.42% of our outstanding common
stock. These stockholdings give our executive officers and directors
collectively, and Mr. Schatz individually significant voting power. Depending on
the number of shares that abstain or otherwise are not voted, our executive
officers collectively, and Mr. Schatz individually, may be able to elect all of
the members of our board of directors and to control our business and affairs
for the foreseeable future.
ANTITAKEOVER PROVISIONS LIMIT THE ABILITY OF A PERSON OR ENTITY TO ACQUIRE
CONTROL OF US.
Our certificate of incorporation and bylaws include provisions which:
- allow the board of directors to issue preferred stock with rights senior
to those of the common stock without any vote or other action by the
holders of the common stock;
- limit the right of our stockholders to call a special meeting of
stockholders; and
- impose procedural and other requirements that could make it difficult for
stockholders to effect certain corporate actions.
In addition, we are subject to the anti-takeover provisions of the Delaware
General Corporation Law. Any of these provisions could delay or prevent a person
or entity from acquiring control of us. The effect of these provisions may be to
limit the price that investors are willing to pay in the future for our
securities. These provisions might also discourage potential acquisition
proposals or could diminish the opportunities for our stockholders to
participate in a tender offer, even if the acquisition proposal or tender offer
is at a price above the then current market price for our common stock.
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS
Some of the statements contained in or incorporated by reference in this
prospectus discuss our plans and strategies for our business or make other
forward-looking statements, as this term is defined in the Private Securities
Litigation Reform Act. The words "anticipates", "believes", "estimates",
"expects", "plans", "intends" and similar expressions are intended to identify
these forward-looking statements, but are not the exclusive means of identifying
them. These forward-looking statements reflect the current views of our
management. However, various risks, uncertainties and contingencies could cause
our actual results, performance or achievements to differ materially from those
expressed in, or implied by, these statements, including the following:
- the success or failure of our efforts to implement our business strategy;
and
- the other risks and uncertainties discussed under the heading "Risk
Factors" and elsewhere in this prospectus and in the documents
incorporated by reference.
We do not have any obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
You should carefully consider the information set forth under the caption "Risk
Factors" and elsewhere in this prospectus and in the documents incorporated by
reference. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in, implied by or incorporated by reference in
this prospectus might not occur.
21
<PAGE>
USE OF PROCEEDS
We are offering $100,000,000 of convertible notes. After deducting the
underwriters' discounts and commissions and estimated offering expenses, we
anticipate retaining approximately $96,725,000 of the proceeds from the sale of
the convertible notes (assuming a sale of the convertible notes at 100% of the
principal amount). We anticipate retaining approximately $111,275,000 if the
underwriters exercise their over-allotment option in full.
Concurrently with our convertible notes offering, we are offering to sell
1,000,000 shares of common stock and six of our stockholders are offering to
sell 2,000,000 shares of common stock. After deducting the underwriters'
discounts and commissions and estimated offering expenses, we anticipate
retaining proceeds from that offering of approximately $35,825,000 (based upon
an assumed offering price of $38.00 per share). We will not receive any of the
proceeds from the sale of common stock by the selling stockholders.
We intend to use the net proceeds from these offerings of approximately
$132,550,000 for general corporate purposes, including possible acquisitions,
and working capital requirements. Although we actively seek acquisition
opportunities, no agreement or understanding with respect to any future
acquisition has been reached. Pending their ultimate use, we intend to invest
the net proceeds from these offerings in short-term, investment grade, interest
bearing securities, certificates of deposit or direct or guaranteed obligations
of the United States.
PRICE RANGE OF COMMON STOCK
Our common stock is quoted on the Nasdaq National Market under the symbol
"AEIS". The following table sets forth the range of high and low bid prices for
the common stock on the Nasdaq National Market for the periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1997
First quarter............................................................. 7 7/8 5 1/4
Second quarter............................................................ 14 3/8 7 1/8
Third quarter............................................................. 31 1/8 14 1/2
Fourth quarter............................................................ 34 1/8 12 1/4
1998
First quarter............................................................. 17 5/8 10
Second quarter............................................................ 15 1/16 11
Third quarter............................................................. 12 3/8 6
Fourth quarter............................................................ 22 7/8 5 5/8
1999
First quarter............................................................. 29 1/2 19 1/4
Second quarter............................................................ 36 5/8 23 1/2
Third quarter (through September 17, 1999)................................ 43 3/8 30 1/4
</TABLE>
DIVIDEND POLICY
We have not declared or paid any cash dividends on the common stock since
prior to 1994 when we were an S corporation for tax purposes. We currently
intend to retain all of our future earnings to finance our business. In
addition, our revolving credit facility prohibits us from declaring or paying
cash dividends on the common stock. As a result, we do not anticipate paying any
cash or other dividends on the common stock in the foreseeable future.
22
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999, (1)
on a historical basis, (2) as adjusted to reflect the sale of $100,000,000 of
convertible notes at an assumed offering price of 100% of principal amount, and
(3) as further adjusted to reflect the sale of 1,000,000 shares of our common
stock at an assumed offering price of $38.00 per share and the application of
the estimated proceeds, in each case net of our estimated offering expenses and
the underwriters' discounts and commissions. You should read this table together
with our financial statements and notes thereto and other financial and
operating data included elsewhere in this prospectus or incorporated by
reference into this prospectus. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
JUNE 30, 1999
---------------------------------
AS
FURTHER
ACTUAL AS ADJUSTED ADJUSTED
--------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt and capital lease obligations................ $ 1,766 $ 1,766 $ 1,766
Convertible notes........................................... -- 100,000 100,000
Stockholders' equity
Preferred stock, 1,000 shares authorized; none issued and
outstanding............................................. -- -- --
Common stock, 40,000 shares authorized; 26,969 issued and
outstanding (actual and as adjusted); 27,969 issued and
outstanding (as further adjusted)....................... 27 27 28
Additional paid-in capital.................................. 62,193 62,193 98,017
Retained earnings........................................... 32,443 32,443 32,443
Cumulative translation adjustment........................... (1,274) (1,274) (1,274)
--------- ----------- ---------
Total stockholders' equity................................ 93,389 93,389 129,214
--------- ----------- ---------
Total capitalization.................................... $ 95,155 $ 195,155 $ 230,980
--------- ----------- ---------
--------- ----------- ---------
</TABLE>
23
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected consolidated financial data in this chart for the years ended
December 31, 1994 to 1998 and as of December 31 of those years are derived from
our audited financial statements.
The selected consolidated statement of operations data for the year ended
December 31, 1998 and the related consolidated balance sheet and other data as
of and for the year ended December 31, 1998 were derived from consolidated
financial statements audited by Arthur Andersen LLP, independent accountants,
whose related audit report is included in our annual report on Form 10-K.
The selected consolidated statement of operations data for the years ended
December 31, 1996 and 1997 and the related consolidated balance sheet and other
data as of and for the year ended December 31, 1997 were derived from
consolidated financial statements audited in part by Arthur Andersen LLP and in
part by KPMG LLP, whose audit reports are included in our annual report on Form
10-K. KPMG LLP's audit report pertains to Advanced Energy Voorhees, Inc.,
formerly named RF Power Products, Inc., whose fiscal year end was November 30.
As such, the balance sheet and other data and the statement of operations data
of the Company for fiscal 1996 and 1997 includes the balance sheet of Advanced
Energy Voorhees, Inc. as of November 30, 1996 and 1997, and the statement of
operations for each of the two years in the period ended November 30, 1997,
respectively.
The selected consolidated statements of operations data for the years ended
December 31, 1994 and 1995, and the related consolidated balance sheet and other
data as of December 31, 1996 were restated from our audited consolidated
financial statements and from audited consolidated financial statements of
Advanced Energy Voorhees. The Advanced Energy Voorhees financial statements are
not included in our annual reports on Form 10-K.
The selected consolidated financial data in this chart for the six months
ended June 30, 1998 and 1999 and as of June 30, 1999 are derived from our
unaudited financial statements, which are included in our quarterly report on
Form 10-Q for the quarter ended June 30, 1999. The unaudited financial data has
been prepared on the same basis as the audited financial data and, in our
opinion, includes all normal recurring adjustments necessary for a fair
statement of the results for the periods covered.
The following data should be read in conjunction with the financial
statements and related notes incorporated by reference in this prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operation".
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------- --------------------
1994 1995 1996 1997 1998 1998 1999
------- -------- -------- -------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales................................... $68,159 $121,075 $129,931 $175,758 $124,698 $75,850 $ 74,243
Cost of sales........................... 36,183 65,003 82,685 108,802 87,985 53,729 42,852
------- -------- -------- -------- -------- ------- --------
Gross profit............................ 31,976 56,072 47,246 66,956 36,713 22,121 31,391
------- -------- -------- -------- -------- ------- --------
Operating expenses
Research and development.............. 7,190 12,865 17,288 19,336 23,849 12,229 12,610
Sales and marketing................... 5,982 8,256 10,723 11,646 13,531 7,076 7,284
General and administrative............ 6,989 10,612 8,865 10,480 9,483 5,627 5,958
Other expenses(1)..................... -- -- -- 5,780 2,625 -- --
------- -------- -------- -------- -------- ------- --------
Total operating expenses................ 20,161 31,733 36,876 47,242 49,488 24,932 25,852
------- -------- -------- -------- -------- ------- --------
Income (loss) from operations........... 11,815 24,339 10,370 19,714 (12,775) (2,811) 5,539
Other (expense) income.................. (96) (452) (39) (191) 358 227 17
------- -------- -------- -------- -------- ------- --------
Net income (loss) before income taxes... 11,719 23,887 10,331 19,523 (12,417) (2,584) 5,556
Provision (benefit) for income taxes.... 4,386 9,089 3,960 7,467 (2,900) (333) 2,252
------- -------- -------- -------- -------- ------- --------
Net income (loss)....................... $ 7,333 $ 14,798 $ 6,371 $ 12,056 $ (9,517) $(2,251) $ 3,304
------- -------- -------- -------- -------- ------- --------
------- -------- -------- -------- -------- ------- --------
Basic earnings (loss) per share......... $ 0.36 $ 0.67 $ 0.25 $ 0.47 $ (0.36) $ (0.08) $ 0.12
------- -------- -------- -------- -------- ------- --------
------- -------- -------- -------- -------- ------- --------
Diluted earnings (loss) per share....... $ 0.32 $ 0.63 $ 0.25 $ 0.46 $ (0.36) $ (0.08) $ 0.12
------- -------- -------- -------- -------- ------- --------
------- -------- -------- -------- -------- ------- --------
OTHER DATA:
Ratio of earnings to fixed charges
(2)................................... 17.4x 36.5x 37.4x 41.6x --(3) --(3) 155.3x
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, 1999
DECEMBER 31, ------------------------------------------
------------------------------- AS FURTHER
1996 1997 1998 ACTUAL AS ADJUSTED(4) ADJUSTED(4)(5)
--------- --------- --------- --------- --------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents/marketable secu-
rities.................................. $ 11,778 $ 32,215 $ 28,134 $ 25,498 $ 122,223 $ 158,048
Working capital........................... 41,638 74,342 62,059 66,964 163,689 199,514
Total assets.............................. 68,078 130,064 101,035 113,383 213,383 249,208
Total debt................................ 3,741 6,518 537 1,766 101,766 101,766
Stockholders' equity...................... 54,927 97,527 89,133 93,389 93,389 129,214
</TABLE>
- ------------------
Notes:
(1) Other operating expenses represent a restructuring charge, merger costs,
storm damages and recoveries and a write-off of purchased in-process
research and development expenses.
(2) The ratio of earnings to fixed charges represents, on a pre-tax basis, the
number of times earnings cover fixed charges. Earnings consist of net income
to which has been added interest expense on capital leases and long-term
debt. Fixed charges consist of interest expense on capital leases and
long-term debt.
(3) The losses for 1998 and the six months ended June 30, 1998 are not
sufficient to cover fixed charges by a total of approximately $12.2 million
for 1998 and $2.5 million for the six months ended June 30, 1998. As a
result, the ratio of earnings to fixed charges has not been computed for
either 1998 or the six months ended June 30, 1998.
(4) Reflects net proceeds of approximately $96,725,000 from the sale of the
convertible notes (assuming an offering price of 100% of the principal
amount), after deducting underwriters' discounts and commissions and
estimated offering expenses relating to the convertible notes offering.
(5) Reflects net proceeds of approximately $35,825,000 from our sale of
1,000,000 shares of common stock in the concurrent common stock offering,
(assuming an offering price of $38.00 per share), after deducting
underwriters' discounts and commissions and estimated offering expenses
relating to the common stock offering.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
We design, manufacture and support power conversion and control systems.
These systems are important components of industrial manufacturing equipment
that modifies surfaces or deposits or etches thin film layers on computer chips,
CDs, flat panel displays such as computer screens, DVDs, windows, eyeglasses,
solar panels and other products. We market and sell our systems primarily to
large, global OEMs of semiconductor, data storage, flat panel display and other
industrial thin film manufacturing equipment. A substantial and increasing
proportion of our sales are made on a just-in-time basis in which the shipment
of systems occurs within a few days or hours after an order is received. Our
revenues are recognized upon shipment of our systems. Since inception, we have
sold over 150,000 power conversion and control systems.
The semiconductor capital equipment industry accounted for approximately 59%
of our total sales in 1997, 49% in 1998 and 59% in the first six months of 1999.
We have been successful in achieving a number of design wins which have resulted
in our obtaining new customers and solidifying relationships with our existing
customers. We believe our ability to continue to achieve design wins with
existing and potential customers will be critical to our future success.
We continuously seek to expand our product offerings and customer base
through internal development and acquisitions.
In May 1997, we acquired the assets of MIK Physics, Inc. This acquisition
provided the base technology for our Astral products, which are high power
direct current (DC) systems used in PVD equipment.
In August 1997, we acquired Tower Electronics. This acquisition expanded our
technology and customer base, and provided us with the capability to design and
manufacture power conversion systems for use in modems, non-impact printers,
night vision goggles and laser devices.
We took another step towards achieving further market diversification in
September 1998 when we acquired the assets of Fourth State Technology. This
acquisition enhanced our capability to design and manufacture RF power-related
process control systems used to monitor and analyze data in thin film processes.
In October 1998, we acquired RF Power Products, which designs, manufactures
and supports RF power conversion and control systems consisting of generators
and matching networks. Generators provide radio frequency power and matching
networks provide control over power flow to the customers' equipment. We believe
our ability to offer an expanded line of RF systems to our existing customer
base has strengthened those relationships. We sell these products principally to
semiconductor capital equipment manufacturers. We also sell similar systems to
capital equipment manufacturers in the flat panel display and thin film data
storage industries, and are exploring applications for these products in other
industries.
In August 1999, we acquired a majority interest in LITMAS, a start-up
company that designs and manufactures plasma abatement systems and high-density
plasma sources. LITMAS' first product, "Litmas Blue", reduces "greenhouse gas"
(PFC and HFC) emissions from tools used in the etch process in the fabrication
of semiconductors. We believe that Litmas Blue and LITMAS' future products will
expand our product offerings to our existing and potential customers in the
semiconductor capital equipment industry.
26
<PAGE>
RESULTS OF OPERATIONS
The following table summarizes certain data as a percentage of sales
extracted from our statements of operations for the periods presented:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
JUNE 30,
---------------------------- ----------------------------
1997 1998 1998 1999
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Sales............................................. 100.0% 100.0% 100.0% 100.0%
Cost of sales..................................... 61.9 70.6 70.8 57.7
----------- ----- ----- -----------
Gross margin...................................... 38.1 29.4 29.2 42.3
----------- ----- ----- -----------
Operating expenses:
Research and development........................ 11.0 19.1 16.1 17.0
Sales and marketing............................. 6.6 10.9 9.3 9.8
General and administrative...................... 6.0 7.5 7.4 8.0
Other expenses.................................. 3.3 2.1 -- --
----------- ----- ----- -----------
Total operating expenses.......................... 26.9 39.6 32.9 34.8
----------- ----- ----- -----------
Income (loss) from operations..................... 11.2 (10.2) (3.7) 7.5
Other (expense) income............................ (0.1) 0.2 0.3 0.0
----------- ----- ----- -----------
Net income (loss) before income taxes............. 11.1 (10.0) (3.4) 7.5
Provision (benefit) for income taxes.............. 4.2 (2.4) (0.4) 3.0
----------- ----- ----- -----------
Net income (loss)................................. 6.9% (7.6)% (3.0)% 4.5%
----------- ----- ----- -----------
----------- ----- ----- -----------
</TABLE>
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
SALES. We sell power conversion and control systems primarily to the
semiconductor capital equipment, data storage and industrial markets in the
United States, to the flat panel display and data storage markets in Japan, and
to the data storage and industrial markets in Europe. We also sell spare parts
and repair services worldwide through our global support organization.
Sales for the first six months of 1999 were $74.2 million, a decrease of 2%
from sales of $75.8 million in the first six months of 1998. The decrease was
attributable mostly to decreases in sales to industrial markets, which were
partially offset by increases in sales to customers in the semiconductor capital
equipment industry.
27
<PAGE>
The following tables summarize net sales and percentages of net sales by
customer type for the six-month periods ended June 30, 1998 and 1999:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1998 1999
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Semiconductor capital equipment........................................ $ 40,820 $ 43,854
Data storage........................................................... 9,160 9,040
Flat panel display..................................................... 3,769 3,559
Industrial............................................................. 18,881 13,745
Customer service technical support..................................... 3,220 4,045
--------- ---------
$ 75,850 $ 74,243
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1998 1999
--------- ---------
<S> <C> <C>
Semiconductor capital equipment.......................................... 53.8% 59.1%
Data storage............................................................. 12.1 12.2
Flat panel display....................................................... 5.0 4.8
Industrial............................................................... 24.9 18.5
Customer service technical support....................................... 4.2 5.4
--------- ---------
100.0% 100.0%
--------- ---------
--------- ---------
</TABLE>
The following tables summarize net sales and percentages of net sales by
geographic region for the six-month periods ended June 30, 1998 and 1999:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1998 1999
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
United States and Canada............................................... $ 57,081 $ 53,453
Europe................................................................. 12,835 11,971
Asia Pacific........................................................... 5,714 8,457
Rest of world.......................................................... 220 362
--------- ---------
$ 75,850 $ 74,243
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1998 1999
--------- ---------
<S> <C> <C>
United States and Canada................................................. 75.3% 72.0%
Europe................................................................... 16.9 16.1
Asia Pacific............................................................. 7.5 11.4
Rest of world............................................................ 0.3 0.5
--------- ---------
100.0% 100.0%
--------- ---------
--------- ---------
</TABLE>
GROSS MARGIN. Our gross margin for the first six months of 1999 was 42.3%,
up from 29.2% in the first six months of 1998. The improvement in gross margin
was primarily a result of our efforts to reduce material and manufacturing
overhead costs, including implementation of our restructuring plan in the third
quarter of 1998.
28
<PAGE>
We provide warranty coverage for our systems ranging from 12 to 24 months.
We estimate the anticipated costs of repairing systems under such warranties
based on the historical average costs of repairs. To date, we have not
experienced significant warranty costs in excess of our recorded reserves.
RESEARCH AND DEVELOPMENT. Our research and development expenses are incurred
researching new technologies, developing new systems and improving existing
system designs. Research and development expenses for the first six months of
1999 were $12.6 million, up from $12.2 million in the first six months of 1998,
representing an increase of 3%. The increase was attributable to higher spending
for materials and supplies. As a percentage of sales, research and development
expenses increased to 17.0% in the first six months of 1999 from 16.1% in the
first six months of 1998.
We believe continued research and development investment for development of
new systems is critical to our ability to serve new and existing markets. Since
our inception, research and development costs generally have been internally
funded and all have been expensed as incurred.
SALES AND MARKETING. Sales and marketing expenses support domestic and
international sales and marketing activities which include personnel, trade
shows, advertising and other marketing activities. Sales and marketing expenses
for the first six months of 1999 were $7.3 million, up slightly from $7.1
million in the first six months of 1998, representing an increase of 3%. As a
percentage of sales, sales and marketing expenses increased to 9.8% in the first
six months of 1999 from 9.3% in the first six months of 1998.
GENERAL AND ADMINISTRATIVE. General and administrative expenses support our
worldwide financial, administrative, information systems and human resources
functions. General and administrative expenses for the first six months of 1999
were $6.0 million, up from $5.6 million in the first six months of 1998,
representing an increase of 7%. As a percentage of sales, general and
administrative expenses increased to 8.0% in the first six months of 1999 from
7.4% in the first six months of 1998.
OTHER INCOME. Other income consists primarily of interest income and
expense, foreign exchange gains and losses, and other non-operating expenses.
Other income for the first six months of 1999 was $17,000, compared to $227,000
in the first six months of 1998, representing a decrease of 93%.
Interest expense consists principally of borrowings under our bank credit
and capital lease facilities and a state government loan.
We have experienced fluctuations in foreign currency exchange rates,
particularly against the Japanese yen. Beginning in 1997, we entered into
various forward foreign exchange contracts as a hedge against currency
fluctuations in the yen. We continue to evaluate various methods to minimize the
effects of currency fluctuations.
PROVISION FOR INCOME TAXES.The income tax provision was $2.3 million for the
first six months of 1999, compared to an income tax benefit of $333,000 for the
first six months of 1998. The estimated effective rate was 40.5% for the first
six months of 1999, compared to an effective income tax benefit rate of 12.9%
for the first six months of 1998. The higher effective consolidated tax rate for
the first six months of 1999 is attributable to losses recorded at our Advanced
Energy Voorhees subsidiary in the second quarter of 1998 for which no tax
benefit had been recorded and a shift in the mix of our taxable income toward a
greater share from countries with higher effective tax rates. Changes in the
relative earnings of our U.S. and foreign operations affect our consolidated
effective tax rate. To the extent that a larger percentage of taxable earnings
are derived from our foreign subsidiaries whose tax rates are higher than
domestic tax rates, we could experience a higher consolidated effective tax rate
than the historical rates we have experienced. We adjust our
29
<PAGE>
provision for income taxes periodically based upon the anticipated tax status of
all of our foreign and domestic entities.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1998
SALES. Sales for 1998 were $124.7 million, a decrease of 29% from sales of
$175.8 million for 1997. The decrease was due to decreased unit sales. The
semiconductor capital equipment industry, affected primarily by the Asian
financial crisis, experienced a severe downturn from the end of 1997 through
1998. This caused a 41% decrease in our sales to this industry in 1998 compared
to 1997, primarily in the United States and the Asia Pacific region. Sales to
the data storage industry decreased 27%, although sales to our largest customer
in that industry grew significantly from 1997 to 1998, resulting in higher sales
in Europe. Sales to industrial markets were slightly higher, but would have been
lower if not for the full-year effect of sales by Tower Electronics in 1998.
GROSS MARGIN. Our gross margin for 1998 was 29.4%, down from 38.1% in 1997.
The decrease in gross margin was primarily due to unfavorable absorption of
manufacturing overhead as a result of significant capacity expansion in 1997 and
the reduced level of sales in 1998.
RESEARCH AND DEVELOPMENT. Research and development expenses for 1998 were
$23.8 million, up from $19.3 million in 1997, representing an increase of 23%.
As a percentage of sales, research and development expenses increased to 19.1%
in 1998 from 11.0% in 1997 as a result of the lower sales base. The increase in
expenses from 1997 to 1998 is primarily due to increases in payroll, materials
and supplies, purchased services, and higher infrastructure costs for new
product development.
We recorded a one-time charge of $3.1 million in 1997 for the portion of the
Tower Electronics purchase price attributable to in-process research and
development. This one-time charge is not included in the $19.3 million reported
for research and development expense in 1997.
SALES AND MARKETING. Sales and marketing expenses for 1998 were $13.5
million, up from $11.6 million in 1997, representing an increase of 16%. The
increase is attributable to higher payroll costs incurred as we continue to
increase our sales management and product management capabilities. Additionally,
we increased spending in 1998 to develop worldwide applications engineering
capabilities. As a percentage of sales, sales and marketing expenses increased
to 10.9% in 1998 from 6.6% in 1997 as a result of the lower sales base.
GENERAL AND ADMINISTRATIVE. General and administrative expenses for 1998
were $9.5 million, down from $10.5 million in 1997, representing a decrease of
10%. This decrease is primarily attributable to implementation of our 1998
restructuring plan. As a percentage of sales, general and administrative
expenses increased to 7.5% in 1998 from 6.0% in 1997. This increase was due to
the lower sales base.
OTHER EXPENSES. We took one-time charges totaling $5.8 million in 1997. We
took a net charge of $2.7 million for storm damage to our headquarters and main
manufacturing facilities that resulted from heavy rains in the Fort Collins area
in July 1997. We settled with our insurance carrier in 1998, and recorded a $1.1
million recovery in the fourth quarter of 1998.
As discussed above in "--Research and Development", our acquisition of Tower
Electronics resulted in a write-off of $3.1 million in 1997 for purchased
in-process research and development, which is nondeductible for income tax
purposes.
We took one-time charges totaling $3.7 million in 1998. In August 1998, we
announced a restructuring plan to respond to the downturn in the semiconductor
capital equipment market. The plan included a reduction of workforce of 128
people, the closure of one facility in our Fort Collins,
30
<PAGE>
Colorado campus, and the abandonment of plans to construct a new manufacturing
facility in Fort Collins. Other reductions in workforce at the Voorhees facility
were effected during 1998. We took a one-time charge of $1.0 million for the
restructuring in the third quarter of 1998.
On October 8, 1998, we acquired RF Power Products in a pooling of interests
that involved the exchange of four million shares of our common stock for the
publicly held common stock of RF Power Products. We incurred as part of the
business combination $2.7 million of acquisition expenses recorded in the fourth
quarter of 1998, which is non-capitalizable and generally nondeductible for
income tax purposes.
OTHER (EXPENSE) INCOME. Other (expense) income consists primarily of
interest income and expense, foreign exchange gains and losses and other
non-operating expenses. Interest income for 1998 was $1.1 million, up from $0.6
million in 1997, representing an increase of 83%. Interest income was due
primarily to earnings on investments made from the proceeds of our IPO in
November 1995 and our underwritten public offering in October 1997.
Interest expense decreased to approximately $0.2 million for 1998 from $0.5
million for 1997.
PROVISION (BENEFIT) FOR INCOME TAXES. The income tax benefit was $2.9
million for 1998 compared to an income tax provision of $7.5 million in 1997.
The estimated effective rate was 23.4% for 1998, compared to an effective rate
of 38.2% for 1997. The lower rate of the tax benefit in 1998 was due to
nondeductible costs associated with our acquisition of RF Power Products, and
foreign operating losses for which no benefit was recorded.
31
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following tables present quarterly results in dollars and as a
percentage of sales for each of the eight quarters in the period ended June 30,
1999. We believe that all necessary adjustments, consisting only of normal
recurring adjustments, have been included in the amounts stated below to present
fairly such quarterly information. The operating results for any quarter are not
necessarily indicative of results for any subsequent period.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------
SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1997 1997 1998 1998 1998 1998 1999 1999
--------- --------- --------- --------- --------- --------- --------- ---------
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales.......................... $ 52,688 $ 56,059 $ 43,869 $ 31,981 $ 26,292 $ 22,556 $ 32,728 $ 41,515
Cost of sales.................. 31,658 34,878 30,263 23,466 18,317 15,939 19,630 23,222
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit................... 21,030 21,181 13,606 8,515 7,975 6,617 13,098 18,293
--------- --------- --------- --------- --------- --------- --------- ---------
Operating expenses:
Research and development..... 5,484 5,656 5,835 6,394 5,722 5,898 5,852 6,758
Sales and marketing.......... 2,829 3,684 3,564 3,512 3,255 3,200 3,305 3,979
General and administrative... 2,780 3,371 2,859 2,768 2,353 1,503 2,870 3,088
Restructuring charge......... -- -- -- -- 1,000 -- -- --
Merger costs................. -- -- -- -- -- 2,742 -- --
Storm damages (recoveries)... 3,000 (300) -- -- -- (1,117) -- --
Purchased in-process research
and development............ 3,080 -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
Total operating expenses....... 17,173 12,411 12,258 12,674 12,330 12,226 12,027 13,825
--------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) from
operations................... 3,857 8,770 1,348 (4,159) (4,355) (5,609) 1,071 4,468
Other (expense) income......... (22) 37 98 129 (214) 345 (39) 56
--------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss) before income
taxes........................ 3,835 8,807 1,446 (4,030) (4,569) (5,264) 1,032 4,524
Provision (benefit) for income
taxes........................ 2,544 2,305 552 (885) (1,089) (1,478) 498 1,754
--------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss).............. $ 1,291 $ 6,502 $ 894 $ (3,145) $ (3,480) $ (3,786) $ 534 $ 2,770
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Diluted earnings (loss) per
share........................ $ 0.05 $ 0.24 $ 0.03 $ (0.12) $ (0.13) $ (0.14) $ 0.02 $ 0.10
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Diluted weighted-average number
of shares and share
equivalents.................. 26,401 27,143 27,170 26,531 26,585 26,681 28,027 28,169
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------
SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1997 1997 1998 1998
--------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Percentage of Sales:
Sales..................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales............................. 60.1 62.2 69.0 73.4
--------- -------- -------- --------
Gross margin.............................. 39.9 37.8 31.0 26.6
--------- -------- -------- --------
Operating expenses:
Research and development................ 10.4 10.1 13.3 19.9
Sales and marketing..................... 5.4 6.6 8.1 11.0
General and administrative.............. 5.3 6.0 6.5 8.7
Restructuring charge.................... -- -- -- --
Merger costs............................ -- -- -- --
Storm damages (recoveries).............. 5.7 (0.5) -- --
Purchased in-process research and
development........................... 5.8 -- -- --
--------- -------- -------- --------
Total operating expenses.................. 32.6 22.2 27.9 39.6
--------- -------- -------- --------
Income (loss) from operations............. 7.3 15.6 3.1 (13.0)
Other income (expense).................... 0.0 0.1 0.2 0.4
--------- -------- -------- --------
Net income (loss) before income taxes..... 7.3 15.7 3.3 (12.6)
Provision (benefit) for income taxes...... 4.8 4.1 1.3 (2.8)
--------- -------- -------- --------
Net income (loss)......................... 2.5% 11.6% 2.0% (9.8)%
--------- -------- -------- --------
--------- -------- -------- --------
<CAPTION>
SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1998 1998 1999 1999
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Percentage of Sales:
Sales..................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales............................. 69.7 70.7 60.0 55.9
--------- -------- -------- --------
Gross margin.............................. 30.3 29.3 40.0 44.1
--------- -------- -------- --------
Operating expenses:
Research and development................ 21.8 26.1 17.9 16.3
Sales and marketing..................... 12.4 14.2 10.1 9.6
General and administrative.............. 8.9 6.7 8.8 7.4
Restructuring charge.................... 3.8 -- -- --
Merger costs............................ -- 12.2 -- --
Storm damages (recoveries).............. -- (5.0) -- --
Purchased in-process research and
development........................... -- -- -- --
--------- -------- -------- --------
Total operating expenses.................. 46.9 54.2 36.7 33.3
--------- -------- -------- --------
Income (loss) from operations............. (16.6) (24.9) 3.3 10.8
Other income (expense).................... (0.8) 1.6 (0.1) 0.1
--------- -------- -------- --------
Net income (loss) before income taxes..... (17.4) (23.3) 3.2 10.9
Provision (benefit) for income taxes...... (4.2) (6.5) 1.5 4.2
--------- -------- -------- --------
Net income (loss)......................... (13.2)% (16.8)% 1.6% 6.7%
--------- -------- -------- --------
--------- -------- -------- --------
</TABLE>
Our quarterly operating results have fluctuated significantly and we expect
them to continue to experience significant fluctuations. Quarterly results are
affected by a variety of factors, many of which are beyond our control,
including:
- changes or slowdowns in economic conditions in the semiconductor and
semiconductor capital equipment industries and other industries in which
our customers operate;
- the timing and nature of orders placed by major customers;
- customer cancellations of previously placed orders and shipment delays;
- pricing competition from our competitors;
- component shortages resulting in manufacturing delays;
- changes in customers' inventory management practices;
- the introduction of new products by us or our competitors; and
- costs incurred by responding to specific feature requests by customers.
A substantial portion of our shipments are made on a "just-in-time" basis in
which shipment of systems occurs within a few days or hours after an order is
received. Our backlog is not meaningful because of the importance of
"just-in-time" shipments. We are dependent on obtaining orders for shipment in a
particular quarter to achieve our revenue objectives for that quarter.
Accordingly, it is difficult for us to predict accurately the timing and level
of sales in a particular quarter. Due to our "just-in-time" program, we
anticipate quarterly fluctuations in sales to continue to occur.
33
<PAGE>
Sales fluctuated significantly during the periods presented, reflecting
changing demand. Demand for our systems is affected primarily by changes in the
semiconductor capital equipment market. The semiconductor capital equipment
market experienced a major but short-lived recovery in the second half of 1997,
but then a severe downturn began at the end of 1997 and continued through 1998
until the market began to recover in early 1999. Our quarterly sales generally
mirrored the market. To a lesser extent, sales are affected by events in the
data storage, flat panel display and other industrial markets.
Our gross margin fluctuated significantly, primarily reflecting the level at
which we utilized our manufacturing capacity. Successive decreases in gross
margin to 31.0% in the first quarter of 1998 and 26.6% in the second quarter of
1998 were due to decreased utilization of capacity resulting from two successive
quarterly decreases in sales to the semiconductor capital equipment industry.
Gross margin improved to 30.3% in the third quarter of 1998, despite continued
decreased utilization of capacity, due to lower material costs obtained through
supplier contract negotiations and cost improvements realized from our
restructuring. Gross margin declined to 29.3% in the fourth quarter of 1998, due
primarily to further decreased utilization of capacity resulting from another
decrease in sales to the semiconductor capital equipment industry. Gross margin
increased significantly to 40.0% in the first quarter of 1999, primarily as
result of our efforts to reduce material costs and, to a lesser extent, the
higher sales base. Gross margin increased again in the second quarter of 1999 to
44.1% due to the higher sales base.
Operating expenses have been affected by non-recurring charges and credits
and our responses to changes in demand for our product, particularly from the
semiconductor capital equipment industry. For example, in the third quarter of
1997, we recorded a $3.0 million charge in connection with storm damage we
experienced and wrote off $3.1 million of purchased in-process research and
development associated with the Tower Electronics acquisition. Due to the
downturn in the semiconductor capital equipment industry in 1998, our operating
expenses were held relatively flat during the first half of 1998 in anticipation
of an early recovery. With the extent and duration of the downturn still
uncertain, in the second half of 1998 we reduced operating expenses while
maintaining a minimum level of resources necessary to address an upturn in the
semiconductor capital equipment industry that began to occur in the first half
of 1999. Operating expenses in the third and fourth quarters of 1998 were also
affected by non-recurring charges and credits. Operating expenses increased in
the first two quarters of 1999, reflecting expenditures to support the
significant growth in sales during those periods. As a percentage of sales,
operating expenses have declined during periods of rapid sales growth, when
sales increased at a rate faster than our ability to add personnel and
facilities to support the growth, and increased during periods of flat or
decreased sales, when our infrastructure is retained to support anticipated
future growth.
Our provision (benefit) for income taxes fluctuated significantly from the
third quarter of 1997 through the second quarter of 1999, primarily due to the
effect of non-recurring charges and credits. For example, an effective income
tax rate of 66.3% in the third quarter of 1997 was due primarily to the $3.1
million write-off associated with the acquisition of Tower Electronics. An
effective income tax benefit rate of 28.1% for the fourth quarter of 1998 was
due primarily to nondeductible merger costs offset by tax benefits recorded for
operating losses incurred during the quarter.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations, acquired equipment and
met our working capital requirements through borrowings under our revolving line
of credit, long-term loans secured by property and equipment, cash flow from
operations and proceeds from equity offerings.
Operating activities used cash of $2.1 million in the first six months of
1999, primarily a result of increases in accounts receivable and inventories,
partially offset by net income, increases in accounts payable and increased
accruals for payroll, employee benefits and income taxes.
34
<PAGE>
Operating activities provided cash of $4.7 million in the first six months of
1998, primarily as a result of decreases in accounts receivable and inventories,
offset by the net loss, decreases in accounts payable and decreased accruals for
income taxes. We expect future receivable and inventory balances to fluctuate
with net sales. We provide just-in-time deliveries to certain of our customers
and may be required, under certain contracts or agreements, to maintain minimum
levels of inventory to satisfy our customers' delivery requirements. Any
increase of our inventory levels will require the use of cash to finance the
inventory.
Investing activities used cash of $1.1 million in the first six months of
1999 and included the purchase of property and equipment for $3.0 million,
offset by sales of $1.9 million of marketable securities. Investing activities
used cash of $3.2 million in the first six months of 1998 and included the
purchase of property and equipment for $4.0 million and the purchase of a stock
investment in a start-up company for $0.75 million, offset by sales of $1.5
million of marketable securities.
Financing activities in the first six months of 1999 provided cash of $3.0
million and consisted primarily of proceeds of $1.8 million from the exercise of
employee stock options and net increases in notes payable and capital lease
obligations of $1.2 million. Financing activities in the first six months of
1998 used cash of $1.6 million and consisted primarily of payment of notes
payable and capital lease obligations of $1.9 million, partially offset by
proceeds of $0.3 million from the exercise of employee stock options.
We plan to spend approximately $7.0 million through the remainder of 1999
and the first six months of 2000 for the acquisition of manufacturing and test
equipment and furnishings. Further, we continue to implement our management
system software, including the replacement of existing systems in our domestic
and foreign locations. We expect to incur aggregate costs of approximately $0.3
million related to training and implementation of the software through the year
2000.
As of June 30, 1999, we had working capital of $67.0 million. Our sources of
available funds as of June 30, 1999 consisted of $11.3 million of cash and cash
equivalents, $14.2 million of marketable securities, and a credit facility
consisting of a $30.0 million revolving line of credit, of which none was
outstanding as of June 30, 1999. Advances under the revolving line of credit
bear interest at either the prime rate (8.25% at September 16, 1999) minus 1.25%
or the LIBOR 360-day rate (6.0425% at September 16, 1999) plus 150 basis points,
at our option. All advances under the revolving line of credit will be due and
payable on December 7, 2000, unless up to $10 million of indebtedness is
converted into a 3-year term loan prior to that date.
We believe that our cash and cash equivalents, marketable securities, cash
flow from operations and available borrowings will be sufficient to meet our
working capital needs for the next twelve months. From time to time, we may
raise capital through additional equity or debt financing in order to take
advantage of favorable market conditions or to fund material capital equipment
purchases or desired expansion. We have considered, and will continue to
consider, possible acquisitions of businesses or entities, which we believe
could create synergies or opportunities for us. If we were to undertake one or
more acquisitions, we may require additional funds which may be provided by the
sale of equity or debt securities. The requisite funding might not be available
when required or it might not be available on terms acceptable to us.
35
<PAGE>
BUSINESS
OVERVIEW
We design, manufacture and support power conversion and control systems.
These systems are important components of industrial manufacturing equipment
that modifies surfaces or deposits or etches thin film layers on computer chips,
CDs, flat panel displays such as computer screens, DVDs, windows, eyeglasses,
solar panels and other products. Our systems refine, modify and control the raw
electrical power from a utility and convert it into power that is uniform and
predictable. This allows manufacturing equipment to produce and deposit very
thin films at an even thickness on a mass scale. We market and sell our systems
primarily to large, global OEMs of semiconductor, flat panel display, data
storage and other industrial thin film manufacturing equipment.
We have sold our systems worldwide to more than 100 OEMs and directly to
more than 500 end-users. Since inception, we have sold more than 150,000 power
conversion and control systems. Our principal customers include Applied
Materials, Balzers, Eaton, Lam Research, Novellus, Singulus and ULVAC.
BACKGROUND
THE MARKET FOR PLASMA-BASED THIN FILM PRODUCTION PROCESSES
Manufacturing processes in use today employ thin film technology to modify
surfaces or to deposit or etch thin layers of materials on substrates such as
silicon, glass and metals. In recent years, significant technological advances
in thin film processes have permitted materials to be manipulated on an atomic
and molecular level. Manufacturers can now both deposit and etch layers of
materials that are less than one hundredth of a micron in thickness. Thin film
production processes enable manufacturers to control and alter the electrical,
magnetic, optical and mechanical characteristics of materials. Products produced
by thin film processing include integrated circuits, flat panel displays and
magnetic media. The ongoing demand for improvements in the performance, capacity
and speed of these products drives manufacturers to develop more advanced
technology to produce increasingly thinner, more consistent and more precise
layers of film.
Thin film production processes are now used in a broad and rapidly growing
range of industrial manufacturing processes. Thin film processes have been
employed most extensively in the semiconductor industry. In the fabrication of
integrated circuits, multiple thin film layers of insulating or conductive
materials are deposited on a wafer or substrate. Each thin film layer becomes an
integral part of microscopic device and circuitry features. For example, the
current generation dynamic random access memory chips (DRAMs) are manufactured
with ten to thirty layers of film and an overall thickness of no more than 0.5
microns. Thin film manufacturing processes similar to those employed in the
semiconductor industry are increasingly being used in the production of flat
panel displays such as the monitors in portable computers. These processes are
also used extensively in the data storage industry in the production of CDs,
DVDs and computer hard disks. Thin film processes for data storage products are
used to create the optical and magnetic storage mediums and to deposit
protective wear surfaces on the finished products. In addition, industrial
manufacturers have begun to use thin film processes to apply coatings or films
to a wide range of products, including solar panels, architectural glass,
eyeglasses, tools, bar-code readers, lenses, automotive parts, front surface
mirrors, razor blades, decorative wrappings and food product packaging.
The primary applications for thin film manufacturing include deposition, in
which a layer of material is deposited on a surface, and etch, in which unneeded
portions of a layer are removed. Thin film production was initially accomplished
with liquid chemicals, known as wet chemistry processing, or thermal processes.
Over time, those processes became inadequate for many
36
<PAGE>
applications as the demand for products requiring thinner, more precise films
increased. Plasma-based process technology was developed to address the
limitations of wet chemistry and thermal technologies and to enable new
applications.
Today plasma-based processing is broadly used by thin film manufacturers.
Plasma is commonly created by applying enough electrical force to a gas at
reduced pressure to separate electrons from their parent atoms. The atom is
transformed to a highly energetic state. In plasma-based thin film processing,
the material to be altered, known as the substrate, and one or more specific
gases are inserted into a vacuum chamber. The plasma created from the gases is
then manipulated by electrical forces to alter the molecular characteristics of
the substrate surface. Plasma-based processes are inherently more controllable
and more accurate for many applications than other thin film production
processes because of the electrical characteristics of plasma. It is possible to
more precisely control the arrival rate, angle and energy of molecules at the
surface being modified using electrical forces. Plasma-based process technology
is expected to continue evolving to meet the worldwide growth in demand for
smaller, more versatile electronics, finer visual resolution products and denser
data storage mediums because of the precision provided by plasma's electrical
characteristics.
Below is an illustration of a plasma-based production process:
[Illustration titled "Plasma Process Illustration" depicting in diagram form the
flow of utility power to a power conversion and control system, with arrows
identifying the plasma, ions, electric field and substrate in the vacuum process
system.]
POWER CONVERSION AND CONTROL SYSTEM REQUIREMENTS
The effectiveness of plasma-based production processes depends in large part
on the quality of the electrical power used to ignite and manipulate the plasma.
A power conversion and control system used in a plasma-based process must
refine, modify and control the raw electrical power from a utility and convert
it into power that is uniform, predictable and precisely repeatable, which
permits the production of identical thin films of unvarying thickness on a mass
scale. Instability of electrical forces in the plasma may damage or destroy the
substrate under production, as well as the power conversion and control system.
A power conversion and control system must react within microseconds, or
millionths of a second, to changes in the level of the utility supplied power,
the electrical characteristics of the plasma and the process control settings in
order to avoid instabilities. The key requirements for plasma processing power
conversion and control systems are:
CONVERSION AND CONTROL OF HIGH POWER. Plasma-based production requires the
generation of extremely high levels of electrical power, usually in the range of
500 to 25,000 watts. In contrast, the power level required to operate most home
and office electrical equipment is generally far below 500 watts. A power
conversion and control system must include the ability to properly convert the
externally supplied power, and must also make accurate and fast measurements so
the system can be dynamically controlled. These measurements are difficult
because of the strong electrical fields
37
<PAGE>
and electrical noise that result from the high power concentration and the
nature of the plasma itself. Additionally, a power conversion and control system
must meet the small footprint requirements of a clean room environment while
minimizing the impact of the concentration of electrical radiation and heat
caused by tightly packed high power circuitry.
CONTROL OVER A WIDE RANGE OF POWER LEVELS. Power conversion and control
systems for plasma-based processes must operate over a wide range of power
levels in order to support a variety of plasma-based processes and applications.
For example, a power conversion and control system may need to operate at power
levels that vary by a factor of one thousand. In contrast, the power supplies
used in most home and office electrical equipment generally only need to operate
at power levels that vary by no more than a factor of two. One of the most
challenging requirements for plasma-based process power conversion and control
systems is the need for system instrumentation to make rapid measurements of
many electrical characteristics, including current, voltage, power and impedance
levels. The measurements must be made with precision, speed and accuracy at both
low and high levels of power.
CONTROL OF UTILITY INSTABILITIES. Incoming power from a utility supplier is
subject to brownouts, surges, voltage transients and general voltage variations.
A power conversion and control system must serve as a buffer from the
variability of raw utility power sources. Under normal operating conditions,
excluding brownouts, voltage from the utility source may vary by as much as 10%.
In comparison, even a 1% variance in the power supply to a plasma chamber may
cause significant defects in the film under production.
CONTROL OF ARCS. One of the most critical problems that arises from a
failure to control power in a plasma-based process is arcing, which is
characterized by intense localized electrical discharges which act like
lightning. Arcs often cause serious damage to both the substrate and the power
conversion and control equipment. A power conversion and control system must not
only be rugged enough to withstand the impact of abrupt electrical changes in
the plasma, but must also contain circuitry to extinguish arcs as they occur.
The power system must act to control the power levels within less than a
microsecond in order to effectively control arcs.
CONTROL OF SYSTEM INSTABILITIES. The current and voltage in the plasma may
fluctuate in some advanced plasma-based processes using exotic gases and
electrode arrangements, causing system instabilities. The power conversion and
control system must promptly detect the changing electrical characteristics of
the plasma and adjust the power supply to prevent instabilities. If these system
instabilities are not properly controlled, the thin films will lack uniformity,
which may seriously impair the yield and performance of the products being
manufactured.
CHARACTERISTICS OF THE POWER CONVERSION AND CONTROL SYSTEM MARKET
The plasma-based processing industry requires a wide range of power
frequencies for plasma-based thin film processes, from zero frequency direct
current (DC) to alternating current (AC) at frequencies of several gigahertz.
Frequency influences the type of physical and chemical activity that will occur
in the plasma. Power conversion and control systems change the frequency of raw
utility power as required for particular applications. For example, DC is
typically used in PVD processes, while high frequency AC such as RF are
typically used in etch and chemical vapor deposition (CVD) processes.
Power conversion and control systems for plasma-based processes often need
to be highly customized to meet application and customer requirements. This
customization involves developing unique design and component configurations to
permit specific variations in power, voltage, current and frequency levels,
modifications for interfacing with customer equipment, and adjustments to
controls and external packaging requirements. The long-term challenge facing
manufacturers of power conversion and control systems is to efficiently produce
these complex, highly customized
38
<PAGE>
systems in a cost effective manner. Moreover, power conversion and control
systems must be continuously adapted to address the requirements of the growing
number of applications using thin film production processes. The customers for
these types of systems are generally large, global OEMs in the semiconductor
capital equipment, flat panel display and data storage markets. They require a
global infrastructure from the manufacturers of power control and conversion
systems.
THE ADVANCED ENERGY SOLUTION
We have been and continue to be a pioneer in the development of power
conversion and control systems for advanced plasma-based production processes.
Key elements of the Advanced Energy solution include:
KNOWLEDGE OF PLASMA-BASED PROCESSES. Since our inception, we have built a
large base of expertise in the interaction between plasma-based processes and
power conversion and control systems. This knowledge allows us to develop
systems that optimize our customers' plasma-based processes and applications,
and to assist customers and potential customers in developing new process
applications. One of our core competencies is our ability to advise customers of
design advantages that may be achieved in plasma-based production processes for
specific applications and in the related power conversion and control systems.
We regularly place our scientists and engineers at customer sites to support
customers in their process development. We believe this application of knowledge
and resources is unique in the industry and represents a key competitive
strength.
UTILIZATION OF SWITCHMODE TECHNOLOGY. We believe that we developed the
first switchmode power conversion and control systems for plasma-based
processing. Switchmode power conversion is a digitally based solution to power
conversion that represents an improvement over previously employed alternatives.
Switchmode based systems are smaller, lighter and faster due to their use of
high speed switching. Switchmode technology also enables rapid control of the
high power required in plasma-based production processes and improves the
response time to random variables in the system. In addition, switchmode has the
benefit of significantly reducing the stored energy in a system, a major cause
of arcing. The MDX system, which we introduced in 1983, was the first switchmode
power supply available for PVD applications. It reduced the amount of stored
energy by a factor of 100 to 1,000 times compared to the technology then in use
and fostered the development and widespread use of PVD processes. We utilize
switchmode technology in the majority of our systems. We believe our expertise
with switchmode-based systems provides us with a competitive advantage.
MEASUREMENT AND CONTROL SOLUTIONS. We have designed our systems to
incorporate high speed, highly precise electronic measurement and system
controls. Multiple sensors continually measure current, voltage and other
electrical properties of the plasma. These measurements are converted into
signals, processed with digital signal processors, and the results then
converted to input signals for the power conversion and control systems. Our
power conversion and control systems thus dynamically control the flow of power
delivered, minimize stored energy, make precise system adjustments, compensate
for random variabilities and notify the user of out-of-range conditions. These
dynamic in-system controls enable our systems to prevent or eliminate arcs and
other system or utility related instabilities.
REUSABLE ENGINEERING AND MODULAR DESIGN. We provide customers with fast
time-to-market solutions by designing our components using:
- reusable engineering, in which the core technology of a component can be
incorporated in a similar component of a new system or a new product
platform; and
- modular design, in which the same component used in systems of one product
platform can be used in systems of another product platform.
39
<PAGE>
Reusable engineering and programmable software-based architectures enable us
to modify our basic platforms to create solutions that are tailored for specific
applications and customer requirements. We achieve efficiencies by designing our
products to have an open architecture, common features and standard components
and interfaces across a variety of processes. As a result, we believe we have
the capability to deliver a broad range of customized products with short lead
times and on a competitively priced basis.
STRATEGY
We have achieved a market leadership position by applying our large base of
expertise in the interaction between plasma-based processes and power conversion
and control systems to design highly precise, customized power conversion and
control systems that provide a wide range of power frequencies for plasma-based
thin film processes. Our strategy is to continue to build upon our leadership
positions in the semiconductor capital equipment, flat panel display and data
storage industries while exploring other emerging markets. We believe our five
key growth opportunities are:
EXPANDING LEADERSHIP IN OUR CORE MARKETS. We are the market share leader in
the semiconductor capital equipment, data storage and flat panel display
markets. We plan to continue to increase our penetration in these three markets
by introducing new products and solutions for our existing customers and
targeting new customers, but our primary focus will continue to be on the
semiconductor capital equipment market. For example, in the semiconductor
capital equipment market, we believe that significant opportunities exist for us
to introduce new products for processes or applications such as:
- etch applications using RF power;
- gas abatement;
- on-line measurement of power characteristics; and
- copper electroplating.
PROVIDING INTEGRATED SOLUTIONS FOR CUSTOMERS. We believe that customers
want solutions that improve process control and yield, and decrease their total
cost and time to market. We are developing integrated systems to provide more
complete solutions that meet our customers' plasma-based process requirements.
We are identifying currently fragmented applications of technology involving
significant power, measurement and control content, and developing integrated,
high performance, robust and cost-effective solutions for these applications.
TARGETING EMERGING APPLICATIONS. We are targeting emerging applications
that have the potential to benefit from more efficient and reliable use of power
in manufacturing processes for telecommunications networking equipment,
automotive parts, tools, architectural glass and other industrial products.
PURSUING ACQUISITIONS TO FUEL GROWTH. We actively seek complementary
technologies and companies as a means to expand our presence in existing and
emerging markets and to provide integrated solutions for customers and potential
customers. We have acquired and integrated four companies in the last two years.
We continually evaluate companies whose products and technologies could enhance
our system level capabilities.
CAPITALIZING ON WORLDWIDE INFRASTRUCTURE. Our principal customers are
large, global OEMs that require that their suppliers have a well-developed
worldwide infrastructure. We plan to continue to take advantage of and expand
our established global infrastructure, operating skills and comprehensive
product portfolio to better serve these customers and to attract new customers
with international support needs.
40
<PAGE>
PRODUCTS
Our switchmode power conversion and control systems have enabled our
customers to develop new plasma-based processing applications. In 1982, we
introduced our first low-frequency switchmode power conversion and control
system specifically designed for use in plasma processes. In 1983, we introduced
our first DC system designed for use in PVD applications. This DC system is a
compact, cost-effective power solution which greatly reduces stored energy, a
major limitation in PVD systems. In 1989, we introduced tuners used to match the
characteristics of the plasma with the RF generators. This theme was carried
further with the introduction of the Pinnacle series of DC systems in 1995. In
1990, we introduced the first switchmode RF power conversion and control systems
for use in semiconductor etch applications. This product line achieved
significant design wins because of its smaller size and its ability to provide
more precise control. In 1998, we developed the APEX series of RF systems which
use new technology to further reduce size and extend the frequency and power
range of our RF product line. We introduced a family of accessories for the DC
product line in 1993. These pulsed DC products provided major improvements in
arc prevention and suppression. We are currently extending the power range of
our systems to much higher power levels to enable us to supply products for
emerging industrial applications. The products in these product families range
in price from $1,500 to $150,000, with an average selling price of approximately
$9,200.
The acquisition of the assets of MIK Physics, Inc. provided the base
technology for our recently introduced Astral products, which are high-power DC
systems used in PVD equipment.
The acquisition of Tower Electronics in August 1997 expanded our product
line to include low-power DC power conversion systems for use in
telecommunications and other industrial applications. These power conversion
systems range in power from 50 watts to 600 watts and have an average selling
price of approximately $500.
The acquisition of RF Power Products in October 1998 expanded our product
line of RF generators and matching networks. Solid-state generators are
presently available for power requirements of up to 5,000 watts and are sold
primarily to capital equipment manufacturers in the semiconductor, flat panel
display, thin film, and analytical equipment markets. Tube-type generators are
available at power levels from 10,000 to 30,000 watts and are primarily sold to
capital equipment manufacturers in the thin film head manufacturing market. RF
matching networks are systems composed primarily of variable inductors and
capacitors with application-specific circuits that can be designed to a
customer's specific power requirements. Our RF generators and matching networks
have average selling prices similar to our DC products.
The acquisition of Fourth State Technology in September 1998 enhanced our
capability to design and manufacture RF power-related process control systems
used to monitor and analyze data in thin film processes. Fourth State's
technology also is enabling us to develop power conversion and control systems
that incorporate advanced measurement and control systems.
The acquisition of a majority interest in LITMAS in August 1999 is expected
to expand our product line to include plasma abatement systems and high-density
plasma sources. These products will be marketed to semiconductor capital
equipment manufacturers.
41
<PAGE>
The following chart sets forth our principal product lines and related basic
information:
<TABLE>
<S> <C> <C> <C> <C>
PRODUCT DESCRIPTION POWER/CURRENT MAJOR PROCESS
PLATFORM LEVEL APPLICATIONS
Direct MDX Power control and 500W-80kW PVD
Current conversion system - Metal sputtering
Products - Reactive sputtering
MDX-II Power control and 15kW-120kW PVD
conversion system - Metal sputtering
- Reactive sputtering
Pinnacle Power control and 6kW-120kW PVD
conversion system - Metal sputtering
- Reactive sputtering
Sparc-LE Arc management 1kW-60kW For use with MDX systems--permits
accessory precise control of reactive
sputtering of insulating films
E-Chuck Electrostatic less than 100W General wafer handling in
chuck power semiconductor PVD, CVD and etch
system applications
Radio HFV Power control and 3kW-8kW PVD
Frequency conversion system Etch
Products
RFX Power control and 600W General R&D
conversion system
RFG Power control and 600W-5.5kW Etch
conversion system CVD
RFXII Power control and 600W-5.5kW Etch
conversion system CVD
APEX Power control and 1000W-10kW Etch
conversion system CVD
AZX, VZX, Tuner 100W-5kW Impedance matching network
SwitchMatch
RF Power control and 500W-3kW Etch
conversion system CVD
Hercules Power control and 10kW-30kW PVD
conversion system
Atlas Power control and 1.5kW-5kW Etch
conversion system
Mercury Tuner 500W-10kW Impedance matching network
FTMS Tuner 2kW-5kW Impedance matching network
Low and Mid- PE and PE-II Low-frequency 1.25kW-30kW CVD
Frequency power control and PVD
Products conversion system - Reactive sputtering
Surface modification
PD Mid-frequency 1.25kW-8kW CVD
power control and PVD
conversion system - Reactive sputtering
Surface modification
LF Low-frequency 500W-1kW Etch
power control and PVD
conversion system
</TABLE>
42
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
PRODUCT DESCRIPTION POWER/CURRENT MAJOR PROCESS
PLATFORM LEVEL APPLICATIONS
High-Power Astral-20 Pulsed DC power 20kW PVD
Products system - Metal sputtering
- Reactive sputtering
Astral-120 Pulsed DC power 120kW PVD
system - Reactive sputtering
Crystal Multizone 180kW Semiconductor epitaxy
induction heating
power system
Other Gen-Cal RF power 50W-3kW Generator diagnostic tool
Products measurement
RF-EP RF probe 50W-5kW End-point detection system
Z-Scan RP probe 50W-5kW Impedance measurement tool
RF-MS RF metrology 5W-5kW Plasma diagnostic tool
system
ID Ion-beam 500W-5kW Ion-beam deposition
conversion and Ion implantation
control system Ion-beam etching/milling
E'Wave Bi-polar 400W-8kW Electroplating copper onto a wafer
electroplating
</TABLE>
MARKETS, APPLICATIONS AND CUSTOMERS
MARKETS
Most of our sales historically have been made to customers in the
semiconductor capital equipment industry. Sales to customers in this industry
represented 59% of our sales in 1997, 49% in 1998 and 59% in the first six
months of 1999. Our power conversion and control systems are also used in the
flat panel display, data storage and other industrial markets. Following is a
discussion of the major markets for our systems:
SEMICONDUCTOR CAPITAL EQUIPMENT MANUFACTURING MARKET. We sell our products
primarily to semiconductor capital equipment manufacturers for incorporation
into equipment used to make integrated circuits. Our products are currently used
in a variety of applications including deposition, etch, ion implantation and
megasonic cleaning. The precise control over plasma-based processes that use our
power conversion and control systems enables the production of integrated
circuits with reduced feature sizes and increased speed and performance. We
anticipate that the semiconductor capital equipment industry will continue to be
a significant part of our business for the foreseeable future.
FLAT PANEL DISPLAY MANUFACTURING EQUIPMENT MARKET. We also sell our systems
to manufacturers of flat panel displays and flat panel projection devices, which
have fabrication processes similar to those employed in manufacturing integrated
circuits. Flat panel technology produces bright, sharp, large, color-rich images
on flat screens for products ranging from hand-held computer games to laptop
computer monitors to large-screen televisions. There are three major types of
flat panel displays, liquid crystal displays, field emitter displays and gas
plasma displays. There are two types of flat panel projection devices, liquid
crystal projection and digital micro-mirror displays. We sell our products to
all five of these markets.
DATA STORAGE MANUFACTURING EQUIPMENT MARKETS. Our products are sold to data
storage equipment manufacturers and to data storage device manufacturers for use
in producing a variety
43
<PAGE>
of products, including CDs, computer hard disks, both media and thin film heads,
CD-ROMs and DVDs. These products use a PVD process to produce optical and
magnetic thin film layers, as well as a protective wear layer. In this market
the trend towards higher recording densities is driving the demand for
increasingly dense, thinner and more precise films. The use of equipment
incorporating magnetic media to store analog and digital data continues to
expand with the growth of the laptop, desktop, and workstation computer markets.
OTHER INDUSTRIAL MARKETS. We sell our products to OEMs and producers of end
products in a variety of industrial markets. Thin film optical coatings are used
in the manufacture of many industrial products including solar panels,
architectural glass, eyeglasses, lenses, bar-code readers and front surface
mirrors. Thin films of diamond-like coatings and other materials are currently
applied to products in plasma-based processes to strengthen and harden surfaces
on such diverse products as tools, razor blades, automotive parts and hip joint
replacements. Other thin film processes that use our products also enable a
variety of industrial packaging applications, such as decorative wrapping and
food packaging. The advanced thin film production processes allow precise
control of various optical and physical properties, including color,
transparency and electrical and thermal conductivity. The improved adhesion and
high film quality resulting from plasma-based processing make it the preferred
method of applying the thin films. Many of these thin film industrial
applications require power levels substantially greater than those used in our
other markets.
We sell low-wattage power supplies to OEMs in the telecommunications,
non-impact printing and laser markets through Tower Electronics. For example,
Tower Electronics provides products to the largest manufacturer of non-impact
printers used for printing date codes and lot information on beverage cans.
APPLICATIONS
Our products have been sold for use in connection with the following
processes and applications:
<TABLE>
<CAPTION>
SEMICONDUCTOR DATA STORAGE FLAT PANEL DISPLAY INDUSTRIAL/RESEARCH
- --------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
Chemical vapor CD-ROMs Active matrix LCDs Automobile coatings
deposition CDs Digital micro-mirror Chemical, physical
(CVD)(metal and DVDs Field emission and materials
dielectric) Hard disk carbon wear displays research
Etch coatings Large flat panel Circuit board etch-
High density plasma Hard disk magnetic displays back and de-smear
CVD media LCD projection Consumer product
Ion implantation Magneto-optic CDs Liquid crystal coatings
Magnet field controls Recordable CDs displays Diamond-like coatings
Megasonic cleaning Thin film heads Medical applications Food package
Photo-resist Plasma displays Glass coatings
stripping Non-impact printing
Physical vapor Optical coatings
deposition Photovoltaics
Plasma-enhanced CVD Superconductors
Telecommunications
</TABLE>
44
<PAGE>
CUSTOMERS
We have sold our systems worldwide to more than 100 OEMs and directly to
more than 500 end-users. Since inception, we have sold more than 150,000 power
conversion and control systems. Our principal customers include Applied
Materials, Balzers, Eaton, Lam Research, Novellus, Singulus and ULVAC.
Sales to our top ten customers accounted in the aggregate for 67% of our
total sales in 1997, 62% in 1998 and 67% in the first six months of 1999. We
expect that sales of our products to these customers will continue to account
for a high percentage of our sales in the foreseeable future. Our customers
include:
<TABLE>
<S> <C>
Alcatel Comptech Mattson Technologies
Applied Materials Motorola
Balzers Novellus
CVC Products Optical Coatings Laboratory
Eaton PlasmaTherm
First Light Technology Singulus
Fujitsu Sony
Hewlett-Packard Sputtered Films
IBM Texas Instruments
Intevac 3Com
Komag ULVAC
Lam Research Verteq
Materials Research Division of Tokyo Videojet International
Electron, Ltd.
</TABLE>
MARKETING, SALES AND SERVICE
We sell our systems primarily through direct sales personnel to customers in
the United States, Europe and Asia, and through distributors and sales
representatives in China, France, Israel, Italy, Singapore, Sweden and Taiwan.
Our domestic sales personnel are located in our headquarters in Fort Collins,
Colorado, and in regional sales offices in:
- Voorhees, New Jersey;
- Austin, Texas
- Milpitas, California; and
- Concord, Massachusetts.
We also have international offices in:
- Tokyo, Japan;
- Filderstadt, Germany;
- Bicester, United Kingdom; and
- Seoul, South Korea.
Each of the international offices has primary responsibility for sales in its
respective market.
We sell our Tower Electronics products through manufacturers'
representatives.
We believe that customer service and technical support are important
competitive factors and are essential to building and maintaining close,
long-term relationships with our customers.
45
<PAGE>
Sales outside the United States represented approximately 23% of our total
sales during 1997, 28% in 1998 and 28% in the first six months of 1999. We
expect sales outside the United States to continue to represent a significant
portion of future sales. For a discussion of risks involved in international
sales, see "Risk Factors--We might not be able to compete successfully in
international markets or to meet the service and support needs of our
international customers".
We offer warranty coverage for our systems for periods ranging from 12 to 24
months after shipment against defects in design, materials and workmanship.
MANUFACTURING
We conduct the majority of our manufacturing at our facilities in Fort
Collins, Colorado and Voorhees, New Jersey. We also conduct manufacturing for
one customer in Austin, Texas. Tower Electronics conducts manufacturing at its
facility in Fridley, Minnesota. We generally manufacture different systems at
each facility. Our manufacturing activities consist of the assembly and testing
of components and subassemblies which our customers then integrate into their
equipment. Once final testing of all electrical and electro-mechanical
subassemblies is completed, the final system is subjected to a series of
reliability enhancing operations prior to shipment to customers. We purchase a
wide range of electronic, mechanical and electrical components, some of which
are custom products designed to our specifications. We also outsource some of
our subassembly work.
INTELLECTUAL PROPERTY
We have a policy of seeking patents on inventions governing new products or
technologies as part of our ongoing research, development and manufacturing
activities. We currently hold eighteen United States patents and four foreign
patents covering various aspects of our systems. We also have 47 patent
applications pending in the United States, Europe and Japan. We believe the
duration of our patents generally exceeds the life cycles of the technologies
disclosed and claimed in the patents.
For a discussion of risks involved in our intellectual property, see "Risk
Factors--We are highly dependent on our intellectual property but may not be
able to protect it adequately".
COMPETITION
The markets we serve are highly competitive and characterized by ongoing
technological developments and changing customer requirements. Significant
competitive factors in our markets include product performance, price, quality
and reliability and level of customer service and support. We believe that we
currently compete effectively with respect to these factors, although we might
not be able to compete effectively in the future.
The markets in which we compete have seen an increase in global competition,
especially from Japanese- and European-based equipment vendors. We have several
foreign and domestic competitors for each of our lines of products. Some of our
competitors are larger and have greater resources than we do. Our ability to
continue to compete successfully in these markets depends on our ability to
introduce system enhancements and new systems on a timely basis. Our primary
competitors are ENI, a subsidiary of Astec (BSR) plc, Applied Science and
Technology (ASTeX), Huettinger, Shindingen, Kyosan, Comdel and Daihen. Our
competitors are expected to continue to improve the design and performance of
their systems and to introduce new systems with competitive performance
characteristics. We believe we will be required to maintain a high level of
investment in research and development and sales and marketing in order to
remain competitive.
46
<PAGE>
RESEARCH AND DEVELOPMENT
The market for power conversion and control systems and related accessories
is characterized by ongoing technological changes. We believe that continued and
timely development of new systems and enhancements to existing systems to
support OEM requirements is necessary for us to maintain a competitive position
in the markets we serve. Accordingly, we devote a significant portion of our
personnel and financial resources to research and development projects and seek
to maintain close relationships with our customers and other industry leaders to
remain responsive to their product requirements.
Research and development expenses were $19.3 million in 1997, $23.8 million
in 1998 and $12.6 million in the first six months of 1999. These expenses
represented 11% of our total sales in 1997, 19% in 1998 and 17% in the first six
months of 1999. We believe that continued research and development investment
and ongoing development of new products are essential to the expansion of our
markets. We expect to continue to make significant investments in our research
and development activities.
EMPLOYEES
At June 30, 1999, we had a total of 1,018 employees, of whom 950 were
full-time employees. There is no union representation of our employees, and we
have never experienced an employee work stoppage. We utilize temporary employees
as a means to provide additional staff while reviewing the performance of the
temporary employee. We consider our employee relations to be good.
47
<PAGE>
MANAGEMENT
The following table sets forth certain information with respect to our
directors and execuitve officers.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ------------------------------ --- -------------------------------------------------
<S> <C> <C>
Douglas S. Schatz............. 53 Chief Executive Officer and Chairman of the Board
Hollis L. Caswell............. 68 President, Chief Operating Officer and Director
Richard P. Beck............... 66 Senior Vice President, Chief Financial Officer
and Director
Richard Scholl................ 60 Senior Vice President and Chief Technology
Officer
Joseph Stach.................. 60 Senior Vice President
G. Brent Backman.............. 59 Director
Arthur A. Noeth............... 63 Director
Elwood Spedden................ 62 Director
Gerald M. Starek.............. 58 Director
Arthur W. Zafiropoulo......... 60 Director
</TABLE>
DOUGLAS S. SCHATZ is a co-founder and has been our Chief Executive Officer
and Chairman of the Board since our incorporation in 1981. From our
incorporation to July 1997, Mr. Schatz also served as our President. Mr. Schatz
co-founded Energy Research Associates, Inc., a designer of custom power
supplies, and served as its Vice President of Engineering from 1977 through
1980.
HOLLIS L. CASWELL joined our board of directors in February 1997 and served
on the Audit and Compensation Committees from that time until June 1997. Dr.
Caswell became our Chief Operating Officer in June 1997. He also became our
President in July 1999. From 1990 to 1994, Dr. Caswell was Chairman of the Board
and Chief Executive Officer of HYPRES, Inc., a manufacturer of superconducting
electronics. Prior to that time, Dr. Caswell served as Senior Vice President of
Unisys Corporation, an information technology company, and President of its
Computer Systems Group.
RICHARD P. BECK joined us in March 1992 as Vice President and Chief
Financial Officer and became a Senior Vice President in April 1998. He joined
our board of directors in September 1995. From 1987 to 1992, Mr. Beck served as
Executive Vice President and Chief Financial Officer of Cimage Corporation, a
computer software company. Mr. Beck is a director, and serves on the Audit and
Compensation Committees, of Applied Films Corporation, a publicly held
manufacturer of flat panel display equipment.
RICHARD A. SCHOLL joined us in 1988 as Vice President, Engineering. Mr.
Scholl became our Chief Technology Officer in September 1995. Prior to joining
us, Mr. Scholl was General Manager, Vacuum Products Division at Varian
Associates, Inc., a publicly held manufacturer of high-technology systems and
components.
JOSEPH STACH joined us in October 1998 as a Senior Vice President. Dr. Stach
had been the Chairman, President and Chief Executive Officer of RF Power
Products from 1992 until October 1998 when we acquired RF Power Products, which
we re-named Advanced Energy Voorhees, Inc. Dr. Stach continues to serve as
President of Advanced Energy Voorhees.
G. BRENT BACKMAN is a co-founder and has been on our board of directors
since our incorporation in 1981. Mr. Backman had been one of our Vice Presidents
from our incorporation until April 1998, when he became our Senior Vice
President, Special Projects. Mr. Backman served in this position until he
retired in January 1999. Prior to co-founding Advanced Energy,
48
<PAGE>
Mr. Backman was a Business Manager at Ion Tech, Inc., a manufacturer of ion beam
systems, sources, electronics and components.
ARTHUR A. NOETH joined our board of directors in July 1997 and has served on
the Audit and Compensation Committees since that time. From 1993 to 1998, Mr.
Noeth was President of the Implant Center, a provider of ion implant services to
the electronics industry. From April 1987 to September 1993, he was President of
A.N. Services, a business consulting service.
ELWOOD SPEDDEN joined our board of directors in August 1995 and has served
on the Audit and Compensation Committees since that time. Mr. Spedden was a
Senior Vice President of KLA Tencor, a manufacturer of automatic test equipment
used in the fabrication of semiconductors, from July 1996 to June 1997. From
1990 through March 1996, Mr. Spedden was with Credence Systems Corporation, a
manufacturer of automatic test equipment used in the fabrication of
semiconductors, in various senior management positions including President,
Chief Executive Officer and Vice-Chairman of the Board. Mr. Spedden is also a
director of Insight Objects, a privately held software company.
GERALD M. STAREK joined our board of directors in October 1998, following
our acquisition of RF Power Products and has served on the Audit Committee since
that time. Mr. Starek had been a non-employee director of RF Power Products
since February 1994. Mr. Starek was the founder of Silicon Valley Group, Inc., a
supplier of automated wafer processing equipment for the semiconductor industry.
He served as Silicon Valley Group's Chairman from September 1984 to September
1991 and as Vice Chairman from September 1991 to April 1993. Mr. Starek also is
a director of AML Communications Inc., a manufacturer of amplifiers for
telecommunications equipment.
ARTHUR W. ZAFIROPOULO joined our board of directors in October 1998,
following our acquisition of RF Power Products and has served on the
Compensation Committee since that time. Mr. Zafiropoulo had been a non-employee
director of RF Power Products since July 1992. Mr. Zafiropoulo is the founder of
Ultratech Stepper, Inc., a company that develops and manufactures
photolithography equipment for the semiconductor industry. Mr. Zafiropoulo has
been Chief Executive Officer and Chairman of the Board of Ultratech Stepper
since March 1993. Mr. Zafiropoulo also served as President of Ultratech Stepper
from May 1997 to April 1999 and from March 1993 to March 1996. Mr. Zafiropoulo
is a director of Semi/Sematech, an association of U.S.-owned suppliers of
equipment, materials and services to the semiconductor industry and
Semiconductor and Equipment Materials International (SEMI), an international
trade association.
49
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table provides information as to the common stock beneficially
owned and to be offered in the concurrent common stock offering by the following
persons:
- each person known to us to own more than 5% of the common stock
outstanding;
- each selling stockholder; and
- all of the current executive officers and directors as a group.
The table assumes that the underwriters' over-allotment option is not
exercised. If the underwriters' over-allotment option is exercised, each selling
stockholder will sell an additional 15% of the "Shares to be Sold" listed
opposite his name.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY OWNED
OWNED PRIOR TO THE
OFFERING (1) AFTER THE OFFERING (1)
------------------------ SHARES TO --------------------------
NAME NUMBER PERCENT BE SOLD NUMBER PERCENT(2)
- --------------------------------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Douglas S. Schatz (3).................. 11,939,500 44.11 875,000 11,064,500 39.42
G. Brent Backman (4)................... 2,116,500 7.82 875,000 1,241,500 4.42
Franklin Resources, Inc. (5)........... 1,756,100 6.49 -- 1,756,100 6.16
Richard P. Beck (6).................... 170,614 * 50,000 120,614 *
Hollis Caswell (7)..................... 271,858 * 50,000 221,858 *
Richard Scholl (8)..................... 398,840 1.47 100,000 298,840 1.05
Joseph Stach (9)....................... 348,508 1.27 50,000 298,508 1.05
All executive officers and directors as
a group (10 persons) (10)............ 15,364,584 55.84 2,000,000 13,364,584 46.87
</TABLE>
- ----------------
* Less than one percent (1.0%)
(1) The numbers in the table reflect the stockholders' beneficial ownership of
common stock as of September 16, 1999. A stockholder is considered to
beneficially own shares that:
- the stockholder actually holds;
- are held by persons related to the stockholder;
- are held by companies or trusts in which the stockholder has a significant
interest; and
- the stockholder has the right to acquire within 60 days, such as by
exercising a stock option.
(2) The percentage is based on 27,065,355 shares outstanding as of September
16, 1999 plus the 1,000,000 shares we are offering to sell in the concurrent
common stock offering.
(3) Mr. Schatz' business address is 1625 Sharp Point Drive, Fort Collins,
Colorado 80525.
(4) Mr. Backman has an option to purchase 7,500 shares. By November 15, 1999,
60 days following September 16, 1999, his option will be exercisable as to
2,500 of those shares. Consistent with footnote (1), the numbers in the
table include:
- 2,500 shares issuable upon the exercise of his option on or before
November 15, 1999; and
- 546,000 shares owned by Mr. Backman's wife, even though Mr. Backman
disclaims beneficial ownership of these shares.
Mr. Backman's address is 946 Lochland Court, Fort Collins, Colorado 80524.
50
<PAGE>
(5) This information is based on the Schedule 13G that Franklin Resources,
Inc., Charles B. Johnson, Rupert H. Johnson, Jr. and Franklin Advisers, Inc.
filed with the Securities and Exchange Commission on January 26, 1999. The
Schedule 13G indicates that these shares are held by one or more open- or
closed-end investment companies or other managed accounts that are advised
by investment advisory subsidiaries of Franklin Resources. Charles B.
Johnson and Rupert H. Johnson, Jr. are the principal shareholders of
Franklin Resources, and Franklin Advisers is a subsidiary of Franklin
Resources. The address for each of these persons is reported as 777 Mariners
Island Boulevard, San Mateo, California 94404.
(6) Mr. Beck has options to purchase 40,000 shares. By November 15, 1999, his
options will be exercisable as to 15,313 shares, which shares are included
in the numbers in the table.
(7) Dr. Caswell has options to purchase 318,438 shares. By November 15, 1999,
his options will be exercisable as to 257,500 shares, which shares are
included in the numbers in the table.
(8) Mr. Scholl has options to purchase 10,000 shares. None of these options
will be exercisable by November 15, 1999. Mr. Scholl's wife, who is one of
our business unit managers, has options to purchase 23,874, shares. By
November 15, 1999, her options will be exercisable as to 18,468 of those
shares. The numbers in the table include:
- the 18,468 shares issuable upon the exercise of Mrs. Scholl's options on
or before November 15, 1999; and
- 300 shares owned by Mrs. Scholl.
(9) Dr. Stach has options to purchase 241,430 shares of our common stock. RF
Power Products had granted options to Dr. Stach prior to the time that we
acquired RF Power Products. We assumed those options and also granted new
options to Dr. Stach. By November 15, 1999, his options will be exercisable
as to 110,180 shares, which shares are included in the numbers in the table.
(10) The numbers in the table include:
- an aggregate of 431,121 shares that the executive officers and directors
can purchase under their stock options on or before November 15, 1999;
- 546,000 shares owned by Mrs. Backman;
- 300 shares owned by Mrs. Scholl and 18,468 shares issuable upon the
exercise of options owned by Mrs. Scholl; and
- 6,292 shares owned by the wife of one of our other directors.
51
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 40,000,000 shares of common stock,
$0.001 par value, and 1,000,000 shares of preferred stock, $0.001 par value. As
of September 16, 1999, 27,065,355 shares of common stock were outstanding, held
by 901 holders of record, and no shares of preferred stock were outstanding. In
addition, 3,135,257 shares were reserved for issuance under our 1995 Stock
Option Plan, 102,461 shares were reserved for issuance under the RF Power stock
option plans we assumed in connection with our acquisition of RF Power in
October 1998, 94,500 shares were reserved for issuance under our 1995
Non-Employee Director Stock Option Plan and 171,550 shares were reserved for
issuance under our Employee Stock Purchase Plan. As of September 16, 1999,
options to purchase an aggregate of 1,993,961 shares of common stock were
outstanding under these plans.
COMMON STOCK
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Subject to
preferences that may be applicable to any outstanding shares of preferred stock
that may be issued, the holders of common stock are entitled to receive ratably
any dividends that may be declared from time to time by the board of directors
out of funds legally available for the payment of dividends. See "Dividend
Policy". The holders of our common stock are entitled to share ratably in all
assets remaining after payment of liabilities and liquidation preferences of any
outstanding shares of preferred stock in the event of our liquidation,
dissolution or winding up. Holders of common stock have no preemptive rights or
rights to convert their common stock into any other securities. There are no
redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and non-assessable.
PREFERRED STOCK
Our board of directors has the authority, without action by the
stockholders, to designate and issue up to 1,000,000 shares of preferred stock
in one or more series and to designate the dividend rate, voting rights and
other rights, preferences and restrictions of each series any or all of which
may be greater than the rights of the common stock. The actual effects of the
issuance of any shares of preferred stock upon the rights of holders of the
common stock might include:
- restricting dividends on the common stock;
- diluting the voting power of the common stock;
- impairing the liquidation rights of the common stock; and
- delaying or preventing a change in control.
We have no present plans to issue any shares of preferred stock.
DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
Our certificate of incorporation and bylaws include provisions which:
- allow the board of directors to issue preferred stock with rights senior
to those of the common stock without any further vote or action by the
stockholders;
- limit the right of the stockholders to call a special meeting of
stockholders; and
- allow us to impose various procedural and other requirements that could
make it more difficult for stockholders to effect certain corporate
actions. Such provisions could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from
attempting to acquire, control of Advanced Energy. Such provisions could
limit the price that certain investors might be willing to pay in the
future for shares of our common stock.
52
<PAGE>
We also are subject to provisions of the Delaware General Corporation Law,
including Section 203 which prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless upon consummation of such transaction
the interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced or unless the
business combination is, or the transaction in which such person became an
interested stockholder was, approved in a prescribed manner. A "business
combination" includes a merger, an asset sale and any other transaction
resulting in a financial benefit to the interested stockholder. An "interested
stockholder" is a person who, together with affiliates and associates, owns 15%
or more of the corporation's voting stock.
TRANSFER AGENT
The transfer agent and registrar for our common stock is Boston Equiserve.
DESCRIPTION OF CONVERTIBLE NOTES
The convertible notes will be issued under an indenture between Advanced
Energy and State Street Bank and Trust Company of California, N.A., as trustee,
a copy of which is filed as an exhibit to the registration statement of which
this prospectus forms a part. The following summaries of certain provisions of
the indenture do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, the detailed provisions of the
convertible notes and the indenture, including the definitions therein of
certain terms.
OVERVIEW
The convertible notes will be unsecured, direct, general, subordinated
obligations of Advanced Energy and will mature on , 2006. Payment in
full of the principal amount of the convertible notes will be due on
, 2006 at a price of 100% of the principal amount.
The convertible notes will bear interest at the annual rate shown on the
front cover of this prospectus from , 1999 or from the most recent
date to which interest has been paid or provided for, payable on and
of each year, commencing , 2000 until the principal is
paid or made available for payment, to the person in whose name the convertible
note is registered at the close of business on the preceding or
, as the case may be.
The convertible notes will be convertible into shares of our common stock
initially at the conversion rate stated on the front cover of this prospectus at
any time following the initial issue date of the convertible notes and before
the close of business on the business day immediately preceding ,
2006, unless previously redeemed or repurchased. The conversion rate will be
subject to adjustment upon the occurrence of certain events described under
"--Conversion Rights".
The convertible notes are redeemable at our option at any time on or after
, 2002, in whole or in part, at the redemption prices set forth
below under "--Optional Redemption by Advanced Energy", plus accrued and unpaid
interest to the date of redemption. The convertible notes also are subject to
repurchase by us at the option of the holders upon a change of control as
described below under "--Repurchase at Option of Holders Upon a Change in
Control".
The principal of, premium, if any, and interest on the convertible notes
will be payable, and the convertible notes may be surrendered for registration
of transfer, exchange and conversion, at the office or agency of the trustee in
Manhattan, New York. See "--Payment and Conversion". Payments, transfers,
exchanges and conversions relating to beneficial interests in convertible notes
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issued in book-entry form will be subject to the procedures applicable to global
notes described below.
We will initially appoint the trustee as paying agent, transfer agent,
registrar and conversion agent for the convertible notes. In these capacities,
the trustee will be responsible for:
- maintaining a record of the aggregate holdings of convertible notes
represented by the global note described below, and accepting convertible
notes for exchange and registration of transfer,
- ensuring that payments of principal, premium, if any, and interest
received by the trustee from us in respect of the convertible notes are
duly paid to The Depository Trust Company (DTC) or its nominees,
- transmitting to us any notices from holders of the convertible notes,
- accepting conversion notices and related documents and transmitting the
relevant items to us, and
- delivering certificates for common stock issued upon conversion of the
convertible notes.
We will cause each transfer agent to act as a registrar and will cause each
transfer agent to keep a register at their office in which, subject to any
reasonable regulations we may prescribe, we will provide for registration of
transfers of the convertible notes. We may vary or terminate the appointment of
any paying agent, transfer agent or conversion agent, or appoint additional or
other agents or approve any change in the office through which any agent acts.
However, we will at all times maintain a paying agent, a transfer agent and a
conversion agent in Manhattan, New York. We will cause notice of any
resignation, termination or appointment of the trustee or any paying agent,
transfer agent or conversion agent, and of any change in the office through
which any agent will act, to be provided to holders of the convertible notes.
No service charge will be made for any registration of transfer or exchange
of convertible notes, but we may require payment of a sum sufficient to cover
any applicable tax or other governmental charges.
FORM, DENOMINATION, TRANSFER, EXCHANGE AND BOOK-ENTRY PROCEDURES
The convertible notes will be issued only in fully registered form, without
interest coupons, in minimum denominations of $1,000 and integral multiples in
excess of $1,000. The convertible notes sold in this offering will be issued
only against payment in immediately available funds.
The convertible notes initially will be represented by one or more notes in
registered, global form, referred to as global notes. The global notes will be
deposited upon issuance with the trustee as custodian for DTC, in New York, New
York, and registered in the name of DTC or its nominee, for credit to an account
of a direct or indirect participant in DTC as described below.
Transfers of beneficial interests in the global notes will be subject to the
applicable rules and procedures of DTC and its direct or indirect participants,
which may change from time to time.
Except as set forth below, the global notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the global notes may not be exchanged for notes
in certificated form except in the limited circumstances described below under
"--Exchanges of Book-Entry Notes for Certificated Notes".
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EXCHANGES OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A beneficial interest in a global note may not be exchanged for a note in
certificated form unless:
- DTC
-- notifies us that it is unwilling or unable to continue as depositary for
the global note, or
-- has ceased to be a clearing agency registered under the Securities
Exchange Act,
-- and in either case we fail to appoint a successor depositary within 90
days after we are notified or become aware of either of the events
described above,
- at our option, we notify the trustee in writing that we elect to cause the
issuance of all of the convertible notes in certificated form, or
- there shall have occurred and be continuing an event of default or any
event which after notice or lapse of time or both would be an event of
default with respect to the convertible notes.
In all cases, certificated notes delivered in exchange for any global note
or beneficial interests in any global note will be registered in the names, and
issued in any approved denominations, requested by or on behalf of the
depositary, in accordance with its customary procedures.
CERTAIN BOOK-ENTRY PROCEDURES FOR GLOBAL NOTES
The descriptions of the operations and procedures of DTC that follow are
provided solely as a matter of convenience. These operations and procedures are
solely within the control of DTC and are subject to changes by DTC from time to
time. We take no responsibility for these operations and procedures and urge
investors to contact DTC or its participants directly to discuss these matters.
DTC has advised us as follows:
- DTC is a:
-- limited purpose trust company organized under the laws of the State of
New York,
-- member of the Federal Reserve System,
-- "clearing corporation" within the meaning of the Uniform Commercial
Code, and
-- "clearing agency" registered under the provisions of Section 17A of the
Securities Exchange Act.
- DTC was created to hold securities for its participants and to facilitate
the clearance and settlement of securities transactions between
participants using electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical transfer and
delivery of certificates.
- Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include certain other
organizations.
- Certain participants, or their representatives, together with other
entities, own DTC.
- Indirect access to the DTC system is available to other entities such as
banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a participant, either directly or
indirectly.
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DTC has advised us that its current practice, upon the issuance of a global
note, is to credit the respective principal amount of the individual beneficial
interests represented by a global note to the accounts with DTC of the
participants through which interests are to be held. Ownership of beneficial
interests in the global note will be shown on, and the transfer of that
ownership will be effected only through records maintained by DTC or its
nominees, with respect to interests of participants. With respect to the
interests of persons other than participants, ownership and transfers of
ownership interests will be shown on and effected through the records of
participants and indirect participants.
As long as DTC, or its nominee, is the registered holder of a global note,
DTC or such nominee, will be considered the sole owner and holder of the
convertible notes represented by such global note for all purposes under the
indenture and the convertible notes. Except in the limited circumstances
described above under "--Exchanges of Book-Entry Notes for Certificated Notes",
owners of beneficial interests in a global note:
- will not be entitled to have any portion of that global note registered in
their names,
- will not receive or be entitled to receive physical delivery of notes in
definitive form, and
- will not be considered the owners or holders of the global note, or any
convertible notes represented by the global note, under the indenture or
the convertible notes.
Accordingly, each person owning a beneficial interest in the global note must
rely on the procedures of DTC and, if such person is not a participant, those of
the participant through which that person owns its interest, in order to
exercise any rights of a holder under the indenture or the convertible note.
Investors may hold their interests in the global note directly through DTC
if they are participants in such system, or indirectly through organizations
that are participants in such system. All interests in a global note will be
subject to the procedures and requirements of DTC.
The laws of some states require that certain persons take physical delivery
of securities that they own in definitive form. The ability to transfer
beneficial interests in a global note to those persons may be limited because
global notes are not represented by physical certificates. Since DTC can act
only on behalf of its participants, which in turn act on behalf of indirect
participants and certain banks, the lack of a physical certificate may also
adversely affect the ability of a person owning a beneficial interest in a
global note to pledge their interest to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of those
interests.
Cash payment of the principal of, premium on, interest on, or the redemption
or repurchase of the global note will be made to DTC or its nominee, as the case
may be, as the registered owner of the global note by wire transfer of
immediately available funds on each relevant payment date. Neither we, the
trustee nor any of our or their respective agents will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in a global note including any delay
by DTC or any participant or indirect participant in identifying the beneficial
ownership interests. We and the trustee may conclusively rely on, and shall be
protected in relying on, instructions from DTC for all purposes.
We expect that DTC or its nominee will immediately credit participants'
accounts upon receipt of any cash payment of principal, premium, interest or the
redemption or repurchase price in respect of a global note representing any
convertible notes, in amounts proportionate to their respective beneficial
interests in the principal amount of the global note as shown on the records of
DTC or its nominee. We expect that adjustments will be made as necessary so that
such payments are made with respect of whole notes only, unless DTC has reason
to believe that it will not receive payment on the payment date. We also expect
that payments by participants to the owners of
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beneficial interests in the global note held through the participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in "street name".
These payments will be the responsibility of those participants.
Redemption notices will be sent to DTC or its nominee. If less than all the
convertible notes are being redeemed, DTC's practice is to determine by lot the
amount of the holdings of each participant in the issue to be redeemed.
Neither DTC nor its nominee will consent or vote with respect to the
convertible notes. Under its usual procedures, DTC mails an omnibus proxy to the
issuer as soon as possible after the record date. The omnibus proxy assigns
DTC's, or its nominee's, consenting or voting rights to those participants to
whose accounts the convertible notes are credited on the record date. Those
participants are identified in a listing attached to the omnibus proxy.
Interests in the global notes will trade in DTC's Same-Day Funds Settlement
System, and secondary market trading activity in those interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its participants. Transfers between participants in DTC
will be effected in accordance with DTC's procedures, and will be settled in
same-day funds.
DTC has advised us that it will take any action permitted to be taken by a
holder of convertible notes, including the presentation of convertible notes for
exchange as described below and the conversion of convertible notes:
- only at the direction of one or more participants to whose account with
DTC interests in the global notes are credited, and
- only in respect of the portion of the aggregate principal amount of the
convertible notes as to which the participant or participants has or have
given that direction.
However, if there is an event of default under the convertible notes, DTC
reserves the right to exchange the global notes for convertible notes in
certificated form, and to distribute the convertible notes to its participants.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of beneficial ownership interests in the global note among
participants, it is under no obligation to perform or continue to perform those
procedures, and those procedures may be discontinued at any time.
None of us, the trustee nor any of our or their respective agents will have
any responsibility for the performance by DTC, its participants or indirect
participants of their respective obligations under the rules and procedures
governing its operations, including maintaining, supervising or reviewing the
records relating to, or payments made on account of, beneficial ownership
interests in global notes.
PAYMENT AND CONVERSION
The principal of the convertible notes will be payable in U.S. dollars,
against surrender of the convertible notes at the office or agency of the
trustee in Manhattan, New York, by dollar check or by transfer to a dollar
account maintained by the holder with a bank in New York City. Payment of
interest on a convertible note may be made by dollar check mailed to the person
entitled to the interest at their address as it appears in our security
register, or, upon written application by the holder to the security registrar
not later than the relevant record date, by transfer to a dollar account
maintained by the holder with a bank in the United States. Transfers to dollar
accounts will be
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made only to holders of an aggregate principal amount of convertible notes in
excess of $2,000,000.
Payments in respect of the principal of, and premium, if any, and interest
on any global note registered in the name of DTC or its nominee will be payable
by the trustee to DTC or its nominee in its capacity as the registered holder
under the indenture. Under the terms of the indenture, we and the trustee will
treat the persons in whose names the convertible notes, including the global
notes, are registered as the owners of those notes for the purpose of receiving
payments and for any and all other purposes. Consequently, neither we, the
trustee nor any agent of ours or the trustee's has or will have any
responsibility or liability for:
- any aspect of DTC's records or any participant's or indirect participant's
records relating to, or payments made on account of, beneficial ownership
interests in the global notes,
- maintaining, supervising or reviewing any of DTC's records or any
participant's or indirect participant's records relating to the beneficial
ownership interests in the global notes, or
- any other matter relating to the actions and practices of DTC or any of
its participants or indirect participants.
Any payment on a convertible note due on any day that is not a business day
may be made on the next succeeding business day with the same force and effect
as if made on the due date, and no interest will accrue on the payment for the
period from and after that date.
Convertible notes may be surrendered for conversion at the office or agency
of the trustee in Manhattan, New York. In the case of global notes, conversion
will be effected by DTC upon notice from the holder of a beneficial interest in
a global note in accordance with its rules and procedures. Convertible notes
surrendered for conversion must be accompanied by a conversion notice and any
payments in respect of interest, as applicable, as described below under
"--Conversion Rights".
All money for the payment of principal of, and premium, if any, or interest
on any convertible note that is deposited with the trustee or any paying agent
or then held by us in trust which remains unclaimed at the end of two years
after the payment has become due and payable may be repaid to us. Thereafter,
the holder of such convertible note will look only to us for payment and no
interest will accrue on the amount that we hold.
CONVERSION RIGHTS
The holder of any outstanding convertible note will have the option to
convert all or any portion of the principal amount of a convertible note that is
an integral multiple of $1,000 into shares of our common stock at any time
following the original issue date of the convertible notes and prior to the
close of business on the business day immediately preceding the maturity date.
The conversion rate will be equal to the number of shares per $1,000 principal
amount of convertible notes shown on the front cover of this prospectus. The
conversion rate is subject to adjustment in certain events as described below.
The right to convert a convertible note called for redemption or delivered for
repurchase will terminate at the close of business on the business day
immediately preceding the redemption date or repurchase date for such note,
unless we default in making the payment due upon redemption or repurchase.
The right of conversion attaching to any convertible note may be exercised
by the holder by delivering the convertible note at the office or agency of the
trustee in Manhattan, New York, accompanied by a duly signed and completed
notice of conversion, a copy of which may be obtained from the trustee. A holder
of a convertible note will cease to have any further rights as a holder of a
convertible note at the time of conversion. The conversion date will be the date
on
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which the convertible note and the duly signed and completed notice of
conversion are so delivered. As promptly as practicable on or after the
conversion date, we will issue and deliver to the trustee a certificate or
certificates for the number of full shares of our common stock issuable upon
conversion, together with payment in lieu of any fraction of a share. This
certificate will be sent by the trustee to the conversion agent for delivery to
the holder. Shares of our common stock issuable upon conversion of the
convertible notes, in accordance with the provisions of the indenture, will be
fully paid and nonassessable and will also rank equally with the other shares of
our common stock outstanding from time to time.
Holders that surrender convertible notes for conversion on a date that is
not an interest payment date under the indenture are not entitled to receive any
interest for the period from the next preceding interest payment date to the
date of conversion, except as described below. However, holders of convertible
notes on a regular record date, including convertible notes surrendered for
conversion after the regular record date, will receive the interest payable on
the convertible notes on the next succeeding interest payment date. Accordingly,
any convertible note surrendered for conversion during the period from the close
of business on a regular record date to the opening of business on the next
succeeding interest payment date must be accompanied by payment of an amount
equal to the interest payable on that interest payment date on the principal
amount of convertible notes being surrendered for conversion. However, no
payment will be required upon the conversion of any convertible note, or portion
thereof, that has been called for redemption or that is eligible to be delivered
for repurchase if, as a result, the right to convert such convertible note would
terminate during the period between the regular record date and the close of
business on the next succeeding interest payment date.
No other payment or adjustment for interest will be made upon conversion.
Holders of our common stock issued upon conversion will not be entitled to
receive any dividends payable to holders of our common stock as of any record
date before the close of business on the conversion date. No fractional shares
will be issued upon conversion but, instead, we will pay an appropriate amount
in cash based on the market price of our common stock at the close of business
on the date of conversion.
A holder delivering a convertible note for conversion will not be required
to pay any taxes or duties in respect of the issue or delivery of our common
stock on conversion. However, we will not be required to pay any tax or duty
that may be payable in respect of any transfer involved in the issue or delivery
of our common stock in a name other than that of the holder of the convertible
note. Certificates representing shares of our common stock will not be issued or
delivered unless the person requesting such issue has paid to us the amount of
any tax or duty or has established to our satisfaction that any tax or duty has
been paid.
The conversion rate may be adjusted in certain events, including:
- dividends, and other distributions payable in common stock on shares of
our capital stock,
- the issuance of rights, options or warrants to all holders of our common
stock entitling them to subscribe for or purchase shares of our common
stock at less than the then current market price of our common stock.
However if those rights, options or warrants are only exercisable upon the
occurrence of certain triggering events, then the conversion rate will not
be adjusted until those triggering events occur,
- subdivisions, combinations and reclassifications of our common stock,
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- distributions to all holders of our common stock of evidences of our debt,
shares of our capital stock, cash or other assets, including securities,
but excluding:
-- those dividends, rights, options, warrants and distributions referred to
in the first two bullet points above,
-- dividends and distributions paid exclusively in cash, and
-- distributions upon mergers or consolidations to which the next bullet
point applies,
- distributions consisting exclusively of cash, excluding any cash portion
of distributions referred to in the bullet point immediately above or cash
distributed upon a merger or consolidation to which the next bullet point
applies, to all holders of our common stock in an aggregate amount that,
combined together with
-- other all-cash distributions made within the preceding 12 months from
the date of the payment in respect of which no adjustment has been made,
and
-- any cash and the fair market value of other consideration payable in
respect of any tender offer by us or any of our subsidiaries for common
stock concluded within the preceding 12 months in respect of which no
adjustment has been made,
exceeds 10% of our market capitalization, being the product of the current
market price per share of our common stock on the record date for that
distribution and the number of shares of our common stock then outstanding,
- the successful completion of a tender offer made by us or any of our
subsidiaries for our common stock which involves an aggregate
consideration that, together with
-- any cash and other consideration payable in a tender offer by us or any
of our subsidiaries for common stock expiring within the 12 months
preceding the expiration of that tender offer in respect of which no
adjustment has been made, and
-- the aggregate amount of any all-cash distributions referred to in the
immediately preceding bullet point to all holders of our common stock
within the 12 months preceding the expiration of that tender offer in
respect of which no adjustments have been made,
exceeds 10% of our market capitalization on the expiration of such tender
offer, and
- payment in respect of a tender offer or exchange offer by a person other
than us or any of our subsidiaries in which, as the closing of the offer,
our board of directors is not recommending rejection of the offer.
The adjustment referred to in the immediately preceding bullet point will
only be made if:
- the tender offer or exchange offer is for an amount which increases that
person's ownership of our common stock to more than 25% of the total
shares of our common stock outstanding, and
- the cash and value of any other consideration included in that payment per
share of our common stock exceeds the then current market price per share
of our common stock on the business day next succeeding the last date on
which tenders or exchanges may be made under such tender or exchange.
The adjustment referred to in the immediately preceding bullet point will
not be made, however, if, as of the closing of the offer, the related offering
documents disclose a plan or an intention to cause us to engage in any
transaction described below in "--Mergers and Sales of Assets by Advanced
Energy". We reserve the right to increase the conversion rate as we consider to
be advisable in order that any event treated for United States federal income
tax purposes as a
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dividend of stock or stock rights will not be taxable to the recipients. No
adjustment of the conversion rate will be required until the cumulative
adjustments amount to 1.0% or more of the conversion rate. We will compute any
adjustments to the conversion rate under the indenture and will give notice to
the holders of any adjustments.
In the case of any consolidation or merger of Advanced Energy with or into
another person or any merger of another person into Advanced Energy or upon the
sale or other transfer of all or substantially all of our assets, each
convertible note then outstanding will become convertible only into the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares of
common stock into which the convertible note was convertible immediately prior
thereto, assuming such holder of common stock failed to exercise any rights of
election and that such convertible note was then convertible. The preceding
sentence will not apply to a merger which does not result in any
reclassification, conversion, exchange or cancellation of the common stock.
We may from time to time increase the conversion rate for any period of at
least 20 days if our board of directors determines that an increase would be in
our best interests, which determination will be conclusive. We will give at
least 15 days' prior notice of the increase to the holders of the convertible
notes. No increase shall be taken into account for purposes of determining
whether the closing price of the common stock exceeds the conversion price by
105% in connection with an event which otherwise would be a change in control.
If we make a distribution of property to our stockholders that would be
taxable to them as a dividend for United States federal income tax purposes,
and, under the anti-dilution provisions of the indenture, the number of shares
into which convertible notes are convertible is increased, that increase will be
deemed for United States federal income tax purposes to be the payment of a
taxable dividend to holders of convertible notes. This might occur with
distributions of our evidences of indebtedness or assets, but generally would
not occur with stock dividends on common stock or rights to subscribe for common
stock. See "Material United States Federal Income Tax Consequences--United
States Holders".
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the
convertible notes, including amounts payable on any redemption or repurchase,
will be subordinated in right of payment to the extent set forth in the
indenture to the prior full and final cash payment of all of our "senior debt".
Our "senior debt" includes the principal of, and premium, if any, and interest,
including all interest accruing subsequent to the commencement of any bankruptcy
or similar proceeding, whether or not a claim for post-petition interest is
allowable in any such proceeding, on, and all fees and other amounts payable in
connection with, the following, whether absolute or contingent, secured or
unsecured, due or to become due, outstanding on the date of the indenture or
thereafter created, incurred or assumed:
- our indebtedness evidenced by a credit or loan agreement, note, bond,
debenture or other written obligation,
- all of our obligations for money borrowed,
- all of our obligations evidenced by a note or similar instrument given in
connection with the acquisition of any businesses, properties or assets of
any kind,
- our obligations
-- as lessee under leases required to be capitalized on our balance sheet
under generally accepted accounting principles and
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-- as lessee under other leases for facilities, capital equipment or
related assets, whether or not capitalized, entered into or leased for
financing purposes,
- all of our obligations under interest rate and currency swaps, caps,
floors, collars, hedge agreements, forward contracts or similar agreements
or arrangements,
- all of our obligations with respect to letters of credit, bankers'
acceptances and similar facilities, including reimbursement obligations
with respect to the foregoing,
- all of our obligations issued or assumed as the deferred purchase price of
property or services, but excluding trade accounts payable and accrued
liabilities,
- all obligations referred to in the bullet points above of another person
or entity, the payment of which we have assumed or guaranteed, or for
which we are responsible or liable, directly or indirectly, jointly or
severally, as obligor, guarantor or otherwise, or which is secured by a
lien on our property, and
- renewals, extensions, modifications, replacements, restatements and
refundings of, or any indebtedness or obligation issued in exchange for,
any indebtedness or obligation described in the bullet points above.
However, "senior debt" does not include
- the convertible notes or any indebtedness or obligation if the terms of
that indebtedness or obligation, or the terms of the instrument under
which it is issued expressly provide that it is not superior in right of
payment to the convertible notes or
- any particular indebtedness or obligation that we owe to any of our direct
or indirect subsidiaries.
We may not make any payment on account of principal of or premium, if any,
or interest on, or redemption or repurchase of, the convertible notes if:
- we default in the payment of principal, premium, if any, or interest,
including a default under any repurchase or redemption obligation, or
other amounts with respect to senior debt, and that default continues
beyond the applicable grace period or
- we default and that default continues with respect to "designated senior
debt" that permits the holders of designated senior debt to accelerate its
maturity. Designated senior debt includes our obligations under
-- our credit facility, as it may be amended, modified or supplemented,
including all extensions, replacements, refinancings and substitutions,
and
-- any particular senior debt that is specifically designated as
"designated senior debt" under the indenture, although limitations and
conditions may be placed on that senior debt to exercise the rights of
"designated senior debt".
and, in either case, the trustee receives a notice of our default from a
holder of designated senior debt or other person entitled to give notice of our
default under the indenture.
We may resume payments on the convertible notes:
- in the case of a payment default, upon the date the default is cured,
waived or ceases to exist, and
- in the case of a nonpayment default, the earlier of the date the
nonpayment default is cured or waived or 179 days after the date on which
the trustee receives the notice of default, if the maturity of the
designated senior debt has not been accelerated.
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No new payment blockage period may be commenced unless and until:
- 365 days have elapsed since the effectiveness of the immediately prior
notice received by the trustee, and
- all scheduled payments of principal, premium, if any, and interest on the
convertible notes that have come due have been paid in full in cash.
No nonpayment default that existed or was continuing on the date of delivery
of any notice to the trustee may be the basis for any subsequent notice of
default to be delivered to the trustee.
In addition, all principal, premium, if any, interest and other amounts due
on all senior debt must be paid in full in cash before the holders of the
convertible notes are entitled to receive any payment otherwise due upon any
acceleration of the principal on the convertible notes as a result of:
- an event of default of the convertible notes, or
- payment or distribution of our assets to creditors upon any dissolution,
winding up, liquidation or reorganization, whether voluntary or
involuntary, marshaling of assets, assignment for the benefit of
creditors, or in bankruptcy, insolvency, receivership or other similar
proceedings.
In the event of insolvency, creditors who are holders of senior debt may
recover more, ratably, than the holders of the convertible notes because of this
subordination. The subordination may result in a reduction or elimination of
payments to the holders of the notes. In addition, the convertible notes will be
structurally subordinated to all of our subsidiaries' indebtedness and other
liabilities, including trade payables and lease obligations. Any of our rights
to receive any assets of our subsidiaries upon their liquidation or
reorganization, and the resulting right of the holders of the convertible notes
to participate in those assets, will be effectively subordinated to the claims
of that subsidiary's creditors, including trade creditors, except to the extent
that we are recognized as a creditor of that subsidiary. If we are recognized as
a creditor of that subsidiary, our claims would still be subordinate to any
security interest in the assets of that subsidiary and any senior debt of that
subsidiary. As of August 31, 1999, our senior debt and indebtedness of our
subsidiaries totalled $1.4 million.
The indenture does not limit our ability or the ability of any of our
subsidiaries to incur indebtedness, including senior debt.
OPTIONAL REDEMPTION BY ADVANCED ENERGY
On and after , 2002, the convertible notes may be redeemed, in
whole or in part, at our option, at the redemption prices specified below, upon
not less than 30 nor more than 60 days' prior notice. The redemption price,
expressed as a percentage of principal amount, is as follows for the 12-month
periods beginning on of the following years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- -------------------------------------------------------------------------------- ------------
<S> <C>
2002............................................................................
2003............................................................................
2004............................................................................
2005............................................................................
</TABLE>
and 100% of the principal amount beginning on , 2006, in each case
together with accrued and unpaid interest to the redemption date.
No sinking fund is provided for the convertible notes.
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REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE IN CONTROL
If a change in control occurs, each holder of convertible notes will have
the option to require us to repurchase all of its convertible notes not
previously called for redemption, or any portion of the principal amount of the
convertible notes that is equal to $1,000 or an integral multiple of $1,000.
This option may be exercised 45 days after the date on which we notify the
holders of any change in control. The repurchase price would be equal to 100% of
the principal amount of the notes to be repurchased, together with interest
accrued to that date.
A change in control will be deemed to have occurred if at any time after the
original issuance of the convertible notes any of the following occurs:
- the acquisition by any person of beneficial ownership of shares of our
capital stock entitling that person to exercise 50% or more of the total
voting power of all shares of our capital stock entitled to vote generally
in elections of directors. Beneficial ownership may be acquired directly
or indirectly, through a purchase, merger or other acquisition transaction
or series of transactions, other than any acquisition by us, any of our
subsidiaries or any or our employee benefit plans; or
- our consolidation or merger with or into any other entity, any merger of
another entity into us, or any conveyance, transfer, sale, lease or other
disposition of all or substantially all of our properties and assets to
another person or entity, other than:
-- any transaction (x) that does not result in any reclassification,
conversion, exchange or cancellation of our outstanding shares of
capital stock and (y) pursuant to which holders of our common stock
immediately prior to such transaction are entitled to exercise, directly
or indirectly, 50% or more of the total voting power of all shares of
our capital stock entitled to vote generally in the election of
directors of the continuing or surviving entity immediately after such
transaction, and
-- any merger which is effected solely to change our jurisdiction of
incorporation and results in a reclassification, conversion or exchange
of outstanding shares of common stock solely into shares of common stock
of the surviving entity.
"Beneficial owner" will be determined in accordance with Rule 13d-3 promulgated
by the SEC under the Securities Exchange Act. "Person" includes any syndicate or
group which would be deemed to be a "person" under Section 13(d)(3) of the
Securities Exchange Act.
However, a change in control will not be deemed to have occurred if the
closing sales price per share of our common stock for any five trading days
within the period of 10 consecutive trading days ending immediately after the
later of the change in control or the public announcement of the change in
control, in a change of control under the first bullet point above, or the
period of 10 consecutive trading days ending immediately before the change in
control, in a change in control under the second bullet point above, equals or
exceeds 105% of the conversion price in effect on each such trading day. The
conversion price is equal to $1,000 divided by the conversion rate.
We may, at our option, in lieu of paying that amount in cash, pay it in
common stock valued at 95% of the average of the closing sales prices of the
common stock for the five trading days immediately preceding and including the
third trading day prior to the date of repurchase. However, payment may not be
made in common stock unless we satisfy certain conditions prior to the
repurchase date as provided in the indenture.
Within 30 days after the occurrence of a change in control, we are obligated
to give to all holders of the convertible notes notice of the change in control
and of the resulting repurchase right. We must also deliver a copy of this
notice to the trustee. To exercise the repurchase right, a holder of convertible
notes must deliver irrevocable written notice to the trustee of the holder's
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exercise of this right, together with the respective convertible notes, on or
before the 30th day after the date of this notice.
Rule 13e-4 under the Securities Exchange Act requires that we disseminate
certain information to security holders in the event of an issuer tender offer
and this requirement may apply in the event that the repurchase option becomes
available to holders of the convertible notes. We will comply with this rule to
the extent applicable at that time.
We may purchase convertible notes at any time in the open market or by
tender at any price or by private agreement, to the extent permitted by
applicable law. Any note so purchased by us may, to the extent permitted by
applicable law, be reissued or resold or may, at our option, be surrendered to
the trustee for cancellation. Any convertible notes surrendered may not be
reissued or resold and will be canceled promptly.
The foregoing provisions would not necessarily protect holders of the
convertible notes in the event of highly leveraged or other transactions that
may adversely affect holders.
Our ability to repurchase convertible notes on a change in control is
limited. A change in control could cause an event of default under, or be
prohibited or limited by, senior debt that we acquire in the future. As a
result, any repurchase of the convertible notes would, absent a waiver, be
prohibited under the subordination provisions of the indenture until the senior
debt is paid in full. Further, we cannot guarantee that we would be able to pay
the repurchase price for all the convertible notes that might be delivered by
holders of convertible notes seeking to exercise the repurchase right. Our
ability to repurchase notes with cash may also be limited by our subsidiaries'
future borrowing arrangements due to dividend restrictions. Our failure to
repurchase the convertible notes when required following a change in control
would result in an event of default under the indenture whether or not such
repurchase is permitted by the subordination provisions of the indenture. Any
such default may, in turn, cause a default under our senior debt. See "--
Subordination".
MERGERS AND SALES OF ASSETS BY ADVANCED ENERGY
We may not consolidate with or merge into any other entity or transfer or
sell substantially all our properties and assets to any person or entity, and we
may not permit any entity to consolidate with or merge into us or transfer or
sell all or substantially all their properties and assets to us, unless:
- the entity formed by such consolidation or merger or the person or entity
to which our properties and assets are transferred or sold, is a
corporation, limited liability company, partnership or trust organized and
existing under the laws of the United States, any State thereof or the
District of Columbia and, if other than us, shall expressly assume the due
and punctual payment of the principal of and, premium, if any, and
interest on the convertible notes and the performance of our other
covenants under the indenture;
- immediately after such transaction, no event of default, and no event
which, after notice or lapse of time or both, would become an event of
default, shall have occurred and be continuing; and
- an officer's certificate and legal opinion relating to the conditions
described in the previous two bullet points above is delivered to the
trustee.
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EVENTS OF DEFAULT
The following will be events of default under the indenture:
- failure to pay principal of or premium, if any, on any convertible note
when due, whether or not payment is prohibited by the subordination
provisions of the indenture;
- failure to pay any interest on any convertible note when due, continuing
for 30 days, whether or not payment is prohibited by the subordination
provisions of the indenture;
- failure to perform any other of our covenants in the indenture, continuing
for 60 days after written notice to us by the trustee or the holders of at
least 25% in aggregate principal amount of outstanding convertible notes;
- failure to pay when due the principal of, or acceleration of, any debt for
money borrowed by us or any subsidiary in excess of $10 million if such
debt is not discharged, or such acceleration is not annulled, within 30
days after written notice to us by the trustee or the holders of at least
25% in aggregate principal amount of outstanding convertible notes;
- certain events of bankruptcy, insolvency or reorganization; and
- failure to provide a notice to note holders in the event of a change in
control, whether or not notice is prohibited by the subordination
provisions of the indenture.
The trustee is not required to exercise any of its rights or powers at the
request or direction of any of the holders, unless those holders have offered to
the trustee reasonable indemnity, except when an event of default occurs and
continues. If the trustee is adequately indemnified, the holders of a majority
in aggregate principal amount of the outstanding convertible notes will 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.
If an event of default, other than an event of default specified in the
second to the last bullet point above, occurs and is continuing, either the
trustee or the holders of at least 25% in principal amount of the outstanding
convertible notes may accelerate the maturity of all notes. However, after such
acceleration, but before a judgment or decree based on acceleration, the holders
of a majority of the outstanding convertible notes may, under certain
circumstances, rescind and annul the acceleration if all events of default,
other than the nonpayment of principal of the convertible notes which have
become due solely by such declaration of acceleration, have been cured or waived
as provided in the indenture. If an event of default specified in the last
bullet point above occurs and is continuing, then the principal of, and accrued
interest on, all of the convertible notes will automatically become immediately
due and payable. For information on waivers of defaults, see "-- Modification,
Waiver and Meetings" below.
No holder of any convertible note may institute any proceeding with respect
to the indenture or for any remedy thereunder, unless:
- that holder has previously given to the trustee written notice of a
continuing event of default;
- the holders of at least 25% of the outstanding notes have made written
request, and offered reasonable indemnity, to the trustee to institute
that proceeding as trustee;
- the trustee shall not have received from the holders of a majority of the
outstanding notes a direction inconsistent with such request; and
- and the trustee shall have failed to institute such proceeding within 60
days of the written request.
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However, these limitations do not apply to a suit for the enforcement of payment
of the principal of or premium, if any, or interest on a convertible note on or
after the respective due dates or of the right to convert that convertible note.
We must furnish to the trustee an annual statement concerning performance
(or default of performance) of certain of our obligations under the indenture.
MODIFICATION, WAIVER AND MEETINGS
Certain limited modifications of the indenture may be made without the
consent of the holders of the convertible notes. Other modifications and
amendments of the indenture may be made, and certain past defaults by us may be
waived, either
- with the written consent of the holders of not less than a majority in
aggregate principal amount of the convertible notes at the time
outstanding or
- by a resolution adopted at a meeting of holders of the convertible notes
at which a quorum is present, by the holders of at least 66 2/3% in
aggregate principal amount of the convertible notes represented at such
meeting.
However, no modification or amendment may be made without the consent of
every holder of outstanding notes affected that would:
- change the stated maturity of the principal of, premium, if any, on, or
any installment of interest on, any convertible note,
- reduce the principal amount of, or the premium, if any, or interest on,
any convertible note,
- reduce the amount payable on a redemption or mandatory repurchase,
- modify the provisions with respect to the repurchase right of the holders
in a manner adverse to the holders,
- change the city of any place of payment or the currency of payment of
principal of, premium, if any, or interest on, any convertible note,
including any payment of the repurchase price in respect of that
convertible note,
- impair the right to institute suit for the enforcement of any payment on
or with respect to any convertible note,
- modify our obligation to maintain an office or agency in New York City,
- adversely affect the right of holders to convert or to require us to
repurchase any convertible note other than as provided in the indenture,
except as otherwise allowed or contemplated by provisions concerning
consolidation, merger, conveyance, transfer, sale or lease of all or
substantially all of our property and assets,
- modify the subordination provisions in a manner adverse to the holders of
the convertible notes,
- reduce the percentage of outstanding convertible notes necessary to modify
or amend the indenture,
- reduce the percentage of outstanding convertible notes necessary to waive
compliance with certain provisions of the indenture or to waive certain
defaults, or
- reduce the percentage of outstanding convertible notes required for the
adoption of a resolution or the quorum required at any meeting of holders
of convertible notes at which a resolution is adopted.
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The quorum at any meeting called to adopt a resolution will be persons
holding or representing a majority in aggregate principal amount of the
convertible notes at the time outstanding and, at any reconvened meeting
adjourned for lack of a quorum, 25% of such aggregate principal amount. In
certain circumstances, therefore, we can make certain changes with the consent
of holders of approximately 17% of the aggregate principal amount of convertible
notes.
The holders of a majority in aggregate principal amount of the outstanding
convertible notes may waive our compliance with certain restrictive provisions
of the indenture by written consent or by the adoption of a resolution at a
meeting. The holders of a majority in aggregate principal amount of the
outstanding convertible notes also may waive any past default under the
indenture, except a default in the payment of principal, premium, if any, or
interest, by written consent.
The indenture contains provisions for convening meetings of holders of
convertible notes.
NOTICES
Notice to holders of the convertible notes will be given by mail to their
addresses as they appear in the security register. These notices will be deemed
to have been given on the date they are mailed.
Notice of a redemption of convertible notes will be given at least once not
less than 30 nor more than 60 days prior to the redemption date. A redemption
notice will be irrevocable and will specify the redemption date.
REPLACEMENT OF CONVERTIBLE NOTES
We will replace convertible notes that become mutilated, destroyed, stolen
or lost at the expense of the holder upon delivery to the trustee of the
mutilated convertible notes or evidence of the loss, theft or destruction of the
convertible notes satisfactory to us and the trustee. In the case of a lost,
stolen or destroyed convertible note, indemnity satisfactory to the trustee and
us may be required at the expense of the holder of such convertible note before
a replacement convertible note will be issued.
PAYMENT OF STAMP AND OTHER TAXES
We will pay all stamp and similar duties, if any, imposed by the United
States or any of its political subdivisions or taxing authorities with respect
to the issuance of the convertible notes. We will not be required to pay any
other tax, assessment or governmental charge imposed by any government or any
political subdivision or taxing authority.
GOVERNING LAW
The indenture and the convertible notes will be governed by and construed in
accordance with the laws of the State of New York.
THE TRUSTEE
The trustee for the holders of the convertible notes issued under the
indenture will be State Street Bank and Trust Company of California, N.A. If an
event of default occurs and is not cured, the trustee will be required to use
the degree of care of a prudent person in the conduct of its own affairs in the
exercise of its powers. Subject to such provisions, the trustee will be under no
obligation to exercise any of its rights or powers under the indenture at the
request of any of the holders of convertible notes, unless they shall have
offered to the trustee reasonable security or indemnity.
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Except with respect to a trustee appointed by the owners of the convertible
notes, the trustee will be deemed to have resigned and its successor will be
deemed to have been appointed as trustee in accordance with the indenture if:
- no event of default under the indenture or event that, after notice or
lapse of time, or both, would become an event of default under the
indenture exists, and
- we delivered to the trustee a resolution of our board appointing a
successor trustee and that successor trustee has accepted that appointment
in accordance with the terms of the indenture.
If the trustee becomes our creditor, the indenture and the Trust Indenture
Act limit the rights of the trustee to obtain payments 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 Trust Indenture Act, the trustee may
engage in other transactions with us or any of our affiliates or any affiliate
of Advanced Energy. However, if the trustee acquires any conflicting interest as
described in the Trust Indenture Act, it must eliminate that conflict or resign.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of material United States federal income tax
consequences relating to the purchase, ownership and disposition of the
convertible notes and of the common stock issuable on conversion of the
convertible notes. For purposes of this summary (1) the Internal Revenue Code of
1986, as amended, is referred to as "the Code" and (2) the Internal Revenue
Service is referred to as "the IRS". The following is not a complete discussion
of all of the possible tax consequences of the occurrence of the contingent
events described below. You should contact your own tax advisor with respect to
the application of the United States federal income and estate tax laws to your
particular situation as well as any tax consequences arising under the laws of
any state, local or foreign taxing jurisdiction or under any applicable tax
treaty.
This summary:
- does not purport to be a complete analysis of all the potential tax
considerations that may be relevant to holders in light of their
particular circumstances;
- is based on laws, rulings and decisions now in effect, all of which are
subject to change, possibly on a retroactive basis;
- deals only with holders that will hold convertible notes and common stock
as "capital assets" within the meaning of Section 1221 of the Code;
- does not address tax considerations applicable to investors that may be
subject to special tax rules, such as banks (other than as set forth
below), tax-exempt organizations, insurance companies, dealers in
securities or currencies, or persons that will hold convertible notes as a
position in a hedging transaction, "straddle", or "conversion transaction"
for tax purposes, or persons deemed to sell convertible notes or common
stock under the constructive sale provisions of the Code; and
- discusses only the tax considerations applicable to the initial purchasers
of the convertible notes who purchase the convertible 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
convertible notes.
Advanced Energy has not sought any ruling from the IRS with respect to the
statements made and the conclusions reached in the following summary, and we
cannot assure you that the IRS will agree with the statements and conclusions
expressed in this summary. 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 CONVERTIBLE 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.
As used herein, the term "United States Holder" means a beneficial owner of
a convertible note or common stock that is, for United States federal income tax
purposes,
- a citizen or resident, as defined in Section 7701 (b) of the Code, of the
United States;
- a corporation, partnership or other entity created or organized under the
laws of the United States or political subdivision thereof;
- an estate the income of which is subject to federal income taxation
regardless of its source; or
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- in general, a trust subject to the primary supervision of a United States
court and the control of one or more United States persons, or a trust in
existence on August 20, 1996, which has made an election to continue to be
taxed as a United States person.
A "Foreign Holder" is a beneficial owner of convertible notes or common stock
that is not a United States Holder.
UNITED STATES HOLDERS
PAYMENT OF INTEREST
Interest on a convertible note generally will be includable in the income of
a United States Holder as ordinary income at the time such interest is received
or accrued, in accordance with such United States Holder's regular method of
accounting for United States federal income tax purposes.
SALE, EXCHANGE OR REDEMPTION OF A CONVERTIBLE NOTE
Upon the sale, exchange or redemption of a convertible note, a United States
Holder generally will recognize capital gain or loss equal to the difference
between (1) 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 not previously included in income,
which is taxable as ordinary income, and (2) such United States Holder's
adjusted tax basis in the convertible note. A United States Holder's adjusted
tax basis in a convertible note generally will equal the cost of the convertible
note to such United States Holder, less any principal payments received by such
United States Holder.
For certain non-corporate taxpayers, including individuals, the rate of
taxation of capital gains will depend upon:
(1) the taxpayer's holding period in the capital asset, with
preferential rates available for capital assets held for more than 12
months, and
(2) the taxpayer's marginal tax rate for ordinary income.
The deductibility of capital losses is subject to limitations.
United States Holders are urged to consult their own tax advisors with
respect to the rate of taxation of capital gains and the ability to deduct
capital losses.
CONVERSION OF THE CONVERTIBLE NOTES
A United States Holder generally will not recognize any income, gain or loss
upon conversion of a convertible note into common stock except to the extent the
common stock is considered attributable to accrued interest not previously
included in income, which is taxable as ordinary income, or with respect to cash
received in lieu of a fractional share of common stock. A United States Holder's
tax basis in the common stock received on conversion of a convertible note will
be the same as such United States Holder's adjusted tax basis in the convertible
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 convertible note
converted. However, a United States Holder's tax basis in shares of common stock
considered attributable to accrued interest as described above generally will
equal the amount of such accrued interest included in income, and the holding
period for such shares shall begin on the date of conversion.
Cash received in lieu of a fractional share of common stock upon conversion
will be treated as a payment in exchange for the fractional share of common
stock. Accordingly, the receipt of cash in lieu of a fractional share of common
stock generally will result in capital gain or loss, measured by
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the difference between the cash received for the fractional share and the United
States Holder's adjusted tax basis in the fractional share.
DIVIDENDS, ADJUSTMENTS TO CONVERSION RATE
Any dividends paid on the common stock generally will be includable in the
income of a United States Holder as ordinary income to the extent of our current
or accumulated earnings and profits. Dividends paid to holders that are United
States corporations may qualify for the dividends received deduction. To the
extent, if any, that a United States Holder receives distributions on shares of
common stock that would otherwise constitute dividends for United States federal
income tax purposes but that exceed our current and accumulated earnings and
profits, such distributions will be treated first as non-taxable return of
capital reducing the holder's basis in the shares of common stock. Any such
distributions in excess of the holder's basis in the shares of common stock
generally will be treated as capital gain realized on the disposition of common
stock.
If at any time
- we distribute cash or property to our stockholders or purchases common
stock and such distribution or purchase would be taxable for such
stockholders as a dividend for United States federal Income tax
purposes--for example, distributions of evidences of our indebtedness
or our assets, but generally not stock dividends or rights to subscribe
for common stock--and, pursuant to the antidilution provisions of the
convertible notes indenture, the conversion rate of the convertible
notes is increased; or
- the conversion rate of the convertible notes is increased at our
discretion,
the increase in the conversion rate may be deemed to be the payment of a taxable
dividend to holders of convertible notes under Section 305 of the Code. Holders
of convertible notes could therefore have taxable income as a result of an event
pursuant to which they received no cash or property, and such income would
increase their tax bases in their convertible notes.
SALE OR EXCHANGE OF COMMON STOCK
Upon the sale or exchange of common stock, a United States Holder generally
will recognize capital gain or loss equal to the difference between (1) the
amount of cash and the fair market value of any property received upon the sale
or exchange and (2) such United States Holder's adjusted tax basis in the common
stock.
For certain non-corporate taxpayers (including individuals), the rate of
taxation of capital gains will depend upon (1) the taxpayer's holding period in
the capital asset (with preferential rates available for capital assets held for
more than 12 months) and (2) the taxpayer's marginal tax rate for ordinary
income. The deductibility of capital losses is subject to limitations.
FOREIGN HOLDERS
STATED INTEREST
Payments of principal and interest on a convertible note to a Foreign Holder
will not be subject to United States federal withholding tax provided that
- the holder does not actually or constructively own 10% or more of the
total combined voting power of all classes of our stock entitled to
vote;
- the holder is not a controlled foreign corporation that is related to
Advanced Energy through stock ownership;
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- either (A) the beneficial owner of the convertible note, under
penalties of perjury, provides us or our agent with its name and
address and certifies that it is not a United States person or (B) a
securities clearing organization, bank, or other financial institution
that holds customers' securities in the ordinary course of its trade or
business (a "financial institution") certifies to us or our agent,
under penalties of perjury, that such a statement has been received
from the beneficial owner by it or another financial institution and
furnishes to us or our agent a copy thereof; and
- the holder is not a bank receiving interest described in Section
881(c)(3)(A) of the Code (i.e., interest on an extension of credit made
pursuant to a loan entered into in the ordinary course of its trade or
business).
For purposes of this summary, we refer to this exemption from United States
federal withholding tax as the "Portfolio Interest Exemption". Under United
States Treasury regulations, which generally are effective for payments made
after December 31, 2000, subject to certain transition rules, (i) the
certification statements of the beneficial owner described above must be
provided on a validly executed Form W-8 (or an acceptable variation thereof),
and (ii) the certification described in clause (B) of the third bullet point
above may also be provided by a qualified intermediary on behalf of one or more
beneficial owners or other intermediaries, provided that such intermediary has
entered into a withholding agreement with the IRS and certain other conditions
are met.
The gross amount of payments to a Foreign Holder of interest that does not
qualify for the Portfolio Interest Exemption and that is not effectively
connected with a United States trade or business will be subject to United
States federal withholding tax at the rate of 30%, unless a United States income
tax treaty applies to reduce or eliminate withholding.
A Foreign Holder will generally be subject to tax in the same manner as a
United States corporation or resident with respect to payments of interest if
such payments are effectively connected with the conduct of trade or business in
the Unites States. Such effectively connected income received by a Foreign
Holder which is a corporation may in certain circumstances be subject to an
additional "branch profits tax" at a 30% rate or, if applicable, a lower treaty
rate.
Foreign Holders should consult their own tax advisors regarding applicable
income tax treaties, which may provide different rules.
To claim the benefit of a tax treaty or to claim exemption from withholding
because the income is effectively connected with a U.S. trade or business, the
Foreign Holder must provide a properly executed Form 1001 or 4224, as
applicable, or an acceptable alternative to those forms, prior to the payment of
interest. These forms must be periodically updated. United States Treasury
regulations, which generally are effective for payments made after December 31,
2000, subject to certain transition rules, require Foreign Holders or, under
certain circumstances, a qualified intermediary to file a validly executed
withholding certificate on Form W-8 (or an acceptable variation thereof) with
the Company's withholding agent to obtain the benefit of an applicable tax
treaty providing for a lower rate of withholding tax. Such certificate must
contain, among other information, the name and address of the Foreign Holder,
and may have to be provided prior to the date on which a current certificate
would otherwise have expired.
SALE, EXCHANGE OR REDEMPTION OF A CONVERTIBLE NOTE
A Foreign Holder generally will not be subject to United States federal
income tax or withholding tax on gain realized on the sale or exchange of
convertible notes unless (1) the holder is an individual who was present in the
United States for 183 days or more during the taxable year, such gain is U.S.
source and certain other conditions are met, or (2) the gain is effectively
connected with the conduct of a trade or business of the holder in the United
States and, if a treaty
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applies, such gain is attributable to an office or other fixed place of business
maintained in the United States by such holder.
In general, no United States federal income tax or withholding tax will be
imposed upon the conversion of a convertible note into common stock by a Foreign
Holder except (1) to the extent the common stock is considered attributable to
accrued interest not previously included in income, which may be taxable under
the rules set forth in "Foreign Holders--Stated Interest", (2) with respect to
the receipt of cash in lieu of fractional shares by Foreign Holders upon
conversion of a convertible note, in each case where either the conditions
described in (1) or (2) above, under "Foreign Holders--Sale, Exchange or
Redemption of a Convertible Note" is satisfied or (3) if we are deemed to be a
United States real property holding corporation as discussed below.
SALE OR EXCHANGE OF COMMON STOCK
A Foreign Holder will generally not be subject to United States federal
income tax or withholding tax on the sale or exchange of common stock unless
either of the conditions described in (1) or (2) above under "Foreign
Holders--Sale, Exchange or Redemption of a Convertible Note" is satisfied or we
are or have been deemed to be a United States real property holding corporation
for United States federal income tax purposes within the meaning of Section 897
of the Code (a "USRPHC") at any time within the shorter of the five year period
preceding such disposition or such Foreign Holder's holding period. We do not
believe we are, nor do we believe we have ever been a USRPHC. Further, we do not
expect in the foreseeable future to become a USRPHC. If we are, have been or
become a USRPHC, so long as the common stock continues to be regularly traded on
an established securities market within the meaning of Section 897(c)(3) of the
Code, only a Foreign Holder who holds or held, at any time during the shorter of
the five-year period preceding the date of disposition or the holder's holding
period, more than 5% of the common stock will be subject to U.S. federal income
tax on the disposition of the common stock.
DIVIDENDS
Distributions by us with respect to the common stock that are treated as
dividends paid or deemed paid, as described above under "United States
Holders--Dividends, Adjustments to Conversion Rate", to a Foreign Holder,
excluding dividends that are effectively connected with the conduct of a trade
or business in the United States by such Holder which are taxable as described
below, will be subject to United States federal withholding tax at a 30% rate,
or lower rate provided under any applicable income tax treaty. Except to the
extent that an applicable tax treaty otherwise provides, a Foreign Holder will
be subject to tax in the same manner as a United States Holder on dividends paid
or deemed paid that are effectively connected with the conduct of a trade or
business in the United States by the Foreign Holder. If such Foreign Holder is a
foreign corporation, it may also be subject to a United States "branch profits
tax" on such effectively connected income at a 30% rate or such lower rate as
may be specified by an applicable income tax treaty. Even though such
effectively connected dividends are subject to income tax, and may be subject to
the branch profits tax, they will not be subject to U.S. withholding tax if the
Foreign Holder delivers IRS Form 4224 (or appropriate successor form) to the
payer.
Under current United States Treasury regulations, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country, unless the payer has knowledge to the contrary, for purposes of the
withholding discussed above, and under the current interpretation of United
States Treasury regulations, for purposes of determining the applicability of a
tax treaty rate. However, under United States Treasury regulations which
generally are effective for payments made after December 31, 2000, subject to
certain transition rules, a Foreign Holder of common stock who wishes to claim
the benefit of an applicable treaty rate would be required to satisfy applicable
certification requirements.
74
<PAGE>
DEATH OF A FOREIGN HOLDER
A convertible note held by an individual who is not a citizen or resident of
the United States at the time of death will not be includable in the decedent's
gross estate for United States estate tax purposes, provided that such holder or
beneficial owner did not at the time of death actually or constructively own 10%
or more of the combined voting power of all classes of our stock entitled to
vote, and provided that, at the time of death, payments with respect to the
convertible note would not have been effectively connected with the conduct by
such Foreign Holder of a trade or business within the United States.
Common stock actually or beneficially held, other than through a foreign
corporation, by an individual who is not a citizen or resident of the United
States at the time of his or her death, or previously transferred subject to
certain retained rights or powers, will be subject to United States federal
estate tax unless otherwise provided by an applicable estate tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on a convertible note, dividends on
common stock, and payments of the proceeds of the sale of a convertible note or
common stock to certain non-corporate United States Holders, and a 31% backup
withholding tax may apply to such payment if the United States Holder (1) fails
to furnish or certify his correct taxpayer identification number and other
required information to the payer in the manner required, (2) is notified by the
IRS that he has failed to report payments of interest or dividends properly or
(3) 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 or dividend payments.
Information reporting requirements will apply to payments of interest or
dividends to Foreign Holders where such interest or dividends are (i) subject to
withholding, (ii) with respect to payments of dividends or interest made before
January 1, 2001, exempt from United States withholding tax pursuant to a tax
treaty, (iii) exempt from United States tax under the Portfolio Interest
Exemption, or (iv) with respect to payments of dividends or interest made after
December 31, 2000, effectively connected with the conduct of a United States
trade or business. Copies of these information returns may also be made
available under the provisions of a specific treaty or agreement to the tax
authorities of the country in which the Foreign Holder resides.
United States Treasury regulations provide that backup withholding and
information reporting will not, however, apply to our payments of principal on
the convertible notes to a Foreign Holder if the Foreign Holder certifies as to
its status as a Foreign Holder under penalties of perjury or otherwise
establishes an exemption (provided that neither we nor our paying agent has
actual knowledge that the holder is a United States person or that the
conditions of any other exemption are not, in fact, satisfied.)
The payment of the proceeds from the disposition of convertible notes or
common stock to or through the United States office of any broker, United States
or foreign, will be subject to information reporting and possible backup
withholding unless the owner certifies as to its non-United States status under
penalty of perjury or otherwise establishes an exemption, provided that the
broker does not have actual knowledge that the holder is a United States person
or that the conditions of any other exemption are not, in fact, satisfied. The
payment of the proceeds from the disposition of a convertible note or common
stock to or through a non-United States office of a
75
<PAGE>
non-United States broker that is not a United States related person will not be
subject to information reporting or backup withholding. For this purpose, a
"United States related person" is
- a "controlled foreign corporation" for United States federal income tax
purposes; or
- a foreign person 50% or more of whose gross income from all sources for
the three-year period ending with the close of its taxable year
preceding the payment, or for such part of the period that the broker
has been in existence, is derived from activities that are effectively
connected with the conduct of a United States trade or business.
In the case of the payment of proceeds from the disposition of convertible
notes or common stock to or through a non-United States office of a broker that
is either a United States person or a United States related person, United
States Treasury regulations require information reporting on the payment unless
the broker has appropriate documentary evidence in its files that the owner is a
Foreign Holder, the broker has no knowledge to the contrary, and certain other
conditions are met.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
United States Treasury regulations, which generally are effective for
payments made after December 31, 2000, subject to certain transition rules, will
generally expand the circumstances under which information reporting and backup
withholding may apply. Holders of convertible notes should consult their tax
advisors regarding the application of the information and reporting and backup
withholding rules, including such Treasury regulations.
The preceding discussion of certain United States federal income tax
consequences is for general information only and is not tax advice. Accordingly,
holders of the convertible notes should consult their own tax advisers as to
particular tax consequences to them or purchasing, holding and disposing of the
convertible notes and the common stock, including the applicability and effect
of any state, local or foreign tax laws, and of any proposed changes in
applicable law.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-3 under the Securities Act of 1933, relating to the
convertible notes being offered. This prospectus is filed as part of the
registration statement. Other parts of the registration statement are omitted
from this prospectus. Statements made in this prospectus concerning the contents
of any contract or other document are not necessarily complete. For a more
complete description of the matter involved, you should read the entire contract
or other document, which has been filed as an exhibit to the registration
statement.
We are required by the Securities Exchange Act of 1934 to file reports,
proxy statements and other information with the SEC. You may read and copy such
reports, proxy statements and other information at the SEC's public reference
facilities:
<TABLE>
<S> <C> <C>
WASHINGTON, D.C. NEW YORK CHICAGO
Judiciary Plaza Seven World Trade Center Citicorp Center
450 Fifth Street, N.W. Suite 1300 500 West Madison Street
Room 1024 New York, NY 10048 Suite 1400
Washington, D.C. 20549 Chicago, IL 60661-2511
</TABLE>
You may call 1-800-SEC-0330 for further information about the public
reference facilities. For a fee, the SEC will send copies of any of our filings
to you. In addition, our filed reports, proxy statements and other information
are contained in the Internet web site maintained by the SEC. The address is
http://www.sec.gov.
76
<PAGE>
Our common stock is quoted on the Nasdaq National Market under the symbol
"AEIS", and our SEC filings can also be read at the following Nasdaq address:
Nasdaq Operations
1735 K Street, N.W.
Washington, D.C. 20006
The SEC allows us to incorporate by reference the information we file with
it, which means we can disclose important information to you by referring you to
those documents. The information incorporated by reference is considered to be a
part of this prospectus, and later information that we file with the SEC will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until
we sell all of the securities:
- our annual report on Form 10-K for the year ended December 31, 1998;
- our quarterly reports on Form 10-Q for the quarters ended March 31, 1999
and June 30, 1999; and
- the description of our common stock contained in our Registration
Statement on Form 8-A filed October 12, 1995, and any amendment or report
filed for the purpose of updating such description.
You may request a copy of these filings, at no cost, by writing us at the
following address:
Advanced Energy Industries, Inc.
1625 Sharp Point Drive
Fort Collins, Colorado 80525
Attention: Richard P. Beck
or by calling Investor Relations at (970) 221-4670.
LEGAL MATTERS
The validity of the convertible notes and the common stock issuable on
conversion of the convertible notes will be passed upon for us by Thelen Reid &
Priest LLP, San Francisco, California, who have acted as counsel to Advanced
Energy in connection with this offering. Certain legal matters will be passed
upon for the underwriters by Kaye, Scholer, Fierman, Hays & Handler, LLP, Los
Angeles, California.
EXPERTS
The financial statements and schedules included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as set forth in their reports. In those
reports, that firm states that with respect to a certain subsidiary its opinion
is based on the reports of other independent public accountants. The financial
statements and supporting schedules referred to above have been included herein
in reliance upon the authority of those firms as experts in giving said reports.
77
<PAGE>
UNDERWRITING
Advanced Energy and the underwriters for the offering named below have
entered into an underwriting agreement with respect to the convertible notes
being offered. Subject to certain conditions, each underwriter has severally
agreed to purchase the principal amount of convertible notes indicated in the
following table.
<TABLE>
<CAPTION>
Principal Amount
Underwriters of Notes
- ---------------------------------------------------------- ----------------
<S> <C>
Goldman, Sachs & Co.......................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Banc of America Securities LLC............................
----------------
Total................................................... $ 100,000,000
----------------
----------------
</TABLE>
If the underwriters sell more convertible notes than the total principal
amount set forth in the table above, the underwriters have an option to buy up
to an additional $15,000,000 principal amount of convertible notes from Advanced
Energy to cover such sales. They may exercise that option for 30 days. If any
convertible notes are purchased pursuant to this option, the underwriters will
severally purchase convertible notes in approximately the same proportion as set
forth in the table above.
The following table shows the per convertible note and total underwriting
discounts and commissions to be paid to the underwriters by Advanced Energy.
Such amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional convertible notes.
<TABLE>
<CAPTION>
Paid by Advanced Energy
-------------------------
Full
No Exercise Exercise
----------- ------------
<S> <C> <C>
Per Convertible Note............................ % %
----------- ------------
Total......................................... $ $
</TABLE>
Convertible notes sold by the underwriters to the public will initially be
offered at the initial public offering price set forth on the cover of this
prospectus. Any convertible notes sold by the underwriters to securities dealers
may be sold at a discount from the initial public offering price of up to % of
the principal amount of the convertible notes. Any such securities dealers may
resell any convertible notes purchased from the underwriters to certain other
brokers or dealers at a discount from the initial public offering price of up to
% of the principal amount of the convertible notes. If all the convertible
notes are not sold at the initial public offering price to public, the
underwriters may change the offering price and the other selling terms.
Advanced Energy has agreed with the underwriters not to dispose of or hedge
any of its common stock or securities convertible into or exchangeable for
shares of common stock during the period from the date of this prospectus
continuing through the date 90 days after the date of this prospectus, except
with the prior written consent of Goldman, Sachs & Co. This agreement does not
apply to any existing employee benefit plans.
The convertible notes are a new issue of securities with no established
trading market. Advanced Energy has been advised by the underwriters that the
underwriters intend to make a market in the convertible notes but are not
obligated to do so and may discontinue market making
U-1
<PAGE>
at any time without notice. No assurance can be given as to the liquidity of the
trading market for the convertible notes.
In connection with this offering, the underwriters may purchase and sell
convertible notes and common stock in the open market. These transactions may
include short sales, stabilizing transactions and purchases to cover positions
created by short sales. Short sales involve the sale by the underwriters of a
greater principal amount of convertible notes than they are required to purchase
in this offering. Stabilizing transactions consist of certain bids or purchases
made for the purpose of preventing or retarding a decline in the market price of
the convertible notes or the common stock while the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the underwriters have repurchased convertible
notes sold by or for the account of such underwriter in stabilizing or short
covering transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the convertible notes and the common stock. As a
result, the price of the convertible notes or the common stock may be higher
than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by the underwriters at any
time. These transactions may be effected in the over-the-counter market or
otherwise.
Advanced Energy estimates that its share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $ .
Advanced Energy has agreed to indemnify the several underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
Concurrently with this convertible notes offering and by means of a separate
prospectus Advanced Energy and six of Advanced Energy's stockholders are
offering a total of 3,000,000 shares of common stock, plus an additional 450,000
shares (to be offered by the selling stockholders) to cover over-allotments by
the underwriters for that offering. The completion of this convertible notes
offering and the common stock offering are not dependent on one another. The
underwriters for the common stock offering, of which Goldman, Sachs & Co. is
one, will receive customary compensation in connection with the common stock
offering.
U-2
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the convertible notes offered hereby, but only under circumstances and
in jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 12
Cautionary Note on Forward-Looking Statements............................. 21
Use of Proceeds........................................................... 22
Price Range of Common Stock............................................... 22
Dividend Policy........................................................... 22
Capitalization............................................................ 23
Selected Consolidated Financial Data...................................... 24
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 26
Business.................................................................. 36
Management................................................................ 48
Principal and Selling Stockholders........................................ 50
Description of Capital Stock.............................................. 52
Description of Convertible Notes.......................................... 53
Material United States Federal Income Tax Consequences.................... 70
Where You Can Find More Information....................................... 76
Legal Matters............................................................. 77
Experts................................................................... 77
Underwriting.............................................................. U-1
</TABLE>
$100,000,000
ADVANCED ENERGY
INDUSTRIES, INC.
% Convertible Subordinated Notes due 2006
---------------------
[LOGO]
---------------------
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
BANC OF AMERICA
SECURITIES LLC
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<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 Advanced Energy and the
selling stockholders in connection with the sale of the convertible notes and
common stock being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fee and the Nasdaq listing fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
------------------
<S> <C>
SEC Registration Fee................................... $ 31,970
NASD Filing Fee........................................ 12,000
Nasdaq Listing Fee..................................... 8,750
Printing............................................... 75,000
Legal Fees and Expenses................................ 100,000
Accounting Fees and Expenses........................... 18,000
Blue Sky Fees and Expenses............................. 10,000
Transfer Agent and Registrar Fees...................... 5,000
Miscellaneous.......................................... 14,280
----------
Total.............................................. $ 275,000
----------
----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the Delaware General Corporation Law ("DGCL"), Advanced
Energy's Certificate of Incorporation, as amended (the "AE Certificate"),
provides that no director shall be personally liable to Advanced Energy or any
stockholder for monetary damages for breach of fiduciary duty as a director,
except for liability: (i) for any breach of the duty of loyalty to Advanced
Energy or its stockholders; (ii) for acts or omissions not in good faith or
involving intentional misconduct or a knowing violation of the law; (iii) under
Section 174 of the DGCL; or (iv) for any transaction from which the director
derived an improper personal benefit. While the AE Certificate provides
protection from awards for monetary damages for breaches of fiduciary duty, it
does not eliminate the director's duty of care. Accordingly, the AE Certificate
will not affect the availability of equitable remedies, such as an injunction,
based on a director's breach of the duty of care. The provisions of the AE
Certificate described above apply to officers of Advanced Energy only if they
are directors of Advanced Energy and are acting in their capacity as directors,
and does not apply to officers of Advanced Energy who are not directors.
In addition, Advanced Energy's Bylaws provide that Advanced Energy shall
indemnify its Executive Officers (as defined in Rule 3b-7 promulgated under the
Exchange Act) and directors, and any employee who serves as an Executive Officer
or director of any corporation at Advanced Energy's request, to the fullest
extent permitted under and in accordance with the DGCL; provided, however, that
Advanced Energy may modify the extent of such indemnification by individual
contracts with its Executive Officers and directors; and, provided further, that
Advanced Energy shall not be required to indemnify any Executive Officer or
director in connection with any proceeding (or part thereof) initiated by such
person unless: (i) such indemnification is expressly required to be made by law;
(ii) the proceeding was authorized by the directors of Advanced Energy; (iii)
such indemnification is provided by Advanced Energy, in its sole discretion,
pursuant to the powers vested in Advanced Energy under the DGCL; or (iv) such
indemnification is required to be made under Article XI, Section 43, Subsection
(d) of Advanced Energy's Bylaws. Under the DGCL,
II-1
<PAGE>
directors and officers as well as employees and individuals may be indemnified
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement in connection with specified actions, suits or proceedings,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation as a derivative action) if they acted in
good faith and in a manner they reasonably believed to be in or not opposed to
the best interests of the corporation, and with respect to any criminal action
or proceeding, had no reasonable cause to believe their conduct was unlawful.
Advanced Energy maintains a policy of directors' and officers' liability
insurance that insures Advanced Energy's directors and officers against the
costs of defense, settlement or payment of a judgment under certain
circumstances.
In addition, the underwriters for this offering, and the underwriters and
selling stockholders for the concurrent common stock offering, have agreed to
indemnify Advanced Energy's officers, directors and controlling persons against
certain civil liabilities, including liabilities under the Securities Act of
1933.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement between the Underwriters and Advanced Energy Industries, Inc.
4.1 Restated Certificate of Incorporation (1)
4.2 Bylaws (1)
4.3 Specimen Certificate for the Common Stock (2)
4.4 Form of Indenture between State Street Bank and Trust Company of California, N.A., as trustee, and
Advanced Energy Industries, Inc. (including form of % Convertible Subordinated Note due 2006)
4.5 Undertaking re Other Long-Term Debt
*5.1 Opinion of Thelen Reid & Priest LLP re Legality of the Notes
*8.1 Opinion of Thelen Reid & Priest LLP re Tax Matters
*23.1 Consents of Thelen Reid & Priest LLP (3)
23.2 Consent of Arthur Andersen LLP
23.3 Consent of KPMG LLP
24.1 Power of Attorney (4)
25.1 Statement re Eligibility of Trustee
</TABLE>
- --------------
(1) Incorporated by reference from Advanced Energy's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999, filed July 28, 1999 (File No.
000-26966).
(2) Incorporated by reference from Advanced Energy's Registration Statement on
Form S-1, filed September 20, 1995, as amended (File No. 33-97188).
(3) Included in Exhibits 5.1 and 8.1.
(4) Included on the signature pages to this Registration Statement.
* To Be Filed By Amendment.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(i) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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.
(j) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
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 Fort Collins, State of Colorado, on September 17,
1999.
<TABLE>
<S> <C> <C>
ADVANCED ENERGY INDUSTRIES, INC.
By: /s/ DOUGLAS S. SCHATZ
--------------------------------------
Name: Douglas S. Schatz
--------------------------------------
Title: Chief Executive Officer and Chairman of
the Board
--------------------------------------
</TABLE>
II-4
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Douglas S. Schatz,
Hollis L. Caswell and Richard P. Beck, and each of them severally, acting alone
and without the other, his true and lawful attorney-in-fact with authority to
execute in the name of each such person, and to file with the Securities and
Exchange Commission, together with any exhibits thereto and other documents
therewith, any and all amendments (including without limitation post-effective
amendments) to this registration statement, and to sign any registration
statement for the same offering covered by this registration statement that is
to be effective upon filing pursuant to Rule 462(b) under the Securities Act,
necessary or advisable to enable the Registrant to comply with the Securities
Act and any rules, regulations and requirements of the Securities and Exchange
Commission in respect thereof, which amendments may make such changes in this
registration statement as the aforesaid attorney-in-fact deems appropriate.
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 date indicated.
<TABLE>
<S> <C>
Date: September 17, 1999 /s/ DOUGLAS S. SCHATZ
--------------------------------------------
Douglas S. Schatz
Chief Executive Officer and Chairman of the
Board
(Principal Executive Officer)
Date: September 17, 1999 /s/ HOLLIS L. CASWELL
--------------------------------------------
Hollis L. Caswell
President, Chief Operating Officer and
Director
Date: September 17, 1999 /s/ RICHARD P. BECK
--------------------------------------------
Richard P. Beck
Senior Vice President and Chief Financial
Officer and Director
(Principal Financial and Accounting Officer)
Date: September 17, 1999 /s/ G. BRENT BACKMAN
--------------------------------------------
G. Brent Backman
Director
Date: September 17, 1999 /s/ ARTHUR A. NOETH
--------------------------------------------
Arthur A. Noeth
Director
Date: September 17, 1999 /s/ ELWOOD SPEDDEN
--------------------------------------------
Elwood Spedden
Director
Date: September 17, 1999 /s/ GERALD STAREK
--------------------------------------------
Gerald Starek
Director
Date: September 17, 1999 /s/ ARTHUR ZAFIROPOULO
--------------------------------------------
Arthur Zafiropoulo
Director
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement between the Underwriters and Advanced Energy Industries, Inc.
4.1 Restated Certificate of Incorporation (1)
4.2 Bylaws (1)
4.3 Specimen Certificate for the Common Stock (2)
4.4 Form of Indenture between State Street Bank and Trust Company of California, N.A., as trustee, and
Advanced Energy Industries, Inc. (including form of % Convertible Subordinated Note due 2006)
4.5 Undertaking re Other Long-Term Debt
*5.1 Opinion of Thelen Reid & Priest LLP re Legality of the Notes
*8.1 Opinion of Thelen Reid & Priest LLP re Tax Matters
*23.1 Consents of Thelen Reid & Priest LLP (3)
23.2 Consent of Arthur Andersen LLP
23.3 Consent of KPMG LLP
24.1 Power of Attorney (4)
25.1 Statement re Eligibility of Trustee
</TABLE>
- --------------
(1) Incorporated by reference from Advanced Energy's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999, filed July 28, 1999 (File No.
000-26966).
(2) Incorporated by reference from Advanced Energy's Registration Statement on
Form S-1, filed September 20, 1995, as amended (File No. 33-97188).
(3) Included in Exhibits 5.1 and 8.1.
(4) Included on the signature pages to this Registration Statement.
* To Be Filed By Amendment.
<PAGE>
DRAFT OF SEPTEMBER 17, 1999
ADVANCED ENERGY INDUSTRIES, INC.
___% CONVERTIBLE SUBORDINATED NOTES DUE 2006
-----------
UNDERWRITING AGREEMENT
September __, 1999
Goldman, Sachs & Co.,
Merrill Lynch, Pierce, Fenner
& Smith Incorporated and Banc
of America Securities LLC
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Advanced Energy Industries, Inc., a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Banc America Securities LLC (the "Underwriters") an aggregate
of $_________ principal amount of the Convertible Notes, convertible into Common
Stock, $0.001 par value ("Stock") of the Company, specified above (the "Firm
Securities") and, at the election of the Underwriters, up to an aggregate of
$_________ additional aggregate principal amount (the "Optional Securities")
(the Firm Securities and the Optional Securities which the Underwriters elect to
purchase pursuant to Section 2 hereof are herein collectively called the
"Securities").
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-3 (File No.
33-___________) (the "Initial Registration Statement") in respect of
the Securities and shares of the Stock issuable upon conversion
thereof has been filed with the Securities and Exchange Commission
(the "Commission"); the Initial Registration Statement and any
post-effective amendment
<PAGE>
thereto, excluding exhibits thereto but including all documents
incorporated by reference in the prospectus contained therein, each
in the form heretofore delivered to you and for each of the other
Underwriters, have been declared effective by the Commission in such
form; other than a registration statement, if any, increasing the
size of the offering (a "Rule 462(b) Registration Statement"), filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended
(the "Act"), which became effective upon filing, no other document
with respect to the Initial Registration Statement or document
incorporated by reference therein has been filed with the
Commission; and no stop order suspending the effectiveness of the
Initial Registration Statement, any post-effective amendment thereto
or the Rule 462(b) Registration Statement, if any, has been issued
and no proceeding for that purpose has been initiated or threatened
by the Commission (any preliminary prospectus included in the
Initial Registration Statement or filed with the Commission pursuant
to Rule 424(a) of the rules and regulations of the Commission under
the Act, is hereinafter called a "Preliminary Prospectus"); the
various parts of the Initial Registration Statement and the Rule
462(b) Registration Statement, if any, including all exhibits
thereto but excluding Form T-1 and including (i) the information
contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section
5(a) hereof and deemed by virtue of Rule 430A under the Act to be
part of the Initial Registration Statement at the time it was
declared effective and (ii) the documents incorporated by reference
in the prospectus contained in the Initial Registration Statement at
the time such part of the Initial Registration Statement became
effective, each as amended at the time such part of the Initial
Registration Statement became effective or such part of the Rule
462(b) Registration Statement, if any, became or hereafter becomes
effective, are hereinafter collectively called the "Registration
Statement"; such final prospectus, in the form first filed pursuant
to Rule 424(b) under the Act, is hereinafter called the
"Prospectus"; any reference herein to any Preliminary Prospectus or
the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3
under the Act, as of the date of such Preliminary Prospectus or
Prospectus, as the case may be; any reference to any amendment or
supplement to any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include any documents filed after the date of
such Preliminary Prospectus or Prospectus, as the case may be, under
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and incorporated by reference in such Preliminary Prospectus
or Prospectus, as the case may be; and any reference to any
amendment to the Registration Statement shall be deemed to refer to
and include any annual report of the Company filed pursuant to
Section 13(a) or 15(d) of the Exchange Act after the effective date
of the Initial Registration Statement that is incorporated by
reference in the Registration Statement;
(b) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Act and the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the
rules and regulations of the Commission thereunder, and did not contain
an untrue statement of a
2
<PAGE>
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
PROVIDED, HOWEVER, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by
an Underwriter through Goldman, Sachs & Co. expressly for use
therein;
(c) The documents incorporated by reference in the Prospectus,
when they became effective or were filed with the Commission, as the
case may be, conformed in all material respects to the requirements of
the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder, and none of such documents
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and any further documents so filed
and incorporated by reference in the Prospectus or any further
amendment or supplement thereto, when such documents become effective
or are filed with the Commission, as the case may be, will conform in
all material respects to the requirements of the Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission
thereunder and will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; PROVIDED,
HOWEVER, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter
through Goldman, Sachs & Co. expressly for use therein;
(d) The Registration Statement conforms, and the Prospectus
and any further amendments or supplements to the Registration Statement
or the Prospectus will conform, in all material respects to the
requirements of the Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder and do not and will not, as of
the applicable effective date of the Registration Statement and any
amendment thereto and as of the applicable filing date of the
Prospectus and any amendment or supplement thereto, contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; PROVIDED, HOWEVER, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company
by an Underwriter through Goldman, Sachs & Co. expressly for use
therein;
(e) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, except as set
forth or contemplated in the Prospectus or as would not have,
individually or in the aggregate, a material adverse effect on the
3
<PAGE>
current or future consolidated financial position, business, prospects,
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole (a "Material Adverse Effect"); and,
since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any
change in the capital stock, capital lease obligations or long-term
debt of the Company or any of its subsidiaries or any material adverse
change, or any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries, taken as a whole, otherwise than as set forth or
contemplated in the Prospectus;
(f) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title
to all personal property owned by them, in each case free and clear of
all liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such
property and do not materially interfere with the use made and proposed
to be made of such property by the Company and its subsidiaries; and
any real property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not materially
interfere with the use made and proposed to be made of such property
and buildings by the Company and its subsidiaries;
(g) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with the corporate power and authority to own its
properties and conduct its business as described in the Prospectus, and
has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, or is subject to no
material liability or disability by reason of the failure to be so
qualified or in good standing in any such jurisdiction; and each
subsidiary of the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified or in good standing in any
such jurisdiction;
(h) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully
paid and non-assessable; the shares of Stock initially issuable upon
conversion of the Securities have been duly and validly authorized and
reserved for issuance and, when issued and delivered in accordance with
the provisions of the Securities and the Indenture referred to below,
will be duly and validly issued, fully paid and non-assessable and will
conform to the description of the Stock contained in the
4
<PAGE>
Prospectus; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable and are owned directly or
indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims;
(i) The Securities have been duly authorized and, when issued
and delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and
legally binding obligations of the Company entitled to the benefits
provided by the indenture to be dated as of September __, 1999 (the
"Indenture") between the Company and State Street Bank and Trust, as
Trustee (the "Trustee"), under which they are to be issued, which will
be substantially in the form filed as an exhibit to the Registration
Statement; the Indenture has been duly authorized and duly qualified
under the Trust Indenture Act and, when executed and delivered by the
Company and the Trustee, will constitute a valid and legally binding
instrument, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors' rights and
to general equity principles; and the Securities and the Indenture will
conform to the descriptions thereof in the Prospectus;
(j) The issue and sale of the Securities and the compliance by
the Company with all of the provisions of the Securities, the Indenture
and this Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is bound
or to which any of the property or assets of the Company or any of its
subsidiaries is subject, except , in each case, (i) breaches,
violations or defaults which, individually or in the aggregate, would
not have a Material Adverse Effect and (ii) would not have an adverse
effect on the Company's ability to consummate the transactions
contemplated hereby; nor will such actions result in any violation of
the provisions of the Certificate of Incorporation or By-laws of the
Company or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties; and no consent,
approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required for the
issue and sale of the Securities or the consummation by the Company of
the transactions contemplated by this Agreement or the Indenture,
except the registration under the Act of the Securities and the shares
of Stock issuable upon conversion thereof, such as have been obtained
under the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the purchase
and distribution of the Securities by the Underwriters;
5
<PAGE>
(k) Neither the Company nor any of its subsidiaries (i) is in
violation of its Certificate of Incorporation or By-laws or (ii) in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be bound,
except in the case of (ii) above where such default would not have a
Material Adverse Effect and would not have an adverse effect on the
Company's ability to consummate the transactions contemplated hereby;
(l) The statements set forth in the Prospectus under the
captions "Description of Notes" and "Description of Capital Stock",
insofar as they purport to constitute a summary of the terms of the
Securities and the Stock, under the caption "Material United States
Federal Income Tax Consequences", and under the caption "Underwriting",
insofar as they purport to describe the provisions of the laws and
documents referred to therein, are accurate, complete and fair;
(m) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of the Company
or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, would individually
or in the aggregate have a Material Adverse Effect; and, to the best of
the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(n) The Company is not and, after giving effect to the
offering and sale of the Securities, will not be an "investment
company" or an entity "controlled" by an "investment company", as such
terms are defined in the Investment Company Act of 1940, as amended
(the "Investment Company Act");
(o) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida
Statutes;
(p) Arthur Andersen LLP, who has opined as to certain
financial statements of the Company and its subsidiaries, and KPMG LLP,
who has opined as to certain financial statements of RF Power Products,
Inc., are each independent public accountants as required by the Act
and the rules and regulations of the Commission thereunder;
(q) The Company has reviewed its operations and that of its
subsidiaries and has made reasonable inquiries of any third parties
with which the Company or any of its subsidiaries has a material
relationship to evaluate the extent to which the business or operations
of the Company or any of its subsidiaries will be affected by the Year
2000 Problem. As a result of such review, except as specifically
described in the Prospectus, the Company has no reason to believe, and
does not believe, that the Year 2000 Problem will
6
<PAGE>
have a material adverse effect on the general affairs, management,
the current or future consolidated financial position, business,
prospects, stockholders' equity or results of operations of the
Company and its subsidiaries or result in any material loss or
interference with the Company's business or operations. The "Year
2000 Problem" as used herein means any significant risk that
computer hardware, firmware or software used in the receipt,
transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case
of dates or time periods occurring after December 31, 1999, function
at least as effectively as in the case of dates or time periods
occurring prior to January 1, 2000; and
(r) Neither the Company not any of its subsidiaries own any
real property.
2. Subject to the terms and conditions herein set forth, (a) the
Company agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company,
at a purchase price of ____% of the principal amount thereof, plus accrued
interest, if any, from ____________, 1999 to the First Time of Delivery
hereunder, the principal amount of Firm Securities set forth opposite the
name of such Underwriter in Schedule I hereto, and (b) in the event and to
the extent that the Underwriters shall exercise the election to purchase
Optional Securities as provided below, the Company agrees to issue and sell
to each of the Underwriters, and each of the Underwriters agrees, severally
and not jointly, to purchase from the Company, at the same purchase price set
forth in clause (a) of this Section 2, that portion of the aggregate
principal amount of the Optional Securities as to which such election shall
have been exercised (to be adjusted by you so as to eliminate fractions of
$_________), determined by multiplying such aggregate principal amount of
Optional Securities by a fraction, the numerator of which is the maximum
aggregate principal amount of Optional Securities which such Underwriter is
entitled to purchase as set forth opposite the name of such Underwriter in
Schedule I hereto and the denominator of which is the maximum aggregate
principal amount of Optional Securities which all of the Underwriters are
entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to $_________ aggregate principal amount of Optional
Securities, at the purchase price set forth in clause (a) of the first paragraph
of this Section 2, for the sole purpose of covering sale of Securities in excess
of the number of Firm Securities. Any such election to purchase Optional
Securities may be exercised by written notice from you to the Company, given
within a period of 30 calendar days after the date of this Agreement, setting
forth the aggregate principal amount of Optional Securities to be purchased and
the date on which such Optional Securities are to be delivered, as determined by
you but in no event earlier than the First Time of Delivery (as defined in
Section 4 hereof) or, unless you and the Company otherwise agree in writing,
earlier than two or later than ten business days after the date of such notice.
7
<PAGE>
3. Upon the authorization by you of the release of the Firm Securities,
the several Underwriters propose to offer the Firm Securities for sale upon the
terms and conditions set forth in the Prospectus.
4. (a) The Securities to be purchased by each Underwriter
hereunder will be represented by one or more definitive global
Securities in book-entry form which will be deposited by or on
behalf of the Company with The Depository Trust Company ("DTC") or
its designated custodian. The Company will deliver the Securities to
Goldman, Sachs & Co., for the account of each Underwriter, against
payment by or on behalf of such Underwriter of the purchase price
therefor by wire transfer of Federal (same-day) funds to the account
specified by the Company to Goldman, Sachs & Co. at least
forty-eight hours in advance, by causing DTC to credit the
Securities to the account of Goldman, Sachs & Co. at DTC. The
Company will cause the certificates representing the Securities to
be made available to Goldman, Sachs & Co. for checking at least
twenty-four hours prior to the Time of Delivery (as defined below)
at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be,
with respect to the Firm Securities, 9:30 a.m., New York City time,
on ____________, 1999 or such other time and date as Goldman, Sachs
& Co. and the Company may agree upon in writing, and, with respect
to the Optional Securities, 9:30 a.m., New York City time, on the
date specified by Goldman, Sachs & Co. in the written notice given
by Goldman, Sachs & Co. of the Underwriters' election to purchase
such Optional Securities, or such other time and date as Goldman,
Sachs & Co. and the Company may agree upon in writing. Such time and
date for delivery of the Firm Securities is herein called the "First
Time of Delivery", such time and date for delivery of the Optional
Securities, if not the First Time of Delivery, is herein called the
"Second Time of Delivery", and each such time and date for delivery
is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by
or on behalf of the parties hereto pursuant to Section 7 hereof,
including the cross-receipt for the Securities and any additional
documents requested by the Underwriters pursuant to Section 7(k)
hereof, will be delivered at the offices of [Kaye, Scholer, Fierman,
Hays & Handler, LLP, 1999 Avenue of the Stars, Suite 1600, Los Angeles,
California 90067] (the "Closing Location"), and the Securities will be
delivered at the Designated Office, all at such Time of Delivery. A
meeting will be held at the Closing Location at _______ p.m., New York
City time, on the New York Business Day next preceding such Time of
Delivery, at which meeting the final drafts of the documents to be
delivered pursuant to the preceding sentence will be available for
review by the parties hereto. For the purposes of this Section 4, "New
York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York
City are generally authorized or obligated by law or executive order to
close.
8
<PAGE>
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Act; to make no further amendment or any supplement to the
Registration Statement or Prospectus prior to such Time of Delivery
which shall be disapproved by you promptly after reasonable notice
thereof; to advise you, promptly after it receives notice thereof, of
the time when any amendment to the Registration Statement has been
filed or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish you with copies
thereof; to file timely all reports and any definitive proxy or
information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus and for so long
as the delivery of a prospectus is required in connection with the
offering or sale of the Securities; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Securities or the shares of Stock issuable upon
conversion of the Securities for offering or sale in any jurisdiction,
of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the
withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Securities and the shares of Stock
issuable upon conversion of the Securities for offering and sale under
the securities laws of such jurisdictions as you may request and to
comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary
to complete the distribution of the Securities, provided that in
connection therewith the Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of process
in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time, to furnish the Underwriters with copies of the Prospectus in
New York City in such quantities as you may reasonably request, and, if
the delivery of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the Prospectus in
connection with the offering or sale of the Securities and the shares
of Stock issuable upon conversion of the Securities and if at such time
any event shall have occurred as a result of which the
9
<PAGE>
Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made when such Prospectus is
delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the Prospectus or
to file under the Exchange Act any document incorporated by reference
in the Prospectus in order to comply with the Act, the Exchange Act or
the Trust Indenture Act, to notify you and upon your request to file
such document and to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as you may
from time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or
omission or effect such compliance; and in case any Underwriter is
required to deliver a prospectus in connection with sales of any of
the Securities and the shares of Stock issuable upon conversion of the
Securities at any time nine months or more after the time of issue of
the Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies
as you may request of an amended or supplemented Prospectus complying
with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon
as practicable, but in any event not later than eighteen months after
the effective date of the Registration Statement (as defined in Rule
158(c) under the Act), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a)
of the Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(e) During the period beginning from the date of the
Prospectus and continuing to and including the date 90 days after the
date of the Prospectus, not to offer, sell, contract to sell or
otherwise dispose of, except as provided hereunder any securities of
the Company that are substantially similar to the Securities or the
Stock, including but not limited to any securities that are convertible
into or exchangeable for, or that represent the right to receive, Stock
or any such substantially similar securities (other than pursuant to
employee stock option plans existing on, or upon the conversion or
exchange of convertible or exchangeable securities outstanding as of,
the date of this Agreement) and other than the shares of Stock sold to
the Underwriters pursuant to that certain Underwriting Agreement, dated
the date hereof, among the Company, the Selling Stockholders and
Goldman, Sachs & Co., BancBoston Robertson Stephens and CIBC World
Markets, without your prior written consent;
(f) To furnish to the holders of the Securities as soon as
practicable after the end of each fiscal year an annual report
(including a balance sheet and statements of income, stockholders'
equity and cash flows of the Company and its consolidated subsidiaries
certified by independent public accountants) and, as soon as
practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the
effective date of the Registration Statement), to make available to the
holders of the
10
<PAGE>
Securities consolidated summary financial information of the Company
and its subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of
the Registration Statement, to furnish to you copies of all reports or
other communications (financial or other) furnished to stockholders,
and to deliver to you (i) as soon as they are available, copies of any
reports and financial statements furnished to or filed with the
Commission or any national securities exchange on which the Securities
or any class of securities of the Company is listed; and (ii) such
additional information concerning the business and financial condition
of the Company as you may from time to time reasonably request (such
financial statements to be on a consolidated basis to the extent the
accounts of the Company and its subsidiaries are consolidated in
reports furnished to its stockholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of
the Securities pursuant to this Agreement in the manner specified in
the Prospectus under the caption "Use of Proceeds";
(i) If the Company elects to rely upon Rule 462(b), the
Company shall file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) by 10:00 P.M., Washington,
D.C. time, on the date of this Agreement, and the Company shall at the
time of filing either pay to the Commission the filing fee for the Rule
462(b) Registration Statement or give irrevocable instructions for the
payment of such fee pursuant to Rule 111(b) under the Act;
(j) To reserve and keep available at all times, free of
preemptive rights, shares of Stock for the purpose of enabling the
Company to satisfy any obligations to issue shares of its Stock upon
conversion of the Securities; and
(k) To use its best efforts to list for quotation, subject to
notice of issuance, the shares of Stock issuable upon conversion of the
Securities on the Nasdaq National Market ("NASDAQ").
6. The Company covenants and agrees with the several
Underwriters that the Company will pay or cause to be paid the following: (i)
the fees, disbursements and expenses of the Company's counsel and accountants
in connection with the registration of the Securities and the shares of Stock
issuable upon conversion of the Securities under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or
producing any Agreement among Underwriters, this Agreement, the Indenture,
the Blue Sky Memorandum, closing documents (including any compilations
thereof) and any other documents in connection with the
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offering, purchase, sale and delivery of the Securities; (iii) all expenses
in connection with the qualification of the Securities and the shares of
Stock issuable upon conversion of the Securities for offering and sale under
state securities laws as provided in Section 5(b) hereof, including the fees
and disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky and legal investment
surveys; (iv) any fees charged by securities rating services for rating the
Securities; (v) the filing fees incident to, and the fees and disbursements
of counsel for the Underwriters in connection with, any required review by
NASD Regulations, Inc. of the terms of the sale of the Securities; (vi) the
cost of preparing the Securities; (vii) the fees and expenses of the Trustee
and any agent of the Trustee and the fees and disbursements of counsel for
the Trustee in connection with the Indenture and the Securities; and (viii)
all other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section.
It is understood, however, that, except as provided in this Section, and
Sections 8 and 11 hereof, the Underwriters will pay all of their own costs
and expenses, including the fees of their counsel, transfer taxes on resale
of any of the Securities by them, and any advertising expenses connected with
any offers they may make.
7. The obligations of the Underwriters hereunder, as to the
Securities to be delivered at each Time of Delivery, shall be subject, in
their discretion, to the condition that all representations and warranties
and other statements of the Company herein are, at and as of such Time of
Delivery, true and correct, the condition that the Company shall have
performed all of its obligations hereunder theretofore to be performed, and
the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act and in
accordance with Section 5(a) hereof; if the Company has elected to rely
upon Rule 462(b), the Rule 462(b) Registration Statement shall have
become effective by 10:00 P.M., Washington, D.C. time, on the date of
this Agreement; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and
no proceeding for that purpose shall have been initiated or threatened
by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your reasonable
satisfaction;
(b) Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel for
the Underwriters, shall have furnished to you such written opinion or
opinions (a draft of each such opinion is attached as Annex II(a)
hereto), dated such Time of Delivery, with respect to the matters
covered in paragraphs (i), (ii), (vii), (viii), (ix) and (xvi) of
subsection (c) below as well as such other related matters as you may
reasonably request, and such counsel shall have received such papers
and information as they may reasonably request to enable them to pass
upon such matters;
(c) Thelen Reid & Priest LLP, counsel for the Company, shall
have furnished to you their written opinion (a draft of such opinion is
attached as Annex II(b) hereto), dated such Time of Delivery, in form
and substance satisfactory to you, to the effect that:
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(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing
under the laws of the State of Delaware. The Company
has the corporate power and authority to own its
properties and conduct its business as described in
the Prospectus;
(ii) The Company has an authorized capitalization as
set forth in the Prospectus, and all of the issued
shares of capital stock of the Company have been duly
and validly authorized and issued and are fully paid
and non-assessable; and the shares of Stock initially
issuable upon conversion of the Securities have been
duly and validly authorized and reserved for issuance
and, when issued and delivered in accordance with the
provisions of the Securities and the Indenture, will
be duly and validly issued and fully paid and
non-assessable, and will conform, in all material
respects, to the description of the Stock contained
in the Prospectus;
(iii) The Company is duly qualified as a foreign
corporation for the transaction of business and is in
good standing under the laws of each jurisdiction in
which it owns or leases properties or conducts any
business so as to require such qualification except
where the failure to be so qualified or in good
standing would not, individually or in the aggregate,
have a Material Adverse Effect (such counsel being
entitled to rely in respect of the opinion in this
clause upon opinions of local counsel and in respect
of matters of fact upon certificates of officers of
the Company, provided that such counsel shall state
that they believe that both you and they are
justified in relying upon such opinions and
certificates);
(iv) Each subsidiary of the Company organized under
the laws of the United States, any state of the
United States or the District of Columbia (a
"Domestic Subsidiary") has been duly incorporated and
is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation;
and all of the issued shares of capital stock of each
Domestic Subsidiary have been duly and validly
authorized and issued, are fully paid and
non-assessable, and are owned directly or indirectly
by the Company, free and clear of all liens,
encumbrances, equities or claims (such counsel being
entitled to rely in respect of the opinion in this
clause upon opinions of local counsel and in respect
of matters of fact upon certificates of officers of
the Company or its subsidiaries, provided that such
counsel shall state that they believe that both you
and they are justified in relying upon such opinions
and certificates);
(v) To such counsel's knowledge, the manufacturing
facilities located at 1625 Sharp Point Drive, Fort
Collins, Colorado and 1007 Laurel Oak Drive,
Voorhees, New Jersey held under lease by the Company
and RF Power Products, Inc. (the "Principal
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Subsidiary") are held by them under valid,
subsisting and enforceable leases, except as such
enforcement may be limited by bankruptcy and with
such exceptions as are not material and do not
interfere with the use made and proposed to be
made of such property and buildings by the Company
and the Principal Subsidiary (in giving the
opinion in this clause, such counsel may state
that no examination of record titles for the
purpose of such opinion has been made, and that
they are relying upon a general review of the
titles of the Company and the Principal
Subsidiary, upon opinions of local counsel and
abstracts, reports and policies of title companies
rendered or issued at or subsequent to the time of
acquisition of such property by the Company or the
Principal Subsidiary, upon opinions of counsel to
the lessors of such property and, in respect of
matters of fact, upon certificates of officers of
the Company or its subsidiaries, provided that
such counsel shall state that they believe that
both you and they are justified in relying upon
such opinions, abstracts, reports, policies and
certificates);
(vi) To the best of such counsel's knowledge and
other than as set forth in the Prospectus, there
are no legal or governmental proceedings pending
to which the Company or any of its subsidiaries is
a party or of which any property of the Company or
any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its
subsidiaries, would, individually or in the
aggregate, have a Material Adverse Effect; and, to
the best of such counsel's knowledge, no such
proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(vii) This Agreement has been duly authorized,
executed and delivered by the Company;
(viii) The Securities have been duly authorized,
executed, authenticated, issued and delivered and
constitute valid and legally binding obligations
of the Company entitled to the benefits provided
by the Indenture; and the Securities and the
Indenture conform to the descriptions thereof in
the Prospectus;
(ix) The Indenture has been duly authorized, executed
and delivered by the parties thereto and constitutes
a valid and legally binding instrument, enforceable
in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency,
reorganization and other laws of general
applicability relating to or affecting creditors'
rights and to general equity principles; and the
Indenture has been duly qualified under the Trust
Indenture Act;
(x) The issue and sale of the Securities being issued
and sold at such Time of Delivery and the compliance
by the Company with all of the
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provisions of the Securities, the Indenture and
this Agreement and the consummation of the
transactions herein and therein contemplated will
not conflict with or result in a breach or
violation of any of the terms or provisions of, or
constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to
which the Company or any of its subsidiaries is a
party or by which the Company or any of its
subsidiaries is bound or to which any of the
property or assets of the Company or any of its
subsidiaries is subject, except in each case,
breaches, violations or defaults which,
individually or in the aggregate, would not have a
Material Adverse Effect and would not have an
adverse effect on the Company's ability to
consummate the transactions contemplated hereby,
nor will such actions result in any violation of
the provisions of the Certificate of Incorporation
or By-laws of the Company or any statute or any
order, rule or regulation of any court or
governmental agency or body having jurisdiction
over the Company or any of its subsidiaries or any
of their properties;
(xi) No consent, approval, authorization, order,
registration or qualification of or with any such
court or governmental agency or body is required for
the issue and sale of the Securities being issued at
such Time of Delivery or the consummation by the
Company of the transactions contemplated by this
Agreement or the Indenture, except such as have been
obtained under the Act and the Trust Indenture Act,
such as have been obtained under the Act in
connection with the shares of Stock issuable upon
conversion of the Securities and such consents,
approvals, authorizations, registrations or
qualifications as may be required under state
securities or Blue Sky laws in connection with the
purchase and distribution of the Securities by the
Underwriters;
(xii) Neither the Company nor any of its Domestic
Subsidiaries is (A) in violation of its Certificate
of Incorporation or By-laws or (B) in default in the
performance or observance of any obligation,
agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument known to such
counsel to which it is a party or by which it or any
of its properties may be bound, except in the case of
(B) where such default (1) would not have a Material
Adverse Effect and (2) would not have an adverse
effect on the Company's ability to consummate the
transactions contemplated hereby (such counsel being
entitled to rely in respect of the opinion in this
clause upon opinions of local counsel and in respect
of matters of fact upon certificates of officers of
the Company or its Domestic Subsidiaries, provided
that such counsel shall
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<PAGE>
state that they believe that both you and they are
justified in relying upon such opinions and
certificates);
(xiii) The statements set forth in the Prospectus
under the captions "Description of Convertible Notes"
and "Description of Capital Stock", insofar as they
purport to constitute a summary of the terms of the
Securities and the Stock, under the caption "Material
United States Federal Income Tax Consequences", and
under the caption "Underwriting", insofar as they
purport to describe the provisions of the laws and
documents referred to therein, are accurate, complete
and fair in all material respects;
(xiv) The Company is not an "investment company" or
an entity "controlled" by an "investment company", as
such terms are defined in the Investment Company Act;
(xv) The documents incorporated by reference in the
Prospectus or any further amendment or supplement
thereto made by the Company prior to the Time of
Delivery (other than the financial statements and
related schedules therein, as to which such counsel
need express no opinion), when they became effective
or were filed with the Commission, as the case may
be, complied as to form in all material respects with
the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the
Commission thereunder; and they have no reason to
believe that any of such documents, when such
documents became effective or were so filed, as the
case may be, contained, in the case of a registration
statement which became effective under the Act, an
untrue statement of a material fact, or omitted to
state a material fact required to be stated therein
or necessary to make the statements therein not
misleading, or, in the case of other documents which
were filed under the Act or the Exchange Act with the
Commission, an untrue statement of a material fact or
omitted to state a material fact necessary in order
to make the statements therein, in the light of the
circumstances under which they were made when such
documents were so filed, not misleading; and
(xvi) The Registration Statement and the Prospectus
and any further amendments and supplements thereto
made by the Company prior to such Time of Delivery
(other than the financial statements and related
schedules therein, as to which such counsel need
express no opinion) comply as to form in all material
respects with the requirements of the Act and the
Trust Indenture Act and the rules and regulations
thereunder; although they do not assume any
responsibility for the accuracy, completeness or
fairness of the statements contained in the
Registration Statement or the Prospectus, except for
those referred to in the opinion in subsection (xiii)
of this Section 7(c),
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<PAGE>
they have no reason to believe that, as of its
effective date, the Registration Statement or any
further amendment thereto made by the Company
prior to such Time of Delivery (other than the
financial statements and related schedules
therein, as to which such counsel need express no
opinion) contained an untrue statement of a
material fact or omitted to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading or that, as
of its date, the Prospectus or any further
amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than
the financial statements and related schedules
therein, as to which such counsel need express no
opinion) contained an untrue statement of a
material fact or omitted to state a material fact
necessary to make the statements therein, in the
light of the circumstances under which they were
made, not misleading or that, as of such Time of
Delivery, either the Registration Statement or the
Prospectus or any further amendment or supplement
thereto made by the Company prior to such Time of
Delivery (other than the financial statements and
related schedules therein, as to which such
counsel need express no opinion) contains an
untrue statement of a material fact or omits to
state a material fact necessary to make the
statements therein, in the light of the
circumstances under which they were made, not
misleading; and they do not know of any amendment
to the Registration Statement required to be filed
or of any contracts or other documents of a
character required to be filed as an exhibit to
the Registration Statement or required to be
incorporated by reference into the Prospectus or
required to be described in the Registration
Statement or the Prospectus which are not filed or
incorporated by reference or described as required;
(d) [(i)] On the date of the Prospectus at a time
prior to the execution of this Agreement, at 9:30
a.m., New York City time, on the effective date of
any post-effective amendment to the Registration
Statement filed subsequent to the date of this
Agreement and also at each Time of Delivery,
Arthur Andersen LLP shall have furnished to you a
letter or letters, dated the respective dates of
delivery thereof, in form and substance
satisfactory to you, to the effect set forth in
Annex I hereto (the executed copy of the letter
delivered prior to the execution of this Agreement
is attached as Annex I(a) hereto and a draft of
the form of letter to be delivered on the
effective date of any post-effective amendment to
the Registration Statement and as of each Time of
Delivery is attached as Annex I(b) hereto);
[(ii) On the date of the Prospectus at a time prior
to the execution of this Agreement, at 9:30 a.m., New
York City time, on the effective date of any
post-effective amendment to the Registration
Statement filed subsequent to the date of this
Agreement and also at each Time of Delivery, KPMG LLP
17
<PAGE>
shall have furnished to you a letter or letters,
dated the respective dates of delivery thereof, in
form and substance satisfactory to you, to the effect
set forth in Annex II hereto (the executed copy of
the letter delivered prior to the execution of this
Agreement is attached as Annex II(a) hereto and a
draft of the form of letter to be delivered on the
effective date of any post-effective amendment to the
Registration Statement and as of each Time of
Delivery is attached as Annex II(b) hereto;]
(e) (i) Neither the Company nor any of its
subsidiaries shall have sustained since the date of the latest
audited financial statements included or incorporated by reference
in the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated
in the Prospectus, and (ii) since the respective dates as of which
information is given in the Prospectus there shall not have been any
change in the capital stock, capital lease obligations or long-term
debt of the Company or any of its subsidiaries or any change, or any
development involving a prospective change, in or affecting the
general affairs, management, financial position, stockholders'
equity or results of operations of the Company and its subsidiaries,
taken as a whole, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in
clause (i) or (ii), is in the judgment of Goldman, Sachs & Co., as
representatives of the Underwriters, so material (to the Company and
its subsidiaries taken as a whole) and adverse as to make it
impracticable or inadvisable to proceed with the public offering or
the delivery of the Securities being issued at such Time of Delivery
on the terms and in the manner contemplated in the Prospectus;
(f) On or after the date hereof (i) no downgrading
shall have occurred in the rating accorded the Company's debt
securities by any "nationally recognized statistical rating
organization", as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its
rating of any of the Company's debt securities;
(g) On or after the date hereof there shall not have
occurred any of the following: (i) a suspension or material
limitation in trading in securities generally on the New York Stock
Exchange or on NASDAQ; (ii) a suspension or material limitation in
trading in the Company's securities on NASDAQ; (iii) a general
moratorium on commercial banking activities declared by either
Federal or New York State authorities; or (iv) the outbreak or
escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if
the effect of any such event specified in this clause (iv) in the
judgment of Goldman, Sachs & Co. makes it impracticable or
inadvisable to proceed with the public offering or the delivery of
the Securities being issued at such Time of Delivery on the terms
and in the manner contemplated in the Prospectus;
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<PAGE>
(h) The shares of Stock issuable upon conversion of the
Securities shall have been duly listed for quotation, subject to notice
of issuance, on NASDAQ;
(i) The Company has obtained and delivered to the
Underwriters executed copies of an agreement from each of the
officers and directors of the Company, substantially to the effect
set forth in Exhibit A attached hereto and incorporated herein by
this reference;
(j) The Company shall have complied with the
provisions of Section 5(c) hereof with respect to the furnishing of
prospectuses on the New York Business Day next succeeding the date
of this Agreement; and
(k) The Company shall have furnished or caused to be
furnished to you at such Time of Delivery certificates of officers
of the Company satisfactory to you as to the accuracy of the
representations and warranties of the Company herein at and as of
such Time of Delivery, as to the performance by the Company of all
of its obligations hereunder to be performed at or prior to such
Time of Delivery, as to the matters set forth in subsections (a) and
(e) of this Section and as to such other matters as you may
reasonably request.
8 (a) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection
with investigating or defending any such action or claim as such
expenses are incurred; PROVIDED, HOWEVER, that the Company shall not
be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished
to the Company by any Underwriter through Goldman, Sachs & Co.
expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to which the
Company may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus,
the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or
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necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission
was made in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any such amendment or supplement in reliance upon and
in conformity with written information furnished to the Company by such
Underwriter through Goldman, Sachs & Co. expressly for use therein; and
will reimburse the Company for any legal or other expenses reasonably
incurred by the Company in connection with investigating or defending
any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party under such subsection, notify
the indemnifying party in writing of the commencement thereof; but the
omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to any indemnified party otherwise than
under such subsection. In case any such action shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall
not, except with the consent of the indemnified party, be counsel to
the indemnifying party), and, after notice from the indemnifying party
to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified
party under such subsection for any legal expenses of other counsel or
any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to,
any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not
the indemnified party is an actual or potential party to such action or
claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from
the offering of the Securities. If, however, the allocation provided by
the immediately preceding sentence is not permitted by applicable law
or if the indemnified party failed to give the notice required
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under subsection (c) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the
one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims,
damages or liabilities (or actions in respect thereof), as well as
any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by
the Company bear to the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Underwriters on the
other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this subsection
(d) were determined by PRO RATA allocation (even if the Underwriters
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 above in this subsection (d). The amount
paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include
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 subsection (d), no
Underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Securities
underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute are
several in proportion to their respective underwriting obligations
and not joint.
(e) The obligations of the Company under this Section 8 shall
be in addition to any liability which the Company may otherwise have
and shall extend, upon the same terms and conditions, to each person,
if any, who controls any Underwriter within the meaning of the Act; and
the obligations of the Underwriters under this Section 8 shall be in
addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to
each officer and director of the Company and to each person, if any,
who controls the Company within the meaning of the Act.
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9 (a) If any Underwriter shall default in its obligation to
purchase the Securities which it has agreed to purchase hereunder at
a Time of Delivery, you may in your discretion arrange for you or
another party or other parties to purchase such Securities on the
terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of
such Securities, then the Company shall be entitled to a further
period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Securities on
such terms. In the event that, within the respective prescribed
periods, you notify the Company that you have so arranged for the
purchase of such Securities, or the Company notifies you that it has
so arranged for the purchase of such Securities, you or the Company
shall have the right to postpone such Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments to the Registration
Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like
effect as if such person had originally been a party to this
Agreement with respect to such Securities.
(b) If, after giving effect to any arrangements for the
purchase of the Securities of a defaulting Underwriter or Underwriters
by you and the Company as provided in subsection (a) above, the
aggregate principal amount of such Securities which remains unpurchased
does not exceed one-eleventh of the aggregate principal amount of all
the Securities to be purchased at such Time of Delivery, then the
Company shall have the right to require each non-defaulting Underwriter
to purchase the principal amount of Securities which such Underwriter
agreed to purchase hereunder at such Time of Delivery and, in addition,
to require each non-defaulting Underwriter to purchase its pro rata
share (based on the principal amount of Securities which such
Underwriter agreed to purchase hereunder) of the Securities of such
defaulting Underwriter or Underwriters for which such arrangements have
not been made; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Securities of a defaulting Underwriter or Underwriters
by you and the Company as provided in subsection (a) above, the
aggregate principal amount of such Securities which remains unpurchased
exceeds one-eleventh of the aggregate principal amount of all of the
Securities to be purchased at such Time of Delivery, or if the Company
shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Securities of a
defaulting Underwriter or Underwriters, then this Agreement (or, with
respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Company to sell the Optional
Securities) shall thereupon terminate, without liability on the part of
any non-defaulting Underwriter or the Company, except for the expenses
to be borne by the Company and the Underwriters as provided in Section
6 hereof and the indemnity and
22
<PAGE>
contribution agreements in Section 8 hereof; but nothing herein shall
relieve a defaulting Underwriter from liability for its default.
10 The respective indemnities, agreements, representations,
warranties and other statements of the Company and the several Underwriters,
as set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless
of any investigation (or any statement as to the results thereof) made by or
on behalf of any Underwriter or any controlling person of any Underwriter, or
the Company, or any officer or director or controlling person of the Company,
and shall survive delivery of and payment for the Securities.
11 If this Agreement shall be terminated pursuant to Section 9
hereof, the Company shall not then be under any liability to any Underwriter
except as provided in Sections 6 and 8 hereof; but, if for any other reason,
any Securities are not delivered by or on behalf of the Company as provided
herein, the Company will reimburse the Underwriters through you for all
out-of-pocket expenses approved in writing by you, including fees and
disbursements of counsel, reasonably incurred by the Underwriters in making
preparations for the purchase, sale and delivery of the Securities, but the
Company shall then be under no further liability to any Underwriter except in
respect of the Securities as provided in Sections 6 and 8 hereof.
12 In all dealings hereunder, you shall act on behalf of each
of the Underwriters, and the parties hereto shall be entitled to act and rely
upon any statement, request, notice or agreement on behalf of any Underwriter
made or given by you.
All statements, requests, notices and agreements hereunder shall be
in writing, and if to the Underwriters shall be delivered or sent by mail,
telex or facsimile transmission to you as the representatives at 32 Old Slip,
21st Floor, New York, New York 10005, Attention: Registration Department; and
if to the Company shall be delivered or sent by mail, telex or facsimile
transmission to the address of the Company set forth in the Registration
Statement, Attention: Secretary; provided, however, that any notice to an
Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company by you upon
request. Any such statements, requests, notices or agreements shall take
effect upon receipt thereof.
13 This Agreement shall be binding upon, and inure solely to
the benefit of, the Underwriters, the Company and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and each
person who controls the Company or any Underwriter, and their respective
heirs, executors, administrators, successors and assigns, and no other person
shall acquire or have any right under or by virtue of this Agreement. No
purchaser of any of the Securities from any Underwriter shall be deemed a
successor or assign by reason merely of such purchase.
23
<PAGE>
14 Time shall be of the essence of this Agreement. As used
herein, the term "business day" shall mean any day when the Commission's
office in Washington, D.C. is open for business.
15 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
ANY CHOICE OF LAW PROVISIONS THEREOF.
16 This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed
to be an original, but all such counterparts shall together constitute one
and the same instrument.
If the foregoing is in accordance with your understanding, please
sign and return to us four counterparts hereof, and upon the acceptance
hereof by you, on behalf of each of the Underwriters, this letter and such
acceptance hereof shall constitute a binding agreement among each of the
Underwriters and the Company. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is pursuant to the authority set
forth in a form of Agreement among Underwriters, the form of which shall be
submitted to the Company for examination upon request, but without warranty
on your part as to the authority of the signers thereof.
Very truly yours,
ADVANCED ENERGY INDUSTRIES, INC.
By:
------------------------------
Name:
Title:
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.
By:
----------------------------------
Name:
Title:
24
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
PRINCIPAL
PRINCIPAL AMOUNT OF
AMOUNT OF OPTIONAL SECURITIES
FIRM SECURITIES TO BE PURCHASED
TO BE IF MAXIMUM OPTION
UNDERWRITER PURCHASED EXERCISED
----------- --------- ---------
<S> <C> <C>
Goldman, Sachs & Co. $ $
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Banc of America Securities LLC
------------------- ---------------------
Total $ $
------------------- ---------------------
------------------- ---------------------
</TABLE>
25
<PAGE>
DRAFT OF SEPTEMBER 17, 1999
ADVANCED ENERGY INDUSTRIES, INC.
and
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
AS TRUSTEE
------------------
INDENTURE
DATED AS OF ___________ __, 1999
-------------------------------
___% CONVERTIBLE SUBORDINATED NOTES DUE 2006
--------------------------------
<PAGE>
Reconciliation and tie between Trust Indenture Act of 1939 (the "Trust
Indenture Act") and this Indenture, dated as of ___________ __, ____.
Trust Indenture Action Section Indenture Section
Section 310(a)(1) 6.7
(a)(2) 6.7
(b) 6.7, 6.8
Section 311(a) 6.13
(b) 6.13
Section 312(a) 7.4
(b) 7.5
(c) 7.1
Section 313(a) 7.2
(b) 7.2
(c) 1.6, 7.2
(d) 7.2
Section 314(a) 7.3
(a)(4) 10.7
(c)(1) 1.2
(c)(2) 1.2
(c)(3) 13.3
(e) 1.2
Section 315(a) 6.2
(b) 6.1
(c) 6.2
(d) 6.2
(e) 5.15
Section 316(a) (last sentence) 1.1 ("Outstanding")
(a)(1)(A) 5.2, 5.12
(a)(1)(B) 5.13
(b) 5.8
(c) 1.4
Section 317(a)(1) 5.3
(a)(2) 5.4
(b) 10.3
Section 318(a) 1.14
(c) 1.14
- ----------------------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of this Indenture. Attention should also be directed to Section 318(c)
of the Trust Indenture Act, which provides that the provisions of Sections
310 to and including 317 of the Trust Indenture Act are a part of and govern
every qualified indenture, whether or not physically contained therein.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
RECITALS..........................................................................................................1
ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION..............................................1
SECTION 1.1 Definitions.................................................................................1
Act......................................................................................................2
Affiliate................................................................................................2
Aggregate Cash Distribution Amount.......................................................................2
Authenticating Agent.....................................................................................2
Authorized Newspaper.....................................................................................2
Board of Directors.......................................................................................2
Board Resolution.........................................................................................2
Business Day.............................................................................................2
Capital Stock............................................................................................3
Change in Control........................................................................................3
Closing Price Per Share..................................................................................3
Commission...............................................................................................3
Common Stock.............................................................................................3
Company..................................................................................................3
Company Notice...........................................................................................3
Company Request"and "Company Order.......................................................................3
Constituent Person.......................................................................................3
Conversion Agent.........................................................................................3
Conversion Price.........................................................................................3
Conversion Rate..........................................................................................4
Corporate Trust Office...................................................................................4
Corporation..............................................................................................4
Debt.....................................................................................................4
Defaulted Interest.......................................................................................4
Designated Senior Debt...................................................................................5
DTC......................................................................................................5
Dollar"or "$"............................................................................................5
Event of Default.........................................................................................5
Excess Amount............................................................................................5
Exchange Act.............................................................................................5
Expiration Time..........................................................................................5
GAAP.....................................................................................................5
Global Security..........................................................................................5
Government Obligations...................................................................................5
Holder...................................................................................................6
Indenture................................................................................................6
i
<PAGE>
Interest Payment Date....................................................................................6
Maturity.................................................................................................6
Notes....................................................................................................6
Notice of Default........................................................................................6
Officers'Certificate.....................................................................................6
Opinion of Counsel.......................................................................................6
Outstanding..............................................................................................6
Paying Agent.............................................................................................7
Payment Blockage Notice..................................................................................7
Person...................................................................................................7
Place of Conversion......................................................................................7
Place of Payment.........................................................................................8
Predecessor Security.....................................................................................8
Purchased Shares.........................................................................................8
Purchasers...............................................................................................8
Record Date..............................................................................................8
Redemption Date..........................................................................................8
Redemption Price.........................................................................................8
Regular Record Date......................................................................................8
Representative...........................................................................................8
Repurchase Date..........................................................................................8
Repurchase Price.........................................................................................8
Responsible Officer......................................................................................8
RF Power.................................................................................................9
Secured Debt.............................................................................................9
Securities Act...........................................................................................9
Security.................................................................................................9
Security Register"and "Security Registrar................................................................9
Senior Debt..............................................................................................9
Significant Subsidiary..................................................................................10
Special Record Date.....................................................................................10
Stated Maturity.........................................................................................10
Subsidiary..............................................................................................10
Third Party Expiration Time.............................................................................10
Third Party Purchased Shares............................................................................10
Trading Day.............................................................................................10
Triggering Event........................................................................................10
Trust Indenture Act.....................................................................................11
Trustee.................................................................................................11
United States...........................................................................................11
SECTION 1.2 Compliance Certificates and Opinions..............................................11
SECTION 1.3 Form of Documents Delivered to Trustee............................................12
SECTION 1.4 Acts of Holders; Record Dates.....................................................12
SECTION 1.5 Notices, etc., to Trustee and Company.............................................13
ii
<PAGE>
SECTION 1.6 Notice to Holders; Waiver.........................................................14
SECTION 1.7 Effect of Headings and Table of Contents..........................................14
SECTION 1.8 Successors and Assigns............................................................14
SECTION 1.9 Separability Clause...............................................................15
SECTION 1.10 Benefits of Indenture.............................................................15
SECTION 1.11 No Personal Liability.............................................................15
SECTION 1.12 Governing Law.....................................................................15
SECTION 1.13 Legal Holidays....................................................................15
SECTION 1.14 Conflict with Trust Indenture Act.................................................16
SECTION 1.15 Counterparts......................................................................16
ARTICLE II SECURITIES FORM...................................................................................16
SECTION 2.1 Designation of Securities; Form Generally.........................................16
SECTION 2.2 Form of Security..................................................................17
SECTION 2.3 Form of Trustee's Certificate of Authentication...................................26
SECTION 2.4 Form of Election of Holder to Require Repurchase..................................26
SECTION 2.5 Form of Conversion Notice.........................................................27
SECTION 2.6 Form of Assignment................................................................28
SECTION 2.7 Securities Issuable in Global Form................................................29
ARTICLE III THE SECURITIES....................................................................................30
SECTION 3.1 Title and Terms...................................................................30
SECTION 3.2 Denominations.....................................................................30
SECTION 3.3 Execution, Authentication, Delivery and Dating....................................31
SECTION 3.4 Global Securities.................................................................31
SECTION 3.5 Registration, Registration of Transfer and Exchange...............................32
SECTION 3.6 Mutilated, Destroyed, Lost and Stolen Securities..................................34
SECTION 3.7 Payment of Interest; Interest Rights Preserved....................................35
SECTION 3.8 Persons Deemed Owners.............................................................36
SECTION 3.9 Cancellation......................................................................37
SECTION 3.10 Computation of Interest...........................................................37
SECTION 3.11 CUSIP Numbers.....................................................................37
ARTICLE IV SATISFACTION AND DISCHARGE.........................................................................38
SECTION 4.1 Satisfaction and Discharge of Indenture...........................................38
SECTION 4.2 Application of Trust Funds........................................................39
ARTICLE V REMEDIES............................................................................................39
SECTION 5.1 Events of Default.................................................................39
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment................................41
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee...................42
SECTION 5.4 Trustee May File Proofs of Claim..................................................43
SECTION 5.5 Trustee May Enforce Claims Without Possession of Securities. .....................43
SECTION 5.6 Application of Money Collected....................................................44
iii
<PAGE>
SECTION 5.7 Limitation on Suits...............................................................44
SECTION 5.8 Unconditional Right of Holders to Receive Principal (Premium,
if any) and Interest............................................................45
SECTION 5.9 Restoration of Rights and Remedies................................................45
SECTION 5.10 Rights and Remedies Cumulative....................................................45
SECTION 5.11 Delay or Omission Not Waiver......................................................46
SECTION 5.12 Control by Holders of Securities..................................................46
SECTION 5.13 Waiver of Past Defaults...........................................................46
SECTION 5.14 Waiver of Usury, Stay or Extension Laws...........................................47
SECTION 5.15 Undertaking for Costs.............................................................47
SECTION 5.16 Notice of Default or Event of Default.............................................47
ARTICLE VI THE TRUSTEE........................................................................................48
SECTION 6.1 Notice of Defaults................................................................48
SECTION 6.2 Certain Duties and Responsibilities...............................................48
SECTION 6.3 Not Responsible for Recitals or Issuance of Securities............................49
SECTION 6.4 May Hold Securities...............................................................49
SECTION 6.5 Money Held in Trust...............................................................50
SECTION 6.6 Compensation and Reimbursement....................................................50
SECTION 6.7 Corporate Trustee Required; Eligibility...........................................51
SECTION 6.8 Resignation and Removal; Appointment of Successor.................................51
SECTION 6.9 Acceptance of Appointment by Successor............................................53
SECTION 6.10 Merger, Conversion, Consolidation or Succession to Business.......................53
SECTION 6.11 Appointment of Authenticating Agent...............................................54
SECTION 6.12 Preferential Collection of Claims Against Company.................................55
SECTION 6.13 Disqualification; Conflicting Interests...........................................55
SECTION 6.14 Certain Rights of Trustee.........................................................56
ARTICLE VII HOLDERS'LISTS AND REPORTS BY TRUSTEE AND COMPANY..................................................57
SECTION 7.1 The Company to Furnish Trustee Names and Addresses of Holders.....................57
SECTION 7.2 Reports by Trustee................................................................57
SECTION 7.3 Reports by Company................................................................57
SECTION 7.4 Preservation Of Information; Communications to Holders............................58
ARTICLE VIII CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE.................................................58
SECTION 8.1 Company May Consolidate, Etc., Only on Certain Terms..............................58
SECTION 8.2 Successor Substituted.............................................................59
ARTICLE IX SUPPLEMENTAL INDENTURES............................................................................59
SECTION 9.1 Supplemental Indentures Without Consent of Holders................................59
SECTION 9.2 Supplemental Indentures with Consent of Holders...................................60
SECTION 9.3 Execution of Supplemental Indentures..............................................61
SECTION 9.4 Effect of Supplemental Indentures.................................................62
SECTION 9.5 Conformity with Trust Indenture Act...............................................62
iv
<PAGE>
SECTION 9.6 Reference in Securities to Supplemental Indentures................................62
SECTION 9.7 Notice of Supplemental Indentures.................................................62
ARTICLE X COVENANTS...........................................................................................63
SECTION 10.1 Payment of Principal, Premium and Interest........................................63
SECTION 10.2 Maintenance of Office or Agency...................................................63
SECTION 10.3 Money for Securities Payments to Be Held in Trust.................................64
SECTION 10.4 Existence.........................................................................65
SECTION 10.5 Maintenance of Properties.........................................................65
SECTION 10.6 Payment of Taxes and Other Claims.................................................65
SECTION 10.7 Statement as to Compliance........................................................66
SECTION 10.8 Waiver of Certain Covenants.......................................................66
SECTION 10.9 Statement by Officers as to Default...............................................66
ARTICLE XI REDEMPTION OF SECURITIES...........................................................................66
SECTION 11.1 Right of Redemption...............................................................66
SECTION 11.2 Applicability of Article..........................................................67
SECTION 11.3 Election to Redeem; Notice to Trustee.............................................67
SECTION 11.4 Selection by Trustee of Securities to Be Redeemed.................................67
SECTION 11.5 Notice of Redemption..............................................................67
SECTION 11.6 Deposit of Redemption Price.......................................................68
SECTION 11.7 Securities Payable on Redemption Date.............................................69
SECTION 11.8 Securities Redeemed in Part.......................................................69
SECTION 11.9 Conversion Arrangement on Call For Redemption.....................................69
ARTICLE XII PURCHASE OF SECURITIES AT THE OPTION
OF HOLDERS UPON THE CHANGE OF CONTROL.............................................................70
SECTION 12.1 Right to Require Repurchase.......................................................70
SECTION 12.2 Conditions to The Company's Election to Pay the Repurchase
Price in Common Stock...........................................................71
SECTION 12.3 Notices; Method of Exercising Repurchase Right, Etc...............................72
SECTION 12.4 Certain Definitions...............................................................75
SECTION 12.5 Consolidation, Merger, Etc................................................................76
ARTICLE XIII SUBORDINATION....................................................................................76
SECTION 13.1 Agreement to Subordinate..........................................................76
SECTION 13.2 Liquidation; Dissolution; Bankruptcy..............................................77
SECTION 13.3 No Payment in Certain Circumstances, Payment over of Proceeds
upon Dissolution, Etc...........................................................77
SECTION 13.4 Prior Payment of Senior Debt Upon Acceleration of Securities......................78
SECTION 13.5 When Distribution Must Be Paid Over...............................................79
SECTION 13.6 Reliance on Judicial Order or Certificate of Liquidating Agent....................79
SECTION 13.7 Subrogation.......................................................................79
SECTION 13.8 Relative Rights...................................................................79
v
<PAGE>
SECTION 13.9 Subordination May Not Be Impaired By Company......................................80
SECTION 13.10 Distribution or Notice to Representative..........................................80
SECTION 13.11 Rights of Trustee and Paying Agent................................................80
SECTION 13.12 Notice to Trustee.................................................................80
SECTION 13.13 Payment Permitted If No Default...................................................81
SECTION 13.14 Trustee to Effectuate Subordination...............................................82
SECTION 13.15 Reliance by Holders of Senior Debt on Subordination Provisions....................82
SECTION 13.16 Rights of Trustee as Holder of Senior Debt; Preservation of
Trustee's Rights................................................................82
SECTION 13.17 Article Applicable to Paying Agents...............................................82
SECTION 13.18 Determination of Certain Conversions and Repurchases as
Payments........................................................................83
ARTICLE XIV CONVERSION OF SECURITIES..........................................................................83
SECTION 14.1 Conversion Privilege And Conversion Rate..........................................83
SECTION 14.2 Exercise Of Conversion Privilege..................................................84
SECTION 14.3 Fractions Of Shares...............................................................84
SECTION 14.4 Adjustment Of Conversion Rate.....................................................85
SECTION 14.5 Notice Of Adjustments Of Conversion Rate..........................................92
SECTION 14.6 Notice Of Certain Corporate Action................................................93
SECTION 14.7 Company To Reserve Common Stock...................................................94
SECTION 14.8 Taxes On Conversions..............................................................94
SECTION 14.9 Covenant As To Common Stock.......................................................94
SECTION 14.10 Cancellation Of Converted Securities..............................................94
SECTION 14.11 Provisions In Case Of Consolidation, Merger Or Sale Of Assets.....................94
SECTION 14.12 Responsibility of Trustee for Conversion Provisions...............................95
ARTICLE XV MEETINGS OF HOLDERS OF SECURITIES..................................................................96
SECTION 15.1 Purposes For Which Meetings May Be Called.........................................96
SECTION 15.2 Call, Notice And Place Of Meetings................................................96
SECTION 15.3 Persons Entitled To Vote At Meetings..............................................97
SECTION 15.4 Quorum; Action....................................................................97
SECTION 15.5 Determination Of Voting Rights; Conduct And Adjournment Of
Meetings........................................................................98
SECTION 15.6 Counting Votes And Recording Action Of Meetings...................................98
</TABLE>
vi
<PAGE>
This Indenture (this "Indenture") is dated as of _________ __, 1999,
by and between Advanced Energy Industries, Inc., a Delaware corporation (the
"Company"), having its principal office at 1625 Sharp Point Drive, Fort
Collins, Colorado 80525, and State Street Bank and Trust Company of
California, N.A., a national banking association, as Trustee hereunder (the
"Trustee"), having its Corporate Trust Office (as defined below) at 633 West
5th Street, 12th Floor, Los Angeles, California 90071.
RECITALS
The Company deems it necessary and advisable to issue a series of
debt securities designated as the [ ]% Convertible Subordinated Notes due
2006 (the "Securities") evidencing its unsecured subordinated indebtedness,
and has duly authorized the execution and delivery of this Indenture to
provide for the issuance of the Securities.
This Indenture is subject to the provisions of the Trust Indenture
Act of 1939, as amended, that are deemed to be incorporated into this
Indenture and shall, to the extent applicable, be governed by such provisions.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligation of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION I.1 Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
1
<PAGE>
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(4) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision;
"Act," when used with respect to any Holder, has the meaning
specified in Section 1.4.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Aggregate Cash Distribution Amount" has the meaning specified in
Section 14.4(5).
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.11 to act on behalf of the Trustee to authenticate
Securities.
"Authorized Newspaper" means a newspaper, printed in the English
language or in an official language of the place of publication, customarily
published on each day that is a Business Day in the place of publication,
whether or not published on days that are not Business Days in the place of
publication, and of general circulation in each place in connection with
which the term is used or in the financial community of each such place.
Whenever successive publications are required to be made in Authorized
Newspapers, the successive publications may be made in the same or in
different Authorized Newspapers in the same city meeting the foregoing
requirements and in each case on any day that is a Business Day in the place
of publication.
"Board of Directors" means the board of directors of the Company or
any committee of that board duly authorized to act hereunder, as the case may
be.
"Board Resolution" means a copy of a resolution of the Company,
certified by the Secretary or an Assistant Secretary of the Company to have
been duly adopted by the Board of Directors and to be in full force and
effect on the date of such certification, which is delivered to the Trustee.
"Business Day" when used with respect to any Place of Payment, Place
of Conversion or any other location referred to in this Indenture or in the
Securities, means any day, other than a Saturday, Sunday or other day on
which banking institutions in that Place of Payment, Place of Conversion or
location are authorized or obligated by law, regulation or executive order to
close.
2
<PAGE>
"Capital Stock" means with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) in equity of such Person, whether now
outstanding or issued after the Closing Date, including, without limitation,
all common stock and preferred stock.
"Change in Control" has the meaning specified in Section 12.4.
"Closing Price Per Share" has the meaning specified in Section 12.4.
"Commission" means the United States Securities and Exchange
Commission, as from time to time constituted, created under the Exchange Act,
or, if at any time after execution of this Indenture such Commission is not
existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties on such date.
"Common Stock" means the Common Stock, par value $0.001 per share,
of the Company authorized at the date of this instrument as originally
executed. Subject to the provisions of Section 14.11, shares issuable on
conversion or repurchase of Securities shall include only shares of Common
Stock or shares of any class or classes of common stock resulting from any
reclassification or reclassifications thereof; provided, however, that if at
any time there shall be more than one such resulting class, the shares so
issuable on conversion of Securities shall include shares of all such
classes, and the shares of each such class then so issuable shall be
substantially in the proportion which the total number of shares of such
class resulting from all such reclassifications bears to the total number of
shares of all such classes resulting from all such reclassifications.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor Company shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Company.
"Company Notice" has the meaning specified in Section 12.3.
"Company Request" and "Company Order" mean, respectively, a written
request or order signed in the name of and on behalf of the Company by its
Chairman of the Board, its President or a Vice President, and by its Chief
Financial Officer, its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary of the Company, and which is delivered to the Trustee.
"Constituent Person" has the meaning specified in Section 14.11.
"Conversion Agent" means any Person authorized by the Company to
convert Securities in accordance with Article XIV. The Company has initially
appointed the Trustee as its Conversion Agent pursuant to Section 10.2 hereof.
3
<PAGE>
"Conversion Price" shall equal $1,000 divided by the Conversion Rate
(rounded to the nearest cent).
"Conversion Rate" has the meaning specified in Section 14.1.
"Corporate Trust Office" means the corporate trust office of the
Trustee at which, at any particular time, the trust created by this Indenture
shall be administered, which office at the date hereof is located at 633 West
5th Street, 12th Floor, Los Angeles, California 90071, attention: Corporate
Trust Department (Advanced Energy Industries, Inc.), except that for purposes
of Section 10.2 and all other references to a Corporate Trust Office in the
Borough of Manhattan, City of New York, such term shall mean the office or
agency of the Trustee in the Borough of Manhattan, the City of New York,
which office at the date hereof is located at State Street Bank and Trust
Company, N.A., 61 Broadway, New York, New York 10006, attention: Corporate
Trust Department (Advanced Energy Industries, Inc.)
"Corporation" includes corporations, limited liability companies,
partnerships, joint stock companies, associations, companies and business and
real estate investment trusts.
"Debt" of the Company or any Subsidiary means any indebtedness of
the Company or any Subsidiary, whether or not contingent, in respect of (i)
borrowed money or evidenced by bonds, notes, debentures or similar
instruments, (ii) indebtedness secured by any mortgage, pledge, lien, charge,
encumbrance or any security interest existing on property owned by the
Company or any Subsidiary, (iii) letters of credit or amounts representing
the balance deferred and unpaid of the purchase price of any property except
any such balance that constitutes an accrued expense or trade payable or (iv)
any lease of property by the Company or any Subsidiary as lessee which is
reflected on the Company's consolidated balance sheet as a capitalized lease
in accordance with GAAP, in the case of items of indebtedness under (i)
through (iii) above to the extent that any such items (other than letters of
credit) would appear as a liability on the Company's consolidated balance
sheet in accordance with GAAP, and also includes, to the extent not otherwise
included, any obligation by the Company or any Subsidiary to be liable for,
or to pay, as obligor, guarantor or otherwise (other than for purposes of
collection in the ordinary course of business), indebtedness of another
person (other than the Company or any Subsidiary) and all renewals,
extensions, refundings, deferrals, restructurings, amendments and
modifications of any such indebtedness, obligation or guarantee (it being
understood that "Debt" shall be deemed to be incurred by the Company and its
Subsidiaries on a consolidated basis whenever the Company and its
Subsidiaries on a consolidated basis shall create, assume, guarantee or
otherwise become liable in respect thereof); Debt of a Subsidiary of the
Company existing prior to the time it became a Subsidiary of the Company
shall be deemed to be incurred upon such Subsidiary's becoming a Subsidiary
of the Company; and Debt of a Person existing prior to a merger or
consolidation of such Person with the Company or any Subsidiary of the
Company in which such Person is the successor of the Company or such
Subsidiary shall be deemed to be incurred upon the consummation of such
merger or consolidation; provided, however, that the term "Debt" shall not
include any indebtedness that has been the subject of an "in substance"
defeasance in accordance with GAAP.
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"Defaulted Interest" has the meaning specified in Section 3.7.
"Designated Senior Debt" means the Company's obligations under that
certain Loan and Security Agreement dated December 8, 1997, as now in effect
and as the same may be amended from time to time, by and among the Company as
Borrower, Silicon Valley Bank, as Servicing Agent and a Bank, and Bank of
Hawaii, as a Bank (such capitalized terms being understood to have the
meanings ascribed thereto in the Credit Agreement), and any particular Senior
Debt 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 indebtedness shall be
"Designated Senior Debt" for purposes of the Indenture (provided that such
instrument, agreement or other document may place limitations and conditions
on the right of such Senior Debt to exercise the rights of Designated Senior
Debt), in each case, including any amendments, replacements, supplements or
other modifications thereto, or any refinancings or extensions thereof, in
whole or in part.
"DTC" means The Depository Trust Company for so long as it shall be
a clearing agency registered under the Exchange Act, or such successor as the
Company shall designate from time to time in an Officers' Certificate
delivered to the Trustee.
"Dollar" or "$" means a dollar or other equivalent unit in such coin
or currency of the United States of America as at the time shall be legal
tender for the payment of public and private debts.
"Event of Default" has the meaning specified in Section 5.1.
"Excess Amount" has the meaning specified in Section 14.4(5).
"Exchange Act" means the Securities Exchange Act of 1934 and any
successor statute thereto, in each case as amended from time to time, and the
rules and regulations of the Commission thereunder.
"Expiration Time" has the meaning specified in Section 14.4(6).
"GAAP" means generally accepted accounting principles, as in effect
from time to time, as used in the United States applied on a consistent
basis; provided that, solely for purposes of any calculation required or
permitted hereunder, "GAAP" shall mean generally accepted accounting
principles as used in the United States on the date hereof, applied on a
consistent basis.
"Global Security" means a Security that is registered in the
Security Register in the name of DTC or a nominee thereof or a substitute
depositary or a nominee of such substitute depositary.
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"Government Obligations" means securities which are (i) direct
obligations of the United States of America, for the payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled
or supervised by and acting as an agency or instrumentality of the United
States of America, the payment of which is unconditionally guaranteed as a
full faith and credit obligation by the United States of America, which, in
either case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank or
trust company as custodian with respect to any such Government Obligation or
a specific payment of interest on or principal of any such Government
Obligation held by such custodian for the account of the holder of a
depository receipt, provided that (except as required by law) such custodian
is not authorized to make any deduction from the amount payable to the holder
of such depository receipt from any amount received by the custodian in
respect of the Government Obligation or the specific payment of interest on
or principal of the Government Obligation evidenced by such depository
receipt.
"Holder" means the Person in whose name such Security is registered
in the Security Register.
"Indenture" means this instrument as originally executed or as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions
hereof, including, for all purposes of this instrument and any supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Interest Payment Date" means the Stated Maturity of an installment
of interest on the Securities.
"Maturity" when used with respect to any Security, means the date
on which the principal of (and premium, if any, on) such Security or an
installment of principal or premium becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, notice of redemption or repurchase, repurchase or otherwise,
and includes the Redemption Date.
"Notes" has the meaning specified in Section 2.1.
"Notice of Default" has the meaning specified in Section 5.1.
"Officers' Certificate" means a certificate signed by the Chairman
of the Board of Directors, the Chief Executive Officer, the President, the
Chief Financial Officer of the Company or an Executive Vice President and by
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary of the Company, and which is delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company and who shall be acceptable to the Trustee.
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"Outstanding" when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or the
Security Registrar or delivered to the Trustee or Security Registrar for
cancellation;
(ii) Securities for whose payment, redemption or repurchase
money in the necessary amount has been theretofore deposited with the Trustee
or any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Securities, provided that, if such
Securities are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the Trustee
has been made; and
(iii) Securities which have been paid pursuant to Section 3.6
or in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any such
Securities in respect of which there shall have been presented to the Trustee
proof satisfactory to it that such Securities are held by a bona fide
purchaser in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any
request, demand, authorization, direction, notice, consent or waiver
hereunder, and for the purpose of making the calculations required by Trust
Indenture Act Section 313, Securities owned by the Company or any other
obligor upon the Securities or any Affiliate of the Company or of such other
obligor shall be disregarded and deemed not to be Outstanding, except that,
in determining whether the Trustee shall be protected in making such
determination or calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which a
Responsible Officer of the Trustee actually knows to be so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and
that the pledgee is not the Company or any other obligor upon the Securities
or any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Payment Blockage Notice" has the meaning specified in Section 13.3.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, real estate investment trust or government or
any agency or political subdivision thereof or other entity of any kind.
"Place of Conversion" has the meaning specified in Section 3.1.
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"Place of Payment" means the place or places where the principal of
(and premium, if any) and interest on the Securities are payable as specified
as contemplated by Sections 3.1 and 10.2. Such term shall include the Company
if it shall act as its own Paying Agent.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 3.6 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security
shall be deemed to evidence the same debt as the mutilated, destroyed, lost
or stolen Security.
"Purchased Shares" has the meaning specified in Section 14.4(6).
"Purchasers" has the meaning specified in Section 11.9.
"Record Date" means any Regular Record Date on Special Record Date.
"Redemption Date" when used with respect to any Security to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price" when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest
Payment Date on the Securities means the date specified for that purpose as
contemplated by Section 3.1, whether or not a Business Day.
"Representative" means the (a) indenture trustee or other trustee,
agent or representative for any Senior Debt or (b) with respect to any Senior
Debt that does not have any such trustee, agent or other representative, (i)
in the case of such Senior Debt issued pursuant to an agreement providing for
voting arrangements as among the holders or owners of such Senior Debt, any
holder or owner of such Senior Debt acting with the consent of the required
persons necessary to bind such holders or owners of such Senior Debt and (ii)
in the case of all other such Senior Debt, the holder or owner of such Senior
Debt.
"Repurchase Date" when used with respect to any Security to be
repurchased at the option of the Holder, means the date fixed for such
repurchase specified in Section 12.1.
"Repurchase Price" when used with respect to any Security to be
repurchased at the option of the Holder, means the price at which it is to be
repurchased specified in Section 12.1.
"Responsible Officer" when used with respect to the Trustee, means any
officer in the Corporate Trust Office of the Trustee or any other officer of the
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means,
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with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of such officer's knowledge and
familiarity with the particular subject.
"RF Power" means RF Power Products, Inc., a New Jersey corporation,
or any other subsidiary of the Company who is the successor in interest to
the assets of RF Power Products, Inc.
"Secured Debt" means, without duplication, Debt that is secured by a
mortgage, trust deed, deed of trust, deed to secure Debt, security agreement,
pledge, conditional sale or other title retention agreement, capitalized
lease, or other like agreement granting or conveying security title to or a
security interest in real property or other tangible assets.
"Securities Act" means the Securities Act of 1933 and any successor
statute thereto, in each case as amended from time to time, and the rules and
regulations of the Commission thereunder.
"Security" has the meaning stated in the first recital of this
Indenture and, more particularly, means any Security or Securities
authenticated and delivered under this Indenture.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
"Senior Debt" means the principal of (and premium, if any) and
interest (including all interest accruing subsequent to the commencement of
any bankruptcy or similar proceeding, whether or not a claim for
post-petition interest is allowable as a claim in such proceeding) on, and
all fees and other amounts payable in connection with, the following, whether
absolute or contingent secured or unsecured, due or to become due, whether
outstanding at the date of execution of this Indenture or thereafter
incurred, created or assumed: (a) indebtedness of the Company evidenced by a
credit or loan agreement, note, bond, debenture or other written obligation,
(b) all obligations of the Company for money borrowed, (c) all obligations of
the Company evidenced by a note or similar instrument given in connection
with the acquisition of any businesses, properties or assets of any kind, (d)
obligations of the Company (i) as lessee under leases required to be
capitalized on the balance sheet of the lessee under GAAP and (ii) as lessee
under other leases for facilities, capital equipment or related assets,
whether or not capitalized, entered into or leased for financing purposes,
(e) all obligations of the Company under interest rate and currency swaps,
caps, floors, collars, hedge agreements, forward contracts or similar
agreements or arrangements, (f) all obligations of the Company with respect
to letters of credit, bankers' acceptances and similar facilities (including
reimbursement obligations with respect to the foregoing), (g) all obligations
of the Company issued or assumed as the deferred purchase price of property
or services (but excluding trade accounts payable and accrued liabilities),
(h) all obligations of the type referred to in clauses (a) through (g) above
of another Person, the payment of which, in either case, the Company has
assumed or guaranteed, or for which the Company is responsible or liable,
directly or indirectly, jointly or severally, as obligor, guarantor or
otherwise, or which is secured by a lien on the property of the Company, and
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(i) renewals, extensions, modifications, replacements, restatements and
refundings of, or any indebtedness or obligation issued in exchange for, any
such indebtedness or obligation described in clauses (a) through (h) of this
paragraph; provided, however, that Senior Debt shall not include the
Securities or any such indebtedness or obligation if the terms of such
indebtedness or obligation (or the terms of the instrument under which, or
pursuant to which it is issued) expressly provide that such indebtedness or
obligation is not superior in right of payment to the Securities.
"Significant Subsidiary" means any Subsidiary which is a
"significant subsidiary" (as defined in Article I, Rule 1-02 of Regulation
S-X, promulgated under the Securities Act) of the Company.
"Special Record Date" for the payment of any Defaulted Interest on
the Securities means a date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity" when used with respect to any Security or any
installment of principal thereof, premium thereon or interest thereon, means
the date specified in such Security as the fixed date on which the principal
of such Security or such installment of principal, premium or interest is due
and payable.
"Subsidiary" means (a) a corporation at least a majority of the
outstanding voting stock of which is owned, directly or indirectly, by the
Company or by one or more other Subsidiaries of the Company or (b) a Person
(other than a corporation) in which the Company or one or more other
Subsidiaries, directly or indirectly, has at least a majority equity
ownership. For the purposes of this definition, "voting stock" means stock
having voting power for the election of directors, or persons performing
similar functions, whether at all times or only so long as no senior class of
stock has such voting power by reason of any contingency.
"Third Party Expiration Time" has the meaning specified in Section
14.4(8).
"Third Party Purchased Shares" has the meaning specified in Section
14.4(8).
"Trading Day" means (i) if the Common Stock is quoted on the Nasdaq
National Market or any other system of automated dissemination of quotations
of securities prices, days on which trades may be effected through such
system, (ii) if the Common Stock is listed or admitted for trading on any
national or regional securities exchange, days on which such national or
regional securities exchange is open for business, or (iii) if the Common
Stock is not listed on a national or regional securities exchange or quoted
on the Nasdaq National Market or any other system of automated dissemination
of quotation of securities prices, days on which the Common Stock is traded
regular way in the over-the-counter market and for which a closing bid and a
closing asked price for the Common Stock are available.
"Triggering Event" has the meaning specified in Section 14.4(9).
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"Trust Indenture Act" means the Trust Indenture Act of 1939, and the
rules and regulations thereunder, as in force at the date as of which this
Indenture was executed, provided, however, that in the event the Trust Indenture
Act of 1939 is amended after such date, "Trust Indenture Act" means, to the
extent required by any such amendment, the Trust Indenture Act of 1939, and the
rules and regulations thereunder, as so amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder.
"United States" means the United States of America (including the
states and the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction.
SECTION I.2 Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate in form and substance satisfactory to the
Trustee 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 in form and substance satisfactory to the Trustee stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (including certificates
delivered pursuant to Section 10.9) shall include:
(1) a statement that each individual signing such certificate
or opinion has read such condition or covenant and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he or she has made such examination or investigation as is necessary to enable
the individual to express an informed opinion as to whether or not such
condition or covenant has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
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SECTION I.3 Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion as to some matters and one or more
other such Persons as to other matters, and any such Person may certify or give
an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon an Opinion of Counsel, or a
certificate or representations by counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the Opinion of Counsel,
certificate or representations with respect to the matters upon which his or her
certificate or opinion is based are erroneous. Any such Opinion of Counsel,
certificate or representations may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, an officer or
officers of the Company stating that the information as to such factual matters
is in the possession of the Company, unless such counsel or officer knows, or in
the exercise of reasonable care should know, that the certificate, opinion or
representations as to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION I.4 Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders of the Outstanding Securities, may be embodied in and evidenced by (1)
one or more instruments of substantially similar tenor signed by such Holders in
person or by agents duly appointed in writing or (2) the record of Holders of
Securities voting in favor thereof, either in person or by proxies duly
appointed in writing, at any meeting of Holders of Securities duly called and
held in accordance with the provisions of Article XV. Except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments or record are delivered to the Trustee and, where it is hereby
expressly required, to the Company. Such instrument or instruments and records
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or instruments
or so voting at such meeting. Proof of execution of any such instrument or of a
writing appointing any such agent, or of the holding by any Person of a
Security, shall be sufficient for any purpose of this Indenture and (subject to
Section 6.14) conclusive in favor of the Trustee and the Company and any agent
of the Trustee or the Company, if made in the manner provided in this Section.
The record of any meeting of Holders of Securities shall be proved in the manner
provided in Section 15.6.
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(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his or her individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his or her authority. The fact and date of the execution of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other reasonable manner which the Trustee deems
sufficient.
(c) The ownership of Securities shall be proved by the Security
Register.
(d) If the Company shall solicit from the Holders of Securities any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, in or pursuant to an Officer's Certificate, fix
in advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding the Trust
Indenture Act, Section 316(c), such record date shall be the record date
specified in or pursuant to such Board Resolution, which shall be a date not
earlier than the date 30 days prior to the first solicitation of Holders
generally in connection therewith and not later than the date such solicitation
is completed. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of record at the close of
business on such record date shall be deemed to be Holders for the purposes of
determining whether Holders of the requisite proportion of Outstanding
Securities have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for that
purpose the Outstanding Securities shall be computed as of such record date.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee, any
Security Registrar, any Paying Agent, any Authenticating Agent or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
SECTION I.5 Notices, etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing to or with
the Trustee at its Corporate Trust Office, or
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(2) the Company by the Trustee or by any Holder shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first class postage prepaid, to the Company addressed to it
at the address of its principal office specified in the first paragraph of this
Indenture or at any other address previously furnished in writing to the Trustee
by the Company.
SECTION I.6 Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to Holders of
Securities by the Company or the Trustee, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each such Holder affected by such event, at such
Holder's address as it appears in the Security Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Holders of Securities is given by
mail, neither the failure to mail such notice, nor any defect in any notice so
mailed, to any particular Holder shall affect the sufficiency of such notice
with respect to other Holders of Securities. Any notice mailed to a Holder in
the manner herein prescribed shall be deemed to have been given when such notice
is mailed.
If by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice by mail, then such
notification to Holders of Securities as shall be made with the approval of the
Trustee shall constitute a sufficient notification to such Holders for every
purpose hereunder.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
SECTION I.7 Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION I.8 Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall be
binding on their successors and assigns, whether so expressed or not.
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SECTION I.9 Separability Clause.
In case any provision in this Indenture or in any Security shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION I.10 Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the Parties hereto, any Security Registrar,
any Paying Agent, any Authenticating Agent and their successors hereunder and
the Holders any benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION I.11 No Personal Liability.
No recourse under or upon any obligation, covenant or agreement
contained in this Indenture, in any Security or because of any indebtedness
evidenced thereby, shall be had against any incorporator, as such, or against
any past, present or future stockholder, officer or director, as such, of the
Company or of any successor, either directly or through the Company or any
successor, under any rule of law, statute or constitutional provision or by the
enforcement of any assessment or by any legal or equitable proceeding or
otherwise, all such liability being expressly waived and released by the
acceptance of the Securities by the Holders thereof and as part of the
consideration for the issue of the Securities.
SECTION I.12 Governing Law.
This Indenture and the Securities shall be governed by and construed in
accordance with the internal laws of the State of New York, without regard to
the principles of conflict of law.
SECTION I.13 Legal Holidays.
In any case where any Interest Payment Date, Repurchase Date,
Redemption Date, Stated Maturity or Maturity of any Security shall not be a
Business Day at any Place of Payment or Place of Conversion, then
(notwithstanding any other provision of this Indenture or any Security other
than a provision in the Securities which specifically states that such provision
shall apply in lieu hereof), payment of interest or principal (and premium, if
any) need not be made at such Place of Payment or Place of Conversion on such
date, but may be made on the next succeeding Business Day at such Place of
Payment or Place of Conversion with the same force and effect as if made on the
Interest Payment Date, Repurchase Date or Redemption Date, or at the Stated
Maturity or Maturity, provided that no interest shall accrue on the amount so
payable for the period from and after such Interest Payment Date, Repurchase
Date, Redemption Date, Stated Maturity or Maturity, as the case may be, so long
as payment is made on such succeeding Business Day.
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SECTION I.14 Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision
of the Trust Indenture Act that is required under the Trust Indenture Act to be
a part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
SECTION I.15 Counterparts.
This Indenture may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
ARTICLE II
SECURITIES FORM
SECTION II.1 Designation of Securities; Form Generally.
Pursuant to the terms hereof, the Company hereby creates a series of
its debt securities designated as the "[ ]% Convertible Subordinated Notes due
2006" (the "Notes"), which Notes shall be deemed "Securities" for all purposes
hereunder.
The Securities shall be in substantially the form set forth in this
Article, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange, the Internal Revenue Code of 1986, as amended, and
regulations thereunder (the "Code"), or as may, consistent herewith, be
determined by the officers executing such Securities, as evidenced by their
execution thereof. All Securities shall be in fully registered form, without
coupon.
The Trustee's certificates of authentication shall be in substantially
the form set forth in Section 2.3.
Conversion notices shall be substantially in the form set forth in
Section 2.4.
Repurchase notices shall be substantially in the form set forth in
Section 2.5.
Assignments shall be substantially in the form set forth in Section
2.6.
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The Securities shall be printed, lithographed, typewritten or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any automated quotation system or securities
exchange (including on steel engraved borders if so required by any securities
exchange upon which the Securities may be listed) on which the Securities may be
quoted or listed, as the case may be, all as determined by the officers
executing such Securities, as evidenced by their execution thereof.
SECTION II.2 Form of Security.
[FORM OF NOTE FACE]
[THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH GLOBAL SECURITY:
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A
NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE COMPANY, THE TRUSTEE AND
ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS NOTE FOR ALL PURPOSES.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR
ITS AGENT FOR REGISTRATION 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.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
DEFINITIVE REGISTERED FORM IN THE LIMITED CIRCUMSTANCES REFERRED TO IN THE
INDENTURE, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY.]
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ADVANCED ENERGY INDUSTRIES, INC.
[ ]% CONVERTIBLE SUBORDINATED NOTE
DUE 2006
No. ________________ $_________________
CUSIP NO.
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ADVANCED ENERGY INDUSTRIES, INC., a corporation duly organized and
existing under the laws of the State of Delaware (herein called the
"Company", which term includes any successor Person under the Indenture
referred to on the reverse hereof), for value received, hereby promises to
pay to _____________________, the principal sum of ________ United States
Dollars ($______ ) [if this Security is a Global Security, then insert -
(which principal amount may from time to time be increased or decreased to
such other principal amounts (which, taken together with the principal
amounts of all other Outstanding Notes, shall not exceed [ ] in the
aggregate at any time) by adjustments made on the records of the Trustee
hereinafter referred to in accordance with the Indenture)] on [ ], 2006
and to pay interest thereon, from [ ], 1999, or from the most recent
Interest Payment Date (as defined below) to which interest has been paid or
duly provided for, semi-annually in arrears on [ ] and [ ] in each
year (each, an "Interest Payment Date"), commencing [ ], 2000, at
the rate of [ ]% per annum, until the principal hereof is due, and at the
rate of [ ]% per annum on any overdue principal and premium, if any, and, to
the extent permitted by law, on any overdue interest. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in the Indenture, be paid to the Person in whose name
this Note (or one or more Predecessor Securities) is registered at the close
of business on the Regular Record Date for such interest, which shall be the
[ ] or [ ](whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Except as otherwise provided in the
Indenture, any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record Date and
may either be paid to the Person in whose name this Note (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Company, notice whereof shall be given to Holders of Notes not less than 10
days prior to the Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any automated
quotation system or securities exchange on which the Notes may be quoted or
listed, and upon such notice as may be required by such exchange, all as more
fully provided in the Indenture. Payments of principal shall be made upon the
surrender of this Note at the Corporate Trust Office of the Trustee, or at
such other office or agency of the Company as may be designated by the
Company for such purpose, in the Borough of Manhattan, The City of New York,
in such coin or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and private debts, by
Dollar check drawn on, or transfer to, a Dollar account. Payments of interest
on this Note may be made by Dollar check, drawn on a Dollar account, mailed
to the address of the Person entitled thereto as such address shall appear in
the Security Register, or, upon written application by the Holder to the
Security Registrar setting forth wire instructions not later than the
relevant Record Date, by transfer to a Dollar account; provided however, that
transfers to Dollar accounts will be made only to Holders of an aggregate
principal amount of Notes in excess of $2,000,000.
Except as specifically provided herein and in the Indenture, the
Company shall not be required to make any payment with respect to any tax,
assessment or other governmental charge imposed by any government or any
political subdivision or taxing authority thereof or therein.
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Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof or an Authenticating Agent by the
manual signature of one of their respective authorized signatories, this Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed and delivered under its corporate seal.
Advance Energy Industries, Inc.
[Corporate Seal]
By:
Name:
Title:
Attest:
Name:
Title:
(Trustee's Certificate of Authentication)
This is one of the [ ]% Convertible Subordinated Notes due 2006
referred to in the within-mentioned Indenture.
STATE STREET BANK AND
TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
By:
Authorized Signatory
[FORM OF REVERSE]
This Note is one of a duly authorized issue of securities of the
Company designated as its "[ ]% Convertible Subordinated Notes due 2006"
(herein called the "Notes"), limited in aggregate principal amount to
$[ ], issued and to be issued under an Indenture, dated as of
[ ], 1999 (herein called the "Indenture"), between the
Company and
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State Street Bank and Trust Company of California, N.A., as Trustee (herein
called the "Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the
Trustee, the holders of Senior Debt and the Holders of the Notes and of the
terms upon which the Notes are, and are to be, authenticated and delivered.
As provided in the Indenture and subject to certain limitations therein set
forth, Notes are exchangeable for a like aggregate principal amount of Notes
of any authorized denominations as requested by the Holder surrendering the
same upon surrender of the Note or Notes to be exchanged, at the Corporate
Trust Office of the Trustee. The Trustee upon such surrender by the Holder
will issue the new Notes in the requested denominations.
No sinking fund is provided for the Notes.
The Notes are subject to redemption at the option of the Company at
any time on or after [ ], 2002, in whole or in part, upon not less
than 30 nor more than 60 days' notice to the Holders prior to the Redemption
Date at the following Redemption Prices (expressed as percentages of the
principal amount) for the twelve-month period beginning on [ ] of
the following years:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2002 [ ]%
2003 [ ]%
2004 [ ]%
2005 [ ]%
2006 [ ]%
</TABLE>
and thereafter at a Redemption Price equal to 100% of the principal amount,
together, in each case, with accrued and unpaid interest to the Redemption Date;
provided, however, that interest installments on Notes whose Stated Maturity is
on or prior to such Redemption Date will be payable to the Holders of such
Notes, or one or more Predecessor Securities, of record at the close of business
on the relevant Record Dates referred to on the face hereof, all as provided in
the Indenture.
In the event of a redemption of the Notes, the Company will not be
required (a) to register the transfer or exchange of Notes for a period of 15
days immediately preceding the date notice is given identifying the serial
numbers of the Notes called for such redemption or (b) to register the transfer
or exchange of any Note, or portion thereof, called for redemption.
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In any case where the due date for the payment of the principal of,
premium, if any, or interest on any Note or the last day on which a Holder of a
Note has a right to convert such Note shall be, at any Place of Payment or Place
of Conversion as the case may be, a day on which banking institutions at such
Place of Payment or Place of Conversion are authorized or obligated by law,
regulation or executive order to close, then payment of principal, premium, if
any, interest or delivery for conversion of such Note need not be made on or by
such date at such place but may be made on or by the next succeeding day at such
place which is not a day on which banking institutions are authorized or
obligated by law, regulation or executive order to close, with the same force
and effect as if made on the date for such payment or the date fixed for
redemption or repurchase, or by such last day for conversion, and no interest
shall accrue on the amount so payable for the period after such date.
Subject to and upon compliance with the provisions of the Indenture,
the Holder of this Note is entitled, at such Holder's option, at any time
following the original issue date of the Notes and on or before the close of
business on the Business Day immediately preceding [ ], 2006, or in
case this Note or a portion hereof is called for redemption or the Holder
hereof has exercised his or her right to require the Company to repurchase
this Note or such portion hereof, then in respect of this Note until but
(unless the Company defaults in making the payment due upon redemption or
repurchase, as the case may be) not after, the close of business on Business
Day immediately preceding the Redemption Date or the Repurchase Date, as the
case may be, to convert this Note (or any portion of the principal amount
hereof that is an integral multiple of $1,000, provided that the unconverted
portion of such principal amount is $1,000 or any integral multiple of $1,000
in excess thereof) into fully paid and nonassessable shares of Common Stock
of the Company at an initial Conversion Rate of [ ] shares of Common Stock
for each $1,000 principal amount of Notes (or at the current adjusted
Conversion Rate if an adjustment has been made as provided in the Indenture,
including pursuant to Section 14.4(2)) by surrender of this Note, duly
endorsed or assigned to the Company or in blank and, in case such surrender
shall be made during the period from the close of business on any Regular
Record Date next preceding any Interest Payment Date to the opening of
business on such Interest Payment Date (except if this Note or portion
thereof has been called for redemption on a Redemption Date or is
repurchasable on a Repurchase Date and the conversion rights of this Note, or
such portion thereof, would terminate during the period between such Regular
Record Date and the close of business on such Interest Payment Date), also
accompanied by payment in New York Clearing House or other funds acceptable
to the Company of an amount equal to the interest payable on such Interest
Payment Date on the principal amount of this Note then being converted, and
also the conversion notice hereon duly executed, to the Company at the
Corporate Trust Office of the Trustee, or at such other office or agency of
the Company, subject to any laws or regulations applicable thereto and
subject to the right of the Company to terminate the appointment of any
Conversion Agent (as defined below) as may be designated by it for such
purpose, in the Borough of Manhattan, The City of New York, or at such other
offices or agencies as the Company may designate (each a "Conversion Agent"),
provided, however, that if this Note or portion hereof has been called for
redemption on a Redemption Date or is repurchasable on a Repurchase Date and
the conversion rights of this Note, or such portion
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thereof, would terminate during the period between such Regular Record Date
and the close of business on such Interest Payment Date, then the Holder of
this Note on such Regular Record Date will be entitled to receive the
interest accruing hereon from the Interest Payment Date next preceding the
date of such conversion to such succeeding Interest Payment Date and the
Holder of this Note who converts this Note or a portion hereof during such
period shall not be required to pay such interest upon surrender of this Note
for conversion. Subject to the provisions of the preceding sentence and, in
the case of a conversion after the close of business on the Regular Record
Date next preceding any Interest Payment Date and on or before the close of
business on such Interest Payment Date, to the right of the Holder of this
Note (or any Predecessor Security of record as of such Regular Record Date)
to receive the related installment of interest to the extent and under the
circumstances provided in the Indenture, no cash payment or adjustment is to
be made on conversion for interest accrued hereon from the Interest Payment
Date next preceding the day of conversion, or for dividends on the Common
Stock issued on conversion hereof. The Company shall thereafter deliver to
the Holder the fixed number of shares of Common Stock (together with any cash
adjustment, as provided in the Indenture) into which this Note is convertible
and such delivery will be deemed to satisfy the Company's obligation to pay
the principal amount of this Note. No fractions of shares or scrip
representing fractions of shares will be issued on conversion, but instead of
any fractional interest (calculated to the nearest 1/100th of a share) the
Company shall pay a cash adjustment as provided in the Indenture. The
Conversion Rate is subject to adjustment as provided in the Indenture. In
addition, the Indenture provides that in case of certain consolidations or
mergers to which the Company is a party (other than a consolidation or merger
that does not result in any reclassification, conversion, exchange or
cancellation of the Common Stock) or the conveyance, transfer, sale or lease
of all or substantially all of the property and assets of the Company, the
Indenture shall be amended, without the consent of any Holders of Notes, so
that this Note, if then Outstanding, will be convertible thereafter, during
the period this Note shall be convertible as specified above, only into the
kind and amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance, transfer, sale or lease by a holder of the
number of shares of Common Stock of the Company into which this Note could
have been converted immediately prior to such consolidation, merger,
conveyance, transfer, sale or lease (assuming such holder of Common Stock is
not a Constituent Person or an Affiliate of a Constituent Person, failed to
exercise any rights of election and received per share the kind and amount
received per share by a plurality of Non-electing Shares and further
assuming, if such consolidation, merger, conveyance, transfer, sale or lease
occurs prior to the original issue date of the Notes, that the Note was
convertible at the time of such occurrence at the Conversion Rate specified
above as adjusted from the issue date of such Note to such time as provided
in the Indenture). No adjustment in the Conversion Rate will be made until
such adjustment would require an increase or decrease of at least one percent
of such price, provided that any adjustment that would otherwise be made, but
for the application of the foregoing, will be carried forward and taken into
account in the computation of any subsequent adjustment.
If a Change in Control occurs, the Holder of this Note, at the Holder's
option, shall have the right, in accordance with the provisions of the
Indenture, to require the Company to repurchase this Note (or any portion of the
principal amount hereof that is equal to $1,000 or an
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integral multiple of $1,000 in excess thereof) for cash at a Repurchase Price
equal to 100% of the principal amount thereof plus interest accrued to the
Repurchase Date. At the option of the Company, the Repurchase Price may be
paid in cash or, subject to the conditions provided in the Indenture, by
delivery of shares of Common Stock having a fair market value equal to the
Repurchase Price. For purposes of this paragraph, the fair market value of
shares of Common Stock shall be determined by the Company and shall be equal
to 95% of the average of the Closing Prices Per Share for the five
consecutive Trading Days immediately preceding and including the third
Trading Day prior to the Repurchase Date. Whenever in this Note there is a
reference, in any context, to the principal of any Note as of any time, such
reference shall be deemed to include reference to the Repurchase Price
payable in respect of such Note to the extent that such Repurchase Price is,
was or would be so payable at such time, and express mention of the
Repurchase Price in any provision of this Note shall not be construed as
excluding the Repurchase Price so payable in those provisions of this Note
when such express mention is not made; provided, however, that, for the
purposes of the second succeeding paragraph, such reference shall be deemed
to include reference to the Repurchase Price only to the extent the
Repurchase Price is payable in cash.
[The following paragraph shall appear in each Global Security:
In the event of a deposit or withdrawal of an interest in this Note,
including an exchange, transfer, redemption, repurchase or conversion of this
Note in part only, the Trustee, as custodian of the Depositary, shall make an
adjustment on its records to reflect such deposit or withdrawal in accordance
with the rules and procedures of The Depository Trust Company applicable to, and
as in effect at the time of, such transaction.]
[The following paragraph shall appear in each Note that is not a Global
Security:
In the event of redemption, repurchase or conversion of this Note in
part only, a new Note or Notes for the unredeemed, unrepurchased or unconverted
portion hereof will be issued in the name of the Holder hereof.]
The indebtedness evidenced by this Note is, to the extent and in the
manner provided in the Indenture, subordinate and subject in right of payment to
the prior payment in full in cash of all Senior Debt of the Company, and this
Note is issued subject to such provisions of the Indenture with respect thereto.
Each Holder of this Note, by accepting the same, (a) agrees to and shall be
bound by such provisions, (b) authorizes and directs the Trustee on such
Holder's behalf to take such action as may be necessary or appropriate to
effectuate the subordination so provided and (c) appoints the Trustee such
Holder's attorney-in-fact for any and all such purposes.
If an Event of Default shall occur and be continuing, the principal of
all the Notes, together with accrued interest to the date of declaration, may be
declared due and payable in the manner and with the effect provided in the
Indenture. Upon payment (i) of the amount of principal so declared due and
payable, together with accrued interest to the date of declaration,
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and (ii) of interest on any overdue principal and, to the extent permitted by
applicable law, overdue interest, all of the Company's obligations in respect
of the payment of the principal of and interest on the Notes shall terminate.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes under the Indenture at any
time by the Company and the Trustee with either (a) the written consent of the
Holders of not less than a majority in aggregate principal amount of the
Outstanding Notes, or (b) by the adoption of a resolution, at a meeting of
Holders of the Outstanding Notes at which a quorum is present, by the Holders of
at least 66-2/3% in aggregate principal amount of the Outstanding Notes
represented and entitled to vote at such meeting. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Outstanding Notes, on behalf of the Holders of all the Notes, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Note shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued in
exchange therefor or in lieu hereof whether or not notation of such consent or
waiver is made upon this Note or such other Note.
As provided in and subject to the provisions of the Indenture, the
Holder of this Note shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default, the Holders of not less
than 25% in principal amount of the Outstanding Notes shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity and the Trustee
shall not have received from the Holders of a majority in principal amount of
the Outstanding Notes a direction inconsistent with such request, and shall have
failed to institute any such proceeding, for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to any
suit instituted by the Holder of this Note for the enforcement of any payment of
principal hereof, premiums if any, or interest hereon on or after the respective
due dates expressed herein or for the enforcement of the right to convert this
Note as provided in the Indenture.
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, premium, if any, and
interest on this Note at the times, places and rate, and in the coin or
currency, herein prescribed or to convert this Note as provided in the
Indenture.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable on the Security
Register upon surrender of this Note for registration of transfer at the
Corporate Trust Office of the Trustee or at such other office or agency of
the Company as may be designated by it for such purpose in the Borough of
Manhattan, The City of New York (which shall initially be an office or agency
of the Trustee), or at such other offices or agencies as the Company may
designate, duly endorsed by, or
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accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder thereof or
such Holder's attorney duly authorized in writing, and thereupon one or more
new Notes, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees by the
Security Registrar. No service charge shall be made for any such registration
of transfer or exchange, but the Company may require payment of a sum
sufficient to recover any tax or other governmental charge payable in
connection therewith.
Prior to due presentation of this Note for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name Note is registered, as the owner thereof for
all purposes, whether or not such Note be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.
No recourse for the payment of the principal (and premium, if any)
or interest on this Note 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, officer or director, 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 rule of law,
statute or constitutional provision or by the enforcement of any assessment
or by any legal or equitable proceeding or otherwise, all such liability
being expressly waived and released, by the acceptance hereof and as part of
consideration for the issue hereof.
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAW.
All terms used in this Note which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face
of this Note, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties (Cust)
JT TEN - as joint tenants with right of
survivorship and not as tenants in
common
UNIF GIFT MIN ACT - Custodian
(Minor)
under Uniform Gifts to Minors Act
(State)
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Additional abbreviations may also be used though not in the above
list.
SECTION II.3 Form of Trustee's Certificate of Authentication.
Subject to Section 6.11, the Trustee's certificate of authentication
shall be in substantially the following form:
This is one of the [___]% Convertible Subordinated Notes due 2006
referred to in the within-mentioned Indenture.
Dated:____________________________
State Street Bank and Trust Company
of California, N.A., as Trustee
By:_______________________________
Authorized Signatory
SECTION II.4 Form of Election of Holder to Require Repurchase.
(1 Pursuant to Article XII of the Indenture, the undersigned hereby
elects to have this Note repurchased by the Company.
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(2 The undersigned hereby directs the Trustee or the Company to pay to
the undersigned an amount in cash or, at the Company's election, Common Stock
valued as set forth in the Indenture, equal to 100% of the principal amount to
be repurchased (as set forth below), plus interest accrued to the Repurchase
Date, as provided in the Indenture.
Dated:
Signature(s)
Signature(s) must be
guaranteed by an Eligible
Guarantor Institution with
membership in an approved
signature guarantee program
pursuant to Rule 17Ad-15
under the Securities
Exchange Act of 1934.
Signature Guaranteed
Principal amount to be repurchased (at least $1,000 or an integral multiple
$1,000 in excess thereof): _______________________________
Remaining principal amount following such repurchase
(not less than $1,000): _________________________________
NOTICE: The signature to the foregoing Election must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
SECTION II.5 Form of Conversion Notice.
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The undersigned Holder of this Note hereby irrevocably exercises the
option to convert this Note, or any portion of the principal amount hereof
(which is $1,000 or an integral multiple of $1,000 in excess thereof, PROVIDED
that the unconverted portion of such principal amount is at least $1,000 or any
integral multiple of $1,000 in excess thereof) below designated, into shares of
Common Stock in accordance with the terms of the Indenture referred to in this
Note, and directs that such shares, together with a check in payment for any
fractional share and any Notes representing any unconverted principal amount
hereof, be delivered to and be registered in the name of the undersigned unless
a different name has been indicated below. If shares of Common Stock or Notes
are to be registered in the name of a Person other than the undersigned, (a) the
undersigned will pay all applicable transfer taxes payable with respect thereto
and (b) signature(s) must be guaranteed by an Eligible Guarantor Institution
with membership in an approved signature guarantee program pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934. Any amount required to be
paid by the undersigned on account of interest accompanies this Note.
Dated:______________________________
Signature(s)
If shares or Notes are to be registered in the name of a Person other than the
Holder, please print such Person's name and address:
Name
Address
Social Security or other Identification
Number, if any
Signature Guaranteed
If only a portion of the Notes is to be converted, please indicate:
1. Principal amount to be converted: $_____________
2. Principal amount and denomination of Notes representing
unconverted principal amount to be issued: $______________
($1,000 or any integral multiple of $1,000 in excess thereof,
provided that the unconverted portion of such principal amount
is at least $1,000 or any integral multiple of $1,000 in
excess thereof)
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SECTION II.6 Form of Assignment.
For value received ________________ hereby sell(s), assign(s) and
transfer(s) unto ________________ (Please insert social security or other
identifying number of assignee) the within Note, and hereby irrevocably
constitutes and appoints ____________________ as attorney to transfer the said
Note on the books of the Company, with full power of substitution in the
premises.
Dated:
Signature(s)
Signature(s) must be
guaranteed by an Eligible
Guarantor Institution with
membership in an approved
signature guarantee program
pursuant to Rule 17Ad-15
under the Securities
Exchange Act of 1934.
SECTION II.7 Securities Issuable in Global Form.
The Securities initially will be represented by one or more notes in
registered, global form without interest coupons, referred to as global notes.
Any such Security shall represent Outstanding Securities and may provide that it
shall represent the aggregate amount of Outstanding Securities and that the
aggregate amount of Outstanding Securities may from time to time be increased or
decreased to reflect exchanges. Any endorsement of a Security in global form to
reflect the amount, or any increase or decrease in the amount, of Outstanding
Securities represented thereby shall be made by the Trustee in such manner and
upon instructions given by such Person or Persons as shall be specified therein
or in the Company Order to be delivered to the Trustee pursuant to Section 3.3
or 3.4. Subject to the provisions of Section 3.3 and, if applicable, Section
3.4, the Trustee shall deliver and redeliver any Security in permanent global
form in the manner and upon instructions given by the Person or Persons
specified therein or in the applicable Company Order. If a Company Order
pursuant to Section 3.3 or 3.4 has been, or simultaneously is, delivered, any
instructions by the Company with respect to endorsement or delivery or
redelivery of a Security in global form shall be in writing but need not comply
with Section 1.2 and need not be accompanied by an Opinion of Counsel.
The provisions of the last sentence of Section 3.3 shall apply to any
Security represented by a Security in global form if such Security was never
issued and sold by the Company and the Company delivers to the Trustee the
Security in global form together with written instructions (which need not
comply with Section 1.2 and need not be accompanied by an Opinion of
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Counsel) with regard to the reduction in the principal amount of Securities
represented thereby, together with the written statement contemplated by the
last sentence of Section 3.3.
Notwithstanding the provisions of Section 3.7, payment of principal
of (and premium, if any) and interest on any Security in permanent global
form shall be made to the Person or Persons specified therein.
ARTICLE III
THE SECURITIES
SECTION III.1 Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities shall be known and designated as the "[ ]%
Convertible Subordinated Notes due 2006" of the Company. Their Stated
Maturity shall be [ ], 2006 and they shall bear interest on their principal
amount from [ ], 1999, payable semi-annually in arrears on [ ] and [ ] in
each year, commencing [ ], 2000, at the rate of [ ]% per annum until the
principal thereof is due and at the rate of [ ]% per annum on any overdue
principal and, to the extent permitted by law, on any overdue interest;
provided, however, that payments shall only be made on a Business Day as
provided in Section 1.13.
The principal of, premium, if any, and interest on the Securities
shall be payable as provided in the form of Securities set forth in Section
2.2, and the Repurchase Price, whether payable in cash or in shares of Common
Stock, shall be payable at such places as are identified in the Company
Notice given pursuant to Section 12.3 (any city in which any Paying Agent is
located being herein called a "Place of Payment").
The Securities shall be redeemable at the option of the Company at
any time on or after [ ] 2002, in whole or in part, subject to the conditions
and as otherwise provided in Article XI and in the form of Security set forth
in Section 2.2.
The Securities shall be subject to repurchase by the Company at the
option of the Holders as provided in Article XII.
The Securities shall be subordinated in right of payment to Senior
Debt of the Company as provided in Article XIII.
The Securities shall be convertible as provided in Article XIV (any
city in which any Conversion Agent is located being herein called a "Place of
Conversion").
SECTION III.2 Denominations.
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The Securities shall be issuable in minimum denominations of $1,000
and any integral multiple thereof.
SECTION III.3 Execution, Authentication, Delivery and Dating.
The Securities shall be executed by the Company's Chairman of the
Board, its Chief Executive Officer its President or one of its Executive Vice
Presidents, and attested by its Chief Financial Officer or its Secretary. The
signature of any of these officers on the Securities may be manual or
facsimile signatures and may be imprinted or otherwise reproduced on the
Securities.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the
Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities
did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver the Securities, executed by the
Company to the Trustee for authentication, together with a Company Order for
the authentication and delivery of such Securities, and the Trustee in
accordance with the Company Order shall authenticate and deliver such
Securities.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security
a certificate of authentication substantially in the form provided for herein
duly executed by the Trustee by manual signature of an authorized signatory,
and such certificate upon any Security shall be conclusive evidence, and the
only evidence, that such Security has been duly authenticated and delivered
hereunder and is entitled to the benefits of this Indenture. Notwithstanding
the foregoing, if any Security shall have been authenticated and delivered
hereunder but never issued and sold by the Company, and the Company shall
deliver such Security to the Trustee for cancellation as provided in Section
3.9 together with a written statement (which need not comply with Section 1.2
and need not be accompanied by an Opinion of Counsel) stating that such
Security has never been issued and sold by the Company, for all purposes of
this Indenture such Security shall be deemed never to have been authenticated
and delivered hereunder and shall never be entitled to the benefits of this
Indenture.
SECTION III.4 Global Securities.
Any Global Security shall be exchangeable only as provided in this
paragraph. If the depositary for any permanent Global Security is DTC, then,
unless the terms of such Global Security expressly permit such Global
Security to be exchanged in whole or in part for definitive Securities, a
Global Security may be transferred, in whole but not in part, only to a
nominee of DTC, or by a nominee of DTC to DTC, or to a successor to DTC for
such Global Security
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selected or approved by the Company or to a nominee of such successor to DTC.
If at any time DTC notifies the Company that it is unwilling or unable to
continue as depositary for the applicable Global Security or Securities or if
at any time DTC ceases to be a clearing agency registered under the Exchange
Act if so required by applicable law or regulation, the Company shall appoint
a successor depositary with respect to such Global Security or Securities. If
(x) a successor depositary for such Global Security or Securities is not
appointed by the Company within 90 days after the Company receives such
notice or becomes aware of such unwillingness, inability or ineligibility,
(y) an Event of Default has occurred and is continuing or any event which
after notice or lapse of time or both would be an Event of Default with
respect to such Security or Securities, or (z) the Company, in its sole
discretion, determines at any time that all Outstanding Securities (but not
less than all) issued or issuable in the form of one or more Global
Securities shall no longer be represented by such Global Security or
Securities, then the Company shall execute, and the Trustee shall
authenticate and deliver definitive Securities of like rank, tenor and terms
in definitive form in an aggregate principal amount equal to the principal
amount of such Global Security or Securities. If any beneficial owner of an
interest in a Global Security is otherwise entitled to exchange such interest
for Securities of like tenor and principal amount of another authorized form
and denomination, as specified as contemplated by Section 3.1 and provided
that any applicable notice provided in the Global Security shall have been
given, then without unnecessary delay but in any event not later than the
earliest date on which such interest may be so exchanged, the Company shall
execute, and the Trustee shall authenticate and deliver definitive Securities
in aggregate principal amount equal to the principal amount of such
beneficial owner's interest in such Global Security. On or after the earliest
date on which such interests may be so exchanged, such Global Security shall
be surrendered for exchange by DTC or such other depositary as shall be
specified in the Company Order with respect thereto to the Trustee, as the
Company's agent for such purpose; provided, however, that no such exchanges
may occur during a period beginning at the opening of business 15 days before
selection of the Securities to be redeemed under Section 11.3 and ending at
the close of business on the day of the mailing of the relevant notice of
redemption. If a Security is issued in exchange for any portion of a Global
Security after the close of business at the office or agency where such
exchange occurs on (i) any Regular Record Date and before the opening of
business at such office or agency on the relevant Interest Payment Date, or
(ii) any special Record Date and the opening of business at such office or
agency on the related proposed date for payment of Defaulted Interest,
interest or Defaulted Interest, as the case may be, will not be payable on
such Interest Payment Date or proposed date for payment, as the case may be,
in respect of such Security, but will be payable on such Interest Payment
Date or proposed date for payment, as the case may be, only to the Person to
whom interest in respect of such portion of such Global Security is payable
in accordance with the provisions of this Indenture.
SECTION III.5 Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee or in any office or agency of the Company in a Place of Payment a
register of the Securities (the register maintained in such office or in any
such office or agency of the Company in a Place of Payment being herein
sometimes referred to as the "Security Register") in which, subject to such
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reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Security
Register shall be in written form or any other form capable of being
converted into written form within a reasonable time. The Trustee, at its
Corporate Trust Office, is hereby initially appointed "Security Registrar"
for the purpose of registering Securities and transfers of Securities on such
Security Register as herein provided. In the event that the Trustee shall
cease to be Security Registrar, it shall have the right to examine the
Security Register at all reasonable times.
Subject to the provisions of this Section 3.5, upon surrender for
registration of transfer of any Security at any office or agency of the
Company in a Place of Payment, the Company shall execute, and the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of any authorized denominations and
of a like aggregate principal amount, bearing a number not contemporaneously
outstanding, and containing identical terms and provisions.
Subject to the provisions of this Section 3.5, at the option of the
Holder, Securities may be exchanged for other Securities, of any authorized
denomination or denominations and of a like aggregate principal amount,
containing identical terms and provisions, upon surrender of the Securities
to be exchanged at any such office or agency. Whenever any such Securities
are so surrendered for exchange, the Company shall execute, and the Trustee
shall authenticate and deliver, the Securities which the Holder making the
exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange or redemption shall (if so required by the Company or the
Security Registrar) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar, duly executed by the Holder thereof or such Holder's attorney duly
authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Securities,
other than exchanges pursuant to Sections 9.6, 11.8, 12.3(e), or any
supplemental indenture not involving any transfer and other than any stamp
and similar duties, if any, which may be imposed in connection with any such
transfer or exchange by the United States or any political subdivision
thereof or taxing authority thereof or therein, which shall be paid by the
Company.
The Company, or the Trustee, as applicable, shall not be required
(i) to issue, register the transfer of or exchange any Security if such
Security may be among those selected for redemption during a period beginning
at the opening of business 15 days before selection of the
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Securities to be redeemed under Section 11.3 and ending at the close of
business on the day of the mailing of the relevant notice of redemption, or
(ii) to register the transfer of or exchange any Security so selected for
redemption in whole or in part, except, in the case of any Security to be
redeemed in part, the portion thereof not to be redeemed, or (iii) to issue,
register the transfer of or exchange any Security which has been surrendered
for repurchase at the option of the Holder, except the portion, if any, of
such Security not to be so repaid.
SECTION III.6 Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee or the
Company, together with, in proper cases, such security or indemnity as may be
required by the Company or the Trustee to save each of them or any agent of
either of them harmless, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security of the same
principal amount, containing identical terms and provisions and bearing a
number not contemporaneously outstanding.
If there shall be delivered to the Company and to the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security, and (ii) such security or indemnity as may be required by them to
save each of them and any agent of either of them harmless, then, in the
absence of notice to the Company or the Trustee that such Security has been
acquired by a bona fide purchaser, the Company shall execute and upon its
request the Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Security, a new Security of the same principal
amount, containing identical terms and provisions and bearing a number not
contemporaneously outstanding.
Notwithstanding the provisions of the previous two paragraphs, in
case any such mutilated, destroyed, lost or stolen Security has become or is
about to become due and payable, the Company in its discretion may pay such
Security, instead of issuing a new Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge (other than any stamp and similar duties, if any, which
may be imposed in connection therewith by the United States or any political
subdivision thereof or taxing authority thereof or therein, which shall be
paid by the Company) that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security, shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately
with any and all other Securities duly issued hereunder.
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The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION III.7 Payment of Interest; Interest Rights Preserved.
Interest on any Security that is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person
in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest at the office or agency of the Company maintained for such purpose
pursuant to Section 10.2; provided, however, that, except as otherwise
provided below with respect to Global Securities, each installment of
interest on any Security may at the Company's option be paid by (i) mailing a
check for such interest, payable to or upon the written order of the Person
entitled thereto pursuant to Section 3.8, to the address of such Person as it
appears on the Security Register or (ii) upon written order of the Person
entitled thereto pursuant to Section 3.8 setting forth instructions not later
than the Regular Record Date for such interest, by transfer to an account
maintained by the payee located inside the United States.
Every Global Security will provide that interest, if any, payable on
any Interest Payment Date will be paid to DTC for the purpose of permitting
DTC to credit the interest received by it in respect of such Global Security
to the accounts of the beneficial owners thereof and that all payments with
respect to such Global Security shall be made by wire transfer of immediately
available funds.
Any interest on any Security that is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the registered
Holder thereof on the relevant Regular Record Date by virtue of having been
such Holder, and such Defaulted Interest may be paid by the Company at its
election in each case, as provided in clause (1) or (2) below:
(1 The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a special Record Date
for the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Security and the
date of the proposed payment (which shall not be less than 20 days after such
notice is received by the Trustee), and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit on or prior to the
date of the proposed payment, such money when deposited to be held in trust
for the benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify
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the Company of such Special Record Date and, in the name and at the expense
of the Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed, first-class
postage prepaid, to each Holder of Securities at such Holder's address as it
appears in the Security Register not less than 10 days prior to such Special
Record Date. If the sole registered Holder of the Securities is not DTC, then
the Trustee may, in its discretion, in the name and at the expense of the
Company, cause a similar notice to be published at least once in an
Authorized Newspaper in each place of payment, but such publications shall
not be a condition precedent to the establishment of such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been mailed as aforesaid, such Defaulted
Interest shall be paid to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of business on
such Special Record Date and shall no longer be payable pursuant to the
following clause (2).
(2 The Company may make payment of any Defaulted Interest on the
Securities in any other lawful manner not inconsistent with the requirements
of any automated quotation system or securities exchange on which such
Securities may be listed or quoted, and upon such notice as may be required
by such quotation system or exchange, if, after notice given by the Company
to the Trustee of the proposed payment pursuant to this clause, such manner
of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section and Section 3.5,
each Security delivered under this Indenture upon registration of transfer of
or in exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
In the case of any Security which is converted after any Regular
Record Date and prior to the next succeeding Interest Payment Date (other
than any Security whose Maturity is prior to such Interest Payment Date),
interest whose Stated Maturity is on such Interest Payment Date shall be
payable on such Interest Payment Date notwithstanding such conversion, and
such interest(whether or not punctually paid or duly provided for) shall be
paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on such Regular Record
Date.
SECTION III.8 Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of (and premium, if
any), and (subject to Sections 3.5 and 3.7) interest on, such Security and for
all other purposes whatsoever, whether or not such Security be overdue, and none
of the Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
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None of the Company, the Trustee, any Paying Agent or the Security
Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a Global Security or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
Notwithstanding the foregoing, with respect to any Global Security,
nothing herein shall (a) prevent the Company, the Trustee, or any agent of
the Company, or the Trustee, from giving effect to any written certification
or other authorization furnished by any depositary, as a Holder, with respect
to such Global Security or (b) impair, as between such depositary and owners
of beneficial interests in such Global Security, the operation of customary
practices governing the exercise of the rights of such depositary (or its
nominee) as Holder of such Global Security.
SECTION III.9 Cancellation.
All Securities surrendered for payment, redemption or repurchase at
the option of the Holder, registration of transfer or exchange or conversion
shall, if surrendered to any Person other than the Trustee, be delivered to
the Trustee, and any such Securities and Securities surrendered directly to
the Trustee for any such purpose shall be promptly canceled by it. The
Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and may deliver to the Trustee
(or to any other Person for delivery to the Trustee) for cancellation any
Securities previously authenticated hereunder which the Company has not
issued and sold, and all Securities so delivered shall be promptly canceled
by the Trustee. If the Company shall so acquire any of the Securities,
however, such acquisition shall not operate as a redemption or satisfaction
of the indebtedness represented by such Securities unless and until the same
are surrendered to the Trustee for cancellation. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as
provided in this Section, except as expressly permitted by this Indenture.
All canceled Securities held by the Trustee shall be returned to the Company
or disposed of by the Trustee in accordance with its customary practices as
directed by a Company Order.
SECTION III.10 Computation of Interest.
Interest on the Securities (including, without limitation, any
interest on overdue interest) shall be computed on the basis of a 360-day
year consisting of twelve 30-day months.
SECTION III.11 CUSIP Numbers.
The Company in issuing the Securities may use CUSIP numbers (if then
generally in use) in addition to serial numbers, and, if so, the Trustee
shall use CUSIP numbers in addition to serial numbers in notices of
redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such
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redemption shall not be affected by any defect in or omission of such
numbers. The Company will promptly notify the Trustee of any change in the
CUSIP numbers.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION IV.1 Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further
effect (except as to (i) rights of registration of transfer and exchange,
right of conversion and the Company's right of optional redemption, (ii)
substitution of apparently mutilated, destroyed, lost or stolen Securities,
(iii) rights of Holders to receive payment of principal of and premium, if
any, and interest (including, without limitation, interest on overdue
interest) on the Securities, (iv) rights, obligations and immunities of the
Trustee under this Indenture, (v) rights of the Holders as beneficiaries of
this Indenture with respect to any property deposited with the Trustee
payable to all or any of them) and the Trustee, upon receipt of a Company
Order, and at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture when,
(1) either
(A) all Securities of theretofore authenticated and
delivered (other than (i) Securities which have been destroyed, lost or
stolen and which have been replaced or paid as provided in Section 3.6, and
(ii) Securities for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust, as provided in Section 10.3) have
been delivered to the Trustee for cancellation; or
(B) all Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) if redeemable at the option of the
Company, are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has irrevocably
deposited or caused to be deposited with the Trustee as trust funds
(immediately available to the Holders in the case of clause (a)) in trust for
the purpose an amount in cash sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the Trustee for
cancellation, for
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principal (and premium, if any) and interest (including, without limitation,
interest on overdue interest) to the date of such deposit (in the case of
Securities which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company, including, without limitation, the payment of all fees
and expenses of the Trustee, its agents and counsel; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with; and
(4) the Trustee shall have received such other documents and assurances
as the Trustee shall have reasonably requested.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company to the Trustee and any predecessor Trustee
under Section 6.6, the obligations of the Company to any Authenticating Agent
under Section 6.11 and, if money shall have been deposited with and held by
the Trustee pursuant to subclause (B) of clause (1) of this Section, the
obligations of the Trustee under Section 4.2 and the last paragraph of
Section 10.3 shall survive such satisfaction and discharge.
SECTION IV.2 Application of Trust Funds.
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in
trust and applied by it, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as its own Paying Agent) as the Trustee
may determine, to the Persons entitled thereto, of the principal (and
premium, if any), and any interest for whose payment such money has deposited
with or received by the Trustee, but such money need not be segregated from
other funds except to the extent required by law.
ARTICLE V
REMEDIES
SECTION V.1 Events of Default.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether
or not 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):
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(1) default in the payment of any interest on any Security when such
interest becomes due and payable, and continuance of such default for a
period of 30 days, whether or not such payment is prohibited by the
subordination provisions contained in Article XIII hereof; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security when it becomes due and payable at its Maturity, whether or
not such payment is prohibited by the subordination provisions contained in
Article XIII hereof; or
(3) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or warranty
a default in whose performance or whose breach is elsewhere in this Section
specifically dealt with), and continuance of such default or breach for a
period of 60 days after there has been given, by registered or certified mail
to the Company, by the Trustee or to the Company, and the Trustee by the
Holders of at least 25% in principal amount of the Outstanding Securities a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder; or
(4) (a) a default under any evidence of Debt of the Company or RF
Power under any mortgage, indenture, agreement or other instrument of the
Company or RF Power under which there may be issued or by which there may be
secured any Debt of the Company or by any Subsidiary, whether such Debt now
exists or shall hereafter be created, which default shall constitute a
failure to pay an aggregate amount of principal, premium or interest
exceeding $10,000,000 when due and payable after the expiration of any
applicable grace period with respect thereto and (b) any event of default as
defined in any mortgage, indenture, agreement or other instrument of the
Company or RF Power evidencing Debt in an aggregate amount of principal,
premium or interest exceeding $10,000,000 becoming or being declared due and
payable before the date on which it would otherwise have become due and
payable, without such Debt having been discharged, or such acceleration
having been annulled, within 30 days after there has been given, by
registered or certified mail to the Company, by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities, a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(5) the entry by a court having jurisdiction in the premises of (a)
a decree or order for relief in respect of the Company or RF Power in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (b) a decree
or order adjudging the Company or RF Power a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company or RF Power under
any applicable Federal or State law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of the
Company or RF Power or of any substantial part of the property of either, or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order for relief or any such other decree or order
unstayed and in effect for a period of 60 consecutive days; or
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(6) the commencement by the Company or RF Power of a voluntary case
or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by either to the entry of
a decree or order for relief in respect of the Company or RF Power in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against
either, or the filing by either of a petition or answer or consent seeking
reorganization or similar relief under any applicable Federal or State law,
or the consent by either to the filing of such petition or to the appointment
of or taking possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or RF Power or
of any substantial part of the property of either, or the making by either of
an assignment for the benefit of creditors, or the admission by either in
writing of its inability to pay its debts generally as they become due, or
the taking of corporate action by the Company or RF Power in furtherance of
any such action; or
(7) failure by the Company to give a Company Notice in accordance
within Article XII hereof, whether or not such notice is prohibited by the
subordination provisions contained in Article XIII hereof.
SECTION V.2 Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Sections 5.1(5) or 5.1(6)) occurs and is continuing, then and in every such
case the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Securities may declare the principal and premium (if any) of
all the Securities to be due and payable immediately, by a notice in writing
to the Company, (and to the Trustee if given by the Holders), and upon any
such declaration such principal and premium (if any) or specified portion
thereof shall become immediately due and payable. If an Event of Default
specified in Sections 5.1(5) or 5.1(6) occurs, the principal of, and premium,
if any, and accrued interest on all Securities shall, subject to the
provisions of Article XIII or the subordination provisions of any
supplemental indenture, ipso facto become immediately due and payable without
any declaration or other Act of the Holders or any act on the part of the
Trustee.
At any time after such a declaration of acceleration has been made
and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article provided, the Holders
of a majority in principal amount of the Outstanding Securities, by written
notice to the Company and the Trustee, may rescind and annul such declaration
and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay:
(a) all overdue interest on all Outstanding
Securities,
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(b) the principal of (and premium, if any, on) any
Outstanding Securities which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate or rates borne
by or provided for in such Securities,
(c) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates borne by or provided for
in such Securities, and
(d) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
(2) all Events of Default, other than the nonpayment of the
principal of (or premium, if any, on) or interest on Securities which have
become due solely by such declaration of acceleration, have been cured or
waived as provided in Section 5.13; and
(3) such rescission and annulment would not conflict with any
judgment or decree issued in appropriate judicial proceedings regarding the
payment by the Trustee to the Holders of the amounts referred to in Section
5.2(1).
No such rescission and annulment shall affect any subsequent default
or Event of Default or impair any right consequent thereon.
SECTION V.3 Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if:
(1) default is made in the payment of any installment of interest on
any Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Security at its Maturity, then the Company will, upon demand
of the Trustee, pay to the Trustee, for the benefit of the Holders of such
Securities, the whole amount then due and payable on such Securities for
principal (and premium, if any) and interest, with interest upon any overdue
principal (and premium, if any) and, to the extent that payment of such
interest shall be legally enforceable, upon any overdue installments of
interest, at the rate or rates borne by or provided for in such Securities,
and, in addition thereto, such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, and may prosecute such proceeding to judgment or final decree, and
may enforce the same against the Company, or any other obligor upon such
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other
obligor upon such Securities, wherever situated.
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If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of
the Holders of Securities by such appropriate judicial proceedings as the
Trustee shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy.
SECTION V.4 Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition
or other judicial proceeding relative to the Company or any other obligor
upon the Securities or the property of the Company or of such other obligor
or their creditors, the Trustee (irrespective of whether the principal of the
Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have
made any demand on the Company for the payment of overdue principal or
premium, if any, or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount, or such
lesser amount as may be provided for in the Securities, of principal (and
premium, if any) and interest owing and unpaid in respect of the Securities
and take such other actions and to file such other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel) and of the Holders
allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder of Securities to make such payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee and any
predecessor Trustee, their agents and counsel, and any other amounts due the
Trustee or any predecessor Trustee under Section 6.6.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a
Security any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Holder of a Security in
any such proceeding; provided, however, that the Trustee may, on behalf of
such Holders, vote for the election of a trustee in bankruptcy or similar
procedures.
SECTION V.5 Trustee May Enforce Claims Without Possession of Securities.
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All rights of action and claims under this Indenture or any of the
Securities may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel and any other amounts due the Trustee under Section
6.6, be for the ratable benefit of the Holders of the Securities in respect
of which such judgment has been recovered.
SECTION V.6 Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee
and, in case of the distribution of such money on account of principal (or
premium, if any) or interest, upon presentation of the Securities, and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee
under Section 6.6;
SECOND: To the payment of the amounts then due and unpaid
upon the Securities for principal (and premium, if any) and interest payable,
in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, according to
the aggregate amounts due and payable on such Securities for principal (and
premium, if any) and interest, respectively; and
THIRD: To the payment of the remainder, if any, to the
Company or any other Person or Persons entitled thereto.
SECTION V.7 Limitation on Suits.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder,
unless:
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(3) such Holder or Holders have offered and, if requested,
provided to the Trustee indemnity reasonably satisfactory to the Trustee
against the costs, expenses and liabilities to be incurred in compliance with
such request;
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(4) the Trustee for 60 days after its receipt of such notice,
request and offer and, if requested, the provision of indemnity, has failed
to institute any such proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities;
it being understood and intended that no one or more of such Holders shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other of such Holders, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all such Holders.
SECTION V.8 Unconditional Right of Holders to Receive Principal (Premium, if
any) and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right which is absolute and unconditional to
receive payment of the principal of (and premium, if any) and (subject to
Sections 3.5 and 3.7) interest on such Security or payment on the respective
Stated Maturity expressed in such Security (or, in the case of redemption or
repurchase, on the Redemption Date or Repurchase Date, as may be the case)
and to institute suit for the enforcement of any such payment, and such
rights shall not be impaired without the consent of such Holder.
SECTION V.9 Restoration of Rights and Remedies.
If the Trustee or any Holder of a Security has instituted any
proceeding to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case, the Company, the Trustee and the Holders of Securities shall, subject
to any determination in such proceeding, be restored severally and
respectively to their former positions hereunder and thereafter all rights
and remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION V.10 Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 3.6, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders of Securities is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or
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remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION V.11 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time
to time, and as often as may be deemed expedient, by the Trustee or by the
Holders of Securities, as the case may be.
SECTION V.12 Control by Holders of Securities.
The Holders of not less than a majority in principal amount of the
Outstanding Securities shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve it in
personal liability or be unduly prejudicial to the Holders of Securities not
joining therein.
In the event that the Trustee takes any action or follows any
direction pursuant to this Indenture, the Trustee shall be entitled to
indemnity reasonably satisfactory to it against any loss or expense caused by
taking such action or following such direction.
SECTION V.13 Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Securities may on behalf of the Holders of all the
Securities waive any past default hereunder and its consequences, except a
default:
(1) in the payment of the principal of (or premium, if any) or
interest on any Security, or
(2) in respect of a covenant or provision hereof which under Article
IX cannot be modified or amended without the consent of the Holder of each
Outstanding Security.
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The Company shall deliver to the Trustee an Officers' Certificate
stating that the requisite percentage of Holders have consented to such
waiver and attaching copies of such consents. Upon any such waiver, such
default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured, for every purpose of this Indenture; but
no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon.
SECTION V.14 Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any usury, stay or
extension law wherever enacted, now or at any time hereafter in force, which
may affect the covenants or the performance of this Indenture; and the
Company (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
SECTION V.15 Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security
by such Holder's 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 any undertaking to pay the costs of such suit, and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in such
suit having due regard to the merits and good faith of the claims or defenses
made by such party litigant; but the provisions of this Section shall not
apply to any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in
principal amount of the Outstanding Securities, or to any suit instituted by
any Holder for the enforcement of the payment of the principal of (or
premium, if any) or interest on any Security on or after the respective
Stated Maturity expressed in such Security (or, in the case of redemption or
repurchase, on or after the Redemption Date or Repurchase Date, as may be the
case).
SECTION V.16 Notice of Default or Event of Default.
The Company shall deliver to the Trustee, as soon as possible and in
any event within 10 days after an officer of the Company becomes aware of the
occurrence of any Event of Default or any event which, with notice or the
lapse of time or both, would constitute an Event of Default, an Officers'
Certificate setting forth the details of such Event of Default or default and
the action which the Company proposes to take with respect thereto.
ARTICLE VI
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THE TRUSTEE
SECTION VI.1 Notice of Defaults.
Within 90 days after the occurrence of any default hereunder, the
Trustee shall transmit in the manner and to the extent provided in Trust
Indenture Act Section 313(c) and Section 1.6 hereof, notice of such default
hereunder actually known to a Responsible Officer of the Trustee, unless such
default shall have been cured or waived; provided, however, that, except in
the case of a default in the payment of the principal of (or premium, if any)
or interest on any Security, the Trustee shall be protected in withholding
such notice if and so long as Responsible Officers of the Trustee in good
faith determine that the withholding of such notice is in the interests of
the Holders of the Securities; and provided further that in the case of any
default or breach of the character specified in Section 5.1(3), no such
notice to Holders shall be given until at least 60 days after the occurrence
thereof. For the purpose of this Section, the term "default" means any event
which is, or after notice or lapse of time or both would become, an Event of
Default.
SECTION VI.2 Certain Duties and Responsibilities.
(a) If an Event of Default has occurred and is continuing, the
Trustee will exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in such exercise, as a
prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others, and no implied
covenants or obligations will be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture; but in the case of any such certificates or opinions
which are specifically required to be furnished to the Trustee by any
of the provisions hereof, the Trustee will examine the certificates and
opinions to determine whether or not, on their face, they appear to
conform to the requirements of this Indenture.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own gross negligent action, its own gross
negligent failure to act, or its own willful misconduct, except that:
(i) this paragraph (c) does not limit the effect of
paragraph (b) of this Section 6.2;
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(ii) the Trustee will not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was grossly negligent in ascertaining the pertinent facts;
(iii) the Trustee will not be liable with respect to any
action it takes or omits to take in good faith in accordance with the
direction received by it pursuant to Section 6.2 of the Holders of a
majority in principal amount of the Outstanding Securities relating to
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or when exercising any other trust or power
conferred upon the Trustee under this Indenture; and
(iv) no provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial
liability in the performance of any or its duties hereunder or in the
exercise of any of its rights or powers hereunder if it has reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to
it.
(d) Whether or not herein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to clauses
(i), (ii), (iii) and (iv) of paragraph (c) of this Section 6.2.
SECTION VI.3 Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificate of authentication, shall be taken as the statements of
the Company and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities, except
that the Trustee represents that it is duly authorized to execute and deliver
this Indenture, authenticate the Securities and perform its obligations
hereunder. Neither the Trustee nor any Authenticating Agent shall be
accountable for the use or application by the Company of Securities or the
proceeds thereof.
SECTION VI.4 May Hold Securities.
The Trustee, any Paying Agent, Conversion Agent, Security Registrar,
Authenticating Agent or any other agent of the Company, in its individual or
any other capacity, may become the owner or pledgee of Securities and,
subject to Sections 6.12 and 6.13, may otherwise deal with the Company with
the same rights it would have if it were not the Trustee, Paying Agent,
Conversion Agent, Security Registrar, Authenticating Agent or such other
agent.
SECTION VI.5 Money Held in Trust.
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Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except
as otherwise agreed with the Company in writing.
SECTION VI.6 Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder as agreed with the Company in
writing (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse each
of the Trustee and any predecessor Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) to indemnify each of the Trustee and any predecessor Trustee and
their agents for, and to hold it harmless against, any loss, liability,
claim, damage or expense (including reasonable attorneys' fees and expenses)
incurred without negligence or bad faith on its own part, arising out of or
in connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of enforcing this Indenture
(including this Section 6.6), defending itself against any claim (whether
asserted by a Holder, the Company or otherwise) or liability in connection
with the exercise or performance of any of its powers or duties hereunder.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 5.1(5) or Section 5.1(6), the
expenses (including the reasonable charges and expenses of its counsel) and
the compensation for the services are intended to constitute expenses of
administration under any applicable Federal or State bankruptcy, insolvency
or other similar law.
As security for the performance of the obligations of the Company
under this Section, the Trustee shall have a lien prior to the Securities
upon all property and funds held or collected by the Trustee as such, except
funds held in trust for the payment of principal of (or premium, if any) or
interest on particular Securities. The Trustee's right to receive payment of
any amounts due under this Section 6.6 shall not be subordinate to any other
liability or Debt of the Company (even though the Securities may be so
subordinated).
The provisions of this Section shall survive the termination of this
Indenture, the resignation and removal of any Trustee, the discharge of the
Company's obligations hereunder
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and any rejection or termination under any applicable Federal or State
bankruptcy, insolvency or other similar laws.
SECTION VI.7 Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under the Trust Indenture Act and shall have (or,
in the case of a subsidiary of a bank holding company, its corporate parent
shall have) a combined capital and surplus of at least $50,000,000, subject
to supervision or examination by Federal or State authority and in good
standing under the laws of the United States or of any State or the District
of Columbia. If such corporation publishes reports of condition at least
annually, pursuant to law or the requirements of Federal, State, Territorial
or District of Columbia supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. Except as
otherwise provided in Section 6.13, 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. The Trustee or an Affiliate of the Trustee shall maintain an
established place of business in the Borough of Manhattan, the City of New
York.
SECTION VI.8 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.9.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving
of such notice of resignation, the resigning Trustee may petition any court
of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of
a majority in principal amount of the Outstanding Securities delivered to the
Trustee and the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of removal, the Trustee who is being removed may
petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of
Section 6.13 after written request therefor by the Company or by any Holder of a
Security who has been a bona fide Holder of a Security for at least six months,
or
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(2) the Trustee shall cease to be eligible under Section
6.7 and shall fail to resign after written request therefor by the Company or
by any Holder of a Security who has been a bona fide Holder of a Security for
at least six months, or
(3) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by or pursuant to a Board Resolution
may remove the Trustee and appoint a successor Trustee, or (ii) subject to
Section 5.15, any Holder of a Security who has been a bona fide Holder of a
Security for at least six months may, on behalf of such Holder and all others
similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause,
the Company, by or pursuant to a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapacity, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance or such
appointment, become the successor Trustee and to that extent supersede the
successor Trustee appointed by the Company. If no successor Trustee shall
have been so appointed by the Company or the Holders of Securities and
accepted appointment in the manner hereinafter provided, any Holder of a
Security who has been a bona fide Holder of a Security for at least six
months may, on behalf of such Holder and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(f) So long as no Event of Default or event which is, or after
notice or lapse of time, or both, could become, an Event of Default shall
have occurred and be continuing, and except with respect to a Trustee
appointed by or at the request of the Holders of Securities pursuant to
subsection (e) of this Section, if the Company shall have delivered to the
Trustee (i) a Board Resolution appointing a successor Trustee, effective as
of a date specified therein, and (ii) an instrument accepting such
appointment, effective as of such date, by such successor Trustee in
accordance with Section 6.9, the Trustee shall be deemed to have resigned as
contemplated in subsection (b) of this Section, the successor Trustee shall
be deemed to have been appointed by the Company pursuant to subsection (e) of
this Section and such appointment shall be deemed to have been accepted as
contemplated in Section 6.9, all as of the date specified in such Board
Resolution, and all other provisions of this Section and Section 6.9 shall be
applicable to such resignation, appointment and acceptance except to the
extent inconsistent with this subsection (f).
(g) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee in the
manner provided for notices to the
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Holders of Securities in Section 1.6. Each notice shall include the name of
the successor Trustee and the address of its Corporate Trust Office.
SECTION VI.9 Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee,
every such successor Trustee shall execute, acknowledge and deliver to the
Company and the retiring Trustee an instrument accepting such appointment,
and thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of all sums then
owing to the Trustee pursuant to Section 6.6 , execute and deliver an
instrument transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee, and shall duly assign, transfer and deliver
to such successor Trustee all property and money held by such retiring
Trustee hereunder, subject nevertheless to its claim, if any, provided for in
Section 6.6.
(b) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts
referred to in paragraph (a) of this Section.
(c) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION VI.10 Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Trustee (including the administration of the trust created by
this Indenture), shall be the successor of the Trustee hereunder, provided
such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on
the part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating
Trustee may adopt such authentication and deliver the Securities so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities. In case any Securities shall not have been
authenticated by such predecessor Trustee, any such successor Trustee may
authenticate and deliver such Securities, in either its own name or that of
its predecessor Trustee, with the full force and effect which this Indenture
provides for the certificate of authentication of the Trustee.
SECTION VI.11 Appointment of Authenticating Agent.
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The Trustee may appoint an Authenticating Agent or Agents reasonably
acceptable to the Company with respect to the Securities which shall be
authorized to act on behalf of the Trustee to authenticate Securities issued
upon exchange, registration of transfer or partial redemption or, repurchase
thereof, and Securities so authenticated shall be entitled to the benefits of
this Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Any such appointment shall be
evidenced by an instrument in writing signed by a Responsible Officer of the
Trustee, a copy of which instrument shall be promptly furnished to the
Company. Wherever reference is made in this Indenture to the authentication
and delivery of Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a
certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a bank or trust company or corporation
organized and doing business and in good standing under the laws of the
United States or of any State or the District of Columbia, authorized under
such laws to act as Authenticating Agent, having (or, in the case of a
subsidiary of a bank holding company, its corporate parent shall have) a
combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually,
pursuant to law or the requirements of Federal, State, Territorial or
District of Columbia supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus
as set forth in its most recent report of condition so published. If at any
time an Authenticating Agent shall cease to be eligible in accordance with
the provisions of this Section, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating
Agent shall be a party, or any corporation succeeding to all or substantially
all of the corporate agency or corporate trust business of an Authenticating
Agent, shall continue to be an Authenticating Agent (including the
authenticating agency contemplated by this Indenture), provided such
corporation shall be otherwise eligible under this Section, without the
execution or filing of any paper or further act on the part of the Trustee or
the Authenticating Agent.
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An 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 an Authenticating Agent by giving written
notice of termination to such Authenticating Agent and the Company. Upon
receiving such a notice of resignation or upon such a termination, or in case
at any time such Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, the Trustee may appoint a
successor Authenticating Agent which shall be reasonably acceptable to the
Company and shall give notice of such appointment to all Holders of
Securities in the manner set forth in Section 1.6. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall
become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent
herein. No successor Authenticating Agent shall be appointed unless eligible
under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation including reimbursement of its reasonable
expenses for its services under this Section.
If an appointment is made pursuant to this Section, the Securities
may have endorsed thereon, in addition to or in lieu of the Trustee's
certificate of authentication, an alternate certificate of authentication
substantially in the following form:
This is one of the [ ]% Convertible Subordinated Notes due 2006
referred to in the within-mentioned Indenture.
Dated: ___________________________
State Street Bank and Trust Company
of California, N.A., as Trustee
By:_____________________
as Authenticating Agent
By:______________________
Authorized Signatory
SECTION VI.12 Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to
the provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
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SECTION VI.13 Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within
the meaning of the Trust Indenture Act, the Trustee shall either eliminate
such interest or resign, to the extent and in the manner provided by, and
subject to the provisions of, the Trust Indenture Act and this Indenture.
SECTION VI.14 Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(1) the Trustee may conclusively rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note or other paper or document (whether in its original or
facsimile form) believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(2) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order (other than
delivery of any Security to the Trustee for authentication and delivery
pursuant to Section 3.3 which shall be sufficiently evidenced as provided
therein) and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith
on its part, conclusively rely upon an Officers' Certificate or an Opinion of
Counsel;
(4) the Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders of Securities pursuant to this Indenture, unless such
Holders shall have offered to the Trustee security or indemnity satisfactory
to the Trustee against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, 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
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be entitled to examine the books, records and premises of the Company
personally or by agent or attorney;
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder; and
(8) the Trustee shall not be liable for any action taken, suffered
or omitted by it in good faith and reasonably believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Indenture.
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION VII.1 The Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not later than 15 days after the Regular
Record Date, a list, in such form as the Trustee may reasonably require, of
the names and addresses of the Holders of Securities as of such Regular
Record Date, and
(b) at such other times as the Trustee may request in
Writing, within 30 days after the receipt by the Company of any such request,
a list of similar form and content as of a date not more than 15 days prior
to the time such list is furnished,
provided, however, that, so long as the Trustee is the Security Registrar, no
such list shall be required to be furnished.
SECTION VII.2 Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning
the Trustee and its actions under this Indenture as may be required pursuant
to the Trust Indenture Act at the times and in the manner provided by the
Trust Indenture Act. Reports required pursuant to the Trust Indenture Act
Section 313(a), if any, will be transmitted annually.
(b) A copy of each such report shall, at the time of such
transmission to Holder, be filed with the Commission and the Company. The
Company will notify the Trustee, in writing, if and when the Securities are
listed on any stock exchange.
SECTION VII.3 Reports by Company.
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The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, if any,
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.
SECTION VII.4 Preservation Of Information; Communications to Holders.
(1) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the
most recent list furnished to the Trustee as provided in Section 7.1 and the
names and addresses of Holders received by the Trustee in its capacity as
Security Registrar if the Trustee is acting in such capacity. The Trustee may
destroy any list furnished to it as provided in Section 7.1 upon receipt of a
new list so furnished.
(2) The rights of the Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided by
the Trust Indenture Act and other applicable law.
(3) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that none of the Company, the Trustee
or any agent of any of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant
to the Trust Indenture Act.
ARTICLE VIII
CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE
SECTION VIII.1 Company May Consolidate, Etc., Only on Certain Terms.
The Company (1) shall not consolidate with or merge into any other
Person or, directly or indirectly, convey, transfer, sell, lease or otherwise
dispose of its properties and assets as an entirety or substantially as an
entirety to any Person, and (2) shall not permit any Person to consolidate or
merge with or into the Company or convey, transfer, sell, lease or otherwise
dispose of such Person's properties and assets as an entirety or
substantially as an entirety to the Company, unless:
(a) the Person formed by such consolidation or into or with which
the Company is merged or the Person which acquires by conveyance, transfer or
sale, or which leases or otherwise acquires, the properties and assets of the
Company as an entirety or substantially as an entirety (i) shall be a
corporation, limited liability company, partnership or trust, (ii) shall be
organized and validly existing under the laws of the United States of
America, any State thereof or the District of Columbia and (iii) shall
expressly assume, by an indenture supplemental hereto,
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executed and delivered to the Trustee, in form satisfactory to the Trustee,
the due and punctual payment of the principal of (and premium, if any) and
interest on all the Securities and the performance or observance of every
covenant of this Indenture on the part of the Company to be performed or
observed;
(b) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have 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, sale, lease or other disposition 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 by Section 9.3.
SECTION VIII.2 Successor Substituted.
Upon any consolidation by the Company with, or merger by the Company
into, any other Person or any conveyance, transfer, sale, lease or other
disposition of the properties and assets of the Company as an entirety or
substantially as an entirety as described in Section 8.1, the Person
resulting from such consolidation or into which the Company is merged or to
which such conveyance, transfer, sale, lease or other disposition is made,
will succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein, and thereafter, except
in the case of a lease, the predecessor (if still in existence) will be
released from its obligations and covenants under this Indenture and the
Securities.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION IX.1 Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders of Securities, the Company, when
authorized by or pursuant to a Board Resolution, and the Trustee, at any time
and from time to time, may enter into one or more indentures supplemental
hereto, in form satisfactory to the Trustee, for any of the following
purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants and obligations of the
Company herein and in the Securities as permitted by Article VIII; or
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(2) to add to the covenants of the Company for the benefit of the
Holders of the Securities or to surrender any right or power herein conferred
upon the Company; or
(3) to add any additional Events of Default for the benefit of the
Holders of the Securities provided, however, that in respect of any such
additional Events of Default such supplemental indenture may provide for a
particular period of grace after default (which period may be shorter or
longer than that allowed in the case of other defaults) or may provide for an
immediate enforcement upon such default or may limit the remedies available
to the Trustee upon such default or may limit the right of the Holders of a
majority in aggregate principal amount of the Securities to waive such
default; or
(4) to secure the Securities; or
(5) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee; or
(6) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision herein,
or to make any other provisions with respect to matters or questions arising
under this Indenture which shall not be inconsistent with the provisions of this
Indenture as the Company and the Trustee may deem necessary or desirable;
provided that any such action shall not adversely affect the interests of the
Holders of Securities in any material respect; or
(7) subject to Section 13.15, to make any change in Article XIII that
would limit or terminate the benefits to any holder of Senior Debt under such
Article; or
(8) to comply with the requirements of the Trust Indenture Act; or
(9) to make any change that does not adversely affect the legal rights
under this Indenture of any Holder of Securities; or
(10) to change any Place of Payment to another location within the same
city provided that the Company delivers notice of such change to the Holders
prior to such change of Place of Payment; or
(11) to add a guarantor of the Securities.
SECTION IX.2 Supplemental Indentures with Consent of Holders.
With either (i) the consent of the Holders of not less than a
majority in principal amount of all Outstanding Securities by the Act of said
Holders delivered to the Company and the Trustee, or (ii) by the adoption of
a resolution, at a meeting of Holders of the Outstanding Securities at which
a quorum is present, by the Holders of at least 66-2/3% in aggregate
principal amount of the Outstanding Securities represented at such meeting,
the Company, when
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authorized by or pursuant to a Board Resolution, and the Trustee may enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby:
(1) change the Stated Maturity of the principal of (or premium, if any,
on) or any installment of principal of or interest on, any Security; or reduce
the principal amount thereof or the rate or amount of interest thereon, or any
premium payable upon the redemption or mandatory repurchase thereof, or
adversely affect any right of repurchase at the option of the Holder of any
Security, or change the city of any Place of Payment where, or the currency in
which, the principal of or any premium or the interest on any Security is
payable, including any payment of the Redemption Price or Repurchase Price in
respect of such Security or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof, (or, in
the case of redemption or repurchase at the option of the Holder, on or after
the Redemption Date or the Repurchase Date, as the case may be), or
(2) reduce the requirements of Section 15.4 for quorum or voting or the
percentage in principal amount of the Outstanding Securities, the consent of
whose Holders is required for any such supplemental indenture, or the consent of
whose Holders is required for any waiver with respect to such Outstanding
Securities (or compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section or Sections 5.13 or
10.8, except to increase the required percentage to effect such action or to
provide that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security affected
thereby, or
(4) release any guarantors from their guarantees of the Securities, or,
except as contemplated in any supplemental indenture, make any change in a
guarantee of a Security that would adversely affect the interests of the
Holders, or
(5) adversely affect the right of a Holder of a Security to require the
Company to repurchase any Note other than as provided in Article XII, or
(6) adversely affect the right of a Holder of a Security to require the
Company to convert any Note other than as provided in Article XIV, or
(7) modify the obligation of the Company to maintain an office or
agency in the Borough of Manhattan, the City of New York, pursuant to Section
10.2.
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It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION IX.3 Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modification thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and subject to Section 6.2 shall be fully protected in relying upon, an
Officer's Certificate and an Opinion of Counsel, each stating that the execution
of such supplemental indenture is authorized or permitted by this Indenture, is
in compliance with Article IX, constitutes the legal, valid and binding
obligation of the Company, enforceable in accordance with its terms (subject to
customary exceptions) and that all conditions precedent to the execution of such
supplemental indenture have been fulfilled. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION IX.4 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION IX.5 Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION IX.6 Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall, if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
SECTION IX.7 Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Article IX, the Company
shall give notice thereof to the
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Holders of each Outstanding Security affected, in the manner provided for in
Section 1.6, setting forth in general terms the substance of such
supplemental indenture.
ARTICLE X
COVENANTS
SECTION X.1 Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of the Holders of
Securities that it will duly and punctually pay the principal of (and premium,
if any) and interest on the Securities in accordance with the terms thereof. The
Company will deposit or cause to be deposited with the Trustee, no later than
the opening of business on the date of the Stated Maturity of any Security or no
later than the opening of business on the due date for any installment of
interest, all payments so due, which payments shall be in immediately available
funds on the date of such Stated Maturity or due date, as the case may be.
SECTION X.2 Maintenance of Office or Agency.
The Company shall maintain in each Place of Payment an office or agency
where Securities may be presented or surrendered for payment or conversion,
where Securities may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Company in respect of the Securities
and this Indenture may be served. The Company will give prompt written notice to
the Trustee of the location, and any change in the location, of each such office
or agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee its agent to receive all such presentations, surrenders, notices and
demands.
The Company may from time to time designate one or more other offices
or agencies where Securities may be presented or surrendered for any or all of
such purposes, and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in accordance with the
requirements set forth above for Securities 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 designates as a Place of Payment for Securities the office or
agency of the Company in the Borough of Manhattan, The City of New York, and
initially appoints State Street Bank and Trust Company, N.A., an Affiliate of
the Trustee, at its Corporate Trust Office in such city as Paying Agent,
Security Registrar and Conversion Agent and as its agent to receive all such
presentations, surrenders, notices and demands.
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SECTION X.3 Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of (and premium, if any) or interest
on, the Securities, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal (and premium, if any) or
interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided, and will promptly notify the Trustee
of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Securities, it will, no later than the opening of business on each due date of
the principal of (and premium, if any) or interest on, any Securities, deposit
with a Paying Agent a sum in immediately available funds sufficient to pay the
principal (and premium, if any) or interest, so becoming due, such sum to be
held in trust for the benefit of the Persons entitled to such principal (and
premium, if any) or interest and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument satisfactory to the Trustee in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will
(1) hold all sums held by it for the payment of principal of (and
premium, if any) or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any other
obligor upon the Securities) in the making of any such payment of principal (and
premium, if any) or interest;
(3) at any time during the continuance of any such default upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent; and
(4) acknowledge, accept and agree to comply in all respects with the
provisions of this Indenture relating to the duties, rights and liabilities of
such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such sums.
Except as otherwise provided in the Securities, any money deposited
with the Trustee or any Paying Agent, or then held by the Company, in trust for
the payment of the principal of (and premium, if any) or interest on any
Security and remaining unclaimed for two years after such
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principal (and premium, if any) and interest has become due and payable shall
be paid to the Company upon Company Request or (if then held by the Company)
shall be discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company for
payment of such principal of (and premium, if any) or interest on any
Security, without interest thereon, and all liability of the Trustee or such
Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that
the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in
an Authorized Newspaper, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION X.4 Existence.
Subject to Article VIII, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any right or franchise if the Board of
Directors determines that the preservation thereof is no longer desirable in the
conduct of the business of the Company and the loss thereof is not
disadvantageous in any material respect to the Holders.
SECTION X.5 Maintenance of Properties.
The Company will cause all of the properties of itself and of each
Subsidiary used or useful in the conduct of its business or the business of any
Subsidiary to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, the Company and its Subsidiaries shall not be
prevented from discontinuing the operation and maintenance of any of such
properties if such discontinuance is, in the judgment of the Company, desirable
in the conduct of its business and not disadvantageous in any material respect
to the Holders.
SECTION X.6 Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon it or any Subsidiary or upon the
income, profits or property of the Company or any Subsidiary, (2) all lawful
claims for labor, materials and supplies which, if unpaid, might by law become a
lien upon the property of the Company or any Subsidiary; and (3) all stamps and
similar duties, if any, which may be imposed by the United States or any
political subdivision thereof or taxing authority thereof or therein in
connection with the issuance, transfer, exchange or conversion of any Securities
or with respect to this Indenture; provided, however, that, in the
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case of clauses (1) and (2) that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in good
faith by appropriate proceedings.
SECTION X.7 Statement as to Compliance.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year, a brief certificate in the form of an Officers' Certificate
from its chief executive officer, chief operating officer, or principal
accounting officer as to his or her best knowledge of the Company's compliance
with all conditions and covenants under this Indenture and, in the event of any
noncompliance, specifying such noncompliance and the nature and status thereof.
For purposes of this Section 10.7, such compliance shall be determined without
regard to any period of grace or requirement of notice under this Indenture.
SECTION X.8 Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Section 10.4 (other than with respect
to the existence of the Company (subject to Article VII)), 10.5 and 10.6,
inclusive (other than a covenant or condition which under Article IX cannot be
modified or amended without the consent of the Holder of each Outstanding
Security affected), if before or after the time for such compliance the Holders
of at least a majority in principal amount of all outstanding Securities, by Act
of such Holders, either waive such compliance in such instance or generally
waive compliance with such covenant or condition, but no such waiver shall
extend to or affect such covenant or condition except to the extent so expressly
waived, and, until such waiver shall become effective, the obligations of the
Company and the duties of the Trustee or any Paying Agent or Conversion Agent in
respect of any such term, provision or condition shall remain in full force and
effect.
SECTION X.9 Statement by Officers as to Default.
The Company shall deliver to the Trustee, as soon as possible and in
any event within 10 days after an officer of Company becomes aware of the
occurrence of any Event of Default or any event which, with notice or the lapse
of time or both, would constitute an Event of Default, an Officers' Certificate
setting forth the details of such Event of Default or Default and the action
which the Company proposes to take with respect thereto.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION XI.1 Right of Redemption.
The Securities may be redeemed in accordance with the provisions of the
form of Securities set forth in Section 2.2.
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SECTION XI.2 Applicability of Article.
Redemption of Securities at the election of the Company or otherwise,
as permitted or required by any provision of the Securities or this Indenture,
shall be made in accordance with such provision and this Article XI.
SECTION XI.3 Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced
by or pursuant to a Board Resolution. In case of any redemption at the election
of the Company of less than all of the Securities, the Company shall, at least
45 but not more than 60 days prior to the Redemption Date (unless a shorter
notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date and of the principal amount of the Securities to be redeemed.
SECTION XI.4 Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 30 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by lot or by such other method as the Trustee shall deem
fair and appropriate and which may provide for the selection for redemption of
portions (equal to the minimum authorized denomination for Securities or any
integral multiple thereof) of the principal amount of Securities of a
denomination larger than the minimum authorized denomination therefor.
If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed (so
far as may be) to be the portion selected for redemption. Securities which have
been converted during a selection of Securities to be redeemed may be treated by
the Trustee as Outstanding for the purpose of such selection. The Trustee shall
promptly notify the Company and the Security Registrar (if other than itself) in
writing of the Securities selected for redemption and, in the case of any
Securities selected for partial redemption, the principal amount thereof to be
redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security which has been or is to be
redeemed.
SECTION XI.5 Notice of Redemption.
Notice of redemption shall be given in the manner provided in Section
1.6, not less than 30 days nor more than 60 days prior to the Redemption Date to
each Holder of Securities to be redeemed at such Holder's address appearing in
the Security Register and such notice shall be irrevocable.
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All notices of redemption shall include a description of the Securities
and shall state:
(1) the Redemption Date,
(2) the Redemption Price, accrued interest to the Redemption Date
payable as provided in Section 11.7, if any,
(3) if less than all Outstanding Securities are to be redeemed, the
identification (and, in the case of partial redemption, the principal amount) of
the particular Security or Securities to be redeemed,
(4) in case any Security is to be redeemed in part only, the notice
which relates to such Security shall state that on and after the Redemption
Date, upon surrender of such Security, the holder will receive, without a
charge, a new Security or Securities of authorized denominations for the
principal amount thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price and accrued
interest to the Redemption Date payable as provided in Section 11.7, if any,
will become due and payable upon each such Security, or the portion thereof, to
be redeemed and that interest thereon shall cease to accrue on and after said
date,
(6) the Place or Places of Payment where such Securities maturing after
the Redemption Date, are to be surrendered for payment of the Redemption Price
and accrued interest, if any, or for conversion,
(7) the CUSIP number of such Security, if any, and
(8) the then existing Conversion Rate, the date and time when the
option to convert such Securities to be redeemed shall expire and the places
where such Securities may be surrendered for conversion.
Notice of redemption of Securities to be redeemed shall be given by the
Company or, at the Company's request, by the Trustee in the name and at the
expense of the Company.
SECTION XI.6 Deposit of Redemption Price.
At least one Business Day prior to any Redemption Date, the Company
shall deposit with the Trustee or with a Paying Agent (or, if the Company is
acting as its own Paying Agent, segregate and hold in trust as provided in
Section 10.3) an amount of money sufficient to pay on the Redemption Date the
Redemption Price of, and (except if the Redemption Date shall be an Interest
Payment Date) accrued interest on, all the Securities or portions thereof which
are to be redeemed on that date other than any Securities called for redemption
on that date which have been converted prior to the date of such deposit.
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SECTION XI.7 Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest in which case the Securities to be redeemed shall continue to bear
interest at the default rate of interest, if any) such Securities shall cease to
bear interest. Upon surrender of any such Security for redemption in accordance
with said notice, such Security shall be paid by the Company at the Redemption
Price, together with accrued interest, if any, to the Redemption Date; provided,
however, that installments of interest on Securities whose Stated Maturity is on
or prior to the Redemption Date shall be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 3.7.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption as a result of the failure by the Company to
fund such redemption, the principal of (and premium, if any) and, to the extent
permitted by applicable law, accrued interest on such Security shall, until
paid, bear interest from the Redemption Date at a rate of [ ]% per annum and
such Security shall remain convertible until the full Redemption Price and
accrued interest shall have been paid or duly provided for.
SECTION XI.8 Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
at a Place of Payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or such
Holder's attorney duly authorized in writing) and the Company shall execute and
the Trustee shall authenticate and deliver to the Holder of such Security
without service charge a new Security or Securities of any authorized
denomination as requested by such Holder in aggregate principal amount equal to
and in exchange for the unredeemed portion of the principal of the Security so
surrendered.
SECTION XI.9 Conversion Arrangement on Call For Redemption.
In connection with any redemption of the Securities, the Company may
arrange for the purchase and conversion of any Securities by an agreement with
one or more investment bankers or other purchasers (the "Purchasers") to
purchase such Securities by paying to the Trustee in trust for the Holders, on
or before the Redemption Date, an amount not less than the applicable Redemption
Price, together with interest accrued and unpaid to the Redemption Date, of such
Securities. Notwithstanding anything to the contrary contained in this Article
XI, the obligation of the Company to pay the Redemption Price, together with
interest accrued and unpaid to the Redemption Date, 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 shall be filed
with the Trustee prior to the close of business on the Business Day immediately
prior to the
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Redemption Date), any Securities called for redemption that are 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, and consistent
with any agreement or agreements with such Purchasers, to be acquired by such
Purchasers from such Holders and (notwithstanding anything to the contrary
contained in this Article XI) surrendered by such Purchasers for conversion,
all as of immediately prior to the close of business on the Redemption Date
(and the right to convert any such Securities shall be extended through such
time), subject to payment of the above amount as aforesaid. At the direction
of the Company, the Trustee shall hold and dispose of any such amount paid to
it by the Purchasers to the Holders in the same manner as it would monies
deposited with it by the Company for the redemption of Securities. Without
the Trustee's prior written consent, no arrangement between the Company and
such Purchasers for the purchase and conversion of any Securities 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 Securities between the
Company and such Purchasers, including the costs and expenses, including
reasonable legal fees, 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 XII
REPURCHASE OF SECURITIES AT THE OPTION
OF HOLDERS UPON THE CHANGE OF CONTROL
SECTION XII.1 Right to Require Repurchase.
In the event that a Change in Control (as hereinafter defined) shall
occur, then each Holder shall have the right, at the Holder's option, but
subject to the provisions of Section 12.2., to require the Company to
repurchase, and upon the exercise of such right the Company shall repurchase,
all of such Holder's Securities not theretofore called for redemption, or any
portion of the principal amount thereof that is equal to $1,000 or any
integral multiple of $1,000 in excess thereof (provided that no single
Securities may be repurchased in part unless the portion of the principal
amount of such Securities to be Outstanding after such repurchase is equal to
$1,000 or integral multiples of $1,000 in excess thereof), on the date (the
"Repurchase Date") that is 45 days after the date of the Company Notice at a
purchase price equal to 100% of the principal amount of the Securities to be
repurchased plus interest accrued to the Repurchase Date (the "Repurchase
Price"); provided, however, that installments of interest on Securities whose
Stated Maturity is on or prior to the Repurchase Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered
as such on the relevant Record Date according to their terms and the
provisions of Section 3.7. Such right to require the repurchase of the
Securities shall not continue after a discharge of the Company from its
obligations with respect to the Securities in accordance with the provision
of Article IV unless a Change in Control shall have occurred prior to such
discharge. At the option of the Company, the
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Repurchase Price may be paid in cash or, subject to the fulfillment by the
Company of the conditions set forth Section 12.2, by delivery of shares of
Common Stock having a fair market value equal to the Repurchase Price.
Whenever in this Indenture (including Sections 2.2, 3.1, 5.1(2) and 5.8)
there is a reference, in any context, to the principal of any Securities as
of any time, such reference shall be deemed to include reference to the
Repurchase Price payable in respect of such Securities to the extent that
such Repurchase Price is, was or would be so payable at such time, and
express mention of the Repurchase Price in any provision of this Indenture
shall not be construed as excluding the Repurchase Price in those provisions
of this Indenture when such express mention is not made; provided, however,
that for the purposes of Article XIV such reference shall be deemed to
include reference to the Repurchase Price only to the extent the Repurchase
Price is payable in cash.
SECTION XII.2 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 12.1 if and only if the following
conditions shall have been satisfied:
(1) 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 12.1 and this
Section 12.2, the fair market value of shares of Common Stock shall be
determined by the Company and shall be equal to 95% of the average of the
Closing Prices Per Share of the Common Stock for the five consecutive Trading
Days immediately preceding and including the third Trading Day prior to the
Repurchase Date;
(2) The shares of Common Stock to be issued upon repurchase of
Securities hereunder (i) shall not require registration under any federal
securities law before such shares may be freely transferable without being
subject to any transfer restrictions under the Securities Act upon repurchase
or, if such registration is required, such registration shall be completed
and shall become effective prior to the Repurchase Date, and (ii) shall not
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 or if such registration is required or such
approval must be obtained, such registration shall be completed or such
approval shall be obtained prior to the Repurchase Date;
(3) The shares of Common Stock to be issued upon repurchase of
Securities hereunder are, or shall have been, approved for quotation on the
Nasdaq National Market or listed on a national securities exchange, in any
case, prior to the Repurchase Date; and
(4) All shares of Common Stock which may be issued upon repurchase
of Securities 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 or similar rights.
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If all of the conditions set forth in this Section 12.2 are not
satisfied in accordance with the terms thereof, the Repurchase Price shall be
paid by the Company only in cash.
SECTION XII.3 Notices; Method of Exercising Repurchase Right, Etc.
(a) Unless the Company shall have theretofore called for redemption
all of the Outstanding Securities, on or before the 30th day after the
occurrence of a Change in Control, the Company or, at the request and expense
of the Company on or before the 30th day after such occurrence, the Trustee,
shall give to all Holders of Securities, in the manner provided in Section
1.6 notice (the "Company Notice") of the occurrence of the Change of Control
and of the repurchase right set forth herein arising as a result thereof. The
Company shall also deliver a copy of such Company Notice to the Trustee.
Each notice of a repurchase right shall state:
(i) the Repurchase Date,
(ii) the date by which the repurchase right must be
exercised pursuant to Section 12.3(b),
(iii) the Repurchase Price, and whether the Repurchase
Price shall be paid by the Company in cash or by delivery of shares of Common
Stock,
(iv) a description of the procedure which a Holder must
follow to exercise a repurchase right, and the place or places where such
Securities, are to be surrendered for payment of the Repurchase Price and
accrued interest, if any, to the Repurchase Date,
(v) that on the Repurchase Date the Repurchase Price,
and accrued and unpaid interest, if any, will become due and payable upon
each such Securities designated by the Holder to be repurchased, and that
interest thereon shall cease to accrue on and after said date,
(vi) the Conversion Rate then in effect, the date on
which the right to convert the principal amount of the Securities to be
repurchased will terminate and the place or places where such Securities may
be surrendered for conversion, and
(vii) the place or places that the Securities certificate
with the Election of Holder to Require Repurchase as specified in Section 2.2
shall be delivered.
No failure of the Company to give the foregoing notices or
defect therein shall limit any Holder's right to exercise a repurchase right
or affect the validity of the proceedings for the repurchase of Securities.
If any of the foregoing provisions or other provisions of
this Article VIII are inconsistent with applicable law, such law shall govern.
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(b) To exercise a repurchase right, a Holder shall deliver to the
Trustee on or before the 30th day after the date of the Company Notice (i)
written notice of the Holder's exercise of such right, which notice shall set
forth the name of the Holder, the principal amount of the Securities to be
repurchased (and, if any Securities is to repurchased in part, the serial
number thereof, the portion of the principal amount thereof to be repurchased
and the name of the Person in which the portion thereof to remain Outstanding
after such repurchase is to be registered) and a statement that an election
to exercise the repurchase right is being made thereby, and, in the event
that the Repurchase Price shall be paid in shares of Common Stock, the name
or names (with addresses) in which the certificate or certificates for shares
of Common Stock shall be issued, and (ii) the Securities with respect to
which the repurchase right is being exercised. Such written notice shall be
irrevocable, except that the right of the Holder to convert the Securities
with respect to which the repurchase right is being exercised shall continue
until the close of business on the Repurchase Date.
(c) In the event a repurchase right shall be exercised in accordance
with the terms hereof, the Company shall pay or cause to be paid to the
Trustee the Repurchase Price in cash or shares of Common Stock, as provided
above, for payment to the Holder on the Repurchase Date or, if shares of
Common Stock are to be paid, as promptly after the Repurchase Date as
practicable, together with accrued and unpaid interest to the Repurchase Date
payable with respect to the Securities as to which the repurchase right has
been exercised; provided, however, that installments of interest that mature
on or prior to the Repurchase Date shall be payable in cash to the Holders of
such Securities, or one or more Predecessor Securities, registered as such at
the close of business on the relevant Regular Record Date. The Company
covenants that, if the Repurchase Price is to be paid in cash, at least one
Business Day prior to the Repayment Date it will deposit with the Trustee or
with a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 10.3) an amount of money
sufficient to pay the principal of, and (except if the Repayment Date shall
be an Interest Payment Date) accrued interest on, all the Securities or
portions thereof, as the case may be, to be repaid on such Repayment Date.
(d) If any Securities (or portion thereof) surrendered for
repurchase shall not be so paid on the Repurchase Date, the principal amount
of such Securities (or portion thereof, as the case may be) shall, until
paid, bear interest to the extent permitted by applicable law from the
Repurchase Date at the rate of [ ]% per annum, and each Securities shall
remain convertible into Common Stock until the principal of such Securities
(or portion thereof, as the case may be) shall have been paid or duly
provided for.
(e) Any Securities which is to be repurchased only in part shall be
surrendered to the Trustee (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory
to the Company and the Trustee duly executed by, the Holder thereof or such
Holder's attorney duly authorized in writing), and the Company shall execute,
and the Trustee shall authenticate and make available for delivery to the
Holder of such Securities without service charge, a new Security or
Securities, containing identical terms and
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conditions, each in an authorized denomination in aggregate principal amount
equal to and in exchange for the unrepurchased portion of the principal of
the Securities so surrendered.
(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 distributions on any Common Stock issued upon
repurchase of any Securities declared prior to the Repurchase Date.
(g) No fractions of shares shall be issued upon repurchase of
Securities. If more than one Security 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 Securities
so repurchased. Instead of any fractional share of Common Stock which would
otherwise be issuable on the repurchase of any Securities or Securities, 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 Per Share 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 Securities shall be made without charge to the Holder
of Securities 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 Securities 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 Securities delivered for repurchase shall be delivered to
the Trustee to be canceled at the direction of the Trustee, which shall
dispose of the same as provided in Section 3.9.
SECTION XII.4 Certain Definitions.
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For purposes of this Article XII,
(1) the term "beneficial owner" shall be determined in accordance
with Rule 13d-3, as in effect on the date of the original execution of this
Indenture, promulgated by the Commission pursuant to the Exchange Act;
(2) a "Change in Control" shall be deemed to have occurred at the
time, after the original issuance of the Securities, of:
(i) the acquisition by any Person (including any
syndicate or group deemed to be a "person" under Section 13(d)(3) of the
Exchange Act as in effect on the date of the original execution of this
Indenture) of beneficial ownership, directly or indirectly, through a
purchase, merger or other acquisition transaction or series of transactions,
of shares of Capital Stock of the Company entitling such person to exercise
50% or more of the total voting power of all shares of Capital Stock of the
Company entitled to vote generally in the elections of directors (or persons
holding a similar function), other than any such acquisition by the Company,
any subsidiary of the Company or any employee benefit plan of the Company; or
(ii) any consolidation of the Company with, or merger of
the Company into, any other Person, any merger of another Person into the
Company, or any conveyance, sale, transfer, lease or other disposition of all
or substantially all of the assets of the Company to another Person (other
than (a) any such transaction (x) which does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares
of Capital Stock of the Company and (y) pursuant to which the holders of the
Common Stock immediately prior to such transaction have the entitlement to
exercise, directly or indirectly, 50% or more of the total voting power of
all shares of Capital Stock entitled to vote generally in the election of
directors (or persons holding a similar function) of the continuing or
surviving corporation immediately after such transaction and (b) any merger
which is effected solely to change the jurisdiction of incorporation of the
Company and results in a reclassification, conversion or exchange of
outstanding shares of Common Stock into solely shares of common stock of the
surviving entity);
provided, however, that a Change in Control shall not be deemed to have
occurred if the Closing Sales Price Per Share of the Common Stock for any
five Trading Days within the period of 10 consecutive Trading Days ending
immediately after the later of the Change in Control or the public
announcement of the Change in Control (in the case of a Change in Control
under clause (i) above) or the period of 10 consecutive Trading Days ending
immediately before the Change in Control (in the case of a Change in Control
under clause (ii) above) shall equal or exceed 105% of the Conversion Price
of the Securities in effect on each such Trading Day; and
(3) the term "Closing Price Per Share" means, with respect to the
Common Stock, for any day, (i) the last reported sale price regular way on
the Nasdaq National Market or, (ii) if the Common Stock is not listed on the
Nasdaq National Market, the last reported sale price
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regular way per share or, in case no such reported sale takes place on such
day, the average of the reported closing bid and asked prices regular way, in
either case, on the principal national securities exchange on which the
Common Stock is listed or admitted to trading, or (iii) if the Common Stock
is not quoted on the Nasdaq National Market or listed or admitted to trading
on any national securities exchange, the average of the closing bid prices in
the over-the-counter market as furnished by any Nasdaq National Market member
firm selected from time to time by the Company for that purpose.
SECTION XII.5 Consolidation, Merger, Etc.
In the case of any consolidation, merger, conveyance, sale, transfer
or lease of all or substantially all of the assets of the Company to which
Section 14.11 applies, in which the Common Stock of the Company is changed or
exchanged as a result into the right to receive shares of stock and other
securities or property or assets (including cash) which includes shares of
Common Stock of the Company or common stock of another Person that are, or
upon issuance will be, traded on a United States national securities exchange
or approved for trading on an established automated over-the-counter trading
market in the United States and such shares constitute at the time such
change or exchange becomes effective in excess of 50% of the aggregate fair
market value of such shares of stock and other securities, property and
assets (including cash) (as determined by the Company, which determination
shall be conclusive and binding), then the Person formed by such
consolidation or resulting from such merger or combination or which acquires
the properties or assets (including cash) of the Company, as the case may be,
shall execute and deliver to 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) modifying the provisions of this
Indenture relating to the right of Holders to cause the Company to repurchase
the Securities following a Change in Control, including without limitation
the applicable provisions of this Article XII and the definitions of the
Common Stock and Change in Control, as appropriate, and such other related
definitions set forth herein and in the Indenture as determined in good faith
by the Company (which determination shall be conclusive and binding), to make
such provisions apply in the event of a subsequent Change of Control to the
common stock and the issuer thereof if different from the Company and Common
Stock of the Company (in lieu of the Company and the Common Stock of the
Company).
ARTICLE XIII
SUBORDINATION
SECTION XIII.1 Agreement to Subordinate.
The Company agrees, and each Holder by accepting a Security agrees,
that the indebtedness evidenced by the Securities is subordinated in right of
payment, to the extent and in the manner provided in this Article, to the
prior payment in full in cash of all Senior Debt and that the subordination
is for the benefit of the holders of Senior Debt.
SECTION XIII.2 Liquidation; Dissolution; Bankruptcy.
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Upon any distribution to creditors of the Company in a liquidation
or dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property:
(1) Senior Debt shall be entitled to receive payment in full in cash
of the principal of (and premium, if any) and interest (including all
interest accruing after the commencement of any such bankruptcy or similar
proceeding) to the date of payment on the Senior Debt before Holders shall be
entitled to receive any payment of principal of or interest on Securities;
(2) until the Senior Debt is paid in full in cash, any distribution
to which Holders would be entitled but for this Article shall be made to
holders of Senior Debt as their interests may appear, except that Holders may
receive securities that are subordinated in right of payment to Senior Debt
to at least the same extent as the Securities; and
(3) the Trustee is entitled to rely upon an order or decree of a
court of competent jurisdiction or a certificate of a bankruptcy trustee or
other similar official for the purpose of ascertaining the persons entitled
to participate in such distribution, the holders of Senior Debt and other
Company debt, the amount thereof or payable thereon and all other pertinent
facts relating to the Trustee's obligations under this Article XIII.
The consolidation of the Company with, or the merger of the Company
into, another Person or the liquidation or dissolution of the Company
following the conveyance or transfer of its properties and assets
substantially as an entirety to another Person upon the terms and conditions
set forth in Article VIII shall not be deemed a dissolution, winding up,
liquidation, reorganization, assignment for the benefit of creditors or
marshaling of assets and liabilities of the Company for the purposes of this
Section if the Person formed by such consolidation or into which the Company
is merged or which acquires by conveyance, transfer, lease, sale or other
disposition such properties and assets as an entirety or substantially as an
entirety, as the case may be, shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions set forth in Article VIII.
SECTION XIII.3 No Payment in Certain Circumstances, Payment over of Proceeds
No payment shall be made with respect to the principal of, or
premium, if any, or interest on the Securities (including, but not limited
to, the Redemption Price with respect to the Securities to be called for
redemption in accordance with Article XI or the Repurchase Price with respect
to Securities submitted for repurchase in accordance with Article XII),
except payments and distributions made by the Trustee as permitted by Section
13.11, if:
(i) a default in the payment of principal, premium, if
any, or interest (including a default under any repurchase or redemption
obligation) or other amounts with respect to any Senior Debt occurs and is
continuing (or, in the case of Senior Debt for which there is a period of
grace, in the event of such a default that continues beyond the period of
grace,
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if any, specified in the instrument, agreement or lease evidencing such
Senior Debt) unless and until such default shall have been cured or waived or
shall have ceased to exist; or
(ii) a default, other than a payment default, on any
Designated Senior Debt occurs and is continuing that then permits holders of
such Designated Senior Debt to accelerate its maturity and the Trustee
receives a notice of the default (a "Payment Blockage Notice") from a holder
of such Designated Senior Debt or any other person entitled to give such
notice under this Indenture.
If the Trustee receives any Payment Blockage Notice pursuant to
clause (ii) above, no subsequent Payment Blockage Notice shall be effective
for purposes of this Section unless and until (A) at least 365 days shall
have elapsed since the initial effectiveness of the immediately prior Payment
Blockage Notice, and (B) all scheduled payments of principal, premium, if
any, and interest on the Securities that have come due have been paid in full
in cash. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made,
the basis for a subsequent Payment Blockage Notice.
The Company may and shall resume payments on and distributions in
respect of the Securities upon the earlier of:
(1) In the case of default referred to in clause (i) above, the date
upon which the default is cured or waived or ceases to exist, or
(2) in the case of a default referred to in clause (ii) above, the
earlier of the date on which the nonpayment default is cured or waived or 179
days after the date on which the Trustee receives the Payment Blockage
Notice, if the maturity of such Designated Senior Debt has not been
accelerated,
unless this Article otherwise prohibits the payment or distribution at the
time of such payment or distribution.
SECTION XIII.4 Prior Payment of Senior Debt Upon Acceleration of Securities.
In the event of the acceleration of the principal on the Securities
because of an Event of Default, no payment or distribution shall be made to
the Trustee or any holder of Securities in respect of the principal of,
premium, if any, or interest on the Securities (including, but not limited
to, the Redemption Price with respect to the Securities called for redemption
in accordance with Article XI or the Repurchase Price with respect to the
Securities submitted for repurchase in accordance with Article XII), except
payments and distributions made by the Trustee as permitted by this Article,
until all Senior Debt has been paid in full in cash or other payment
satisfactory to the holders of Senior Debt or such acceleration is rescinded
in accordance with the terms of this Indenture.
SECTION XIII.5 When Distribution Must Be Paid Over.
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If a distribution is made to Holders that because of this Article
should not have been made to them, the Holders who receive the distribution
shall hold it in trust for holders of Senior Debt and pay it over to them as
their interests may appear.
SECTION XIII.6 Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Company referred
to in this Article, the Trustee, subject to the provisions of Section 6.2,
and the Holders of the Securities shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Trustee or to the
Holders of Securities, for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of the Senior
Debt and other indebtedness of the Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article.
SECTION XIII.7 Subrogation.
Subject to the payment in full of all Senior Debt, the Holders of
the Securities shall be subrogated to the extent of the payments or
distributions made to the holders of such Senior Debt pursuant to the
provisions of this Article to the rights of the holders of such Senior Debt
to receive payments and distributions of cash, property and securities
applicable to the Senior Debt until the principal of (and premium, if any)
and interest on the Securities shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Senior Debt
of any cash, property or securities to which the Holders of the Securities or
the Trustee would be entitled except for the provisions of this Article, and
no payments over pursuant to the provisions of this Article to the holders of
Senior Debt by Holders of the Securities or the Trustee, shall, as among the
Company, its creditors other than holders of Senior Debt and the Holders of
the Securities, be deemed to be a payment or distribution by the Company to
or on account of the Senior Debt.
SECTION XIII.8 Relative Rights.
This Article XIII defines, and is intended solely to define, the
relative rights of Holders of Securities and holders of Senior Debt. Nothing
contained in this Indenture or the Securities shall:
(1) impair, as between the Company and Holders of Securities, the
obligation of the Company, which is absolute and unconditional, to pay
principal of, premium, if any, and interest on the Securities as and when the
same shall become due and payable in accordance with their terms;
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(2) affect the relative rights against the Company of Holders of
Securities and creditors of the Company other than holders of Senior Debt; or
(3) prevent the Trustee or any Holder of any Security from
exercising its available remedies upon the occurrence of a default or an
Event of Default, subject to the rights of holders of Senior Debt to receive
cash, property and securities otherwise payable to Holders of Securities.
If the Company fails because of this Article to pay principal of,
premium, if any, or interest on a Security as and when the same shall become
due and payable, the failure is still a default.
SECTION XIII.9 Subordination May Not Be Impaired By Company.
No right of any holder of Senior Debt to enforce the subordination
of the indebtedness evidenced by the Securities shall be impaired by any act
or failure to act by the Company or by its failure to comply with this
Indenture.
SECTION XIII.10 Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders
of Senior Debt, the distribution may be made and the notice given to their
Representative.
SECTION XIII.11 Rights of Trustee and Paying Agent.
The Trustee or any Paying Agent may continue to make payments on the
Securities until it receives written notice of facts that would cause a
payment of principal of or interest on the Securities to violate the Article.
Only the Company, a Representative or a Holder of an issue of Senior Debt
that has no Representative may give the written notice.
The Trustee has no fiduciary duty to the holders of Senior Debt
other than as created under this Indenture. The Trustee in its individual or
any other capacity may hold Senior Debt with the same rights it would have if
it were not Trustee.
The Company's obligation to pay, and the Company's payment of, the
Trustee's fees pursuant to Section 6.6 are excluded from the operation of
this Article XIII.
SECTION XIII.12 Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Securities. Notwithstanding the
provisions of this Article or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts
which would prohibit the making of any payment to or by the Trustee in
respect of the Securities,
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unless and until a Responsible Officer of the Trustee shall have received
written notice thereof from the Company or a Representative or a holder of
Senior Debt (including, without limitation, a holder of Designated Senior
Debt) and, prior to the receipt of any such written notice, the Trustee,
subject to the provisions of Section 6.14, shall be entitled in all respects
to assume that no such facts exist; provided, however, that if a Responsible
Officer of the Trustee shall not have received the notice provided for in
this Section 13.12 at least two Business Days prior to the date upon which by
the terms hereof any money may become payable for any purpose (including,
without limitation, the payment of the principal of (and premium, if any) or
interest on any Security), then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive
such money and to apply the same to the purpose for which such money was
received and shall not be affected by any notice to the contrary which may be
received by a Responsible Offer of the Trustee less than two Business Days
prior to such date.
Notwithstanding anything in this Article XIII to the contrary,
nothing shall prevent any payment by the Trustee to the Holders of monies
deposited with it pursuant to Section 4.1, and any such payment shall not be
subject to the provisions of Sections 13.2, 13.3 and 13.4.
Subject to the provisions of Section 6.14, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a Representative or a holder of Senior Debt
(including, without limitation, a holder of Designated Senior Debt) to
establish that such notice has been given by a Representative or a holder of
Senior Debt (including, without limitation, a holder of Designated Senior
Debt). In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held
by such Person, the extent to which such Person is entitled to participate in
such payment or distribution and any other facts pertinent to the rights of
such Person under this Article, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination
as to the right of such Person to receive such payment.
SECTION XIII.13 Payment Permitted If No Default.
Nothing contained in this Article XIII or elsewhere in this
Indenture or in the Securities shall prevent (a) the Company, at any time
except during the pendency of any case, proceeding, dissolution, liquidation
or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding referred to in Section 13.2, during the circumstance referred to
in the first paragraph of Section 13.3 or under the conditions described in
Section 13.4 hereof, from making payments at any time of principal of (and
premium, if any) or interest on the Securities (including, but not limited
to, the Redemption Price with respect to the Securities called for redemption
in accordance with Article XI or the Repurchase Price with respect to the
Securities submitted for repurchase in accordance with Article XII), or (b)
the application by the Trustee of any money deposited with it hereunder to
the payment of or on account of the principal of (and premium, if any) or
interest on the Securities (including, but not limited to, the Redemption
Price with respect
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to the Securities called for redemption in accordance with Article XI or the
Repurchase Price with respect to the Securities submitted for repurchase in
accordance with Article XII) or the retention of such payment by the Holders,
if, at the time of such application by the Trustee, it did not have knowledge
that such payment would have been prohibited by the provisions of this
Article.
SECTION XIII.14 Trustee to Effectuate Subordination.
Each Holder of a Securities by its acceptance thereof authorizes and
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee its attorney-in-fact for any and all such purposes.
SECTION XIII.15 Reliance by Holders of Senior Debt on Subordination
Provisions.
Each Holder by accepting a Securities acknowledges and agrees that
the foregoing subordination provisions are, and are intended to be, an
inducement and a consideration to each holder of any Senior Debt, whether
such Senior Debt was created or acquired before or after the issuance of the
Securities, to acquire and continue to hold, or to continue to hold, such
Senior Debt and such holder of Senior Debt shall be deemed conclusively to
have relied on such subordination provisions in acquiring and continuing to
hold, or in continuing to hold, such Senior Debt, and no amendment or
modification of the provisions contained herein shall diminish the rights of
such holders of Senior Debt unless such holders shall have agreed in writing
thereto.
SECTION XIII.16 Rights of Trustee as Holder of Senior Debt; Preservation of
Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Debt which may at
any time be held by it, to the same extent as any other holder of Senior
Debt, and nothing in this Indenture shall deprive the Trustee of any of its
rights as such holder. Nothing in this Article shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 6.6 hereof.
SECTION XIII.17 Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying
Agent within its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article in addition to or in place of the
Trustee; provided, however, that Section 13.16 shall not apply to the Company
or any Affiliate of the Company if it or such Affiliate acts as Paying Agent.
SECTION XIII.18 Determination of Certain Conversions and Repurchases as
Payments.
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For the purposes of this Article only, (a) the issuance and delivery
of junior securities upon (i) conversion of Securities in accordance with
Article XIV or (ii) the repurchase of Securities in accordance with Article
VIII, shall not be deemed to constitute a payment or distribution on account
of the principal of, or premium or interest on, Securities or on account of
the purchase or other acquisition of the Securities, and (b) the payment,
issuance or delivery of cash (except in satisfaction of fractional shares
pursuant to Section 14.3), property or securities (other than junior
securities) upon conversion of a Securities shall be deemed to constitute
payment on account of the principal of such Securities. For the purposes of
this Section, the term "junior securities" means (i) shares of any stock of
any class of the Company and securities into which the Securities are
convertible pursuant to Article XIV or the terms of the Securities and (ii)
securities of the Company which are subordinated in right of payment to all
Senior Debt which may be outstanding at the time of issuance or delivery of
such securities to substantially the same extent as, or to a greater extent
than, the Securities are so subordinated as provided in this Article. Nothing
contained in this Article or elsewhere in this Indenture or in the Securities
is intended to or shall impair, as among the Company, its creditors other
than holders of Senior Debt and the Holders of the Securities, the right,
which is absolute and unconditional, of the Holder of any Securities to
convert such Securities in accordance with Article XIV or to exchange such
Securities for Common Stock in accordance with Article XII if the Company
elects to satisfy the obligations under Article XII by the delivery of Common
Stock.
ARTICLE XIV
CONVERSION OF SECURITIES
SECTION XIV.1 Conversion Privilege And Conversion Rate.
Subject to and upon compliance with the provisions of this Article,
at the option of the Holder thereof, any Security or any portion of the
principal amount thereof which is $1,000 or an integral multiple of $1,000
may be converted at the principal amount thereof, or of such portion thereof,
into fully paid and nonassessable shares (calculated as to each conversion to
the nearest 1/100 of a share) of Common Stock of the Company, at the
Conversion Rate, determined as hereinafter provided, in effect at the time of
conversion. Such conversion right shall commence at anytime following the
original issue date of the Securities and expire at the close of business on
the Business Day immediately preceding the date of Maturity of such
Securities. In case a Security or portion thereof is called for redemption
(or delivered for repurchase, if applicable), such conversion right in
respect of the Security or portion so called shall expire at the close of
business on the Business Day immediately preceding the Redemption Date or
Repurchase Date, if applicable, unless the Company defaults in making the
payment due upon redemption or repurchase, if applicable. The rate at which
shares of Common Stock shall be delivered upon conversion (the "Conversion
Rate") shall be initially ___________ shares of Common Stock for each $1,000
principal amount of the Securities. The Conversion Rate shall be adjusted in
certain instances as provided in this Article XIV.
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SECTION XIV.2 Exercise Of Conversion Privilege.
In order to exercise the conversion privilege, the Holder of any
Security to be converted shall surrender such Security, duly endorsed in
blank or assigned to the Company at any office or agency of the Company,
maintained for that purpose pursuant to Section 10.2 accompanied by a duly
signed notice of conversion substantially in the form set forth in Section
2.4 stating that the Holder elects to convert such Security or, if less than
the entire principal amount thereof is to be converted, the portion thereof
to be converted. Securities surrendered for conversion during the period from
the close of business on any Regular Record Date next preceding any Interest
Payment Date to the opening of business on such Interest Payment Date shall
(except in the case of Securities or portions thereof which have been called
for redemption or are eligible to be delivered for repurchase, the conversion
rights of which would terminate between such Regular Record Date and the
close of business on such Interest Payment Date) be accompanied by payment in
New York Clearing House funds or other funds acceptable to the Company of an
amount equal to the interest payable on such Interest Payment Date on the
principal amount of Securities being surrendered for conversion. Except as
provided in the preceding sentence and subject to the last paragraph of
Section 3.7, no payment or adjustment shall be made upon any conversion on
account of any interest accrued on the Securities surrendered for conversion
or on account of any dividends on the Common Stock issued upon conversion.
Securities shall be deemed to have been converted immediately prior
to the close of business on the day of surrender of such Securities for
conversion in accordance with the foregoing provisions, and at such time the
rights of the Holders of such Securities as Holders shall cease, and the
Person or Persons entitled to receive the Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or holders
of such Common Stock at such time. As promptly as practicable on or after the
conversion date, the Company shall issue and shall deliver to the Trustee a
certificate or certificates for the number of full shares of Common Stock
issuable upon conversion, together with payment in lieu of any fraction of a
share, as provided in Section 14.3. Such certificate or certificates shall be
sent by the Trustee, if applicable, to the Conversion Agent for delivery to
the Person or Persons entitled to receive the Common Stock. In the case of
any Security which is converted in part only, upon such conversion the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder thereof, at the expense of the Company, a new Security or Securities
of authorized denominations in aggregate principal amount equal to the
unconverted portion of the principal amount of such Security.
SECTION XIV.3 Fractions Of Shares.
No fractional shares of Common Stock shall be issued upon conversion
of any Security or Securities. If more than one Security shall be surrendered
for conversion at one time by the same Holder, the number of full shares
which shall be issuable upon conversion thereof shall be computed on the
basis of the aggregate principal amount of the Securities (or specified
portions thereof) so surrendered. Instead of any fractional share of Common
Stock which would otherwise be issuable upon conversion of any Security or
Securities (or specified portions thereof), the
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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 Per Share of the Common Stock on the Trading Day
immediately preceding the date of conversion.
SECTION XIV.4 Adjustment Of Conversion Rate.
The Conversion Rate shall be subject to adjustment from time to time
as follows:
(1) In case the Company shall pay or make a dividend or other
distribution on any class of Capital Stock of the Company payable in shares
of Common Stock, the Conversion Rate in effect at the opening of business on
the day following the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution shall be increased by
dividing such Conversion Rate by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding at the close of business on
the date fixed for such determination and the denominator shall be the sum of
such number of shares and the total number of shares constituting such
dividend or other distribution, such increase to become effective immediately
prior to the opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (1), the number of shares
of Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates 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.
(2) Subject to paragraph 9 of this Section 14.4, in case the Company
shall issue rights, options or warrants to all holders of its Common Stock
(other than any rights, options or warrants that by their terms will also be
issued to any Holder upon conversion of a Security into Common Stock without
any action required by the Company or any other person) entitling them to
subscribe for or purchase shares of Common Stock at a price per share less
than the current market price per share (determined as provided in paragraph
(10) of this Section 14.4) of the Common Stock on the date fixed for the
determination of stockholders entitled to receive such rights, options or
warrants, the Conversion Rate in effect at the opening of business on the day
following the date fixed for such determination shall be increased by
dividing such Conversion Rate by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding at the close of business on
the date fixed for such determination plus the number of shares of Common
Stock which the aggregate of the offering price of the total number of shares
of Common Stock so offered for subscription or purchase would purchase at
such current market price per share and the denominator shall be the number
of shares of Common Stock outstanding at the close of business on the date
fixed for such determination plus the number of shares of Common Stock so
offered for subscription or purchase, such increase to become effective
immediately prior to the opening of business on the day following the date
fixed for such determination. For the purposes of this paragraph (2), the
number of shares of Common Stock at
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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
issue any rights, options or warrants in respect of shares of Common Stock
held in the treasury of the Company.
(3) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Rate in
effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately increased, and,
conversely, in case outstanding shares of Common Stock shall be combined into
a smaller number of shares of Common Stock, the Conversion Rate in effect at
the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately reduced, such
reduction or increase, as the case may be, to become effective immediately
prior to the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(4) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock, shares of any class of its Capital Stock,
evidences of its indebtedness, cash or other assets (including securities,
but excluding (a) any rights, options or warrants referred to in paragraph
(2) of this Section, (b) any dividend or distribution paid exclusively in
cash, (c) any dividend or distribution referred to in paragraph (1) of this
Section and (d) any distributions referred to in paragraph (5) of this
Section), the Conversion Rate shall be adjusted so that the same shall equal
the price determined by dividing the Conversion Rate in effect immediately
prior to the close of business on the date fixed for the determination of
stockholders entitled to receive such distribution by a fraction of which the
numerator shall be the current market price per share (determined as provided
in paragraph (10) of this Section) of the Common Stock on the date fixed for
such determination less the then fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and described in
a Board Resolution filed with the Trustee) of the portion of the assets,
shares of Capital Stock or evidences of indebtedness so distributed
applicable to one share of Common Stock and the denominator shall be such
current market price per share of the Common Stock, such adjustment to become
effective immediately prior to the opening of business on the day following
the date fixed for the determination of stockholders entitled to receive such
distribution.
(5) 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 14.11 applies or
as part of a distribution referred to in paragraph (4) of this Section other
than those referenced in the first parenthetical contained therein) in an
aggregate amount that, combined together with:
(a) the aggregate amount of any other distributions to all
holders of its Common Stock made exclusively in cash within the 12 months
preceding the date of payment of such distribution and in respect of which no
adjustment pursuant to this paragraph (5) has been made, and
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(b) the aggregate of any cash plus the fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution filed with the Trustee) of
consideration payable in respect of any tender offer by the Company or any of
its subsidiaries for all or any portion of the Common Stock concluded within
the 12 months preceding the date of payment of such distribution and in
respect of which no adjustment pursuant to paragraph (6) of this Section has
been made (the amount of such cash distribution together with the amounts
described in clauses (a) and (b) above being referred to herein as the
"Aggregate Cash Distribution Amount"),
exceeds 10% of the product of (i) the current market price per share of the
Common Stock on the date for the determination of holders of shares of Common
Stock entitled to receive such distribution, times (ii) the number of shares
of Common Stock outstanding on such date (the amount by which the Aggregate
Cash Distribution Amount exceeds 10% of the product of the amounts described
in clauses (i) and (ii) above being referred to herein as the "Excess
Amount"), then, and in each such case, immediately after the close of
business on such date for determination, the Conversion Rate shall be
increased in accordance with the following formula:
EA
----
AC = CR ) M - / / O / /
--------------
/ / M / /
Where:
AC = the adjusted Conversion Rate.
CR = the Conversion Rate in effect immediately prior to the
close of business on the date fixed for determination of the
stockholders entitled to receive the applicable distribution.
M = the current market price per share (determined as provided
in paragraph (10) of this Section) of the Common Stock on the
date fixed for determination of the stockholders entitled to
receive the applicable distribution.
EA = the Excess Amount.
O = the number of shares of Common Stock outstanding on the
date fixed for determination of the stockholders entitled to
receive the distribution.
(6) In case a tender offer made by the Company or any Subsidiary 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 filed with the Trustee) that combined together with:
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(a) the aggregate of the cash plus the fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution filed with the Trustee), as of
the expiration of such tender offer, of consideration payable in respect of
any other tender offer, by the Company or any Subsidiary for all or any
portion of the Common Stock expiring within the 12 months preceding the
expiration of such tender offer and in respect of which no adjustment
pursuant to this paragraph (6) has been made, and
(b) the aggregate amount of any distributions to all
holders of the Company's Common Stock made exclusively in cash within 12
months preceding the expiration of such tender offer and in respect of which
no adjustment pursuant to paragraph (5) of this Section has been made,
exceeds 10% of the product of (i) the current market price per share of the
Common Stock (determined as provided in paragraph (10) of this Section) as of
the last time (the "Expiration Time") tenders could have been made pursuant
to such tender offer (as it may be amended), times (ii) 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
Rate shall be reduced in accordance with the following formula:
AC = CR ) (M X O) - C
-----------
/ / M x (O - TS) / /
Where:
AC = the adjusted Conversion Rate.
CR = the Conversion Rate immediately prior to close of
business on the date of the Expiration Time.
M = the current market price per share of the Common Stock
(determined as provided in paragraph (10) of this Section) on
the date of the Expiration Time.
O = the number of shares of Common Stock outstanding
(including any tendered shares) on the Expiration Time.
C = the amount of cash plus the fair market value (as
determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution filed
with the Trustee) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum
specified in the terms of the tender offer) of Purchased
Shares.
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TS = the number of all shares of Common Stock 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").
(7) The reclassification of Common Stock into securities including
securities other than Common Stock (other than any reclassification upon a
consolidation or merger to which Section 14.11 applies) shall be deemed to
involve (a) a distribution of such securities other than Common Stock to all
holders of Common Stock (and the effective date of such reclassification
shall be deemed to be "the date fixed for the determination of stockholders
entitled to receive such distribution" and "the date fixed for such
determination" within the meaning of paragraph (4) of this Section), and (b)
a subdivision or combination, as the case may be, of the number of shares of
Common Stock outstanding immediately prior to such reclassification into the
number of shares of Common Stock outstanding immediately thereafter (and the
effective date of such reclassification shall be deemed to be "the day upon
which such subdivision becomes effective" or "the day upon which such
combination becomes effective", as the case may be, and "the day upon which
such subdivision or combination becomes effective" within the meaning of
paragraph (3) of this Section).
(8) In case a tender offer made by a Person other than the Company,
any Subsidiary of the Company for an amount which increases the offeror's
ownership of Common Stock to more than 25% of the Common Stock outstanding
and shall involve 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 Board Resolution
as filed with the Trustee) as of the last time (the "Third Party Expiration
Time") tenders could have been made pursuant to such tender offer (as it may
be amended) that exceeds the current market price of the Common Stock on the
Trading Day next succeeding the Third Party Expiration Time, and in which, as
of the Third Party Expiration Time, the Board of Directors is not
recommending rejection of the offer, the Conversion Rate shall be adjusted in
accordance with the following formula:
AC = CR ) (M1 X O)
----------------
/ / C+ (O1 x M1) / /
Where:
AC = the adjusted Conversion Rate.
CR = the Conversion Rate immediately prior to close of
business on the date of the Third Party Expiration Time.
M1 = the current market price per share of the Common Stock
(determined as provided in paragraph (10) of this Section) on
the date next succeeding the Third Party Expiration Time.
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O = the number of shares of Common Stock outstanding
(including any tendered shares) on the Third Party Expiration
Time.
O1 = the number of shares of Common Stock outstanding (less
any Third Party Purchased Shares, as defined below)
outstanding on the Third Party Expiration Time.
C = the amount of 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
filed with the Trustee) of the aggregate consideration payable
to stockholders based on the acceptance (up to any maximum
specified in the terms of the tender offer) of Third Party
Purchased Shares.
The number of all shares of Common Stock validly tendered and not withdrawn
as of the Third Party Expiration Time and deemed accepted up to any such
maximum, is herein referred to as the "Third Party Purchased Shares." 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 form effecting any such purchases or all such purchases are
rescinded, the Conversion Rate shall again be adjusted to be the Conversion
Rate 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 14.4(8) 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 VIII.
(9) In case the Company shall issue rights, options or warrants to
all holders of the Common Stock entitling the holders thereof to subscribe
for or purchase shares of Common Stock (either initially or under certain
circumstances), which rights, options or warrants (i) are deemed to be
transferred with such shares of Common Stock, (ii) are not exercisable and
(iii) are also issued in respect of future issuances of Common Stock, in each
case in clauses (i) through (iii) until the occurrence of a specified event
or events ("Trigger Event"), shall for purposes of this Section 14.4 not be
deemed issued or distributed until the occurrence of the earliest Trigger
Event, whereupon such rights, options and warrants shall be deemed to have
been distributed and an appropriate adjustment (if any is required) to the
Conversion Rate shall be made under this Section 14.4. If any such rights,
options or warrants, including any such existing rights, options or warrants
distributed prior to the date of this Indenture are subject to subsequent
events, upon the occurrence of each of which such rights, options or warrants
shall become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the occurrence of each such event shall be
deemed to be such date of distribution and record date with respect to new
rights, options or warrants (and a termination or expiration of the existing
rights, options or warrants without exercise by the holder thereof). In
addition, in the event of any distribution (or deemed distribution) of
rights, options or warrants, or any Trigger Event with respect thereto, that
was counted for purposes of calculating a distribution amount for which an
adjustment to the Conversion Rate under this Section 14.4 was made, (a) in
the case of any such rights, options or warrant which shall all have been
redeemed or repurchased without exercise by any holders
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thereof, the Conversion Rate shall be readjusted upon such final redemption
or repurchase to give effect to such distribution or Trigger Event, as the
case may be, as though it were a cash distribution, equal to the per share
redemption or repurchase price received by a holder or holders of Common
Stock with respect to such rights, options or warrants (assuming such holder
had retained such rights, options or warrants), made to all holders of Common
Stock as of the date of such redemption or repurchase, and (b) in the case of
such rights, options or warrants which shall have expired or been terminated
without exercise by any holders thereof, the Conversion Rate shall be
readjusted as if such rights, options and warrants had not been issued.
(10) For the purpose of any computation under paragraphs (2), (4),
(5), (6) and (8) of this Section, the current market price per share of
Common Stock on any date shall be deemed to be the average of the daily
closing prices for the five consecutive Trading Days selected by the Company
commencing not more than 10 Trading Days before, and ending not later than
the earlier of the day in question and the day before the "ex" date with
request to the issuance or distribution requiring such computation. The
closing price for each day shall be the last reported sales price regular way
or, in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the
Nasdaq National Market Exchange or, if the Common Stock is not quoted on the
Nasdaq National Market, on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or, if the Common
Stock is not listed or admitted to trading on any national securities
exchange or quoted on the Nasdaq National Market, the average of the closing
bid and asked prices in the over-the-counter market as furnished by any New
York Stock Exchange member firm selected from time to time by the Company for
that purpose. For purposes of this paragraph, the term ">ex= date", when used
with respect to any issuance or distribution, means the first date on which
the Common Stock trades regular way on such exchange or in such market
without the right to receive such issuance or distribution.
(11) No adjustment in the Conversion Rate shall be required unless
such adjustment (plus any adjustments not previously made by reason of this
paragraph (11)) would require an increase or decrease of at least 1% in such
rate; provided, however, that any adjustments which by reason of this
paragraph (11) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this
paragraph (11) shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
(12) The Company may make such increases in the Conversion Rate, in
addition to those required by this Section, as it considers to be advisable
in order to avoid or diminish any income tax to any holders of shares of
Common Stock resulting from any dividend or distribution of stock or issuance
of rights or warrants to purchase or subscribe for stock or from any event
treated as such for income tax purposes or for any other reasons. The Company
shall have the power to resolve any ambiguity or correct any error in this
paragraph (12) and its actions in so doing shall, absent manifest error, be
final and conclusive.
(13) To the extent permitted by applicable law, the Company from
time to time may increase the Conversion Rate by any amount for any period of
time if the period is at least 20
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days, the increase is irrevocable during such period, and the Board of
Directors shall have made a determination that such increase would be in the
best interests of the Company, which determination shall be conclusive;
provided, however, that no such increase shall be taken into account for
purposes of determining whether the Closing Price Per Share of the Common
Stock exceeds the Conversion Price by 105% in connection with an event which
would otherwise be a Change of Control. Whenever the Conversion Rate is
increased pursuant to the preceding sentence, the Company shall give notice
of the increase to the Holders in the manner provided in Section 1.6 at least
15 days prior to the date the increased Conversion Rate takes effect, and
such notice shall state the increased Conversion Rate and the period during
which it will be in effect.
SECTION XIV.5 Notice Of Adjustments Of Conversion Rate.
Whenever the Conversion Rate is adjusted as herein provided:
(1) the Company shall compute the adjusted Conversion Rate in
accordance with Section 14.4 and shall prepare an Officers' Certificate, one
of the signatories of which shall be the Treasurer or Chief Financial Officer
of the Company, setting forth the adjusted Conversion Rate and showing in
reasonable detail the calculation of the adjusted Conversion Rate and the
facts upon which such adjustment is based, and such certificate shall
promptly be filed with the Trustee and with each Conversion Agent and at each
office or agency maintained for the purpose of conversion of Securities
pursuant to Section 10.2; and
(2) a notice stating that the Conversion Rate has been adjusted and
setting forth the adjusted Conversion Rate shall forthwith be prepared, and
as soon as practicable after it is prepared, such notice shall be mailed by
the Company to all Holders in accordance with Section 1.6.
Unless and until a Responsible Officer of the Trustee shall receive
an Officers' Certificate setting forth an adjusted Conversion Rate, the
Trustee may assume without inquiry that no adjustment has been made and that
the last Conversion Rate of which it has notice remains in effect.
SECTION XIV.6 Notice Of Certain Corporate Action.
In case:
(1) the Company shall declare a dividend (or any other distribution)
on its Common Stock payable (a) otherwise than exclusively in cash or (b)
exclusively in cash in an amount that would require any adjustment pursuant
to Section 14.4;
(2) the Company shall authorize the granting to the holders of its
Common Stock of rights, options or warrants to subscribe for or purchase any
shares of Capital Stock of any class or of any other rights;
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(3) of any reclassification of the Common Stock of the Company, or
of any consolidation, merger or share exchange to which the Company is a
party and for which approval of any stockholders of the Company is required,
or of the conveyance, lease, sale, transfer or other disposition of all or
substantially all of the assets of the Company; or
(4) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed at each office or agency maintained
for the purpose of conversion of Securities pursuant to Section 10.2, and
shall cause to be mailed to all Holders in accordance with Section 1.6, at
least 20 days (or 10 days in any case specified in clause (1) or (2) above)
prior to the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to betaken for the purpose
of such dividend, distribution, rights, options 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, rights, options or
warrants are to be determined, or (y) the date on which such
reclassification, consolidation, merger, share exchange, conveyance, lease,
sale, transfer, disposition, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares
of Common Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, share exchange, conveyance, lease,
sale, transfer, disposition, dissolution, liquidation or winding up. Neither
the failure to give such notice nor any defect therein shall affect the
legality or validity of the proceedings described in clauses (1) through (4)
of this Section 14.6. If at the time the Trustee shall not be the Conversion
Agent, a copy of such notice shall also forthwith be filed by the Company
with the Trustee.
The Company shall cause to be filed at the Corporate Trust Office
and each office or agency maintained for the purpose of conversion of
Securities pursuant to Section 10.2, and shall cause to be provided to all
Holders in accordance with Section 1.6, notice of any tender offer by the
Company or any Subsidiary for all or any portion of the Common Stock at or
about the time that such notice of tender offer is provided to the public
generally.
SECTION XIV.7 Company To Reserve Common Stock.
The Company shall at all times reserve and keep available, free from
preemptive or similar rights, out of its authorized but unissued Common
Stock, for the purpose of effecting the conversion of Securities, the full
number of shares of Common Stock then issuable upon the conversion of all
Outstanding Securities.
SECTION XIV.8 Taxes On Conversions.
Except as provided in the next sentence, the Company will pay any
and all taxes or duties that may be payable in respect of the issue or
delivery of shares of Common Stock on conversion of Securities pursuant
hereto. The Company shall not, however, be required to pay any tax or
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duty which may be payable in respect of any transfer involved in the issue or
delivery of shares of Common Stock in a name other than that of the Holder of
the Security or Securities to be converted, and no such issue or delivery
shall be made unless and until the Person requesting such issue has paid to
the Company the amount of any such tax or duty, or has established to the
satisfaction of the Company that such tax or duty has been paid.
SECTION XIV.9 Covenant As To Common Stock.
The Company agrees that all shares of Common Stock which may be
issued upon conversion of Securities will, upon issuance, have been duly
authorized and validly issued and will be fully paid and nonassessable and,
except as provided in Section 14.8, the Company will pay all taxes, liens and
charges with respect to the issue thereof.
SECTION XIV.10 Cancellation Of Converted Securities.
All Securities delivered for conversion shall be delivered to the
Trustee or its agent to be canceled by or at the direction of the Trustee,
which shall dispose of the same as provided in Section 3.9.
SECTION XIV.11 Provisions In Case Of Consolidation, Merger Or Sale Of Assets.
In case of any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another Person into the Company
(other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the Company) or any conveyance, lease, sale, transfer or other disposition of
all or substantially all of the assets of the Company, the Person formed by
such consolidation or resulting from such merger or to which acquires such
assets, as the case may be, shall execute and deliver to the Trustee a
supplemental indenture providing that the Holder of each Security then
Outstanding shall, without the consent of the Holders, have the right
thereafter, to convert each Security into the kind and amount of securities,
cash and other property receivable upon such consolidation, merger,
conveyance, lease, sale, transfer or other disposition by a holder of the
number of shares of Common Stock of the Company into which such Security
might have been converted immediately prior to such consolidation, merger,
conveyance, lease, sale, transfer or other disposition, assuming such holder
of Common Stock of the Company (i) is not a Person with which the Company
consolidated or into which the Company merged or which merged into the
Company or to which such sale, conveyance, lease, transfer or other
disposition was made, as the case may be ("Constituent Person"), or an
Affiliate of a Constituent Person and (ii) failed to exercise his or her
rights of election, if any, as to the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, conveyance, lease,
sale, transfer or other disposition (provided that if the kind or amount of
securities, cash and other property receivable upon such consolidation,
merger, conveyance, lease, sale, transfer or other disposition is not the
same for each share of Common Stock of the Company held immediately prior to
such consolidation, merger, conveyance, lease, sale, transfer or other
disposition by other than a Constituent Person or an Affiliate thereof and in
respect of which such rights of election shall not
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have been exercised ("Non-electing Share"), then for the purpose of this
Section the kind and amount of securities, cash and other property receivable
upon such consolidation, merger, conveyance, lease, sale, transfer or other
disposition by the holder of each Non-electing Share shall be deemed to be
the kind and amount so receivable per share by a plurality of the holders of
the Non-electing Shares), and assuming, if such consolidation, merger,
conveyance, lease, sale, transfer or other disposition is prior to the date
upon which the Securities first become convertible, that the Securities were
convertible at the time of such consolidation, merger, conveyance, lease,
sale, transfer or other disposition at the initial Conversion Rate specified
in Section 14.1 as adjusted from the date of the issuance of the applicable
Securities to such time pursuant to Section 14.4. Such supplemental indenture
shall provide for adjustments which, for events subsequent to the effective
date of such supplemental indenture, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article. The above
provisions of this Section shall similarly apply to successive
consolidations, mergers, conveyances, leases, sales, transfers or other
dispositions.
Neither the Trustee nor any Conversion Agent shall be under any duty
or responsibility with respect to any such certificate or the information and
calculations contained therein, except to exhibit the same to any Holder of
Securities desiring inspection thereof at its office during normal business
hours, and shall not be deemed to have knowledge of any adjustment in the
Conversion Rate unless and until a Responsible Officer of the Trustee shall
have received such a certificate. Until a Responsible Officer of the Trustee
receives such a certificate, the Trustee and each Conversion Agent may assume
without inquiry that the last Conversion Rate of which the Trustee has
knowledge of remains in effect.
SECTION XIV.12 Responsibility of Trustee for Conversion Provisions.
The Trustee, subject to the provisions of Section 6.2, and any
Conversion Agent shall not at any time be under any duty or responsibility to
any Holder of Securities to determine whether any facts exist which may
require any adjustment of the Conversion Rate, or with respect to the nature
or extent of any such adjustment when made, or with respect to the method
employed, herein or in any supplemental indenture provided to be employed, in
making the same, or whether a supplemental indenture need be entered into.
Neither the Trustee, subject to the provisions of Section 6.2, nor any
Conversion Agent shall be accountable with respect to the validity or value
(or the kind or amount) of any Common Stock, or of any other securities or
property or cash, which may at any time be issued or delivered upon the
conversion of any Security; and it or they do not make any representation
with respect thereto. Neither the Trustee, subject to the provisions of
Section 6.2, nor any Conversion Agent shall be responsible for any failure of
the Company to make or calculate any cash payment or to issue, transfer or
deliver any shares of Common Stock or share certificates or other securities
or property or cash upon the surrender of any Security for the purpose of
conversion; and the Trustee, subject to the provisions of Section 6.2, and
any Conversion Agent shall not be responsible for any failure of the Company
to comply with any of the covenants of the Company contained in this Article.
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ARTICLE XV
MEETINGS OF HOLDERS OF SECURITIES
SECTION XV.1 Purposes For Which Meetings May Be Called.
A meeting of Holders of Securities may be called at any time and
from time to time pursuant to this Article to make, give or take any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be made, given or taken by Holders of
Securities.
SECTION XV.2 Call, Notice And Place Of Meetings.
(a) The Trustee may at any time call a meeting of Holders of
Securities for any purpose specified in Section 15.1, 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 Holders of Securities,
setting forth the time and the place of such meeting and in general terms the
action proposed to be taken at such meeting, shall be given, in the manner
provided in Section 1.6, not less than 21 nor more than 180 days prior to the
date fixed for the meeting.
(b) In case at any time the Company, pursuant to a Board Resolution,
or the Holders of at least 10% in principal amount of the Outstanding
Securities shall have requested the Trustee to call a meeting of the Holders
of Securities for any purpose specified in Section 15.1, 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 21 days after receipt of such request or shall not thereafter proceed
to cause the meeting to be held as provided herein, then the Company or the
Holders of Securities in the amount specified, as the case may be, may
determine the time and the place in the Borough of Manhattan, The City of New
York, for such meeting and may call such meeting for such purposes by giving
notice thereof as provided in paragraph (a) of this Section.
SECTION XV.3 Persons Entitled To Vote At Meetings.
To be entitled to vote at any meeting of Holders of Securities, a
Person shall be (i) a Holder of one or more Outstanding Securities, or (ii) a
Person appointed by an instrument in writing as proxy for a Holder or Holders
of one or more Outstanding Securities by such Holder or Holders. The only
Persons who shall be entitled to be present or to speak at any meeting of
Holders shall be the Persons entitled to vote at such meeting and their
counsel, any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
SECTION XV.4 Quorum; Action.
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The Persons entitled to vote a majority in aggregate principal
amount of the Outstanding Securities shall constitute a quorum. In the
absence of a uqorum within 30 minutes of the time appointed for any such
meeting, the meeting shall, if convened at the request of Holders of
Securities, be dissolved. In any other case, the meeting may be adjourned for
a period of not less than 10 days as determined by the chairman of the
meeting prior to the adjournment of such meeting. In the absence of a quorum
at any such adjourned meeting, such adjourned meeting may be further
adjourned for a period not less than 10 days as determined by the chairman of
the meeting prior to the adjournment of such adjourned meeting (subject to
repeated applications of this sentence). Notice of the reconvening of any
adjourned meeting shall be given as provided in Section 15.2(a), except that
such notice need be given only once not less than five days prior to the date
on which the meeting is scheduled to be reconvened. Notice of the reconvening
of an adjourned meeting shall state expressly the percentage of the principal
amount of the Outstanding Securities which shall constitute a quorum.
Subject to the foregoing, at the reconvening of any meeting
adjourned for a lack of a quorum, the Persons entitled to vote 25% in
principal amount of the Outstanding Securities at the time shall constitute a
quorum for the taking of any action set forth in the notice of the original
meeting.
At a meeting or an adjourned meeting duly reconvened and at which a
quorum is present as aforesaid, any resolution and all matters (except as
limited by the proviso to Section 9.2 and except to the extent Section 10.8
requires a different vote) shall be effectively passed and decided if passed
or decided by the lesser of (i) the Holders of not less than a majority in
principal amount of Outstanding Securities and (ii) the Persons entitled to
vote not less than 66-2/3% in principal amount of Outstanding Securities
represented and entitled to vote at such meeting.
Any resolution passed or decisions taken at any meeting of Holders
of Securities duly held in accordance with this Section shall be binding on
all the Holders of Securities whether or not present or represented at the
meeting. The Trustee shall, in the name and at the expense of the Company,
notify all the Holders of Securities of any such resolutions or decisions
pursuant to Section 1.6.
SECTION XV.5 Determination Of Voting Rights; Conduct And Adjournment Of
Meetings.
(a) Notwithstanding any other provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for any
meeting of Holders of Securities in regard to proof of the holding of
Securities and of the appointment of proxies and in regard to the appointment
and duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall deem appropriate. Except as
otherwise permitted or required by any such regulations, the holding of
Securities shall be proved in the manner specified in Section 1.4 and the
appointment of any proxy shall be proved in the manner specified in Section
1.4 or by having the signature of the Person executing the proxy guaranteed
by any bank, broker or other eligible institution participating in a
recognized medallion signature guarantee program.
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(b) The Trustee shall, by an instrument in writing, appoint a
temporary chairman (which may be the Trustee) of the meeting, unless the
meeting shall have been called by the Company or by Holders of Securities as
provided in Section 15.2(a), in which case the Company or the Holders of
Securities calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary
of the meeting shall be elected by vote of the Persons entitled to vote a
majority in principal amount of the Outstanding Securities represented at the
meeting.
(c) At any meeting, each Holder of a Security or proxy shall be
entitled to one vote for each $1,000 principal amount of Securities held or
represented by such Holder; provided, however, that no vote shall be cast or
counted at any meeting in respect of any Security challenged as not
Outstanding and ruled by the chairman of the meeting to be not Outstanding.
The chairman of the meeting shall have no right to vote, except as a Holder
of a Security or proxy.
(d) Any meeting of Holders of Securities duly called pursuant to
Section 15.2 at which a quorum is present may be adjourned from time to time
by Persons entitled to vote a majority in principal amount of the Outstanding
Securities represented at the meeting, and the meeting may be held as so
adjourned without further notice.
SECTION XV.6 Counting Votes And Recording Action Of Meetings.
The vote upon any resolution submitted to any meeting of Holders of
Securities shall be by written ballots on which shall be subscribed the
signatures of the Holders of Securities or of their representatives by proxy
and the principal amounts at Stated Maturity and serial numbers of the
Outstanding Securities held or represented by them. The permanent chairman of
the meeting shall appoint two inspectors of votes who shall count all votes
cast at the meeting for or against any resolution and who shall make and file
with the secretary of the meeting their verified written reports in duplicate
of all votes cast at the meeting. A record, at least in duplicate, of the
proceedings of each meeting of Holders of Securities shall be prepared by the
secretary of the meeting and there shall be attached to said record the
original reports of the inspectors of votes on any vote by ballot taken
thereat and affidavits by one or more Persons having knowledge of the facts
setting forth a copy of the notice of the meeting and showing that said
notice was given as provided in Section 15.2 and, if applicable, Section
15.4. Each copy shall be signed and verified by the affidavits of the
permanent chairman and secretary of the meeting and one such copy shall be
delivered to the Company and another to the Trustee to be preserved by the
Trustee, the latter to have attached thereto the ballots voted at the
meeting. Any record so signed and verified shall be conclusive evidence of
the matters therein stated.
**********
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
ADVANCED ENERGY INDUSTRIES, INC.
By:____________________________
Name:
Title: Chief Executive Officer, President or
Executive Vice President
[SEAL]
Attest:
By:
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A., as Trustee
By:____________________________
Name:
Title:
[SEAL]
Attest:
By:
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We hereby agree to furnish to the SEC, upon request, a copy of the
instruments which define the rights of holders of our long-term debt. None of
such instruments not included as exhibits in this Form S-3 represents
long-term debt in excess of 10% of our consolidated total assets.
<PAGE>
ARTHUR ANDERSEN LLP
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-3 of our report dated
February 5, 1999 included in Advanced Energy Industries, Inc.'s Form 10-K for
the year ended December 31, 1998 and to all references to our Firm included in
this Registration Statement (File No. 333- ).
/S/ ARTHUR ANDERSEN LLP
Denver, Colorado,
September 20, 1999.
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Advanced Energy Industries, Inc.:
We consent to the incorporation by reference in the Registration Statement on
Form S-3 of Advanced Energy Industries, Inc. of our report dated January 16,
1998 with respect to the consolidated balance sheets of RF Power Products, Inc.
as of November 30, 1997 and 1996 and the related consolidated statements of
income, changes in shareholders' equity and cash flows for the years then ended
and related schedule (not separately presented herein), which report appears in
the annual report on Form 10-K of Advanced Energy Industries, Inc. for the year
ended December 31, 1998.
/S/ KPMG LLP
Philadelphia, Pennsylvania
September 17, 1999
<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) /X/
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 OR (I.R.S. EMPLOYER
ORGANIZATION IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
633 West 5th Street, 12th Floor, Los Angeles, California 90071
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Lynda A. Vogel, Senior Vice President and Managing Director
633 West 5th Street, 12th Floor, Los Angeles, California 90071
(213) 362-7399
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
ADVANCED ENERGY INDUSTRIES, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 84-0846841
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1625 SHARP POINT DRIVE, FORT COLLINS, CO 80525
(Address of principal executive offices) (Zip Code)
__% CONVERTIBLE SUBORDINATED NOTES DUE 2006
(TYPE OF SECURITIES)
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Comptroller of the Currency, Western District Office, 50
Fremont Street, Suite 3900, San Francisco, California, 94105-2292
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its
parent, State Street Bank and Trust Company.
(See notes on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now
in effect, is on file with the Securities and Exchange Commission as
an Exhibit with corresponding exhibit number to the Form T-1 of Western
Digital Corporation, filed pursuant to Section 305(b)(2) of the Trust
Indenture Act of 1939, as amended (the "Act"), on May 12, 1998
(Registration No. 333-52463), and is incorporated herein by reference.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A Certificate of Corporate Existence (with fiduciary powers)
from the Comptroller of the Currency, Administrator of National Banks
is on file with the Securities and Exchange Commission as an Exhibit
with corresponding exhibit number to the Form T-1 of Western Digital
Corporation, filed pursuant to Section 305(b)(2) of the Act, on May 12,
1998 (Registration No. 333-52463), and is incorporated herein by
reference.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
Authorization of the Trustee to exercise fiduciary powers
(included in Exhibits 1 and 2; no separate instrument).
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as an Exhibit with
corresponding exhibit number to the Form T-1 of Western Digital
Corporation, filed pursuant to Section 305(b)(2) of the Act, on May 12,
1998 (Registration No. 333-52463), and is incorporated herein by
reference.
1
<PAGE>
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS
IN DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates
to matters peculiarly within the knowledge of the obligor or any underwriter
for the obligor, the trustee has relied upon information furnished to it by
the obligor and the underwriters, and the trustee disclaims responsibility
for the accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended,
if necessary, to reflect any facts which differ from those stated and which
would have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company of California,
National Association, a national banking 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 20th day of September, 1999.
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, NATIONAL ASSOCIATION
By: /S/ Mark Henson
---------------------------------------
MARK HENSON
ASSISTANT VICE PRESIDENT
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust
Indenture Act of 1939, as amended, in connection with the proposed issuance
by Advanced Energy Industries, Inc., of its __% Convertible Subordinated
Notes due 2006, we hereby consent that reports of examination by Federal,
State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, NATIONAL ASSOCIATION
By: /S/ Mark Henson
------------------------------------
MARK HENSON
ASSISTANT VICE PRESIDENT
DATED: SEPTEMBER 20, 1999
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition and Income for A Bank With Domestic Offices
Only and Total Assets of Less Than $100 Million of State Street Bank and
Trust Company of California, a national banking association duly organized
and existing under and by virtue of the laws of the United States of America,
at the close of business JUNE 30, 1999, published in accordance with a call
made by the Federal Deposit Insurance Corporation pursuant to the required
law: 12 U.S.C. Section 324 (State member banks); 12 U.S.C. Section 1817
(State nonmember banks); and 12 U.S.C. Section 161 (National banks).
<TABLE>
<CAPTION>
Thousands
of Dollars
<S> <C> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin.............. 5,576
Interest-bearing balances....................................... 0
Securities............................................................... 38
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary............................. 0
Loans and lease financing receivables:
Loans and leases, net of unearned income ................ 0
Allowance for loan and lease losses ..................... 0
Allocated transfer risk reserve.......................... 0
Loans and leases, net of unearned income and allowances......... 0
Assets held in trading accounts.......................................... 0
Premises and fixed assets................................................ 42
Other real estate owned.................................................. 0
Investments in unconsolidated subsidiaries............................... 0
Customers' liability to this bank on acceptances outstanding............. 0
Intangible assets........................................................ 0
Other assets............................................................. 748
----------
Total assets............................................................. 6,404
----------
----------
LIABILITIES
Deposits:
In domestic offices............................................. 0
Noninterest-bearing............................ 0
Interest-bearing............................... 0
In foreign offices and Edge subsidiary.......................... 0
Noninterest-bearing............................ 0
Interest-bearing............................... 0
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary............................. 0
Demand notes issued to the U.S. Treasury and Trading Liabilities......... 0
Other borrowed money..................................................... 0
Subordinated notes and debentures........................................ 0
Bank's liability on acceptances executed and outstanding................. 0
Other liabilities........................................................ 2,460
Total liabilities........................................................ 2,460
----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus............................ 0
Common stock............................................................. 500
Surplus.................................................................. 750
Undivided profits and capital reserves/Net unrealized holding
gains (losses)......................................................... 2,694
Cumulative foreign currency translation adjustments...................... 0
Total equity capital..................................................... 3,944
----------
Total liabilities and equity capital..................................... 6,404
----------
----------
</TABLE>
4
<PAGE>
I, John J. Saniuk, Vice President and Comptroller of the above named bank
do hereby declare that this Report of Condition and Income for this report
date have been prepared in conformance with the instructions issued by the
appropriate Federal regulatory authority and is true to the best of my
knowledge and belief.
/S/ John J. Saniuk
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and
correct.
/S/ Alan D. Greene
/S/ Bryan R. Calder
/S/ Lynda A. Vogel
5
