<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 2, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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P-COM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
<TABLE>
<S> <C>
DELAWARE 77-0289371
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
3175 S. WINCHESTER BOULEVARD, CAMPBELL, CALIFORNIA 95008
(408) 866-3666
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
GEORGE P. ROBERTS
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
P-COM, INC.
3175 S. WINCHESTER BOULEVARD
CAMPBELL, CALIFORNIA 95008
(408) 866-3666
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
---------------
COPIES TO:
WARREN T. LABRADOR, ESQ.
BROBECK, PHLEGER & HARRISON LLP
TWO EMBARCADERO PLACE
2200 GENG ROAD
PALO ALTO, CALIFORNIA 94303
(650) 424-0160
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
---------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
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- ------------------------------------------------------------------------------------------
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT
TITLE OF SECURITIES TO BE AGGREGATE PRICE AGGREGATE OF REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(3)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
4 1/4% Convertible
Subordinated Notes due
2002 (the "Notes")... $100,000,000 100% $100,000,000 $29,500
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Common Stock, $0.0001
par value per share
("Common Stock")...... 3,641,660(2) -- -- --
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Such number represents the number of shares of Common Stock as are
initially issuable upon conversion of the Notes registered hereunder and,
pursuant to Rule 416 under the Securities Act, such additional
indeterminate number of shares as may become issuable upon conversion of
the Notes being registered hereunder as a result of adjustments to the
conversion price.
(3) Pursuant to Rule 457(i) there is no filing fee with respect to shares of
Common Stock issuable on conversion of the Notes because no additional
consideration will be received in connection with the exercise of the
conversion privilege.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
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- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THE SECURITIES DESCRIBED HEREIN HAS BEEN +
+FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT +
+BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION +
+STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO +
+SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF +
+THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR +
+SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE +
+SECURITIES LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 2, 1998
PROSPECTUS
- ----------
$100,000,000
P-COM, INC.
4 1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2002
INTEREST PAYABLE MAY 1 AND NOVEMBER 1
AND SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION THEREOF
This prospectus (the "Prospectus") relates to $100,000,000 aggregate
principal amount of 43% Convertible Subordinated Notes due 2002 (the "Notes")
of P-Com, Inc., a Delaware corporation (together with its subsidiaries, "P-Com"
or the "Company"), and the shares of common stock, par value of $.0001 per
share, of the Company (the "Common Stock") which are issuable upon conversion
of the Notes (the "Shares"). The Notes and the Shares that are being registered
hereby are to be offered for the account of the holders thereof (the "Selling
Securityholders"). The Notes were issued and sold in November 1997 in
transactions exempt from the registration requirements of the Securities Act of
1933, as amended (the "Securities Act") to "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act and referred to as "Qualified
Institutional Buyers"), "accredited investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act and referred to as "Institutional
Accredited Investors") who are not Qualified Institutional Buyers or outside
the United States to certain persons in offshore transactions in reliance on
Regulation S under the Securities Act. See "Plan of Distribution."
The Notes will mature on November 1, 2002. Interest on the Notes will be paid
semi-annually on May 1 and November 1 of each year, commencing May 1, 1998. The
Notes are convertible at the option of the holder at any time on or after the
90th day following the latest date of initial issuance of the Notes and on or
prior to maturity, unless previously redeemed or repurchased, into shares of
Common Stock, at a conversion price of $27.46 per share (equivalent to a
conversion rate of 36.4166 shares per $1,000 principal amount of Notes),
subject to adjustment in certain events. The Common Stock is traded on the
Nasdaq National Market under the symbol PCMS. On January 22, 1998, the last
sale price as reported on the Nasdaq National Market was $17.97 per share.
The Notes are not redeemable prior to November 5, 2000. On or after November
5, 2000, the Notes are redeemable upon 30 days' notice at the option of the
Company, in whole, or from time to time, in part, at the redemption prices set
forth in this Prospectus, plus accrued and unpaid interest to the date of
redemption. In addition, upon a Change of Control (as defined herein), holders
of the Notes will have the right, subject to certain restrictions and
conditions, to require the Company to repurchase the holder's Notes, in whole
or in part, at a purchase price equal to 100% of the principal amount thereof
together with accrued and unpaid interest, if any, to the date of repurchase.
The Notes are unsecured obligations of the Company and are subordinated to
all existing and future Senior Indebtedness (as defined herein) of the Company,
and structurally subordinated to all liabilities of the Company's subsidiaries.
The Indenture (as defined herein) contains no limitations on the incurrence of
additional indebtedness or other liabilities by the Company. As of December 31,
1997, the Company had approximately $0.6 million in indebtedness outstanding
that would have constituted Senior Indebtedness. See "Description of Notes--
Subordination."
For a description of certain tax consequences to holders of the Notes, see
"Certain United States Federal Tax Consequences."
Upon their original issuance in November 1997, the Notes became eligible for
trading in the Private Offerings, Resales, and Trading through Automatic
Linkages ("PORTAL") Market. The Notes and the Shares are being registered to
permit public secondary trading after the date of this Prospectus from time to
time in transactions (which may include block transactions in the case of the
Shares) on any exchange or market on which such securities are listed or
quoted, as applicable, in negotiated transactions, through a combination of
such methods of sale, or otherwise, at fixed prices that may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. It should be noted, however, that the
Notes sold pursuant to this Prospectus will no longer be eligible for trading
on the PORTAL Market. No assurance can be given that an active market for the
Notes will develop or as to the liquidity or sustainability of any such market.
See "Risk Factors--Absence of Public Market." A Selling Securityholder may
offer and sell the Notes or Shares directly or to or through broker-dealers,
who may receive compensation in the form of discounts, concessions or
commissions from the Selling Securityholders and/or the purchasers of the Notes
or Shares for whom such broker-dealers may act as agents or to whom they may
sell as principals, or both (which compensation as to a particular broker-
dealer might be in excess of customary commissions). The Company will not
receive any of the proceeds from the sale of the Notes or Shares by the Selling
Securityholders. The Company has agreed to pay all expenses incident to the
offer and sale of the Notes and Shares offered by the Selling Securityholders
hereby, except that the Selling Securityholders will pay all underwriting
discounts and selling commissions, if any. See "Plan of Distribution."
----------
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------
The date of this Prospectus is , 1998
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports, proxy materials and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
materials and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices of
the Commission: Seven World Trade Center, 13th Floor, New York, New York 10048
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies may
also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition,
the Commission maintains a Web site at http://www.sec.gov that contains P-
Com's reports, proxy materials and other information that have been filed
since P-Com began to file electronically with the Commission in August 1996.
The Common Stock of the Company is quoted on the Nasdaq National Market, and
such material may also be inspected at the offices of Nasdaq Operations, 1735
K Street, N.W., Washington, D.C. 20006.
This Prospectus, which constitutes a part of a Registration Statement on
Form S-3 (the "Registration Statement") filed by the Company with the
Commission under the Securities Act, omits certain of the information set
forth in the Registration Statement and the exhibits and schedules thereto.
For further information with respect to the Company and the Notes and the
Shares offered hereby, reference is made to the Registration Statement and the
exhibits and schedules filed as a part thereof. Statements made in this
Prospectus as to the contents of any referenced contract, agreement or other
document are not necessarily complete, and each such statement shall be deemed
qualified in its entirety by reference thereto. Copies of documents relating
to the Company which are publicly filed pursuant to the Exchange Act may be
obtained upon payment of the fee prescribed by the Commission, or may be
examined without charge at the office of the Commission or at the Commission's
Web site.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
0-25356) pursuant to the Exchange Act are incorporated by reference in this
Prospectus:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
2. The Company's Proxy Statement for the Annual Meeting of Stockholders
held on May 19, 1997;
3. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997;
4. The Company's Current Report on Form 8-K filed on March 10, 1997, the
Company's Current Report on Form 8-K filed on March 21, 1997, the Company's
Current Report on Form 8-K/A filed on May 21, 1997, the Company's Current
Report on Form 8-K filed on June 13, 1997, the Company's Current Report on
Form 8-K/A filed on June 26, 1997, the Company's Current Report on Form 8-
K/A filed on June 27, 1997, the Company's Current Report on Form 8-K filed
on October 14, 1997, the Company's additional Current Report on Form 8-K
filed on October 14, 1997, the Company's Current Report on Form 8-K filed
on October 17, 1997, the Company's Current Report on Form 8-K/A filed on
October 30, 1997, the Company's Current Report on Form 8-K filed on
November 5, 1997, the Company's Current Report on Form 8-K filed on
November 21, 1997, the Company's Current Report filed on Form 8-K filed on
December 10, 1997 and the Company's Current Report filed on Form 8-K on
January 23, 1998;
5. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed with the Commission on
January 12, 1995, as amended on February 16, 1995, and the description of
the Company's Series A Junior Participating Preferred Stock contained in
the Company's Registration Statement on Form 8-A filed with the Commission
on October 9, 1997; and
2
<PAGE>
6. All other documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus but prior to the termination of the offering of the Notes.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document that also is incorporated herein modifies or replaces such statement.
Any statement so modified or superseded shall not be deemed, in its unmodified
form, to constitute a part of this Prospectus.
Upon written or oral request, the Company will provide without charge to
each person to whom a copy of the Prospectus is delivered a copy of the
documents incorporated by reference herein (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference
therein). Requests should be submitted in writing or by telephone at (408)
866-3666 to Michael J. Sophie, Chief Financial Officer, 3175 S. Winchester
Boulevard, Campbell, California 95008.
3
<PAGE>
SUMMARY
Some of the information set forth or incorporated by reference in this
Prospectus contains forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act, which are
subject to the "safe harbor" created by those sections. All such forward-
looking statements are necessarily only estimates of future results, and there
can be no assurances that actual results will not materially differ from
expectations. Specific reference is made to the risks and uncertainties
described under "Risk Factors."
THE COMPANY
P-Com supplies equipment and services for access to worldwide
telecommunications and broadcast networks. The Company's Tel-Link(R) systems
are used as wireless digital links in applications that include interconnecting
base stations and mobile switching centers in microcellular and personal
communications services ("PCN/PCS") networks and provide local telephone
company ("telco") connectivity in the local loop. The integrated architecture
and high software content of the Company's systems are designed to offer cost-
effective, high-performance products with a high degree of flexibility and
functionality. Additionally, the Company offers turnkey microwave relocation
services, engineering, program management, installation and maintenance of
communication systems to new licensees of radio spectrum who must first remove
existing users from the frequencies before implementing new systems and
provides equipment for wireline network access applications. The Company is
currently field testing and further developing a range of point-to-multipoint
radio systems for use in both the telecommunications and broadcast industries.
P-Com's Tel-Link(R) wireless radios utilize a common architecture for systems
in multiple millimeter wave and spread spectrum microwave frequencies including
2.4 GHz, 5.7 GHz, 7 GHz, 13 GHz, 14 GHz, 15 GHz, 18 GHz, 23 GHz, 24 GHz, 26
GHz, 38 GHz and 50 GHz. The Company's systems are designed to be highly
reliable, cost effective and simple to install and maintain. Software embedded
in the Company's systems allows the user to easily configure and adjust system
settings such as frequency, power and capacity with minimal manual tuning and
mechanical adjustments. The Company also markets a full line of Windows and
Simple Network Management Protocol ("SNMP")-based software products that are
complementary to its systems as sophisticated diagnostic, maintenance and
system configuration tools.
The Company's radio systems are sold internationally through strategic
partners, system providers, original equipment manufacturers ("OEMs") and
distributors as well as directly to end-users, and domestically primarily
through its direct sales force. The Company's radio system customers include
Advanced Radio Telecom Corp. ("ART"), Bosch Telecom GmbH, Grupo Iusacell S.A.
de C.V., Lucent Technologies, Inc. (including the entities formerly known as
AT&T Network Systems Deutschland GmbH and AT&T Network Systems Nederland BV),
Mercury Communications Ltd., Mercury Personal Communications, Orange Personal
Communications Ltd., Italtel S.p.A. (formerly known as Siemens
Telecommunicazioni, S.p.A.), Ericsson, Ltd., Fujitsu Limited, Northern Telecom,
Ltd. and WinStar Wireless, Inc. (collectively with its subsidiary WinStar
Equipment Corporation, "WinStar"). The Company's customers for microwave
relocation services include Sprint Spectrum, AT&T Wireless, PrimeCo Personal
Communications, BellSouth, Omnipoint and South Carolina Public Service
Authority ("SCPSA").
In December 1993, P-Com received its initial ISO 9001 registration, a
standard established by the International Organization for Standardization that
provides a methodology by which manufacturers can obtain quality certification.
In accordance with ISO 9001 requirements, the Company's ISO 9001 registration
was subsequently recertified. The Company also completed ISO 9001 registration
for its United Kingdom sales and customer support facility and Geritel facility
in Italy in 1996. The Company is in the process of obtaining ISO 9001
registration for its other facilities outside of the United States.
P-Com was incorporated in the State of Delaware on August 23, 1991. Its
executive offices are located at 3175 S. Winchester Boulevard, Campbell,
California 95008, and its telephone number is (408) 866-3666.
4
<PAGE>
THE OFFERING
Securities Offered.......... $100,000,000 principal amount of 4 1/4% Convert-
ible Subordinated Notes due 2002 and the Common
Stock issuable upon conversion thereof.
Maturity Date............... November 1, 2002.
Interest Payment Dates...... May 1 and November 1, commencing May 1, 1998.
Conversion Rights........... The Notes are convertible into shares of Common
Stock at any time on or after the 90th day fol-
lowing the latest date of initial issuance of
Notes and on or prior to maturity, unless previ-
ously redeemed or repurchased, at a Conversion
Price of $27.46 per share (equivalent to a con-
version rate of 36.4166 shares per $1,000 princi-
pal amount of Notes), subject to adjustment in
certain events. See "Description of Notes--Con-
version Rights."
Optional Redemption......... The Notes are not redeemable prior to November 5,
2000. On or after November 5, 2000, the Notes are
redeemable upon 30 days' notice at the option of
the Company, in whole, or from time to time, in
part, at the redemption prices set forth in this
Prospectus, plus accrued and unpaid interest
through the date of redemption. See "Description
of Notes--Optional Redemption by the Company."
Change of Control........... In the event of a Change of Control (as defined),
each Holder of Notes may, subject to certain re-
strictions and limitations, require the Company
to repurchase its Notes, in whole or in part, at
a purchase price equal to 100% of the principal
amount thereof, together with accrued and unpaid
interest, if any, to the date of repurchase. See
"Description of Notes--Repurchase of Notes at the
Option of Holders Upon a Change of Control."
Subordination............... The Notes are unsecured obligations of the Com-
pany and are subordinated to all existing and fu-
ture Senior Indebtedness (as defined herein) of
the Company, and structurally subordinated to all
liabilities of the Company's subsidiaries. The
indenture contains no limitations on the
incurrence of additional indebtedness or other
liabilities by the Company. As of December 31,
1997, the Company had approximately $0.6 million
of indebtedness outstanding that would have con-
stituted Senior Indebtedness. See "Description of
Notes--Subordination."
Use of Proceeds............. The Company will not receive any of the proceeds
from the sale by the Selling Securityholders of
the Notes or the Shares.
5
<PAGE>
RISK FACTORS
This Prospectus contains and incorporates by reference forward-looking
statements that involve numerous risks and uncertainties. The statements
contained in this Prospectus or incorporated by reference herein pursuant to
the Registration Statement of which this Prospectus forms a part that are not
purely historical are forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act, including
without limitation statements regarding the Company's expectations, beliefs,
intentions or strategies regarding the future. All forward-looking statements
included in this Prospectus or incorporated by reference herein pursuant to
the Registration Statement of which this Prospectus is a part are based on
information available to the Company on the date hereof, and the Company
assumes no obligation to update any such forward-looking statements. The
Company's actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including
those set forth in the following risk factors and elsewhere in this Prospectus
or incorporated by reference herein pursuant to the Registration Statement of
which this Prospectus forms a part. In evaluating the Company's business,
prospective investors should consider carefully the following factors in
addition to the other information presented in this Prospectus.
SIGNIFICANT FLUCTUATIONS IN RESULTS OF OPERATIONS
The Company has experienced and will in the future continue to experience
significant fluctuations in sales, gross margins and operating results. The
procurement process for most of the Company's current and potential customers
is complex and lengthy, and the timing and amount of sales is difficult to
predict reliably. The sale and implementation of the Company's products and
services generally involves a significant commitment of the Company's senior
management, sales force and other resources. The sales cycle for the Company's
products and services typically involves a significant technical evaluation
and commitment of cash and other resources, with the attendant delays
frequently associated with, among other things: (i) existing and potential
customers' seasonal purchasing and budgetary cycles; (ii) educating customers
as to the potential applications of, and product-life cost savings associated
with, using the Company's products and services; (iii) complying with
customers' internal procedures for approving large expenditures and evaluating
and accepting new technologies that affect key operations; (iv) complying with
governmental or other regulatory standards; (v) difficulties associated with
each customer's ability to secure financing; and (vi) negotiating purchase and
service terms for each sale. Orders for the Company's products have typically
been strongest towards the end of the calendar year, with a reduction in
shipments occurring during the summer months, as evidenced in the third
quarter of fiscal year 1997, due primarily to the inactivity of the European
market, the Company's major current customer base, at such time. To the extent
such seasonality continues, the Company's results of operations will fluctuate
from quarter to quarter.
In addition, a single customer's order scheduled for shipment in a quarter
can represent a significant portion of the Company's potential sales for such
quarter. There can be no assurance that the Company will be able to obtain
such large orders from single customers in the future. The Company has at
times failed to receive expected orders, and delivery schedules have been
deferred as a result of changes in customer requirements and commitments,
among other factors. As a result, the Company's operating results for a
particular period have in the past been and will in the future be materially
adversely affected by a delay, rescheduling or cancellation of even one
purchase order. Much of the anticipated growth in telecommunications
infrastructure, if any, is expected to result from the entrance of new service
providers, many of which do not have the financial resources of existing
service providers. To the extent these new service providers are unable to
adequately finance their operations, they may cancel orders. Moreover,
purchase orders are often received and accepted substantially in advance of
shipment, and the failure to reduce actual costs to the extent anticipated or
an increase in anticipated costs before shipment could materially adversely
affect the gross margins for such orders, and as a result, the Company's
results of operations. Moreover, most of the Company's backlog scheduled for
shipment in the twelve months subsequent to September 30, 1997 can be canceled
since orders are often made substantially in advance of shipment, and the
Company's contracts typically provide that orders may be canceled with limited
or no penalties. As a result, backlog is not necessarily indicative of future
sales for any particular period. In
6
<PAGE>
addition, the Company's customers have increasingly been requiring shipment of
products at the time of ordering rather than submitting purchase orders far in
advance of expected dates of product shipment. Furthermore, most of the
Company's sales in recent quarters have been realized near the end of each
quarter. Accordingly, a delay in a shipment near the end of a particular
quarter, as the Company has been experiencing recently, due to, for example,
an unanticipated shipment rescheduling, a cancellation or deferral by a
customer, competitive or economic factors, unexpected manufacturing or other
difficulties, delays in deliveries of components, subassemblies or services by
suppliers, or the failure to receive an anticipated order, may cause sales in
a particular quarter to fall significantly below the Company's expectations
and may materially adversely affect the Company's operating results for such
quarter.
In connection with its efforts to ramp-up production of products and
services, the Company expects to continue to make substantial capital
investments in equipment and inventory, recruit and train additional personnel
and possibly invest in additional manufacturing facilities. The Company
anticipates that these expenditures will be made in advance of, and in
anticipation of, increased sales and, therefore, that its gross margins will
be adversely affected from time-to-time due to short-term inefficiencies
associated with the addition of equipment and inventory, personnel or
facilities, and that each cost category may increase as a percentage of
revenues from time-to-time on a periodic basis. In addition, as the Company's
customers increasingly require shipment of products at the time of ordering,
the Company must forecast demand for each quarter and build up inventory
accordingly. Such increases in inventory could materially adversely affect the
Company's operations if such inventory were not utilized or becomes obsolete.
A large portion of the Company's expenses are fixed and difficult to reduce
should revenues not meet the Company's expectations, thus magnifying the
material adverse effect of any revenue shortfall. Furthermore, announcements
by the Company or its competitors of new products, services and technologies
could cause customers to defer or cancel purchases of the Company's systems
and services, which would materially adversely affect the Company's business,
financial condition and results of operations. Additional factors that have
caused and will continue to cause the Company's sales, gross margins and
results of operations to vary significantly from period to period include: new
product introductions and enhancements, including related costs; the Company's
ability to manufacture and produce sufficient volumes of systems and meet
customer requirements; manufacturing capacity, efficiencies and costs; mix of
sales through direct efforts or through distributors or other third parties;
mix of systems and related software tools sold and services provided;
operating and new product development expenses; product discounts; accounts
receivable collection, in particular those acquired in recent acquisitions,
especially outside of the United States; changes in pricing by the Company,
its customers or suppliers; inventory writeoffs, as the Company recently
experienced in the second and third quarters for a relatively immaterial
amount in each such quarter, which the Company may experience again in the
future; inventory obsolescence; natural disasters; market acceptance by the
Company's customers and the timing of availability of new products and
services by the Company or its competitors; acquisitions, including costs and
expenses; usage of different distribution and sales channels; fluctuations in
foreign currency exchange rates; delays or changes in regulatory approval of
its systems and services; warranty and customer support expenses;
customization of systems; and general economic and political conditions. In
addition, the Company's results of operations have been and will continue to
be influenced significantly by competitive factors, including the pricing and
availability of, and demand for, competitive products and services. All of the
above factors are difficult for the Company to forecast, and these or other
factors could materially adversely affect the Company's business, financial
condition and results of operations. As a result, the Company believes that
period-to-period comparisons are not necessarily meaningful and should not be
relied upon as indications of future performance. Due to all of the foregoing
factors, it is likely that in some future quarter the Company's operating
results will be below the expectations of public market analysts and
investors. In such event, the price of the Company's Common Stock may be
materially adversely affected.
SIGNIFICANT CUSTOMER CONCENTRATION
In 1996, six customers accounted for 74% of the Company's sales, and as of
December 31, 1996, seven customers accounted for most of the Company's backlog
scheduled for shipment in the twelve months
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subsequent to December 31, 1996. During the first nine months of 1997, seven
customers accounted for 59% of the Company's sales, and as of September 30,
1997, nine customers accounted for 53% of the Company's backlog scheduled for
shipment in the twelve months subsequent to September 30, 1997. The Company
anticipates that it will continue to sell its products and services to a
changing but still relatively small group of customers. Several of the
Company's subsidiaries are dependent on one or a few customers. Some companies
implementing new networks are at early stages of development and may require
additional capital to fully implement their planned networks. The Company's
ability to achieve sales in the future will depend in significant part upon
its ability to obtain and fulfill orders from, maintain relationships with and
provide support to existing and new customers, to manufacture systems in
volume on a timely and cost-effective basis and to meet stringent customer
performance and other requirements and shipment delivery dates, as well as the
condition, working capital availability and success of its customers. As a
result, any cancellation, reduction or delay in orders by or shipments to any
customer, as a result of manufacturing or supply difficulties or otherwise, or
the inability of any customer to finance its purchases of the Company's
products or services, as has been the case with certain customers
historically, may materially adversely affect the Company's business,
financial condition and results of operations. In addition, financial
difficulties of any existing or potential customers may limit the overall
demand for the Company's products and services (for example, certain potential
customers in the telecommunications industry have been reported to have
undergone financial difficulties and may therefore limit their future orders).
In addition, acquisitions in the communications industry are common, which
further concentrates the customer base and may cause orders to be delayed or
cancelled. There can be no assurance that the Company's sales will increase in
the future or that the Company will be able to support or attract customers.
ACQUISITIONS
Since April 1996, the Company has acquired eight complementary companies and
businesses. Integration of these companies into the Company's business is
currently ongoing, and no assurance may be made that the Company will be able
to successfully complete this process. Risks commonly encountered in such
transactions include the difficulty of assimilating the operations and
personnel of the combined companies, the potential disruption of the Company's
ongoing business, the inability to retain key technical and managerial
personnel, the inability of management to maximize the financial and strategic
position of the Company through the integration of acquired businesses,
additional expenses associated with amortization of acquired intangible
assets, dilution of existing stockholders, the maintenance of uniform
standards, controls, procedures, and policies, the impairment of relationships
with employees and customers as a result of any integration of new personnel,
risks of entering markets in which the Company has no or limited direct prior
experience, and operating companies in different geographical locations with
different cultures. All of the Company's acquisitions to date (the
"Acquisitions"), except Control Resources Corporation ("CRC"), R T Masts
Limited ("R T Masts") and Telematics, Inc., ("Telematics"), have been
accounted for under the purchase method of accounting, and as a result, a
significant amount of goodwill is being amortized as set forth in the
Company's consolidated financial statements. This amortization expense may
have a significant effect on the Company's financial results. There can be no
assurance that the Company will be successful in overcoming these risks or any
other problems encountered in connection with such acquisitions, or that such
transactions will not materially adversely affect the Company's business,
financial condition, or results of operations.
As part of its overall strategy, the Company plans to continue to acquire or
invest in complementary companies, products or technologies and to enter into
joint ventures and strategic alliances with other companies. The Company is
currently pursuing numerous acquisitions; however, no material acquisition has
become the subject of any definitive agreement, letter of intent or agreement
in principle. The Company is unable to predict whether and when any
prospective acquisition candidate will become available or the likelihood that
any acquisition will be completed. The Company competes for acquisition and
expansion opportunities with many entities that have substantially greater
resources than the Company. There can be no assurance that the Company will be
able to successfully identify suitable acquisition candidates, complete
acquisitions, or expand into new markets. Once integrated, acquired businesses
may not achieve comparable levels of revenues, profitability, or productivity
as the existing business of the Company or otherwise perform as expected. In
addition, as commonly
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occurs with mergers of technology companies, during the pre-merger and
integration phases, aggressive competitors may undertake formal initiatives to
attract customers and to recruit key employees through various incentives. If
the Company proceeds with one or more significant acquisitions in which the
consideration consists of cash, a substantial portion of the Company's
available cash could be used to consummate the acquisitions. Many business
acquisitions must be accounted for as a purchase for financial reporting
purposes. Most of the businesses that might become attractive acquisition
candidates for the Company are likely to have significant goodwill and
intangible assets, and acquisition of these businesses, if accounted for as a
purchase, would typically result in substantial amortization of goodwill
charges to the Company. The occurrence of any of these events could have a
material adverse effect on the Company's workforce, business, financial
condition and results of operations. See "--No Assurance of Successful
Expansion of Operations; Management of Growth."
DEPENDENCE ON CONTRACT MANUFACTURERS; RELIANCE ON SOLE OR LIMITED SOURCES OF
SUPPLY
The Company's internal manufacturing capacity is very limited. The Company
utilizes contract manufacturers such as Remec, Inc., Sanmina Corporation, SPC
Electronics Corp., GSS Array Technology, Celeritek, Inc. and Senior Systems
Technology, Inc. to produce its systems, components and subassemblies and
expects to rely increasingly on these and other manufacturers in the future.
The Company also relies on outside vendors to manufacture certain other
components and subassemblies. There can be no assurance that the Company's
internal manufacturing capacity and that of its contract manufacturers will be
sufficient to fulfill the Company's orders. Failure to manufacture, assemble
and ship systems and meet customer demands on a timely and cost-effective
basis could damage relationships with customers and have a material adverse
effect on the Company's business, financial condition and operating results.
Certain necessary components, subassemblies and services necessary for the
manufacture of the Company's systems are obtained from a sole supplier or a
limited group of suppliers. In particular, Eltel Engineering S.r.L. and
Associates, Milliwave, Scientific Atlanta and Xilinx, Inc. each are sole
source or limited source suppliers for critical components used in the
Company's radio systems.
The Company's reliance on contract manufacturers and on sole suppliers or a
limited group of suppliers and the Company's increasing reliance on contract
manufacturers and suppliers involves several risks, many of which the Company
has been experiencing, including an inability to obtain an adequate supply of
finished products and required components and subassemblies, and reduced
control over the price, timely delivery, reliability and quality of finished
products, components and subassemblies. The Company does not have long-term
supply agreements with most of its manufacturers or suppliers. Manufacture of
the Company's products and certain of these components and subassemblies is an
extremely complex process, and the Company has from time to time experienced
and may in the future continue to experience problems in the timely delivery
and quality of products and certain components and subassemblies from vendors.
Certain of the Company's suppliers have relatively limited financial and other
resources. Any inability to obtain timely deliveries of components and
subassemblies of acceptable quality or any other circumstance that would
require the Company to seek alternative sources of supply, or to manufacture
its finished products or such components and subassemblies internally, could
delay the Company's ability to ship its systems, which could damage
relationships with current or prospective customers and have a material
adverse effect on the Company's business, financial condition and results of
operations.
NO ASSURANCE OF SUCCESSFUL EXPANSION OF OPERATIONS; MANAGEMENT OF GROWTH
Recently, the Company has significantly expanded the scale of its operations
to support increased sales and to address critical infrastructure and other
requirements. This expansion has included the leasing of additional space, the
opening of branch offices and subsidiaries in the United Kingdom, Italy,
Germany and Singapore, the opening of design centers and manufacturing
operations throughout the world, the acquisition of a significant amount of
inventory (the Company's inventory increased from approximately $30.8 million
at December 31, 1996 to approximately $50.3 million at September 30, 1997) and
accounts receivable, recent acquisitions, significant investments in research
and development to support product development and services, including the
recently introduced products and the development of point-to-multipoint
systems, and the hiring of additional
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personnel in all functional areas, including in sales and marketing,
manufacturing and operations and finance, and has resulted in significantly
higher operating expenses. Currently, the Company is devoting significant
resources to the development of new products and technologies and is
conducting evaluations of these products and will continue to invest
significant additional resources in plant and equipment, inventory, personnel
and other costs, to begin production of these products and to provide the
marketing and administration, if any, required to service and support these
new products. Accordingly, there can be no assurance that gross profit margin
and inventory levels will not be adversely impacted in the future by start-up
costs associated with the initial production and installation of these new
products. These start-up costs include, but are not limited to, additional
manufacturing overhead, additional allowance for doubtful accounts, inventory
and warranty reserve requirements and the creation of service and support
organizations. In addition, the increases in inventory on hand for new product
development and customer service requirements may increase the rate of
inventory write-offs. As a result, the Company anticipates that its operating
expenses will continue to increase significantly. If the Company's sales do
not correspondingly increase, the Company's results of operations would be
materially adversely affected. See "--Limited Operating History."
Expansion of the Company's operations and its acquisitions have caused and
are continuing to impose a significant strain on the Company's management,
financial, manufacturing and other resources and have disrupted the Company's
normal business operations. The Company's ability to manage the recent and any
possible future growth, should it occur, will depend upon a significant
expansion of its manufacturing, accounting and other internal management
systems and the implementation and subsequent improvement of a variety of
systems, procedures and controls, including improvements relating to inventory
control. For a number of reasons, the Company has not been able to fully
consolidate and integrate the operations of certain acquired businesses. This
inability may cause inefficiencies, additional operational complexities and
expenses and greater risks of billing delays, inventory write-offs and
financial reporting difficulties. The Company must establish and improve a
variety of systems, procedures and controls to more efficiently coordinate its
activities in its acquired (and to be acquired) companies and their facilities
in Rome and Milan, Italy, France, Poland, the United Kingdom, New Jersey,
Florida and Virginia and elsewhere. There can be no assurance that significant
problems in these areas will not re-occur. Any failure to expand these areas
and implement and improve such systems, procedures and controls, including
improvements relating to inventory control, in an efficient manner at a pace
consistent with the Company's business could have a material adverse effect on
the Company's business, financial condition and results of operations. In
particular, the Company must successfully manage the transition to higher
internal and external volume manufacturing, including the establishment of
adequate facilities, the control of overhead expenses and inventories, the
development, introduction, marketing and sales of new products, the management
and training of its employee base, the integration and coordination of a
geographically and ethnically diverse group of employees and the monitoring of
its third party manufacturers and suppliers. Although the Company has
substantially increased the number of its manufacturing personnel and
significantly expanded its internal and external manufacturing capacity, there
can be no assurance that the Company will not experience manufacturing or
other delays or problems that could materially adversely affect the Company's
business, financial condition or results of operations.
In this regard, any significant sales growth will be dependent in
significant part upon the Company's expansion of its marketing, sales,
manufacturing and customer support capabilities. This expansion will continue
to require significant expenditures to build the necessary infrastructure.
There can be no assurance that the Company's attempts to expand its marketing,
sales, manufacturing and customer support efforts will be successful or will
result in additional sales or profitability in any future period. As a result
of the expansion of its operations and the significant increase in its
operating expenses, as well as the difficulty in forecasting revenue levels,
the Company will continue to experience significant fluctuations in its
revenues, costs, and gross margins, and therefore its results of operations.
LIMITED OPERATING HISTORY
P-Com was founded in August 1991 and was in the development stage until
October 1993 when it began commercial shipments of its first product. From
inception to the end of the third quarter of fiscal 1997, the
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Company generated a cumulative net profit of approximately $8.8 million. From
October 1993 through September 30, 1997, the Company generated sales of
approximately $316.1 million, of which $241.1 million, or 76% of such amount,
was generated in the year ended December 31, 1996 and the first nine months of
1997. The Company does not believe recent growth rates are indicative of
future operating results. Due to the Company's limited operating history and
limited resources, among other factors, there can be no assurance that
profitability or significant revenues on a quarterly or annual basis will
occur in the future. During both 1996 and the first nine months of 1997, both
the Company's sales and operating expenses increased more rapidly than the
Company had anticipated. There can be no assurance that the Company's revenues
will continue to remain at or increase from the levels experienced in 1996 or
in the first nine months of 1997 or that sales will not decline. The Company
intends to continue to invest significant amounts in its operations,
particularly to support product development and the marketing and sales of
recently introduced products, and operating expenses will continue to increase
significantly in absolute dollars. If the Company's sales do not
correspondingly increase, the Company's results of operations would be
materially adversely affected. Accordingly, there can be no assurance that the
Company will achieve profitability in future periods. The Company is subject
to all of the risks inherent in the operation of a new business enterprise,
and there can be no assurance that the Company will be able to successfully
address these risks.
DECLINING AVERAGE SELLING PRICES
The Company believes that average selling prices and gross margins for its
systems and services will decline in the long term as such systems mature, as
volume price discounts in existing and future contracts take effect and as
competition intensifies, among other factors. To offset declining average
selling prices, the Company believes that it must successfully introduce and
sell new systems on a timely basis, develop new products that incorporate
advanced software and other features that can be sold at higher average
selling prices and reduce the costs of its systems through contract
manufacturing, design improvements and component cost reduction, among other
actions. To the extent that new products are not developed in a timely manner,
do not achieve customer acceptance or do not generate higher average selling
prices, and the Company is unable to offset declining average selling prices,
the Company's gross margins will decline, and such decline will have a
material adverse effect on the Company's business, financial condition and
results of operations.
TRADE ACCOUNT RECEIVABLES
The Company is subject to credit risk in the form of trade account
receivables. The Company may in certain circumstances be unable to enforce a
policy of receiving payment within a limited number of days of issuing bills,
especially in the case of customers that are in the early phases of business
development. In addition, many of the Company's foreign customers are granted
longer terms than those typically existing in the United States. The Company
has experienced difficulties in the past in receiving payment in accordance
with the Company's policies, particularly from customers awaiting financing to
fund their expansion and from customers outside of the United States and the
days outstanding of receivables have increased recently. There can be no
assurance that such difficulties will not continue in the future, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company typically does not require collateral
or other security to support customer receivables. The Company has in the past
and may from time to time in the future sell its receivables, as part of an
overall customer financing program, with immaterial recourse to the Company.
There can be no assurance that the Company will be able to locate parties to
purchase such receivables on acceptable terms, or at all. See "--Significant
Fluctuations in Results of Operations" and "--International Operations; Risks
of Doing Business in Developing Countries."
NO ASSURANCE OF PRODUCT QUALITY, PERFORMANCE AND RELIABILITY
The Company has limited experience in producing and manufacturing its
systems and contracting for such manufacture. The Company's customers require
very demanding specifications for quality, performance and reliability. There
can be no assurance that problems will not occur in the future with respect to
the quality,
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performance and reliability of the Company's systems or related software
tools. If such problems occur, the Company could experience increased costs,
delays in or cancellations or reschedulings of orders or shipments, delays in
collecting accounts receivable and product returns and discounts, any of which
would have a material adverse effect on the Company's business, financial
condition or results of operations. In addition, in order to maintain its ISO
9001 registration, the Company periodically must undergo a recertification
assessment. Failure to maintain such registration could materially adversely
affect the Company's business, financial condition and results of operations.
The Company completed ISO 9001 registration for its United Kingdom sales and
customer support facility and its Geritel facility in Italy in 1996, and other
facilities will also be attempting ISO 9001 registration. There can be no
assurance that such registration will be achieved.
UNCERTAINTY OF MARKET ACCEPTANCE
The future operating results of the Company depend to a significant extent
upon the continued growth and increased availability and acceptance of
microcellular, PCN/PCS and wireless local loop access telecommunications
services in the United States and internationally. There can be no assurance
that the volume and variety of wireless telecommunications services or the
markets for and acceptance of such services will continue to grow, or that
such services will create a demand for the Company's systems. Because these
markets are relatively new, it is difficult to predict which segments of these
markets will develop and at what rate these markets will grow, if at all. If
the short-haul millimeter wave or spread spectrum microwave wireless radio
market and related services for the Company's systems fails to grow, or grows
more slowly than anticipated, the Company's business, financial condition and
results of operations would be materially adversely affected. In addition, the
Company has invested a significant amount of time and resources in the
development of point-to-multipoint radio systems. Should the point-to-
multipoint radio market fail to develop, or should the Company's products fail
to gain market acceptance, the Company's business, financial condition and
results of operations could be materially adversely affected. Certain sectors
of the communications market will require the development and deployment of an
extensive and expensive communications infrastructure. In particular, the
establishment of PCN/PCS networks will require very large capital
expenditures. There can be no assurance that communications providers have the
ability to or will make the necessary investment in such infrastructure or
that the creation of this infrastructure will occur in a timely manner.
Moreover, one potential application of the Company's technology, use of the
Company's systems in conjunction with the provision by wireless
telecommunications service providers of alternative wireless access in
competition with the existing wireline local exchange providers, is dependent
on the pricing of wireless telecommunications services at rates competitive
with those charged by wireline telephone companies. Rates for wireless access
are currently substantially higher than those charged by wireline companies,
and there can be no assurance that rates for wireless access will generally be
competitive with rates charged by wireline companies. If wireless access rates
are not competitive, consumer demand for wireless access will be materially
adversely affected. If the Company allocates its resources to any market
segment that does not grow, it may be unable to reallocate its resources to
other market segments in a timely manner, which may curtail or eliminate its
ability to enter such market segments.
Certain of the Company's current and prospective customers are currently
delivering products and technologies which utilize competing transmission
media such as fiber optic and copper cable, particularly in the local loop
access market. To successfully compete with existing products and
technologies, the Company must, among many actions, offer systems with
superior price/performance characteristics and extensive customer service and
support, supply such systems on a timely and cost-effective basis in
sufficient volume to satisfy such prospective customers' requirements and
otherwise overcome any reluctance on the part of such customers to transition
to new technologies. Any delay in the adoption of the Company's systems may
result in prospective customers utilizing alternative technologies in their
next generation of systems and networks, which would have a material adverse
effect on the Company's business, financial condition and results of
operations. There can be no assurance that prospective customers will design
their systems or networks to include the Company's systems, that existing
customers will continue to include the Company's systems in their products,
systems or networks in the future, or that the Company's technology will to
any significant extent replace existing technologies and
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achieve widespread acceptance in the wireless telecommunications market.
Failure to achieve or sustain commercial acceptance of the Company's currently
available radio systems or to develop other commercially acceptable radio
systems would materially adversely affect the Company's business, financial
condition and results of operations. In addition, there can be no assurance
that industry technical standards will remain the same or, if emerging
standards become established, that the Company will be able to conform to
these new standards in a timely and cost-effective manner.
INTENSELY COMPETITIVE INDUSTRY
The wireless communications market is intensely competitive. The Company's
wireless-based radio systems compete with other wireless telecommunications
products and alternative telecommunications transmission media, including
copper and fiber optic cable. The Company has experienced increasingly intense
competition worldwide from a number of leading telecommunications companies
that offer a variety of competitive products and services and broader
telecommunications product lines, including Adtran, Inc., Alcatel Network
Systems, California Microwave, Inc., Cylink Corporation, Digital Microwave
Corporation, Ericsson Limited, Harris Corporation--Farinon Division, Innova
International Corp., Larus Corporation, Nokia Telecommunications, Philips
T.R.T. and Western Multiplex Corporation, many of which have substantially
greater installed bases, financial resources and production, marketing,
manufacturing, engineering and other capabilities than the Company. The
Company faces actual and potential competition not only from these established
companies, but also from start-up companies that are developing and marketing
new commercial products and services. The Company may also face competition in
the future from new market entrants offering competing technologies. In
addition, the Company's current and prospective customers and partners,
certain of which have access to the Company's technology or under some
circumstances are granted the right to use the technology for purposes of
manufacturing, have developed, are currently developing or could develop the
capability to manufacture products competitive with those that have been or
may be developed or manufactured by the Company. The Company's results of
operations may depend in part upon the extent to which these customers elect
to purchase from outside sources rather than develop and manufacture their own
radio systems. There can be no assurance that such customers will rely on or
expand their reliance on the Company as an external source of supply for their
radio systems. The principal elements of competition in the Company's market
and the basis upon which customers may select the Company's systems include
price, performance, software functionality, ability to meet delivery
requirements and customer service and support. Recently, certain of the
Company's competitors have announced the introduction of competitive products,
including related software tools and services, and the acquisition of other
competitors and competitive technologies. The Company expects its competitors
to continue to improve the performance and lower the price of their current
products and services and to introduce new products and services or new
technologies that provide added functionality and other features. New product
and service offerings and enhancements by the Company's competitors could
cause a significant decline in sales or loss of market acceptance of the
Company's systems, or make the Company's systems, services or technologies
obsolete or noncompetitive. The Company has experienced significant price
competition, and expects such competition to intensify, which may materially
adversely affect its gross margins and its business, financial condition and
results of operations. The Company believes that to be competitive, it will
continue to be required to expend significant resources on, among other items,
new product development and enhancements. In marketing its systems and
services, the Company will face competition from vendors employing other
technologies and services that may extend the capabilities of their
competitive products beyond their current limits, increase their productivity
or add other features. There can be no assurance that the Company will be able
to compete successfully in the future.
REQUIREMENT FOR RESPONSE TO RAPID TECHNOLOGICAL CHANGE AND REQUIREMENT FOR
FREQUENT NEW PRODUCT INTRODUCTIONS
The communications market is subject to rapid technological change, frequent
new product introductions and enhancements, product obsolescence, changes in
end-user requirements and evolving industry standards. The Company's ability
to be competitive in this market will depend in significant part upon its
ability to successfully
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develop, introduce and sell new systems and enhancements and related software
tools, including its point-to-multipoint systems currently under development,
on a timely and cost-effective basis that respond to changing customer
requirements. Recently, the Company has been developing point-to-multipoint
radio systems. Any success of the Company in developing new and enhanced
systems, including its point-to-multipoint systems currently under
development, and related software tools will depend upon a variety of factors,
including new product selection, integration of the various elements of its
complex technology, timely and efficient completion of system design, timely
and efficient implementation of manufacturing and assembly processes and its
cost reduction program, development and completion of related software tools,
system performance, quality and reliability of its systems and development and
introduction of competitive systems by competitors. The Company has
experienced and is continuing to experience delays from time to time in
completing development and introduction of new systems and related software
tools, including products acquired in the acquisitions. Moreover, there can be
no assurance that the Company will be successful in selecting, developing,
manufacturing and marketing new systems or enhancements or related software
tools. There can be no assurance that errors will not be found in the
Company's systems after commencement of commercial shipments, which could
result in the loss of or delay in market acceptance, as well as significant
expenses associated with re-work of previously delivered equipment. The
inability of the Company to introduce in a timely manner new systems or
enhancements or related software tools that contribute to sales could have a
material adverse effect on the Company's business, financial condition and
results of operations.
INTERNATIONAL OPERATIONS; RISKS OF DOING BUSINESS IN DEVELOPING COUNTRIES
Most of the Company's sales to date have been made to customers located
outside of the United States. In addition, to date, the Company has acquired
two Italy-based companies and two United Kingdom-based companies. These
companies currently sell their products and services primarily to customers in
Europe, the Middle East and Africa. The Company anticipates that international
sales will continue to account for a majority of its sales for the foreseeable
future. Historically the Company's international sales have been denominated
in British pounds sterling or United States currencies. With recent
acquisitions of foreign companies, certain of the Company's international
sales may be denominated in other foreign currencies. A decrease in the value
of foreign currencies relative to the United States dollar could result in
losses from transactions denominated in foreign currencies. With respect to
the Company's international sales that are United States dollar-denominated,
such a decrease could make the Company's systems less price-competitive and
could have a material adverse effect upon the Company's business, financial
condition and results of operations. The Company has in the past mitigated its
currency exposure to the British pound sterling through hedging measures.
However, any future hedging measures may be limited in their effectiveness
with respect to the British pound sterling and other foreign currencies.
Additional risks inherent in the Company's international business activities
include changes in regulatory requirements, costs and risks of localizing
systems in foreign countries, delays in receiving components and materials,
availability of suitable export financing, timing and availability of export
licenses, tariffs and other trade barriers, political and economic
instability, difficulties in staffing and managing foreign operations,
branches and subsidiaries, difficulties in managing distributors, potentially
adverse tax consequences, foreign currency exchange fluctuations, the burden
of complying with a wide variety of complex foreign laws and treaties and the
difficulty in accounts receivable collections. Many of the Company's customer
purchase and other agreements are governed by foreign laws, which may differ
significantly from U.S. laws. Therefore, the Company may be limited in its
ability to enforce its rights under such agreements and to collect damages, if
awarded. There can be no assurance that any of these factors will not have a
material adverse effect on the Company's business, financial condition and
results of operations.
International telephone companies are in many cases owned or strictly
regulated by local regulatory authorities. Access to such markets is often
difficult due to the established relationships between a government owned or
controlled telephone company and its traditional indigenous suppliers of
telecommunications equipment. The successful expansion of the Company's
international operations in certain markets will depend on its ability to
locate, form and maintain strong relationships with established companies
providing communication services and equipment in targeted regions. The
failure to establish regional or local relationships
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or to successfully market or sell its products in international markets could
significantly limit the Company's ability to expand its operations and would
materially adversely affect the Company's business, financial condition and
results of operations. The Company's inability to identify suitable parties
for such relationships, or even if such parties are identified, to form and
maintain strong relationships with such parties could prevent the Company from
generating sales of its products and services in targeted markets or
industries. Moreover, even if such relationships are established, there can be
no assurance that the Company will be able to increase sales of its products
and services through such relationships.
Some of the Company's potential markets consist of developing countries that
may deploy wireless communications networks as an alternative to the
construction of a limited wired infrastructure. These countries may decline to
construct wireless telecommunications systems or construction of such systems
may be delayed for a variety of reasons, in which event any demand for the
Company's systems in those countries will be similarly limited or delayed. In
doing business in developing markets, the Company may also face economic,
political and foreign currency fluctuations that are more volatile than those
commonly experienced in the United States and other areas.
EXTENSIVE GOVERNMENT REGULATION
Radio communications are subject to extensive regulation by the United
States and foreign laws and international treaties. The Company's systems must
conform to a variety of domestic and international requirements established
to, among other things, avoid interference among users of radio frequencies
and to permit interconnection of equipment. Each country has a different
regulatory process. Historically, in many developed countries, the
unavailability of frequency spectrum has inhibited the growth of wireless
telecommunications networks. In order for the Company to operate in a
jurisdiction, it must obtain regulatory approval for its systems and comply
with different regulations in each jurisdiction. Regulatory bodies worldwide
are continuing the process of adopting new standards for wireless
communications products. The delays inherent in this governmental approval
process may cause the cancellation, postponement or rescheduling of the
installation of communications systems by the Company and its customers, which
in turn may have a material adverse effect on the sale of systems by the
Company to such customers. The failure to comply with current or future
regulations or changes in the interpretation of existing regulations could
result in the suspension or cessation of operations. Such regulations or such
changes in interpretation could require the Company to modify its products and
services and incur substantial costs to comply with such time-consuming
regulations and changes. In addition, the Company is also affected to the
extent that domestic and international authorities regulate the allocation and
auction of the radio frequency spectrum. Equipment to support new services can
be marketed only if permitted by suitable frequency allocations, auctions and
regulations, and the process of establishing new regulations is complex and
lengthy. To the extent PCS operators and others are delayed in deploying these
systems, the Company could experience delays in orders. Failure by the
regulatory authorities to allocate suitable frequency spectrum could have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, delays in the radio frequency spectrum
auction process in the United States could delay the Company's ability to
develop and market equipment to support new services. These delays could have
a material adverse effect on the Company's business, financial condition and
results of operations.
The regulatory environment in which the Company operates is subject to
significant change. Regulatory changes, which are affected by political,
economic and technical factors, could significantly impact the Company's
operations by restricting development efforts by the Company and its
customers, making current systems obsolete or increasing the opportunity for
additional competition. Any such regulatory changes, including changes in the
allocation of available spectrum, could have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
might deem it necessary or advisable to modify its systems and services to
operate in compliance with such regulations. Such modifications could be
extremely expensive and time-consuming.
15
<PAGE>
FUTURE CAPITAL REQUIREMENTS
The Company's future capital requirements will depend upon many factors,
including the development of new products and related software tools,
potential acquisitions, requirements to maintain adequate manufacturing
facilities and contract manufacturing agreements, the progress of the
Company's research and development efforts, expansion of the Company's
marketing and sales efforts, and the status of competitive products. There can
be no assurance that additional financing will be available to the Company on
acceptable terms, or at all. As a result of recent securities offerings by the
Company, including the issuance of the Notes in the initial private placement
in November 1997, the Company may be limited in its ability to raise
additional debt financing. If additional funds are raised by issuing equity
securities, further dilution to the existing stockholders will result. If
adequate funds are not available, the Company may be required to delay, scale
back or eliminate its research and development, acquisition or manufacturing
programs or obtain funds through arrangements with partners or others that may
require the Company to relinquish rights to certain of its technologies or
potential products or other assets. Accordingly, the inability to obtain such
financing could have a material adverse effect on the Company's business,
financial condition and results of operations.
UNCERTAINTY REGARDING PROTECTION OF PROPRIETARY RIGHTS
The Company relies on a combination of patents, trademarks, trade secrets,
copyrights, and a variety of other measures to protect its intellectual
property rights. The Company generally enters into confidentiality and
nondisclosure agreements with its service providers, customers and others, and
attempts to limit access to and distribution of its proprietary rights. The
Company also enters into software license agreements with its customers and
others. However, there can be no assurance that such measures will provide
adequate protection for the Company's trade secrets or other proprietary
information, that disputes with respect to the ownership of its intellectual
property rights will not arise, that the Company's trade secrets or
proprietary technology will not otherwise become known or be independently
developed by competitors or that the Company can otherwise meaningfully
protect its intellectual property rights. There can be no assurance that any
patent owned by the Company will not be invalidated, circumvented or
challenged, that the rights granted thereunder will provide competitive
advantages to the Company or that any of the Company's pending or future
patent applications will be issued with the scope of the claims sought by the
Company, if at all. Furthermore, there can be no assurance that others will
not develop similar products or software, duplicate the Company's products or
software or design around the patents owned by the Company or that third
parties will not assert intellectual property infringement claims against the
Company. In addition, there can be no assurance that foreign intellectual
property laws will adequately protect the Company's intellectual property
rights abroad. The failure of the Company to protect its proprietary rights
could have a material adverse effect on its business, financial condition and
results of operations.
Litigation may be necessary to enforce the Company's patents, copyrights and
other intellectual property rights, to protect the Company's trade secrets, to
determine the validity of and scope of the proprietary rights of others or to
defend against claims of infringement or invalidity. Such litigation could
result in substantial costs and diversion of resources and could have a
material adverse effect on the Company's business, financial condition and
results of operations. There can be no assurance that infringement,
invalidity, right to use or ownership claims by third parties or claims for
indemnification resulting from infringement claims will not be asserted in the
future or that such assertions will not materially adversely affect the
Company's business, financial condition and results of operations. If any
claims or actions are asserted against the Company, the Company may seek to
obtain a license under a third party's intellectual property rights. There can
be no assurance, however, that a license will be available under reasonable
terms or at all. In addition, should the Company decide to litigate such
claims, such litigation could be extremely expensive and time consuming and
could materially adversely affect the Company's business, financial condition
and results of operations, regardless of the outcome of the litigation.
DEPENDENCE ON KEY PERSONNEL
The Company's future operating results depend in significant part upon the
continued contributions of its key technical and senior management personnel,
many of whom would be difficult to replace. The Company's
16
<PAGE>
future operating results also depend in significant part upon its ability to
attract and retain qualified management, manufacturing, quality assurance,
engineering, marketing, sales and support personnel. Competition for such
personnel is intense, and there can be no assurance that the Company will be
successful in attracting or retaining such personnel. There may be only a
limited number of persons with the requisite skills to serve in these
positions and it may be increasingly difficult for the Company to hire such
personnel over time. The loss of any key employee, the failure of any key
employee to perform in his or her current position, the Company's inability to
attract and retain skilled employees as needed or the inability of the
officers and key employees of the Company to expand, train and manage the
Company's employee base could materially adversely affect the Company's
business, financial condition and results of operations.
The Company has experienced and may continue to experience employee turnover
due to several factors, including an expanding economy within the geographic
area in which the Company maintains its principal business offices, making it
more difficult for the Company to retain its employees. Due to this and other
factors, the Company has experienced and may continue to experience high
levels of employee turnover, which could adversely impact the Company's
business, financial condition and results of operations. The Company is
presently addressing these issues and will pursue solutions designed to retain
its employees and to provide performance incentives.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. As a result, in fewer
than three years, computer systems and/or software used by many companies may
need to be upgraded to comply with such "Year 2000" requirements. Significant
uncertainty exists concerning the potential effects associated with such
compliance. Any Year 2000 compliance problem of any of the Company, its
customers or its suppliers could result in a material adverse effect on the
Company's business, financial condition and results of operations.
SUBSTANTIAL LEVERAGE
In connection with the initial private placement of the Notes in November
1997, the Company incurred $100 million of indebtedness. As a result, the
Company's total indebtedness and stockholders' equity, on a pro forma basis as
of December 31, 1997, was approximately $101.7 million and approximately
$148.3 million, respectively. The Company's ability to make scheduled payments
of the principal of, or interest on, its indebtedness will depend on its
future performance, which is subject to economic, financial, competitive and
other factors beyond its control.
SUBORDINATION OF NOTES
The Notes are unsecured and subordinated in right of payment to all Senior
Indebtedness (as defined herein) of the Company. As of December 31, 1997, the
Company had approximately $0.6 million of Senior Indebtedness outstanding. In
addition, because a portion of the Company's operations is conducted through
its subsidiaries, claims of holders of indebtedness of such subsidiaries will
have priority with respect to the assets and earnings of such subsidiaries
over the claims of creditors of the Company, including holders of the Notes.
As of December 31, 1997, the aggregate indebtedness and other liabilities
outstanding (other than liabilities of a type not required to be reflected in
the balance sheet in accordance with generally accepted accounting principles
and intercompany indebtedness) of such subsidiaries was approximately $2.0
million. The Indenture does not limit the amount of additional indebtedness,
including Senior Indebtedness or pari passu indebtedness, that the Company or
any of its subsidiaries can create, incur, assume or guarantee. During the
continuance of any default (beyond any applicable grace period) in the payment
of principal, premium, interest on Senior Indebtedness or certain non-payment
defaults on Designated Senior Indebtedness (as defined herein), no payment of
principal or interest on the Notes may be made by the Company. In addition,
upon any distribution of assets of the Company upon any dissolution, winding
up, liquidation or reorganization, the payment of the principal and interest
on the
17
<PAGE>
Notes will be subordinated to the extent provided in the Indenture to the
prior payment in full of all Senior Indebtedness. By reason of this
subordination, in the event of the Company's dissolution, holders of Senior
Indebtedness may receive more, ratably, and Holders of the Notes may receive
less, ratably, than the other creditors of the Company.
ABSENCE OF FINANCIAL COVENANTS
The Indenture does not contain any financial covenants or restrictions on
the payment of dividends, the incurrence of indebtedness, including Senior
Indebtedness, by the Company or the issuance or repurchase of securities by
the Company. The Indenture contains no covenants or other provisions to afford
protection to Holders of the Notes in the event of a highly leveraged
transaction or a change in control of the Company except to the extent
described under "Description of Notes--Repurchase of Notes at the Option of
Holders upon a Change of Control."
REPURCHASE OF NOTES AT THE OPTION OF HOLDERS UPON A CHANGE OF CONTROL
If a Change of Control (as defined herein) were to occur, there can be no
assurance that the Company would have sufficient financial resources, or would
be able to arrange financing to pay the repurchase price in cash for all Notes
tendered by Holders thereof. The Company's ability to repurchase Notes may
also be limited or prohibited by the terms of its then existing borrowing
arrangements and by law. Moreover, any future credit agreements or other
agreements relating to other indebtedness (including other Senior
Indebtedness) to which the Company becomes a party may contain restrictions on
or prohibitions of the repurchase of the Notes by the Company. In the event a
Change of Control occurs at a time when the Company is prohibited from
repurchasing Notes, the Company could seek the consent of the lenders to the
repurchase of the Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such a consent or
repay such borrowings, the Company would remain prohibited from repurchasing
the Notes. In such case, the Company's failure to repurchase the Notes would
constitute an Event of Default (as defined herein) under the Indenture whether
or not payment of the repurchase price is permitted by the subordination
provisions of the Indenture. Any such default may, in turn, cause a default
under Senior Indebtedness of the Company. Moreover, the occurrence of a Change
of Control in and of itself may constitute an event of default under Senior
Indebtedness of the Company. As a result, in either case, payment of the
repurchase price of the Notes with cash would, absent a waiver, be prohibited
under the subordination provisions of the Indenture until the Senior
Indebtedness is paid in full. See "Description of Notes--Subordination" and
"--Subordination of Notes."
No Notes may be repurchased at the option of Holders upon a Change of
Control if there has occurred and is continuing an Event of Default described
under "Description of Notes--Events of Default and Remedies" (other than a
default in the payment of the repurchase price with respect to such Notes on
the repurchase date).
LIMITATIONS ON DIVIDENDS
Since its incorporation in 1991, the Company has not declared or paid cash
dividends on its Common Stock, and the Company anticipates that any future
earnings will be retained for investment in its business. Any payment of cash
dividends in the future will be at the discretion of the Company's Board of
Directors and will depend upon, among other things, the Company's earnings,
financial condition, capital requirements, extent of indebtedness and
contractual restrictions with respect to the payment of dividends.
VOLATILITY OF NOTES AND STOCK PRICE
The Company believes that factors such as announcements of developments
related to the Company's business, developments in the Asia/Pacific region,
announcements of technological innovations or new products or enhancements by
the Company or its competitors, sales by competitors, including sales to the
Company's customers, sales of the Company's Common Stock into the public
market, including by members of management, developments in the Company's
relationships with its customers, partners, lenders, distributors and
18
<PAGE>
suppliers, shortfalls or changes in revenues, gross margins, earnings or
losses or other financial results that differ from analysts' expectations (as
recently experienced upon announcement of third quarter results), regulatory
developments, fluctuations in results of operations and general conditions in
the Company's market or the markets served by the Company's customers or the
economy, could cause the price of the Company's Notes or Common Stock to
fluctuate, perhaps substantially. In addition, future trading prices of the
Notes will depend on other factors, such as prevailing interest rates,
perceptions of the Company's creditworthiness and the market for similar
securities, and the market price of the Notes may trade at a discount from
their principal amount based on such factors. In recent years the stock market
in general, and the market for shares of small capitalization and technology
stocks in particular, have experienced extreme price fluctuations, which have
often been unrelated to the operating performance of affected companies. Many
companies in the telecommunications industry, including the Company, have
recently experienced historic highs in the market price of their Common Stock.
There can be no assurance that the market price of the Company's Common Stock
will not decline substantially from its historic highs, or otherwise continue
to experience significant fluctuations in the future, including fluctuations
that are unrelated to the Company's performance. Such fluctuations could
materially adversely affect the market price of the Company's Notes and Common
Stock.
GLOBAL MARKET RISKS
Countries in the Asia/Pacific region have recently experienced weaknesses in
their currency, banking and equity markets. These weaknesses could adversely
affect demand for the Company's products, the availability and supply of
product components to the Company and, ultimately, the Company's consolidated
results of operations.
ABSENCE OF PUBLIC MARKET
Upon their original issuance, the Notes became eligible for trading on the
PORTAL Market. The Notes sold pursuant to this Prospectus, however, will no
longer be eligible for trading on the PORTAL Market. There can be no assurance
that an active trading market for the Notes will develop or as to the
liquidity or sustainability of any such market, the ability of the holders to
sell their Notes or at what price holders of the Notes will be able to sell
their Notes. Future trading prices of the Notes will depend upon many factors
including, among other things, prevailing interest rates, the Company's
operating results, the price of the Common Stock and the market for similar
securities. The Company does not intend to apply for listing of the Notes on
any securities exchange or quotation system.
CONTROL BY EXISTING STOCKHOLDERS; EFFECTS OF CERTAIN ANTI-TAKEOVER PROVISIONS
Members of the Board of Directors and the executive officers of the Company,
together with members of their families and entities that may be deemed
affiliates of or related to such persons or entities, beneficially own
approximately 5% of the outstanding shares of Common Stock of the Company.
Accordingly, these stockholders are able to influence the election of the
members of the Company's Board of Directors and influence the outcome of
corporate actions requiring stockholder approval, such as mergers and
acquisitions. This level of ownership, together with the Company's Stockholder
Rights Agreement, certificate of incorporation, equity incentive plans, bylaws
and Delaware law, may have a significant effect in delaying, deferring or
preventing a change in control of the Company and may adversely affect the
voting and other rights of other holders of Common Stock. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any preferred stock that may be issued in the
future. The issuance of preferred stock could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding
voting stock of the Company. Although the Company has no present plans to
issue shares of preferred stock, the Board of Directors has preapproved the
terms of a Series A Junior Participating Preferred Stock that may be issued
pursuant to the Stockholder Rights Agreement upon the occurrence of certain
triggering events. In general, the Stockholder Rights Agreement provides a
mechanism by which the Board of Directors and stockholders may act to
substantially dilute the share position of any takeover bidder that acquires
15% or more of the Common Stock. See "Description of Capital Stock."
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<PAGE>
POSSIBLE ADVERSE EFFECT ON MARKET PRICE FOR COMMON STOCK OF SHARES ELIGIBLE
FOR FUTURE SALE AFTER THE OFFERING
Sales of the Company's Common Stock into the market could materially
adversely affect the market price of the Company's Common Stock. Shares of
Common Stock sold in the initial public offering in March 1995 and follow-on
offerings in August 1995 and May 1996, 2,134,590 shares registered on a shelf
registration statement on Form S-3 effective in July 1997 covering shares of
Common Stock issued in the acquisitions of Columbia Spectrum Management L.P.
and CRC, 140,000 shares issued in connection with the acquisition of Atlantic
Communication Sciences, Inc., 1,014,311 shares to be registered on a shelf
registration statement on Form S-3 filed in January 1998 covering shares of
Common Stock issued in the acquisitions of R T Masts and Telematics and option
shares registered on the Company's registration statements covering employee
compensation plans are also, or will be in the near future, eligible for
immediate and unrestricted sale in the public market at any time.
Substantially all of the other shares of the Company's Common Stock are not
restricted and are freely tradeable in the public market.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the Notes
or the Shares by the Selling Securityholders. See "Selling Securityholders"
for a list of those persons and entities receiving proceeds from sales of
Notes or Shares.
DIVIDEND POLICY
To date, the Company has not paid any cash dividends on shares of its Common
Stock. The Company currently anticipates that it will retain any available
funds for use in the operation of its business, and does not anticipate paying
any cash dividends in the foreseeable future.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio (deficiency) of earnings to fixed charges for each of
the periods indicated is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------- NINE MONTHS ENDED
1992 1993 1994 1995 1996 SEPTEMBER 30, 1997
---- ---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C>
-- -- -- 5.6x 13.5x 9.5x
</TABLE>
- --------
(1) For purposes of calculating the ratio (deficiency) of earnings to fixed
charges, (i) "earnings" consist of income (loss) before income taxes plus
fixed charges, and (ii) "fixed charges" consist of interest expense
incurred, including with respect to capital leases, amortization of
interest costs and the portion of rental expense under operating leases
deemed by the Company to be representative of the interest factor.
Earnings did not cover fixed charges by $1.9 million in 1992, $6.2 million
in 1993 and $6.3 million in 1994.
20
<PAGE>
DESCRIPTION OF NOTES
The Notes were issued pursuant to an indenture (the "Indenture"), dated as
of November 1, 1997, between the Company and State Street Bank and Trust
Company of California, N.A., as trustee (the "Trustee"). The following summary
of the Notes, the Indenture and the Registration Rights Agreement (as defined
below) does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all of the provisions of the Notes, the
Indenture and the Registration Rights Agreement, including the definitions
therein. The Indenture, the Registration Rights Agreement and a form of the
Notes have been filed as exhibits to the Registration Statement of which this
Prospectus forms a part. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The definitions
of certain terms used in the following summary are set forth below under "--
Certain Definitions." Capitalized terms used herein without definition have
the meanings ascribed to them in the Indenture. As used in this Description of
Notes, the "Company" refers only to P-Com, Inc. and does not, unless the
context otherwise indicates, include any of its subsidiaries.
GENERAL
The Notes are unsecured obligations of the Company, limited in aggregate
principal amount to $100 million and will mature on November 1, 2002. The
Notes will bear interest at 4 1/2% from the date of initial issuance, or from
the most recent date to which interest has been paid or provided for, payable
in arrears on May 1 and November 1 of each year commencing on May 1, 1998, to
Holders of record of the Notes on the immediately preceding April 15 and
October 15. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months.
Principal, premium, if any, interest and Liquidated Damages, if any, on the
Notes will be payable at the office or agency of the Company maintained for
such purpose within The City of New York or, at the option of the Company,
payment of interest and Liquidated Damages, if any, may be made by check
mailed to the Holders of the Notes at their respective addresses set forth in
the register of Holders of Notes; provided that all payments with respect to
Notes the Holders of which have given wire transfer instructions to the
Company will be required to be made by wire transfer of immediately available
funds to the accounts specified by the Holders thereof. Until otherwise
designated by the Company, the Company's office or agency in New York will be
the office of the Trustee maintained for such purpose.
The Notes will be issued in registered form, without coupons, and in
denominations of $1,000 and integral multiples thereof.
The Indenture does not contain any financial covenants or restrictions on
the payment of dividends, the incurrence of Senior Indebtedness or issuance or
repurchase of securities of the Company. The Indenture contains no covenants
or other provisions to afford protection to Holders of the Notes in the event
of a highly leveraged transaction or a change in control of the Company except
to the extent described under "--Repurchase of Notes at the Option of Holders
Upon a Change of Control."
CONVERSION RIGHTS
Each Holder of Notes will have the right at any time on or after the 90th
day following the latest date of initial issuance of the Notes and on or prior
to maturity, unless previously redeemed or repurchased, at the Holder's
option, to convert any portion of the principal amount hereof that is an
integral multiple of $1,000 into shares of Common Stock at any time at the
conversion price of $27.46 per share (subject to adjustment as described
below.) The right to convert a Note called for redemption or delivered for
repurchase will terminate at the close of business on the Business Day
immediately prior to the Redemption Date or Repurchase Date for such Note,
unless the Company subsequently fails to pay the applicable Redemption Price
or Repurchase Price, as the case may be.
If any Note is converted between the Record Date for the payment of interest
and the next succeeding Interest Payment Date, such Note must be accompanied
by funds equal to the interest payable on such succeeding
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<PAGE>
Interest Payment Date on the principal amount so converted (unless such Note
shall have been called for redemption, in which case no such payment shall be
required), and the interest on the principal amount of the Note being
converted will be paid on such next succeeding Interest Payment Date to the
registered Holder of such Note on the immediately preceding Record Date,
except as provided in the Indenture. A Note converted on an Interest Payment
Date need not be accompanied by any payment, and the interest on the principal
amount of the Note being converted will be paid on such Interest Payment Date
to the registered Holder of such Note on the immediately preceding Record
Date. Subject to the aforesaid right of the registered Holder to receive
interest, no payment or adjustment will be made on conversion for interest
accrued on the converted Note or for dividends on the Common Stock issued on
conversion. Fractional shares of Common Stock shall not be issued upon
conversion, but, in lieu thereof, the Company will pay a cash adjustment based
upon the market price of the Common Stock on the first business day prior to
the day of conversion, as provided in the Indenture.
The Conversion Price is subject to adjustment upon the occurrence of certain
events, including (i) the issuance of shares of Common Stock as a dividend or
distribution on the Common Stock; (ii) the subdivision, combination or
reclassification of the outstanding Common Stock; (iii) the issuance to all or
substantially all holders of Common Stock of rights, warrants or options to
subscribe for or purchase Common Stock (or securities convertible into Common
Stock) at a price per share less than the then current market price per share,
as defined in the Indenture; (iv) the distribution of shares of Capital Stock
of the Company (other than Common Stock), evidences of indebtedness or other
assets (excluding dividends payable exclusively in cash) to all or
substantially all holders of Common Stock; (v) the distribution to all or
substantially all of the holders of Common Stock of rights or warrants to
subscribe for Capital Stock (other than Common Stock) at a price per share
less than the then current market price per share of such Capital Stock; (vi)
the issuance of Common Stock for a price per share less than the current
market price per share (determined as set forth below) on the date the Company
fixes the offering price of such additional shares (other than issuances of
Common Stock under certain employee benefit plans of the Company and certain
other issuances described in the Indenture); (vii) the distribution, by
dividend or otherwise, of cash (excluding any cash portion of a distribution
resulting in an adjustment pursuant to clause (iv) above) to all holders of
Common Stock in an aggregate amount that, combined together with (A) all other
distributions of cash that did not trigger a Conversion Price adjustment to
all holders of Common Stock within the 12 months preceding the date fixed for
determining the stockholders entitled to such distribution plus (B) any cash
and the fair market value of consideration that did not trigger a Conversion
Price adjustment payable in respect of any tender offer by the Company or any
of its subsidiaries for Common Stock (as described in clause (viii) below)
consummated within the 12 months preceding the date fixed for determining the
stockholders entitled to such distribution, exceeds 15% of the product of the
current market price per share (determined as set forth below) on the date
fixed for the determination of stockholders entitled to receive such
distribution times the number of shares of Common Stock outstanding on such
date; and (viii) the completion of a tender offer made by the Company or any
of its subsidiaries for Common Stock involving an aggregate consideration
that, together with (A) any cash and the fair market value of any
consideration that did not trigger a Conversion Price adjustment paid or
payable in respect of any previous tender offer by the Company or a subsidiary
for Common Stock consummated with the 12 months preceding the consummation of
such tender offer plus (B) the aggregate amount of any distribution of cash
that did not trigger a Conversion Price adjustment (as described in clause
(vii) above) to all holders of Common Stock within the 12 months preceding the
consummation of such tender offer, exceeds 15% of the product of the current
market price per share (determined as set forth below) immediately prior to
the expiration of such offer times the number of shares of Common Stock
outstanding at the expiration of such offer. In the event of a distribution to
all or substantially all holders of Common Stock of rights to subscribe for
additional shares of the Company's Capital Stock (other than those referred to
in clause (iii) above), the Company may, instead of making an adjustment in
the Conversion Price, make proper provisions so that each holder of a Note who
converts such Note after the record date for such distribution and prior to
the expiration or redemption of such rights shall be entitled to receive upon
such conversion, in addition to shares of Common Stock, an appropriate number
of such rights. No adjustment of the Conversion Price will be made until
cumulative adjustments amount to one percent or more of the Conversion Price
as last adjusted.
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<PAGE>
Under the terms of the Company's Stockholder Rights Agreement, upon
conversion of the Notes into Common Stock, to the extent the Stockholder
Rights Agreement is still in effect upon such conversion, the holders of such
Notes will receive, in addition to the Common Stock, the rights described
therein (whether or not the rights have separated from the Common Stock at the
time of conversion), subject to certain limited exceptions. See "Description
of Capital Stock--Stockholder Rights Agreement."
In the event of a taxable distribution to holders of Common Stock (or other
transaction) which results in any adjustment of the Conversion Price, the
Holders of Notes may, in certain circumstances, be deemed to have received a
distribution subject to United States income tax as a dividend; in certain
other circumstances, the absence of such an adjustment may result in a taxable
dividend to the holders of Common Stock. See "Certain Federal Income Tax
Considerations."
The Company from time to time may, to the extent permitted by law, reduce
the Conversion Price of the Notes by any amount for any period of at least 20
days, in which case the Company shall give at least 15 days' notice of such
decrease, if the Board of Directors has made a determination that such
decrease would be in the best interests of the Company, which determination
shall be conclusive. The Company may, at its option, make such reductions in
the Conversion Price, in addition to those set forth above, as the Board of
Directors deems advisable to avoid or diminish any income tax to holders of
Common Stock resulting from any dividend or distribution of stock (or rights
to acquire stock) or from any event treated as such for income tax purposes.
See "Certain Federal Income Tax Considerations."
In the Indenture, the "current market price" per share of Common Stock on
any date shall be deemed to be the average of the Daily Market Prices for the
shorter of (i) 30 consecutive Business Days ending on the last full trading
day on the exchange or market referred to in determining such Daily Market
Prices prior to the time of determination or (ii) the period commencing on the
date next succeeding the first public announcement of the issuance of such
rights or warrants or such distribution through such last full trading day
prior to the time of determination.
In case of any consolidation or merger of the Company with or into any other
corporation, or in the case of any consolidation or merger of another
corporation into the Company in which the Company is the surviving
corporation, involving in either case a reclassification, conversion, exchange
or cancellation of shares of Common Stock, or any sale or transfer of all or
substantially all of the assets of the Company, the Holder of each Note shall,
after such consolidation, merger, sale or transfer, have the right to convert
such Note into the kind and amount of securities or other property, which may
include cash, which such Holder would have been entitled to receive upon such
consolidation, merger, sale or transfer if such Holder had held the Common
Stock issuable upon the conversion of such Note immediately prior to the
effective date of such consolidation, merger, sale or transfer.
OPTIONAL REDEMPTION BY THE COMPANY
The Notes are not redeemable by the Company prior to November 5, 2000. On or
after November 5, 2000, the Notes are redeemable upon 30 days' notice at the
option of the Company, in whole, or from time to time, in part, at the
redemption prices set forth below (expressed as percentages of the principal
amount), in each case together with accrued and unpaid interest to, but
excluding, the date fixed for redemption. The Notes are not entitled to any
sinking fund.
If redeemed during the 12-month period beginning November 1 (November 5,
2000 through October 31, 2001 in the case of the first such period):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2000.......................... 101.70%
2001.......................... 100.85
</TABLE>
and 100% on November 1, 2002; provided that any semi-annual payment of
interest becoming due on the date fixed for redemption shall be payable to the
Holders of record on the relevant record date of the Notes being
23
<PAGE>
redeemed. Notwithstanding the foregoing, the Company may not redeem any Notes
unless all accrued and unpaid interest has been paid on all outstanding Notes
for all interest periods terminating on or prior to the last interest payment
date before the date of redemption.
If less than all of the outstanding Notes are to be redeemed, the Trustee
shall select the Notes to be redeemed in principal amounts of $1,000 or
multiples thereof by lot, pro rata or by a method the Trustee considers fair
and appropriate (as long as such method is not prohibited by the rules of any
United States national securities exchange or of an established automated
over-the-counter trading market in the United States on which the Notes are
then listed). If any Note is to be redeemed in part only, a new Note or Notes
in principal amount equal to the unredeemed principal portion thereof will be
issued. If a portion of a Holder's Notes is selected for partial redemption
and such Holder converts a portion of such Notes, such converted portion shall
be deemed to be taken from the portion selected for redemption.
REPURCHASE OF NOTES AT THE OPTION OF HOLDERS UPON A CHANGE OF CONTROL
The Indenture provides that in the event that a Change of Control (as
defined below) has occurred, each Holder will have the right, at such Holder's
option, pursuant to an irrevocable and unconditional offer by the Company (the
"Repurchase Offer"), to require the Company to repurchase all or any part of
such Holder's Notes (provided that the principal amount of such Notes must be
$1,000 or an integral multiple thereof) on the date (the "Repurchase Date")
that is no later than 90 days after the occurrence of such Change of Control
at a cash price equal to 100% of the principal amount thereof, together with
accrued and unpaid interest and Liquidated Damages, if any, to the Repurchase
Date (the "Repurchase Price"). The Repurchase Offer shall be made within 30
days following a Change of Control and shall remain open for a period
specified by the Company but not less than 20 Business Days following its
commencement (the "Repurchase Offer Period"). Upon expiration of the
Repurchase Offer Period, the Company shall purchase all Notes tendered in
response to the Repurchase Offer in the manner described below. If required by
applicable law, the Repurchase Date and the Repurchase Offer Period may be
extended to the extent required; however, if so extended, it shall
nevertheless constitute an Event of Default if the Repurchase Date does not
occur within 90 days of the Change of Control.
The Indenture provides that a "Change of Control" will be deemed to have
occurred when: (i) any "person" or "group" (as such terms are used for
purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable) is or becomes the "beneficial owner," directly or indirectly, of
shares representing more than 50% of the combined total voting power of the
then outstanding securities entitled to vote generally in elections of
directors of the Company ("Voting Stock"), (ii) the Company consolidates with
or merges into any other person or conveys, transfers or leases, whether
directly or indirectly, all or substantially all of its assets to any person,
or any other person merges into the Company, and, in the case of any such
transaction, the outstanding Common Stock of the Company is changed or
exchanged as a result, unless the stockholders of the Company immediately
before such transaction own, directly or indirectly immediately following such
transaction, at least a majority of the combined voting power of the
outstanding voting securities of the corporation resulting from such
transaction in substantially the same proportion as their ownership of the
Voting Stock immediately before such transaction, (iii) at any time the
Continuing Directors (as defined below) do not constitute the majority of the
Board of Directors of the Company (or, if applicable, a successor corporation
to the Company), or (iv) the Common Stock of the Company (or other common
stock into which the Notes are then convertible) is neither listed for trading
on a United States national securities exchange or approved for trading on an
established automatic over-the-counter trading market in the United States
during ten consecutive Trading Days; provided that a Change of Control shall
not be deemed to have occurred if either (x) the Daily Market Price of the
Common Stock for any five trading days during the ten trading days immediately
preceding the Change of Control is at least equal to 105% of the Conversion
Price in effect on such day or (y) in the case of a merger or consolidation
otherwise constituting a Change of Control, all of the consideration
(excluding cash payments for fractional shares) in such merger or
consolidation constituting the Change of Control consists of common stock
traded on a United States national securities exchange or quoted on the Nasdaq
National Market (or which will be so traded or quoted when issued or exchanged
in connection with such Change of Control) and
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as a result of such transaction or transactions such Notes become convertible
solely into such common stock. "Continuing Directors" means, as of any date of
determination, any member of the Board of Directors of the Company who (i) was
a member of the Board of Directors on November 5, 1997 or (ii) was nominated
for election or elected to such Board of Directors with the approval of a
majority of the Continuing Directors who were members of the Board of
Directors at the time of such nomination or election.
On or before the Repurchase Date, the Company will (i) accept for payment
Notes or portions thereof properly tendered pursuant to the Repurchase Offer,
(ii) deposit with the Paying Agent cash sufficient to pay the Repurchase Price
of all Notes so tendered and (iii) deliver to the Trustee all Notes or
portions thereof so accepted, together with an Officers' Certificate listing
the Notes or portions thereof being purchased by the Company. The Paying Agent
will promptly mail to the Holders of Notes so accepted payment in an amount
equal to the Repurchase Price (together with accrued and unpaid interest and
Liquidated Damages, if any, to, but excluding, the Repurchase Date), and the
Trustee will promptly authenticate and mail or deliver to such Holders a new
Note or Notes equal in principal amount to any unpurchased portion of the
Notes surrendered. Any Notes not so accepted will be promptly mailed or
delivered by the Company to the Holder thereof. The Company will publicly
announce the results of the Repurchase Offer on or as soon as practicable
after the Repurchase Date.
The phrase "all or substantially all" of the assets of the Company is likely
to be interpreted by reference to applicable state law at the relevant time,
and will be dependent on the facts and circumstances existing at such time. As
a result, there may be a degree of uncertainty in ascertaining whether a sale
or transfer of "all or substantially all" of the assets of the Company has
occurred. In addition, no assurances can be given that the Company will be
able to acquire the Notes tendered upon the occurrence of a Change of Control.
For purposes of the definition of Change of Control, (i) the terms "person"
and "group" shall have the meaning used for purposes of Rules 13d-3 and 13d-5
of the Exchange Act as in effect on the Issuance Date, whether or not
applicable; and (ii) the term "beneficial owner" shall have the meaning used
in Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the Issuance
Date, whether or not applicable, except that a "person" shall be deemed to
have "beneficial ownership" of all shares that any such person has the right
to acquire, whether such right is exercisable immediately or only after the
passage of time or upon the occurrence of certain events.
The repurchase option upon a Change of Control may in certain circumstances
make more difficult or discourage a takeover of the Company and, thus, the
removal of incumbent management. The Change of Control repurchase feature,
however, is not the result of management's knowledge of any specific effort to
accumulate the Company's stock or to obtain control of the Company by means of
a merger, tender offer, solicitation or otherwise, or part of a plan by
management to adopt a series of anti-takeover provisions. Instead, the Change
of Control repurchase feature resulted from negotiations among the Company and
the initial purchasers in the initial private placement of the Notes.
Management has no present intention to engage in a transaction involving a
Change of Control, although it is possible the Company could decide to do so
in the future. Subject to the limitations on mergers, consolidations and sale
of assets described herein, the Company could, in the future, enter into
certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of indebtedness (including
Senior Indebtedness) outstanding at such time or otherwise affect the
company's capital structure or credit ratings. The payment of the repurchase
price in the event of a Change of Control is subordinated to the prior payment
of Senior Indebtedness as described under "--Subordination."
To the extent applicable and if required by law, the Company will comply
with Section 14 of the Exchange Act and the provisions of Regulation 14E and
any other tender offer rules under the Exchange Act and any other securities
laws, rules and regulations that may then be applicable to any offer by the
Company to purchase the Notes at the option of Holders upon a Change in
Control.
If a Change of Control were to occur, there can be no assurance that the
Company would have sufficient financial resources, or would be able to arrange
financing to pay the repurchase price for all Notes tendered by
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holders thereof. The Company's ability to repurchase the Notes may also be
limited or prohibited by the terms of its then-existing borrowing arrangements
and applicable law. Moreover, any future credit agreements or other agreements
relating to other indebtedness (including Senior Indebtedness) to which the
Company becomes a party may contain restrictions on or prohibitions of the
repurchase of the Notes by the Company. In the event a Change of Control
occurs at a time when the Company is prohibited from repurchasing Notes, the
Company could seek the consent of its lenders to the repurchase of the Notes
or could attempt to refinance the borrowings that contain such prohibition. If
the Company does not obtain such a consent or repay such borrowings, the
Company would remain prohibited from repurchasing the Notes. In such case, the
Company's failure to repurchase the Notes would constitute an Event of Default
under the Indenture whether or not payment of the repurchase price is
permitted by the subordination provisions of the Indenture. Any such default
may, in turn, cause a default under Senior Indebtedness of the Company.
Moreover, the occurrence of a Change of Control in and of itself may
constitute an event of default under Senior Indebtedness of the Company. As a
result, in either case, payment of the repurchase price of the Notes with cash
would, absent a waiver, be prohibited under the subordination provisions of
the Indenture until the Senior Indebtedness is paid in full. See "--
Subordination."
SUBORDINATION
The payment of principal, premium, if any, interest and Liquidated Damages,
if any, on the Notes will be subordinated in right of payment, as set forth in
the Indenture, to the prior payment in full of all Senior Indebtedness,
whether outstanding on the date of the Indenture or thereafter incurred. Upon
any distribution to the creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or other similar proceeding relating to the Company or its
property, an assignment for the benefit of creditors or any marshalling of the
Company's assets and liabilities, the holders of the Senior Indebtedness will
be entitled to receive payment in full of all obligations in respect of such
Senior Indebtedness before the Holders will be entitled to receive any payment
with respect to the Notes.
In the event of any acceleration of the Notes because of an Event of
Default, the holders of any Senior Indebtedness then outstanding would be
entitled to payment in full of all obligations in respect of such Senior
Indebtedness before the Holders are entitled to receive any payment or
distribution in respect of the Notes. The Indenture will further require that
the Company promptly notify holders of Senior Indebtedness if payment of the
Notes is accelerated because of an Event of Default.
The Company also may not make any payment upon or in respect of the Notes if
(i) a default in the payment of the principal of, premium, if any, interest,
rent or other Obligations (as defined in "--Certain Definitions") in respect
of Senior Indebtedness (as defined in "--Certain Definitions") occurs and is
continuing beyond any applicable period of grace or (ii) any other default
occurs and is continuing with respect to Designated Senior Indebtedness that
permits holders of the Designated Senior Indebtedness as to which such default
relates to accelerate its maturity and the Trustee receives a notice of such
default (a "Payment Blockage Notice") from the Company or other person
permitted to give such notice under the Indenture. Payments on the Notes may
and shall be resumed (a) in the case of a payment default, upon the date on
which such default is cured or waived or ceases to exist and (b) in the case
of a nonpayment default, the earlier of the date on which such nonpayment
default is cured or waived or ceases to exist or 179 days after the date on
which the applicable Payment Blockage Notice is received. No new period of
payment blockage may be commenced unless and until (i) 365 days shall have
elapsed since the effectiveness of the immediately prior Payment Blockage
Notice and (ii) all scheduled payments of principal, premium, if any, and
interest on the Notes that have 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 of
a subsequent Payment Blockage Notice.
By reason of the subordination provisions described above, in the event of
the Company's liquidation or insolvency, holders of Senior Indebtedness may
receive more, ratably, and Holders of the Notes may receive less, ratably,
than the other creditors of the Company. Such subordination will not prevent
the occurrences of any Event of Default under the Indenture.
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The Notes are obligations exclusively of the Company. Since certain
operations of the Company are conducted through its Subsidiaries (as defined
in "--Certain Definitions"), the cash flow and the consequent ability to
service debt, including the Notes, of the Company, may be dependent upon the
earnings of its Subsidiaries and the distribution of those earnings to, or
upon loans or other payments of funds by those Subsidiaries to, the Company.
The payment of dividends and the making of loans and advances to the Company
by its Subsidiaries may be subject to statutory or contractual restrictions,
are dependent upon the earnings of those Subsidiaries and are subject to
various business considerations.
Any right of the Company to receive assets of any of its Subsidiaries upon
their liquidation or reorganization (and the consequent right of the Holders
of the Notes to participate in those assets) will be effectively subordinated
to the claims of that Subsidiary's creditors, except to the extent that the
Company is itself recognized as a creditor of such Subsidiary, in which case
the claims of the Company would still be subordinate to any security interests
in the assets of such Subsidiary and any indebtedness of such Subsidiary
senior to that held by the Company.
As of December 31, 1997, the Company had approximately $0.6 million of
indebtedness outstanding that would have constituted Senior Indebtedness, and
the Company's Subsidiaries had approximately $2.0 million of indebtedness and
other liabilities outstanding (other than liabilities of a type not required
to be reflected in a balance sheet in accordance with generally accepted
accounting principles and intercompany indebtedness) to which the Notes would
have been effectively subordinated. The Indenture does not limit the amount of
additional indebtedness, including Senior Indebtedness, which the Company is
permitted to create, incur, assume or guarantee, nor does the Indenture limit
the amount of indebtedness and other liabilities which any Subsidiary is
permitted to create, incur, assume or guarantee.
In the event that, notwithstanding the foregoing, the Trustee or any Holder
receives any payment or distribution of assets of the Company of any kind in
contravention of any of the terms of the Indenture, whether in cash, property
or securities, including, without limitation by way of set-off or otherwise,
in respect of the Notes before all Senior Indebtedness is paid in full, then
such payment or distribution will be held by the recipient in trust for the
benefit of holders of Senior Indebtedness, and will be immediately paid over
or delivered to the holders of Senior Indebtedness or their representative or
representatives to the extent necessary to make payment in full of all Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment
or distribution, or provision therefor, to or for the holders of Senior
Indebtedness.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an "Event of
Default": (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by
the subordination provisions of the Indenture); (ii) default in payment when
due of the principal of or premium, if any, on the Notes (whether or not
prohibited by the subordination provisions of the Indenture); (iii) failure by
the Company to comply with the provisions described under the caption "--
Repurchase of Notes at the Option of Holders Upon a Change of Control;" (iv)
failure by the Company for 60 days after notice to comply with any of its
other agreements in the Indenture or the Notes; (v) default under any
mortgage, indenture or instrument under which there is issued or by which
there is secured or evidenced any indebtedness for money borrowed by the
Company or any of its Significant Subsidiaries (as defined in "--Certain
Definitions") (or the payment of which is guaranteed by the Company or any of
its Significant Subsidiaries) whether such indebtedness or guarantee now
exists, or is created after the date of the Indenture, which default (a) is
caused by a failure to pay principal of or premium, if any, or interest on
such indebtedness prior to the expiration of the grace period provided in such
indebtedness on the date of such default (a "Payment Default") or (b) results
in the acceleration of such indebtedness prior to its express maturity and, in
each case, the principal amount of any such indebtedness, together with the
principal amount of any other such indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, is an amount
which, in the aggregate, is equal to or greater than $15 million and
continuance of such default for 30 days after notice given in accordance with
the Indenture; (vi) failure by the Company or any of its Significant
Subsidiaries to pay final judgments in
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an amount which, in the aggregate, exceeds $15 million and which judgments are
not paid, discharged, bonded or stayed within 60 days after their entry; and
(vii) certain events of bankruptcy or insolvency with respect to the Company
or any of its Significant Subsidiaries.
If any Event of Default (other than pursuant to (vii) above with respect to
the Company) occurs and is continuing, the Trustee or the Holders of at least
25% in principal amount of the then outstanding Notes may declare all the
Notes to be due and payable immediately. Notwithstanding the foregoing, in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency with respect to the Company, all outstanding Notes will become due
and payable without further action or notice. Holders of the Notes may not
enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of
the then outstanding Notes may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of the Notes notice of any
continuing Default (as defined in "--Certain Definitions") or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding, by notice to the Trustee, may on behalf of all Holders waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest on,
or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Indenture provides that the Company may not consolidate or merge with or
into, or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions, to another corporation, Person or entity unless (i) the Company
is the surviving corporation, Person or entity formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (ii) the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Company under the Notes and the Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; and
(iii) immediately after such transaction no Default or Event of Default
exists.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the
Company will furnish to the Holders and the Trustee upon their request (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with
respect to the annual information only, an audit report thereon by the
Company's certified independent accountants and (ii) all current reports that
would be required to be filed with the Commission on Form 8-K if the Company
were required to file such reports. In addition, whether or not required by
the rules and regulations of the Commission, the Company will file a copy of
all such information and reports with the Commission for public availability
(unless the Commission will not accept such a filing).
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee or stockholder of the Company, as such, shall
have any liability for any obligations of the Company under the Notes or the
Indenture or for any claim based on, in respect of, or by
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reason of, such obligations or their creation. Each Holder, by accepting a
Note, waives and releases all such liability. The waiver and release are part
of the consideration for the issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note
selected for redemption. Also, the Company is not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed. The registered Holder of a Note will be treated as the owner of the
Note for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, the Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed
maturity of any Note or alter the provisions with respect to the redemption of
the Notes, (iii) reduce the rate of or change the time for payment of interest
on any Note, (iv) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest or Liquidated Damages, if any, on
the Notes (except a rescission of acceleration of the Notes by the Holders of
at least a majority in aggregate principal amount of the Notes and a waiver of
the payment default that resulted from such acceleration), (v) make any Note
payable in money other than that stated in the Notes, (vi) make any change in
the provisions of the Indenture relating to waivers of past Defaults or the
rights of Holders of Notes to receive payments of principal of, premium, if
any, interest or Liquidated Damages, if any, on the Notes, (vii) waive a
redemption payment or repurchase payment with respect to any Note, (viii)
modify the conversion or subordination provisions of the Indenture in a manner
adverse to the Holders of the Notes or (ix) make any change in the foregoing
amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder, the
Company and the Trustee may amend or supplement the Indenture or the Notes to
cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders or that does not adversely affect the legal rights
under the Indenture of any such Holder, or to comply with requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
CONCERNING THE TRUSTEE
State Street Bank and Trust Company of California, N.A., is the Trustee
under the Indenture. The Indenture contains certain limitations on the rights
of the Trustee, should it become a creditor of the Company, to obtain payment
of claims in certain cases, or to realize on certain property received in
respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days or apply
to the Commission for permission to continue or resign.
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The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. 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 Holder, unless such Holder shall have offered
to the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
BOOK-ENTRY, DELIVERY AND FORM
Notes sold pursuant to this Prospectus will generally be represented by one
or more global Notes ("Global Notes") deposited with, by or on behalf of, the
Depositary Trust Company ("DTC") and registered in the name of DTC's nominee,
Cede & Co. (the "Global Note Holder"). DTC is a limited-purpose trust company
that was created to hold securities for its participating organizations
(collectively, the "Participants" or "DTC's Participants") and to facilitate
the clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. DTC's Participants include securities brokers and dealers, banks
and trust companies, clearing corporations and certain other organizations,
including depositaries for Cedel Bank and Euroclear ("Member Organizations"),
acting as DTC Participants on behalf of their respective participants outside
of the United States. Access to the Depositary's system is also available to
other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants" or "DTC's Indirect Participants")
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly. Persons who are not Participants may
beneficially own securities held by or on behalf of DTC only through DTC's
Participants or DTC's Indirect Participants.
The Company expects that pursuant to procedures established by DTC ownership
of the Notes evidenced by the Global Notes will be shown on, and the transfer
of ownership thereof will be effected only through, records maintained by DTC
(with respect to the interests of the Depositary's Participants), DTC's
Participants and DTC's Indirect Participants. Prospective purchasers are
advised that the laws of some states require that certain persons take
physical delivery in definitive form of securities that they own.
Consequently, the ability to transfer Notes evidenced by the Global Notes will
be limited to such extent.
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of
any Notes evidenced by the Global Notes. Beneficial owners of Notes evidenced
by the Global Notes will not be considered the owners or holders thereof under
the Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any
aspect of the records of DTC or for maintaining, supervising or reviewing any
records of DTC relating to the Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Notes registered in the name of the Global
Note Holder on the applicable Record Date will be payable by the Trustee to or
at the direction of the Global Note Holder in its capacity as the registered
holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee may treat the persons in whose names Notes, including the Global
Notes, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Company nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to beneficial
owners of Notes (including principal, premium, if any, interest and Liquidated
Damages, if any). The Company believes, however, that it is currently the
policy of DTC to immediately credit the accounts of the relevant Participants
with such payments, in amounts proportionate to their respective holdings of
beneficial interests in the relevant security as shown on the records of DTC.
Payments by Participants and Indirect Participants to the beneficial owners of
Notes will be governed by standing instructions and customary practice and
will be the responsibility of Participants or Indirect Participants.
Purchasers of the Notes outside of the United States are advised that
because of time-zone differences, the securities accounts of Euroclear or
Cedel Bank participants purchasing an interest in a Global Note from a DTC
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Participant that is not a Member Organization will be credited during the
securities settlement processing day (which must be a business day for
Euroclear or Cedel Bank, as the case may be) immediately following the DTC
settlement date. Transactions in interests in a Global Note settled during any
securities settlement processing day will be reported to the relevant Member
Organization on the same day. Cash received in Euroclear or Cedel Bank as a
result of sales of interests in a Global Note by or through a Member
Organization to a DTC Participant that is not a Member Organization will be
received with value on the Depositary settlement date, but will not be
available in the relevant Euroclear or Cedel Bank cash account until the
business day following settlement at the Depositary.
Purchasers of the Notes are also advised if (i) the Company notifies the
Trustee in writing that DTC is no longer willing or able to act as a
depositary and the Company is unable to locate a qualified successor within 90
days or (ii) the Company, at its option, notifies the Trustee in writing that
it elects to cause the issuance of Global Notes in the form of Certificated
Notes under the Indenture, then, upon surrender by the Global Note Holder of
its Global Notes, Notes in such form will be issued to each person that the
Global Note Holder and DTC identify as being the beneficial owner of the
related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or DTC in identifying the beneficial owners of Notes and
the Company and the Trustee may conclusively rely on, and will be protected in
relying on, instructions from the Global Note Holder or DTC for all purposes.
PAYMENT
The Indenture will require that payments in respect of the Notes represented
by the Global Note (including principal, premium, if any, interest and
Liquidated Damages, if any) be made by wire transfer of immediately available
funds to the accounts specified by the Global Note Holder. With respect to
Certificated Notes, the Company will make all payments of principal, premium,
if any, interest and Liquidated Damages, if any, by wire transfer of
immediately available funds to the accounts specified by the Holders thereof
or, if no such account is specified, by mailing a check to each such Holder's
registered address.
REGISTRATION RIGHTS
Pursuant to a registration rights agreement (the "Registration Rights
Agreement"), the Company agreed for the benefit of the Holders, to file, at
the Company's sole cost, the shelf registration statement (the "Shelf
Registration Statement") of which this Prospectus is a part with the
Commission with respect to resales of the Notes and the Common Stock issuable
upon conversion thereof. This Prospectus and the Registration Statement of
which it is a part have been filed by the Company pursuant to its obligations
under the Registration Rights Agreement. The Company has further agreed that
(i) it will use its best efforts to cause such Shelf Registration Statement to
be declared effective by the Commission no later than May 8, 1998 and (ii) it
will use its best efforts to keep such Shelf Registration Statement
continuously effective under the Securities Act until, subject to certain
exceptions specified in the Registration Rights Agreement, November 10, 1999.
The Company will be permitted to suspend use of this Prospectus during certain
periods of time and in certain circumstances relating to pending corporate
developments and public filings with the Commission and similar events. If (a)
such Shelf Registration Statement is not declared effective by the Commission
on or prior to the date specified for such effectiveness (the "Effectiveness
Target Date") or (b) the Shelf Registration Statement is declared effective
but thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities (as defined in the Registration Rights
Agreement) for a period of time that shall exceed 90 days in the aggregate in
any period of 365 consecutive days (each such event referred to in clauses (a)
and (b) above a "Registration Default"), then the Company will pay Liquidated
Damages to each Holder of Notes, during the first 90-day period immediately
following the occurrence of such Registration Default in an amount equal to
$0.05 per week per $1,000 principal amount of Notes and, if applicable, on an
equivalent basis per share (subject to adjustment in the event of stock
splits, stock recombinations, stock dividends and the like) of Common Stock
constituting Transfer Restricted Securities held by such Holder. The rate of
accrual of the Liquidated Damages will increase by an additional $0.05 per
week per $1,000 principal amount of Notes and, if applicable, by an equivalent
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<PAGE>
amount per week per share (subject to adjustments as set forth above) of
Common Stock constituting Transfer Restricted Securities for each subsequent
90-day period the applicable Shelf Registration Statement is declared
effective and becomes available for effecting sales of securities, or the
Shelf Registration Statement again becomes effective and becomes available for
effecting sales of securities, as the case may be, up to a maximum amount of
Liquidated Damages of $0.25 per week per $1,000 principal amount of Notes or
if applicable, an equivalent amount per week per share (subject to adjustment
set forth above) of Common Stock constituting Transfer Restricted Securities.
All accrued Liquidated Damages will be paid by the Company on each Interest
Payment Date in cash. Such payment will be made to the Holder of the Global
Notes by wire transfer of immediately available funds or by federal funds
check and to Holders of Certificated Notes, if any, by wire transfer to the
accounts specified by them or by mailing checks to their registered addresses
if no such accounts have been specified. Following the cure of all
Registration Defaults, the accrual of Liquidated Damages will cease.
The Company will provide to each registered holder of the Notes, or the
Common Stock issuable upon conversion of the Notes, copies of each draft of
this Prospectus filed with the Commission, notify each such holder when such
Shelf Registration Statement for the Notes or the Common Stock issuable upon
conversion of the Notes has become effective and take certain other actions as
are required to permit unrestricted resales of the Notes or the Common Stock
issuable upon conversion of the Notes. A holder of Notes, or the Common Stock
issuable upon conversion of the Notes, that sells such securities pursuant to
the Shelf Registration Statement of which this Prospectus is a part generally
will be required to deliver this Prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement which are applicable to such a holder (including
certain indemnification and contribution rights and obligations). Holders of
Notes (including holders who acquire Notes in the open market pursuant to this
Shelf Registration Statement) will be required to deliver information to be
used in connection with maintaining the effectiveness of the Shelf
Registration Statement of which this Prospectus is a part in order to benefit
from certain of the provisions regarding Liquidated Damages set forth above.
GOVERNING LAW
The Indenture and, except as may otherwise be required by law, the Notes
will be governed by and construed in accordance with the laws of the State of
New York, without giving effect to such state's conflicts of laws principles.
ABSENCE OF PUBLIC MARKET
Upon their original issuance, the Notes became eligible for trading on the
Portal Market. The Notes sold pursuant to this Prospectus, however, will no
longer be eligible for trading on the Portal Market. There can be no assurance
that an active trading market for the Notes will develop or as to the
liquidity or sustainability of any such market, the ability of the holders to
sell their Notes or at what price holders of the Notes will be able to sell
their Notes. Future trading prices of the Notes will depend upon many factors
including, among other things, prevailing interest rates, the Company's
operating results, the price of the Common Stock and the market for similar
securities. The Company does not intend to apply for listing of the Notes on
any securities exchange or quotation system.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture and the
Registration Rights Agreement. Reference is made to the Indenture and the
Registration Rights Agreement for a full disclosure of all such terms, as well
as any other capitalized terms used herein for which no definition is
provided.
"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 purposes of this definition,
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<PAGE>
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Default" means any event that is, or with the passage of time or the giving
of notice or both would be, an Event of Default.
"Designated Senior Indebtedness" means any particular Senior Indebtedness
having an outstanding principal amount or commitment in excess of $15 million
with respect to 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 Indebtedness" for purposes of the Indenture (provided that
such instrument, agreement or other document may place limitations and
conditions on the right of such Senior Indebtedness to exercise the rights of
Designated Senior Indebtedness.)
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Indebtedness" means, with respect to any person, all obligations, whether
or not contingent, of such person (i)(a) for borrowed money (including, but
not limited to, any indebtedness secured by a security interest, mortgage or
other lien on the assets of the Company which is (1) given to secure all or
part of the purchase price of property subject thereto, whether given to the
vendor of such property or to another, or (2) existing on property at the time
of acquisition thereof), (b) evidenced by a note, debenture, bond or other
written instrument, (c) under a lease required to be capitalized on the
balance sheet of the lessee under GAAP, (d) in respect of letters of credit,
bank guarantees or bankers' acceptances (including reimbursement obligations
with respect to any of the foregoing), (e) with respect to Indebtedness
secured by a mortgage, pledge, lien, encumbrance, charge or adverse claim
affecting title or resulting in an encumbrance to which the property or assets
of such person are subject, whether or not the obligation secured thereby
shall have been assumed by or shall otherwise be such person's legal
liability, (f) in respect of the balance of deferred and unpaid purchase price
of any property or assets or (g) under interest rate or currency swap
agreements, cap, floor and collar agreements, spot and forward contracts and
similar agreements and arrangements; (ii) with respect to any obligation of
others of the type described in the preceding clause (i) or under clause (iii)
below assumed by or guaranteed in any manner by such person, contingent or
otherwise (and, without duplication, the obligations of such person under any
such assumptions, guarantees or other such arrangements); and (iii) any and
all deferrals, renewals, extensions, refinancings and refundings of, or
amendments, modifications or supplements to, any of the foregoing.
"Issuance Date" means November 10, 1997, the date on which the Notes are
originally issued and authenticated under the Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"person" or "Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
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<PAGE>
"Senior Indebtedness" means the principal of, premium, if any, and interest
on, rent under, and any other amounts payable on or in respect of any other
secured Indebtedness of the Company (including, without limitation, any
Obligations in respect of such secured Indebtedness and any interest accruing
after the filing of a petition by or against the Company under any Bankruptcy
Law, whether or not allowed as a claim after such filing in any proceeding
under such Bankruptcy Law), whether outstanding on the date the Indenture
became effective or thereafter created, incurred, assumed, guaranteed or in
effect guaranteed by the Company (including all deferrals, renewals,
extensions or refundings of, or amendments, modifications or supplements to
the foregoing); provided, however, that Senior Indebtedness does not include
(u) unsecured Indebtedness of the Company, (v) Indebtedness evidenced by the
Notes, (w) any liability for federal, state, local or other taxes owed or
owing by the Company, (x) Indebtedness of the Company to any Subsidiary of the
Company, (y) trade payables of the Company, and (z) any particular
Indebtedness in which the instrument creating or evidencing the same or the
assumption or guarantee thereof (or related agreements or documents to which
the Company is a party) expressly provides that such Indebtedness shall not be
senior in right of payment to, or is pari passu with, or is subordinated or
junior to, the Notes.
"Significant Subsidiary" means any subsidiary of the Company that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act and the Exchange Act, as such
Regulation is in effect on the date of the Indenture.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 95,000,000 shares of
common stock, $0.0001 par value (the "Common Stock"), and 2,000,000 shares of
preferred stock, $0.0001 par value (the "Preferred Stock"), including 750,000
shares of which have been designated Series A junior participating preferred
stock (the "Series A Preferred Stock") pursuant to the Stockholder Rights
Agreement (see discussion below).
COMMON STOCK
As of January 22, 1998, there were 42,760,250 shares of Common Stock
outstanding which were held of record by approximately 245 stockholders. The
holders of Common Stock are entitled to one vote per share on all matters to
be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding Preferred Stock, the holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from
time to time by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." In the event of liquidation, dissolution or
winding up of the Company, the holders of Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to prior
distribution rights of Preferred Stock, if any, then outstanding. The Common
Stock has no preemptive or conversion rights or other subscription rights.
There are no redemption or sinking fund provisions applicable to the Common
Stock. All outstanding shares of Common Stock are fully paid and
nonassessable.
PREFERRED STOCK
The Company's Amended and Restated Certificate of Incorporation authorizes
2,000,000 shares of Preferred Stock, of which 750,000 shares have been
designated Series A Preferred Stock. The Board of Directors has the authority
to issue the remaining shares of Preferred Stock in one or more series and to
fix the rights, preferences, privileges and restrictions thereof, including
dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption, redemption prices, liquidation preferences and the number of
shares constituting any series or the designation of such series, without
further vote or action by the stockholders. The issuance of Preferred Stock
may have the effect of delaying, deferring or preventing a change in control
of the Company without further action by the stockholders and may adversely
affect the voting and other rights of the holders of Common Stock. The
issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of Common Stock, including the loss of
voting control to others. At present, the Company has no plans to issue any of
the Preferred Stock, other than Series A Preferred Stock. The Series A
Preferred Stock is not redeemable. Each share of Series A Preferred Stock will
be entitled to an aggregate dividend of 100 times the dividend declared per
share of Common Stock (a "Common Share"). In the event of liquidation, the
holders of the Series A Preferred Stock will be entitled to an aggregate
payment of 100 times the payment made per Common Share. Each share of Series A
Preferred Stock will have 100 votes, voting together with the Common Shares.
In the event of any merger, consolidation or other transaction in which the
Common Shares are exchanged, each share of Series A Preferred Stock will be
entitled to receive 100 times the amount received per Common Share. These
rights are protected by customary anti-dilution provisions. Because of the
nature of the dividend, liquidation and voting rights of the shares of Series
A Preferred Stock, the value of the one one-hundredth interest in a share of
Series A Preferred Stock purchasable upon exercise of each Right should
approximate the value of one Common Share. See "--Stockholder Rights
Agreement."
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203") which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such
stockholder became an interested stockholder, unless: (i) prior to such date,
the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder,
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<PAGE>
the interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced (for the
purposes of determining the number of shares outstanding, under Delaware law,
those shares owned (x) by persons who are directors and also officers and (y)
by employee stock plans in which employee participants do not have the right
to determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer are excluded from the calculation); or
(iii) on or subsequent to such date, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Section 203 defines a business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii)
any sale, transfer, pledge or other disposition of 10% or more of the assets
of the corporation involving the interested stockholder; (iii) subject to
certain exceptions, any transaction which results in the issuance or transfer
by the corporation of any stock of the corporation to the interested
stockholder; (iv) any transaction involving the corporation which has the
effect of increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested stockholder; or
(v) the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation. In general, Section 203 defines an interested
stockholder as any entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation and any entity or person
affiliated with or controlling or controlled by such entity or person.
Certain provisions of the Company's Stockholder Rights Plan, Amended and
Restated Certificate of Incorporation, equity incentive plans, Bylaws and
Delaware law may have a significant effect in delaying, deferring or
preventing a change in control of the Company and may adversely affect the
voting and other rights of other holders of Common Stock. In particular, the
existence of the Company's classified Board of Directors and the ability of
the Board of Directors to issue blank check Preferred Stock without further
stockholder approval may have the effect of delaying, deferring or preventing
a change in control of the Company and may adversely affect the voting and
other rights of other holders of Common Stock.
STOCKHOLDER RIGHTS AGREEMENT
On September 26, 1997, the Board of Directors of the Company approved a
Stockholder Rights Agreement which was executed by the Company and BankBoston,
N.A., the Rights agent, on November 1, 1997. Pursuant to the Stockholder
Rights Agreement, rights (the "Rights") were distributed as a dividend at the
rate of one preferred share purchase right on each outstanding share of its
Common Stock held by stockholders of record as of the close of business on
November 3, 1997 and will be distributed at the same rate for each share of
Common Stock issued thereafter. Each Right will entitle stockholders to buy
one-hundredth of one share of Series A Preferred Stock at an exercise price of
$125.00 upon certain events. The Rights will expire on November 1, 2007.
The Rights will be exercisable only if a person or group acquires 15% or
more of the Company's Common Stock or announces a tender offer, the
consummation of which would result in ownership by a person or group of 15% or
more of the Company's Common Stock. If, after the Rights become exercisable,
the Company is acquired in a merger or other business combination transaction,
or sells 50% or more of its assets or earning power, each unexercised Right
will entitle its holder to purchase, at the Right's then-current exercise
price, a number of the acquiring company's common shares having a market value
at the time of twice the Right's exercise price. In addition, if a person or
group acquires 15% or more of the Company's outstanding Common Stock, each
Right will entitle its holder (other than such person or members of such
group) to purchase, at the Right's then-current exercise price, a number of
shares of the Company's Common Stock (or cash, other securities or property,
at the discretion of the Board of Directors) having a market value of twice
the Right's exercise price. At any time within ten days after the public
announcement that a person or group has acquired beneficial ownership of 15%
or more of the Company's Common Stock, the Board, in its sole discretion, may
redeem the Rights for $0.0001 per Right.
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TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Boston EquiServe
LLP, 289 San Antonio Road, Suite 100, Los Altos, California 94022. Its
telephone number is (650) 947-3226.
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS OF THE COMPANY
Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's Board of Directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act. Article
VII of the Company's Bylaws provides for mandatory indemnification of its
directors and permissible indemnification of its officers, employees and other
agents to the maximum extent permitted by the Delaware General Corporation
Law. The Company has entered into Indemnification Agreements with its officers
and directors which are intended to provide the Company's officers and
directors with further indemnification to the maximum extent permitted by the
Delaware General Corporation Law.
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SELLING SECURITYHOLDERS
The Notes were originally issued by the Company and resold by the initial
purchasers in transactions exempt from the registration requirements of the
Securities Act to persons reasonably believed by such initial purchasers to be
"qualified institutional buyers" (as defined by Rule 144A under the Securities
Act and referred to as "Qualified Institutional Buyers"), "accredited
investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act and referred to as "Institutional Accredited Investors") who are not
Qualified Institutional Buyers or in transactions complying with the
provisions of Regulation S under the Securities Act. The Selling
Securityholders (which term includes their transferees, pledges, donees or
successors) may from time to time offer and sell pursuant to this Prospectus
any and all of the Notes and Shares.
Set forth below are the names of each Selling Securityholder, the principal
amount of Notes that may be offered by such Selling Securityholder pursuant to
this Prospectus and the number of Shares into which such Notes are
convertible. Unless set forth herein, none of the Selling Securityholders has
had a material relationship with the Company or any of its predecessors or
affiliates within the past three years.
The following table sets forth certain information as of January 21, 1998.
Any or all of the Notes or Shares listed below may be offered for sale
pursuant to this Prospectus by the Selling Securityholders from time to time.
Accordingly, no estimate can be given as to the amounts of Notes or Shares
that will be held by the Selling Securityholders upon consummation of any such
sales. In addition, the Selling Securityholders identified below may have
sold, transferred, or otherwise disposed of all or a portion of their Notes
since the date on which the information regarding their Notes was provided, in
transactions exempt from the registration requirements of the Securities Act.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
AGGREGATE PRINCIPAL AMOUNT PERCENTAGE OF COMMON STOCK THAT
BENEFICIAL HOLDER OF NOTES THAT MAY BE SOLD NOTES OUTSTANDING MAY BE SOLD (1)
----------------- -------------------------- ----------------- -------------------
<S> <C> <C> <C>
Lincoln National
Convertible Securities
Fund................... $ 2,345,000 2.345% 85,396
United National
Insurance.............. 120,000 * 4,369
Walker Art Center....... 285,000 * 10,378
Weirton Trust........... 750,000 * 27,312
Other................... 96,500,000 96.5 3,514,202
------------ ------- ---------
Total................. $100,000,000 100.000% 3,631,279(2)
============ ======= =========
</TABLE>
- --------
* Less than 1%
(1) Assumes a conversion price of $27.46 per share and a cash payment in lieu
of any fractional share interest.
(2) Total differs from the amount to be registered due to rounding down of
fractional shares.
The preceding table has been prepared based solely upon information
furnished to the Company by DTC and certain of its Participants. From time to
time, additional information concerning ownership of the Notes and Shares may
rest with certain holders thereof not named in the preceding table, with whom
the Company believes it has no affiliation.
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PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds of the sale of the Notes
and the Shares offered hereby. The Notes and the Shares may be sold from time
to time to purchasers directly by the Selling Securityholders. Alternatively,
the Selling Securityholders may from time to time offer the Notes or the
Shares through brokers, dealers or agents who may receive compensation in the
form of discounts, concessions or commissions from the Selling Securityholders
and/or the purchasers of the Notes or the Shares for whom they may act as
agent. The outstanding Common Stock of the Company is listed for trading on
The Nasdaq National Market, and the Shares have been approved for listing
thereon. The Selling Securityholders and any such brokers, dealers or agents
who participate in the distribution of the Notes or the Shares may be deemed
to be "underwriters," and any profits on the sale of the Notes or the Shares
by them and any discounts, commissions or concessions received by any such
brokers, dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act. To the extent the Selling
Securityholders may be deemed to be underwriters, the Selling Securityholders
may be subject to certain statutory liabilities, including, but not limited
to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the
Exchange Act.
The Notes and the Shares offered hereby may be sold from time to time in one
or more transactions at fixed prices, at prevailing market prices at the time
of sale, at varying prices determined at the time of sale or at negotiated
prices. The Notes and the Shares may be sold by one or more of the following
methods, without limitation: (a) a block trade in which the broker or dealer
so engaged will attempt to sell the Notes or the Shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this Prospectus; (c)
ordinary brokerage transactions and transactions in which the broker solicits
purchasers; (d) an exchange distribution in accordance with the rules of such
exchange; (e) face-to-face transactions between sellers and purchasers without
a broker-dealer; (f) through the writing of options; and (g) such other
methods of distribution as are customary for securities of this type. At any
time a particular offer of the Notes or the Shares is made, a revised
Prospectus or Prospectus Supplement, if required, will be distributed which
will set forth the aggregate amount and type of Notes or the Shares being
offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, any discounts, commissions, concessions and
other items constituting compensation from the Selling Securityholders and any
discounts, commissions or concessions allowed or reallowed or paid to dealers.
Such Prospectus Supplement and, if necessary, a post-effective amendment to
the Registration Statement of which this Prospectus is a part, will be filed
with the Commission to reflect the disclosure of additional information with
respect to the distribution of the Notes and the Shares. In addition, the
Notes and the Shares covered by this Prospectus may be sold in private
transactions or under Rule 144 rather than pursuant to this Prospectus.
The Company will use its best efforts to keep the Registration Statement of
which this Prospectus is a part effective until November 10, 1999 or until the
Shelf Registration is no longer required for transfer of the Notes or the
Shares. The Company may prohibit offers and sales of Notes and Shares pursuant
to the registration statement to which this Prospectus relates at any time if
(A)(i) it is in possession of material non-public information, (ii) the Board
of Directors of the Company or the Executive Committee thereof determines
(based on advice of counsel) that such prohibition is necessary in order to
avoid a requirement to disclose such material non-public information and (iii)
the Board of Directors of the Company or the Executive Committee thereof
determines in good faith that disclosure of such material non-public
information would not be in the best interests of the Company and its
stockholders or (B) the Company has made a public announcement relating to an
acquisition or business combination transaction including the Company and/or
one or more of its subsidiaries (i) that is material to the Company and its
subsidiaries taken as a whole and (ii) the Board of Directors of the Company
or the Executive Committee thereof determines in good faith that offers and
sales of Notes and Shares pursuant to the registration statement to which this
Prospectus relates prior to the consummation of such transaction (or such
earlier date as the Board of Directors or the Executive Committee thereof
shall determine) is not in the best interests of the Company and its
stockholders.
To the best knowledge of the Company, there are currently no plans,
arrangements or understandings between any Selling Securityholders and any
broker, dealer, agent or underwriter regarding the sale of the Notes
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<PAGE>
and the Shares by the Selling Securityholders. There is no assurance that any
Selling Securityholder will sell any or all of the Notes or the Shares offered
by it hereunder or that any such Selling Securityholder will not transfer,
devise or gift such Notes or Shares by other means not described herein.
The Selling Securityholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation,
Regulation M, which may limit the timing of purchases and sales of any of the
Notes and the Shares by the Selling Securityholders and any other such person.
Furthermore, Regulation M of the Exchange Act may restrict the ability of any
person engaged in the distribution of the Notes or the Shares to engage in
market-making activities with respect to the particular Notes or the Shares
being distributed for a period of up to five business days prior to the
commencement of such distribution. All of the foregoing may affect the
marketability of the Notes and the Shares and the ability of any person or
entity to engage in market-making activities with respect to the Securities.
Pursuant to the Registration Rights Agreement entered into in connection
with the offer and sale of the Notes by the Company, each of the Company and
the Selling Securityholders will be indemnified by the other against certain
liabilities, including certain liabilities under the Securities Act, or will
be entitled to contribution in connection therewith.
The Company has agreed to pay substantially all of the expenses incidental
to the registration, offering and sale of the Notes and the Shares to the
public other than commissions, fees and discounts of underwriters, brokers,
dealers and agents.
40
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material United States federal
income tax consequences expected to result to original Holders from the
purchase, ownership, conversion and disposition of the Notes and the
disposition of the Common Stock into which the Notes may be converted. This
summary is based upon current provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), applicable Treasury regulations, judicial authority
and administrative rulings and practice. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter
or modify the statements and conclusions set forth below. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to Holders. Moreover, no assurance can be offered that the
Internal Revenue Service (the "Service") will not take contrary positions, and
no rulings from the Service or opinions of counsel have been or will be
sought.
The following summary is for general information only. This summary does not
discuss all aspects of United States federal income taxation that may be
relevant to particular Holders in light of their specific circumstances or to
certain types of Holders that may be subject to special rules (including
insurance companies, tax-exempt organizations, financial institutions or
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States). EACH INVESTOR SHOULD CONSULT HIS OR HER OWN
TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF PURCHASING,
HOLDING, CONVERTING AND DISPOSING OF THE NOTES AND ACQUIRING, OWNING AND
DISPOSING OF THE COMMON STOCK ISSUABLE UPON CONVERSION THEREOF, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
STATED INTEREST
Stated interest on the Notes will be reported to Holders and the Service,
and generally will be taxable to the Holders as ordinary income in accordance
with their methods of accounting for tax purposes. There are several
circumstances under which the Company could make a payment on a Note which
would affect the yield to maturity of a Note, including (as described under
"Description of Notes") the payment of Liquidated Damages, the redemption of a
Note by the Company, or the repurchase of a Note upon a Change in Control.
According to Treasury Regulations, the possibility of a change in the interest
rate will not affect the amount of interest income recognized by a holder (or
the timing of such recognition) if the likelihood of the change, as of the
date the debt obligations are issued, is remote. The Company intends to report
on the basis that the likelihood of a change in the interest rate on the Notes
is remote and does not intend to treat the possibility of a change in the
interest rate as affecting the yield to maturity of any Note.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A Holder may be subject to backup withholding at the rate of 31% with
respect to interest paid on and gross proceeds from a sale of, the Notes,
unless (i) the Holder is a corporation or comes within certain other exempt
categories and, when required, demonstrates the relevant facts or (ii) the
Holder provides a correct taxpayer identification number, certifies as to no
loss of exemption from backup withholding and otherwise complies with
applicable requirements of the backup withholding rules. A Holder who does not
provide the Company with its correct taxpayer identification number may be
subject to penalties imposed by the Service. The Company will report to the
Holders and the Service the amount of any "reportable payments" (including
stated interest on the Notes) and any amount withheld with respect to the
Notes during the calendar year. Backup withholding is not an additional tax.
The amount of any backup withholding generally will be allowed as a credit
against the Holder's federal income tax liability, and excess withholdings may
entitle the Holder to a refund, provided that the required information is
furnished to the Service.
CONVERSION OF NOTES
A Holder should not recognize gain or loss on the conversion of a Note into
Common Stock, except to the extent the Common Stock is considered attributable
to accrued interest not previously included in income or with respect to cash
received in lieu of fractional shares. (To the extent the Notes converted are
subject to accrued
41
<PAGE>
market discount, the amount of the accrued market discount will carry over to
the Common Stock on conversion and will be treated as interest income on
disposition of the Common Stock.) The holding period of Common Stock received
upon conversion of a Note will include the period during which the Note was
held (provided the Note was a capital asset in the hands of the Holder prior
to the conversion), and the Holder's aggregate tax basis in the Common Stock
will be equal to its adjusted tax basis in the Note surrendered, less any tax
basis allocable to any fractional share that otherwise would have been
received.
A Holder will recognize taxable gain or loss on cash received in lieu of
fractional shares of Common Stock in an amount equal to the difference between
the amount of cash received and the portion of the Holder's adjusted tax basis
in the Notes allocable to the fractional shares. The gain or loss should be
capital gain or loss if the fractional shares are capital assets in the hands
of the holder. (For the tax rates applicable to net capital gain or net short-
term capital gain, see "Sale or Exchange of Notes or Shares of Common Stock.")
Adjustments in the conversion price of the Notes made pursuant to the anti-
dilution provisions to reflect distributions to holders of Common Stock may
result in constructive distributions to holders that could be taxable to them
as dividends pursuant to Section 305 of the Code.
Sale or Exchange of Notes or Shares of Common Stock. In general, subject to
the market discount rules discussed below, a holder of Notes will recognize
capital gain or loss upon the sale, redemption, retirement or other
disposition of the Notes measured by the difference between the amount of cash
and the fair market value of any property received (except to the extent
attributable to the payment of accrued interest, which will be taxable as
ordinary interest income) and the holder's adjusted tax basis in the Notes. A
holder's tax basis in Notes generally will equal the cost of the Notes to the
holder increased by the amount of market discount, if any, previously taken
into income by the holder or decreased by any bond premium theretofore
amortized by the holder with respect to the Notes. In general, subject to the
market discount rules discussed below, each holder of Common Stock into which
the Notes have been converted will recognize capital gain or loss upon the
sale, exchange, redemption, or other disposition of the Common Stock. However,
special rules may apply to redemptions of the Common Stock which may result in
the amount paid being treated as a dividend. In the case of holders who are
individuals, the maximum tax rate on net capital gains derived from securities
held for more than 18 months is 20%, and the maximum tax rate on net capital
gains derived from securities held for more than one year but not more than 18
months is 28%. Such holders are subject to tax at ordinary income tax rates on
net short-term capital gains derived from securities held for one year or
less. Gains recognized by corporate holders on the sale or other disposition
of securities are subject to tax at ordinary income tax rates, regardless of
the length of time such securities are held prior to disposition. (For the
basis and holding period of shares of Common Stock, see "Conversion of
Notes.")
MARKET DISCOUNT
A purchase at a market discount includes a purchase at the original issue at
a price below the issue price of the Note, or after the original issue at a
price below the stated redemption price at maturity. The market discount rules
generally provide that, subject to a statutorily-defined de minimis exception,
if a holder of a debt instrument purchases it at a market discount and later
recognizes gain upon final maturity, redemption or other disposition of the
debt instrument (including a gift), the lesser of the gain (or appreciation,
in the case of a gift) or the portion of the market discount that accrued
while the debt instrument was held by the holder will be treated as ordinary
interest income at the time of the disposition. The market discount rules also
provide that a holder who acquires a debt instrument at a market discount (and
who does not elect to include the market discount in income on a current
basis) may be required to defer a portion of any interest expense that may
otherwise be deductible on any indebtedness incurred or maintained to purchase
or carry that debt instrument until the holder disposes of the debt instrument
in a taxable transaction.
A holder of a debt instrument acquired at a market discount may elect to
have market discount accrue on a constant interest rate basis (as opposed to a
straight line basis). In addition, a holder of a debt instrument acquired at a
market discount may elect to include the market discount in income as the
discount accrues, either on a
42
<PAGE>
straight line basis or, if elected, on a constant interest rate basis. The
current inclusion election, once made, applies to all market discount
obligations acquired by the holder on or after the first day of the first
taxable year to which the election applies, and may not be revoked without the
consent of the Service. If a Holder elects to include market discount in
income in accordance with the preceding sentence, the rules described above
concerning the recognition of ordinary income on a sale or certain other
dispositions of such a Note and the deferral of interest deductions on
indebtedness related to such a Note would not apply.
AMORTIZABLE BOND PREMIUM
Generally, if the tax basis of an obligation held as a capital asset exceeds
the amount payable at maturity of the obligation, the excess (less any amount
attributable to the conversion features of the obligation) will constitute
amortizable bond premium that the holder may elect to amortize under the
constant interest rate method and deduct over the period from his or her
acquisition date to the obligation's maturity date (or, as discussed below,
until an earlier call date). If bond premium is amortized, the amount required
to be included in the Holder's income each year with respect to interest on
the Note will be reduced by the amount of amortizable bond premium allocable
to such year. A Holder who elects to amortize bond premium must reduce its tax
basis in the related obligation by the amount of the aggregate deductions
allowable for amortizable bond premium. Under recently issued Treasury
Regulations (the "Regulations"), bond premium in excess of the stated interest
allocable to an accrual period will be allowed as a bond premium deduction.
However, the amount treated as a bond premium deduction is limited to the
amount by which the holder's total interest inclusions on the obligation in
prior accrual periods exceed the total amount treated by the holder as a bond
premium deduction on the obligation in prior accrual periods. The Regulations
apply to debt instruments acquired on or after March 2, 1998, except that if a
holder makes the election to amortize bond premium for the taxable year
containing March, 1998, or any subsequent taxable year, the Regulations apply
to debt instruments held on or after the first day of the taxable year in
which the election is made.
In the case of a debt instrument, such as a Note, that may be called at a
premium prior to maturity, an earlier call date of the debt instrument is
treated as the maturity date of the debt instrument and the amount of bond
premium is determined by treating the amount payable on that call date as the
amount payable at maturity if the calculation produces a smaller amortizable
bond premium than the method described in the preceding paragraph. If a holder
of a debt instrument is required to amortize and deduct bond premium by
reference to a certain call date, the debt instrument will be treated as
maturing on that date for the amount payable and, if not redeemed on that
date, the debt instrument will be treated as reissued on that date for the
amount so payable. If a debt instrument purchased at a premium is redeemed
prior to its maturity, a purchaser who has elected to deduct bond premium may
be permitted to deduct any remaining unamortized bond premium as an ordinary
loss in the taxable year of redemption.
An election to amortize bond premium will apply to amortizable bond premium
on all Notes and other bonds, the interest on which is includable in the
Holder's gross income, held at the beginning of the Holder's first taxable
year to which the election applies or thereafter acquired, and may be revoked
only with the consent of the Service.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH INVESTOR
SHOULD CONSULT HIS OR HER OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES
TO HIM OR HER OF THE ACQUISITION, OWNERSHIP, CONVERSION AND DISPOSITION OF THE
NOTES AND THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF, INCLUDING THE APPLICABILITY AND EFFECT OF
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
LEGAL MATTERS
Certain legal matters with respect to the legality of the Notes and the
validity of the Shares offered hereby are being passed upon for the Company by
Brobeck, Phleger & Harrison LLP, Palo Alto, California. As of the date of this
Prospectus, attorneys of Brobeck, Phleger & Harrison LLP and family members
thereof beneficially owned an aggregate of approximately 64,000 shares of the
Company's Common Stock.
43
<PAGE>
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Current Report on Form 8-K dated October 17, 1997 of P-Com, Inc. for the year
ended December 31, 1996 have been so incorporated in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
The financial statements of Columbia Spectrum Management ("CSM") as of and
for the years ended December 31, 1996 and 1995, appearing in the Company's
Current Report on Form 8-K filed on March 21, 1997, as amended, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report appearing therein and incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The financial statements of Control Resources Corporation ("CRC") as of
December 31, 1996 and 1995, and for each of the years in the two-year period
ended December 31, 1996, have been incorporated by reference from the
Company's Current Report on Form 8-K filed on June 13, 1997, as amended, into
this Prospectus and in the registration statement in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing. The report of KPMG Peat Marwick LLP
covering the December 31, 1996 and 1995 financial statements contains an
explanatory paragraph that states that CRC's 1996 losses from operations and
net stockholders' deficit raise substantial doubt about CRC's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of that uncertainty.
44
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY SELLING
SECURITYHOLDERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CON-
TAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION FOR AN OFFER
TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
-----------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 4
The Offering............................................................... 5
Risk Factors............................................................... 6
Use of Proceeds............................................................ 20
Dividend Policy............................................................ 20
Ratio of Earnings to Fixed Charges......................................... 20
Description of Notes....................................................... 21
Description of Capital Stock............................................... 35
Selling Securityholders.................................................... 38
Plan of Distribution....................................................... 39
Certain United States Federal Income Tax Consequences...................... 41
Legal Matters.............................................................. 43
Experts.................................................................... 44
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$100,000,000
P-COM, INC.
4 1/4 CONVERTIBLE
SUBORDINATED NOTES
DUE 2002
AND
SHARES OF
COMMON STOCK
ISSUABLE UPON
CONVERSION THEREOF
-----------------
PROSPECTUS
-----------------
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
All expenses incurred in connection with the issuance and distribution of
the securities being registered will be paid by the Registrant. The following
is an itemized statement of these expenses. All amounts are estimates except
the Securities and Exchange Commission registration fee and the Nasdaq listing
fee.
<TABLE>
<S> <C>
SEC registration fee............................................... $ 29,500
Nasdaq listing fee................................................. 17,500
Printing and engraving............................................. 10,000
Legal fees and expenses of the Registrant.......................... 30,000
Accounting fees and expenses....................................... 10,000
Trustee's fees and expenses........................................ 1,000
Miscellaneous...................................................... 12,000
--------
Total............................................................ $110,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("Section 145")
authorizes a court to award or a corporation's Board of Directors to grant
indemnification to directors and officers in terms sufficiently broad to
permit such indemnification under certain circumstances for liabilities
(including reimbursement for expenses incurred) arising under the Securities
Act. Article VII of the Registrant's Bylaws provides for mandatory
indemnification of its directors and permissible indemnification of its
officers, employees and other agents to the maximum extent permitted by the
Delaware General Corporation Law. The Registrant has entered into
Indemnification Agreements with its officers and directors which are intended
to provide the Registrant's officers and directors with further
indemnification to the maximum extent permitted by the Delaware General
Corporation Law. Reference is also made to the Underwriting Agreements, the
Purchase Agreements and/or Registration Rights Agreements entered into in
connection with the Company's three public offerings and the Company's eight
acquisitions and the sale of the Notes, each of which contains provisions
indemnifying officers and directors of the Company and other persons against
certain liabilities, including, in some cases, those arising under the
Securities Act.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
4.1(1) Form of Common Stock Certificate
4.2 Indenture, dated as of November 1, 1997, between the Registrant
and State Street Bank and Trust Company of California, N.A., as
Trustee.
4.3 Form of 43% Convertible Subordinated Note due 2002 (included in
Exhibit 4.2).
4.4 Registration Rights Agreement, dated as of November 1, 1997 by and
among the Registrant and PaineWebber Incorporated, BancAmerica
Robertson Stephens, NationsBanc Montgomery Securities, Inc. and
Pacific Growth Equities, Inc.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
12.1 Calculation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Price Waterhouse LLP.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
23.2 Consent of Ernst & Young LLP.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit
5.1).
24.1 Powers of Attorney (included in the signature page of this
Registration Statement).
25.1 Statement of Eligibility of Trustee (Form T-1).
</TABLE>
- --------
(1) Incorporated by reference to identically numbered exhibits included in the
Company's Registration Statement on Form S-1 (File No. 33-88492) declared
effective with the Securities and Exchange Commission on March 2, 1995.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining liability under the Securities
Act, each post-effective amendment shall be deemed to be a new registration
statement of the securities offered, and the offering of such securities at
that time to be the initial bona fide offering.
(3) To file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Delaware General Corporation Law, the Certificate of
Incorporation or the Bylaws of the Registrant, or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act,
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered hereunder, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-2
<PAGE>
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-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 CAMPBELL, STATE OF CALIFORNIA ON THIS 30TH DAY OF
JANUARY, 1998.
P-Com, Inc.
/s/ George P. Roberts
By: _________________________________
(George P. Roberts)
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints George P. Roberts and Michael J. Sophie, and
each of them singly, as true and lawful attorneys-in-fact and agents with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities to sign the Registration Statement filed
herewith and any or all amendments to said Registration Statement (including
post-effective amendments and registration statements filed pursuant to Rule
462 and otherwise), and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission
granting unto said attorneys-in-fact and agents the full power and authority
to do and perform each and every act and thing requisite and necessary to be
done in and about the foregoing, as full to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his substitute, may lawfully
do or cause to be done by virtue hereof.
Witness our hands on the date set forth below.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ George P. Roberts Chairman of the Board and January 30, 1998
____________________________________ Chief Executive Officer and
(George P. Roberts) Director (Principal
Executive Officer)
/s/ Michael J. Sophie Chief Financial Officer and January 30, 1998
____________________________________ Vice President, Finance and
(Michael J. Sophie) Administration (Principal
Accounting and Financial
Officer)
/s/ Gill Cogan Director January 30, 1998
____________________________________
(Gill Cogan)
/s/ John A. Hawkins Director January 30, 1988
____________________________________
(John A. Hawkins)
/s/ M. Bernard Puckett Director January 30, 1998
____________________________________
(M. Bernard Puckett)
/s/ James J. Sobczak Director January 30, 1998
____________________________________
(James J. Sobczak)
</TABLE>
II-4
<PAGE>
P-COM, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
4.1(1) Form of Common Stock Certificate
4.2 Indenture, dated as of November 1, 1997, between the Registrant
and State Street Bank and Trust Company of California, N.A., as
Trustee.
4.3 Form of 43% Convertible Subordinated Note due 2002 (included in
Exhibit 4.2).
4.4 Registration Rights Agreement, dated as of November 1, 1997 by and
among the Registrant and PaineWebber Incorporated, BancAmerica
Robertson Stephens, NationsBanc Montgomery Securities, Inc. and
Pacific Growth Equities, Inc.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
12.1 Calculation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit
5.1).
24.1 Powers of Attorney (included in the signature page of this
Registration Statement).
25.1 Statement of Eligibility of Trustee (Form T-1).
</TABLE>
- --------
(1) Incorporated by reference to identically numbered exhibits included in the
Company's Registration Statement on Form S-1 (File No. 33-88492) declared
effective with the Securities and Exchange Commission on March 2, 1995.
<PAGE>
EXHIBIT 4.2
P-COM, INC., AS ISSUER
_________________________
4 1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2002
_________________________
INDENTURE
DATED AS OF NOVEMBER 1, 1997
_________________________
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., AS TRUSTEE
<PAGE>
CROSS-REFERENCE TABLE/1/
<TABLE>
<CAPTION>
TRUST INDENTURE ACT SECTION INDENTURE SECTION
- ----------------------------- -----------------
<S> <C>
310(a)(1)..................................................... 9.10
(a)(2)..................................................... 9.10
(a)(3)..................................................... N.A.
(a)(4)..................................................... N.A.
(a)(5)..................................................... 9.10
(b).....................................................9.8; 9.10
(c)........................................................ N.A.
311(a)........................................................ 9.11
(b)........................................................ 9.11
(c)........................................................ N.A.
312(a)........................................................ 2.5
(b)........................................................ 12.3
(c)........................................................ 12.3
313(a)........................................................ 9.6
(b)(1)..................................................... N.A.
(b)(2)..................................................... 9.6
(c)....................................................9.6, 12.2
(d)........................................................ 9.6
314(a)...............................................4.3, 4.4, 12.2
(b)........................................................ N.A.
(c)(1)..................................................... 12.4
(c)(2)..................................................... 12.4
(c)(3)..................................................... N.A.
(d)........................................................ N.A.
(e)........................................................ 12.5
(f)........................................................ N.A.
315(a)........................................................ 9.1
(b)........................................................ 9.5
(c)........................................................ 9.1
(d)........................................................ 9.1
(e)........................................................ 8.11
316(a)(last sentence)......................................... 2.9
(a)(1)(A).................................................. 8.5
(a)(1)(B).................................................. 8.4
(a)(2)..................................................... N.A.
(b)........................................................ 8.7
(c)........................................................ 11.4
317(a)(1)..................................................... 8.8
(a)(2)..................................................... 8.9
(b)........................................................ 2.4
318(a)........................................................ 12.1
</TABLE>
N.A. means not applicable
________________________
/1/ This Cross-Reference Table is not part of the Indenture.
(i)
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TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE................ 1
Section 1.1 Definitions........................................... 1
Section 1.2 Other Definitions..................................... 7
Section 1.3 Incorporation by Reference of Trust Indenture Act..... 8
Section 1.4 Rules of Construction................................. 8
ARTICLE 2 THE NOTES................................................. 9
Section 2.1 Form and Dating....................................... 9
Section 2.2 Execution and Authentication.......................... 11
Section 2.3 Registrar, Paying Agent and Conversion Agent.......... 12
Section 2.4 Paying Agent to Hold Money in Trust................... 12
Section 2.5 Noteholder Lists...................................... 12
Section 2.6 Transfer and Exchange................................. 13
Section 2.7 Replacement Notes..................................... 17
Section 2.8 Outstanding Notes..................................... 18
Section 2.9 Treasury Securities................................... 18
Section 2.10 Temporary Notes...................................... 18
Section 2.11 Cancellation......................................... 19
Section 2.12 Defaulted Interest................................... 19
Section 2.13 CUSIP Numbers........................................ 20
ARTICLE 3 REDEMPTION................................................ 20
Section 3.1 Notices to Trustee.................................... 20
Section 3.2 Selection of Notes to Be Redeemed..................... 20
Section 3.3 Notice of Redemption.................................. 21
Section 3.4 Effect of Notice of Redemption........................ 22
Section 3.5 Deposit of Redemption Price........................... 22
Section 3.6 Notes Redeemed in Part................................ 22
Section 3.7 Optional Redemption................................... 22
Section 3.8 Conversion Arrangement on Call for Redemption......... 23
ARTICLE 4 COVENANTS................................................. 23
Section 4.1 Payment of Notes...................................... 23
Section 4.2 Maintenance of Office................................. 24
Section 4.3 SEC Reports........................................... 24
Section 4.4 Compliance Certificate................................ 25
Section 4.5 Corporate Existence................................... 25
Section 4.6 Taxes................................................. 26
Section 4.7 Change of Control..................................... 26
Section 4.8 Stay, Extension and Usury Laws........................ 28
</TABLE>
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ARTICLE 5 CONVERSION................................................ 28
Section 5.1 Conversion Privilege.................................. 28
Section 5.2 Manner of Exercise of Conversion Privilege............ 29
Section 5.3 Cash Payments in Lieu of Fractional Shares............ 30
Section 5.4 Adjustment of Conversion Price........................ 31
Section 5.5 Notice to Holders Prior to Certain Corporate Actions.. 37
Section 5.6 Reservation of Shares of Common Stock................. 38
Section 5.7 Taxes upon Conversion................................. 38
Section 5.8 Covenants as to Common Stock.......................... 38
Section 5.9 Consolidation or Merger or Sale of Assets............. 39
Section 5.10 Disclaimer of Responsibility for Certain Matters..... 40
Section 5.11 Cancellation of Converted Notes...................... 40
Section 5.12 Voluntary Reduction.................................. 40
ARTICLE 6 SUBORDINATION............................................. 40
Section 6.1 Agreement to Subordinate.............................. 40
Section 6.2 Liquidation; Dissolution; Bankruptcy.................. 41
Section 6.3 Default on Senior Indebtedness........................ 41
Section 6.4 Acceleration of Notes................................. 42
Section 6.5 When Distribution Must Be Paid Over................... 42
Section 6.6 Notice by Company..................................... 43
Section 6.7 Subrogation........................................... 43
Section 6.8 Relative Rights....................................... 43
Section 6.9 Subordination May Not Be Impaired by Company.......... 43
Section 6.10 Distribution or Notice to Representative............. 44
Section 6.11 Rights of Trustee and Paying Agent................... 44
Section 6.12 Authorization to Effect Subordination................ 44
Section 6.13 Article Applicable to Paying Agents.................. 44
Section 6.14 Senior Indebtedness Entitled to Rely................. 45
Section 6.15 Certain Conversions Not Deemed Payment............... 45
ARTICLE 7 SUCCESSORS................................................ 45
Section 7.1 Merger, Consolidation or Sale of Assets............... 45
Section 7.2 Successor Corporation Substituted..................... 46
Section 7.3 Purchase Option on Change of Control.................. 46
ARTICLE 8 DEFAULTS AND REMEDIES..................................... 46
Section 8.1 Events of Default..................................... 46
Section 8.2 Acceleration.......................................... 48
</TABLE>
(iii)
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(continued)
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Section 8.3 Other Remedies........................................ 48
Section 8.4 Waiver of Past Defaults............................... 48
Section 8.5 Control by Majority................................... 49
Section 8.6 Limitation on Suits................................... 49
Section 8.7 Rights of Noteholders to Receive Payment.............. 49
Section 8.8 Collection Suit by Trustee............................ 49
Section 8.9 Trustee May File Proofs of Claim...................... 50
Section 8.10 Priorities........................................... 50
Section 8.11 Undertaking for Costs................................ 50
ARTICLE 9 THE TRUSTEE............................................... 51
Section 9.1 Duties of Trustee..................................... 51
Section 9.2 Rights of Trustee..................................... 51
Section 9.3 Individual Rights of Trustee.......................... 52
Section 9.4 Trustee's Disclaimer.................................. 52
Section 9.5 Notice of Defaults.................................... 52
Section 9.6 Reports by Trustee to Noteholders..................... 53
Section 9.7 Compensation and Indemnity............................ 53
Section 9.8 Replacement of Trustee................................ 54
Section 9.9 Successor Trustee by Merger, Etc...................... 55
Section 9.10 Eligibility; Disqualification........................ 55
Section 9.11 Preferential Collection of Claims Against Company.... 55
ARTICLE 10 DISCHARGE OF INDENTURE................................... 55
Section 10.1 Termination of Company's Obligations................. 55
Section 10.2 Repayment to Company................................. 55
ARTICLE 11 AMENDMENTS, SUPPLEMENTS AND WAIVERS...................... 56
Section 11.1 Without Consent of Noteholders....................... 56
Section 11.2 With Consent of Noteholders.......................... 56
Section 11.3 Compliance with Trust Indenture Act.................. 57
Section 11.4 Revocation and Effect of Consents.................... 57
Section 11.5 Notation on or Exchange of Notes..................... 58
Section 11.6 Trustee Protected.................................... 58
ARTICLE 12 MISCELLANEOUS............................................ 58
Section 12.1 Trust Indenture Act Controls......................... 58
Section 12.2 Notices.............................................. 59
Section 12.3 Communication by Noteholders with Other Noteholders.. 59
Section 12.4 Certificate and Opinion as to Conditions Precedent... 59
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Section 12.5 Statements Required in Certificate or Opinion........ 60
Section 12.6 Rules by Trustee and Agents.......................... 60
Section 12.7 Legal Holidays....................................... 60
Section 12.8 No Recourse Against Others........................... 60
Section 12.9 Counterparts......................................... 61
Section 12.10 Other Provisions.................................... 61
Section 12.11 Governing Law....................................... 62
Section 12.12 No Adverse Interpretation of Other Agreements....... 62
Section 12.13 Successors.......................................... 62
Section 12.14 Severability........................................ 62
Section 12.15 Table of Contents, Headings, Etc.................... 63
</TABLE>
(v)
<PAGE>
INDENTURE dated as of November 1, 1997 between P-Com, Inc., a Delaware
corporation (the "Company"), and State Street Bank and Trust Company of
California, N.A., a national banking association organized under the laws of the
United States of America, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the holders of $100,000,000 aggregate principal
amount of the Company's 4 1/4% Convertible Subordinated Notes due 2002, or, if
the Initial Purchasers exercise their over-allotment option granted in the
Purchase Agreement defined below, of up to $115,000,000 aggregate principal
amount of the Company's 4 1/4% Convertible Subordinated Notes due 2002 (in
either case, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
------------------------------------------
Section 1.1 Definitions.
-----------
"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" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such person,
whether through the ownership of voting securities or by agreement or otherwise.
"Agent" means any Registrar, Paying Agent, Conversion Agent or co-
registrar.
"Applicable Procedures" means the applicable procedures of the Depositary,
Euroclear or Cedel, as the case may be.
"Board of Directors" means the Board of Directors of the Company or any
authorized committee of the Board.
"Board Resolution" means a duly authorized and adopted resolution of the
Board of Directors certified by the Secretary of the Company as in full force
and effect and delivered to the Trustee.
"Business Day" means any day that is not a Legal Holiday.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interest, participations, rights or other equivalents (however designated) or
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Change of Control" means the occurrence of one or more of the following
events: (a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), is or
<PAGE>
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of shares representing more than 50% of
the combined total voting power of the then outstanding securities entitled to
vote generally in elections of directors of the Company (the "Voting Stock"),
(b) the Company consolidates with or merges into any other person, or conveys,
transfers, or leases, whether directly or indirectly, all or substantially all
of its assets to any person, or any other person merges into the Company, and,
in the case of any such transaction, the outstanding Common Stock of the Company
is changed or exchanged as a result, unless the stockholders of the Company
immediately before such transaction own, directly or indirectly immediately
following such transaction, at least a majority of the combined voting power of
the outstanding voting securities of the corporation resulting from such
transaction in substantially the same proportion as their ownership of the
Voting Stock immediately before such transaction, (c) at any time the Continuing
Directors do not constitute a majority of the Board of Directors of the Company
(or, if applicable, a successor corporation to the Company) or (d) the Common
Stock (or other common stock into which the Notes are then convertible) is
neither listed for trading on a United States national securities exchange nor
approved for trading on an established automated over-the-counter trading market
in the United States for a period of ten consecutive Trading Days; provided a
--------
Change of Control shall not be deemed to have occurred if either (x) the Daily
Market Price of the Common Stock for any five Trading Days during the ten
Trading Days immediately preceding the Change of Control is at least equal to
105% of the Conversion Price in effect on such day or (y) in the case of a
merger or consolidation otherwise constituting a Change of Control, all of the
consideration (excluding cash payments for fractional shares) in such merger or
consolidation constituting the Change of Control consists of common stock traded
on a United States national securities exchange or quoted on the Nasdaq National
Market (or which will be so traded or quoted when issued or exchanged in
connection with such Change of Control) and as a result of such transaction or
transactions such Notes become convertible solely into such common stock.
"Common Stock" means the common stock of the Company as the same exists at
the date of the execution of this Indenture or as such stock may be constituted
from time to time.
"Company" means the party named as such above until a successor replaces it
in accordance with Article 7 and thereafter means the successor.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors who (i) was a member of such Board of Directors on
November 5, 1997 or (ii) was nominated for election or elected to such Board of
Directors with the approval of a majority of the Continuing Directors who were
members of the Board of Directors at the time of such nomination or election.
"Conversion Price" means the initial conversion price specified in Section
9 of the form of Note, as adjusted in accordance with the provisions of Article
5.
"Custodian" means State Street Bank and Trust Company of California, N.A.,
as custodian with respect to the Global Notes, or any successor entity thereto.
"Daily Market Price" means the price of a share of Common Stock on the
relevant date, determined (a) on the basis of the last reported sale price
regular way of the Common Stock as reported
2
<PAGE>
on the NNM, or if the Common Stock is not then listed on the NNM, as reported on
such national securities exchange upon which the Common Stock is listed, or (b)
if there is no such reported sale on the day in question, on the basis of the
average of the closing bid and asked quotations regular way as so reported, or
(c) if the Common Stock is not listed on the NNM or on any national securities
exchange, on the basis of the average of the high bid and low asked quotations
regular way on the day in question in the over-the-counter market as reported by
the National Association of Securities Dealers Automated Quotation System, or if
not so quoted, as reported by National Quotation Bureau, Incorporated, or a
similar organization.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees and their
respective successors.
"Designated Senior Indebtedness" means any particular Senior Indebtedness
having an outstanding principal amount or commitment in excess of $15 million
with respect to 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 Indebtedness" for purposes of the Indenture (provided that
such instrument, agreement or other document may place limitations and
conditions on the right of such Senior Indebtedness to exercise the rights of
Designated Senior Indebtedness.)
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
which are in effect from time to time.
"Global Notes" means, individually and collectively, the Regulation S
Global Note and the Rule 144A Global Note.
"Indebtedness" means, with respect to any person, all obligations, whether
or not contingent, of such person (i) (a) for borrowed money (including, but not
limited to, any indebtedness secured by a security interest, mortgage or other
lien on the assets of the Company which is (1) given to secure all or part of
the purchase price of property subject thereto, whether given to the vendor of
such property or to another, or (2) existing on property at the time of
acquisition thereof), (b) evidenced by a note, debenture, bond or other written
instrument, (c) under a lease required to be capitalized on the balance sheet of
the lessee under GAAP, (d) in respect of letters of credit, bank guarantees or
bankers' acceptances (including reimbursement obligations with respect to any of
the foregoing), (e) with respect to Indebtedness secured by a mortgage, pledge,
lien, encumbrance, charge or adverse claim affecting title or resulting in an
encumbrance to which the property or assets of such person are subject, whether
or not the obligation secured thereby shall have been assumed by or shall
otherwise be such person's legal
3
<PAGE>
liability, (f) in respect of the balance of deferred and unpaid purchase price
of any property or assets, or (g) under interest rate or currency swap
agreements, cap, floor and collar agreements, spot and forward contracts and
similar agreements and arrangements; (ii) with respect to any obligation of
others of the type described in the preceding clause (i) or under clause (iii)
below assumed by or guaranteed in any manner by such person, contingent or
otherwise (and, without duplication, the obligations of such person under any
such assumptions, guarantees or other such arrangements); and (iii) any and all
deferrals, renewals, extensions, refinancings and refundings of, or amendments,
modifications or supplements to, any of the foregoing.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Initial Purchasers" means PaineWebber Incorporated, BancAmerica Robertson
Stephens, NationsBanc Montgomery Securities, Inc., and Pacific Growth Equities,
Inc.
"Interest Payment Date" has the meaning set forth in Section 1 of the
Notes.
"Issuance Date" means the date on which the Notes are first authenticated
and issued under this Indenture.
"Liquidated Damages" has the meaning set forth in the Registration Rights
Agreement.
"Maturity Date" means November 1, 2002.
"NNM" means the Nasdaq National Market.
"Noteholder" or "holder" means a person in whose name a Note is registered.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering Memorandum" means the offering memorandum relating to the Notes
dated November 5, 1997.
"Officer" means the Chairman of the Board, the Chief Executive Officer, the
President, any Vice-President, the Treasurer, the Secretary, any Assistant
Treasurer or any Assistant Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers, one of
whom must be the Chairman of the Board, the Chief Executive Officer, the
President, the Treasurer or a Vice-President of the Company.
"Opinion of Counsel" means a written opinion that meets the requirements of
Section 12.5 from legal counsel who is acceptable to the Trustee. So long as
such counsel is acceptable to the Trustee, such
4
<PAGE>
counsel may be an employee of or counsel to the Company or the Trustee or may be
outside counsel to the Company or the Trustee, except to the extent otherwise
indicated in this Indenture.
"person" or "Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"principal" of a debt security means the principal of the security plus the
premium, if any, on the security.
"Record Date" has the meaning set forth in Section 1 of the Notes.
"Registration Rights Agreement" means the Registration Rights Agreement
relating to the Notes dated as of November 1, 1997, among the Company and the
Initial Purchasers.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a permanent global note that contains the
Global Securities Legend and the Restricted Securities Legend on the face
thereof and the additional schedule referred to in footnote 1 to the form of the
Note attached hereto as Exhibit A, and that is deposited with and registered in
---------
the name of the Depositary or its nominee, representing a series of Notes sold
in reliance on Regulation S.
"Representative" means the (a) trustee, agent or representative for any
Senior Indebtedness or (b) with respect to any Senior Indebtedness that does not
have any such trustee, agent or other representative, (i) in the case of such
Senior Indebtedness issued pursuant to an agreement providing for voting
arrangements as among the holders or owners of such Senior Indebtedness, any
holder or owner of such Senior Indebtedness acting with the consent of the
required persons necessary to bind such holders or owners of such Senior
Indebtedness and (ii) in the case of all other such Senior Indebtedness, the
holder or owner of such Senior Indebtedness.
"Restricted Period" shall mean the "40-day restricted period" as defined in
Regulation S.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 144A Global Note" means a permanent global note that contains the
Global Securities Legend and the Restricted Securities Legend on the face
thereof and the additional schedule referred to in footnote 1 to the form of the
Note attached hereto as Exhibit A, and that is deposited with and registered in
the name of the Depositary, representing a series of Notes sold in reliance on
Rule 144A.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Notes described above issued under this Indenture.
5
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means the principal of, premium, if any, and interest
on, rent under, and any other amounts payable on or in respect of any secured
Indebtedness of the Company (including, without limitation, any Obligations in
respect of such secured Indebtedness and any interest accruing after the filing
of a petition by or against the Company under any Bankruptcy Law, whether or not
allowed as a claim after such filing in any proceeding under such Bankruptcy
Law), whether outstanding on the date of this Indenture or thereafter created,
incurred, assumed, guaranteed or in effect guaranteed by the Company (including
all deferrals, renewals, extensions or refundings of, or amendments,
modifications or supplements to the foregoing); provided, however, that Senior
-------- -------
Indebtedness does not include (u) unsecured Indebtedness of the Company, (v)
Indebtedness evidenced by the Notes, (w) any liability for federal, state, local
or other taxes owed or owing by the Company, (x) Indebtedness of the Company to
any Subsidiary of the Company, (y) trade payables of the Company, and (z) any
particular Indebtedness in which the instrument creating or evidencing the same
or the assumption or guarantee thereof (or related agreements or documents to
which the Company is a party) expressly provides that such Indebtedness shall
not be senior in right of payment to, or is pari passu with, or is subordinated
or junior to, the Notes.
"Shelf Registration Statement" shall have the meaning set forth in the
Registration Rights Agreement.
"Significant Subsidiary" means any subsidiary of the Company which is a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated under the Securities Act and the Exchange Act (as such Regulation is
in effect on the date hereof).
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Trading Days" means (i) if the Common Stock is quoted on the NNM 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 securities exchange,
days on which such national securities exchange is open for business; or (iii)
if the Common Stock is not listed or admitted for trading on any national
securities exchange or quoted on the NNM 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.
6
<PAGE>
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-
77bbbb) as in effect on the date of execution of this Indenture.
"Time of Determination" means the time and date of the earlier of (i) the
record date for determining stockholders entitled to receive their rights,
warrants or distributions referred to in Section 5.4(b) and (c), or (ii) the
commencement of "ex-dividend" trading on the exchange or market referred to in
the definition of the term "Daily Market Price."
"Transfer Restricted Securities" shall have the meaning set forth in the
Registration Rights Agreement.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor.
"Trust Officer" means any officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"U.S. Government Obligations" means direct obligations of the United States
of America for the payment of which the full faith and credit of the United
States of America is pledged. In order to have money available on a payment
date to pay principal or interest on the Notes, the U.S. Government Obligations
shall be payable as to principal or interest on or before such payment date in
such amounts as will provide the necessary money. U.S. Government Obligations
shall not be callable at the issuer's option.
"U.S. person" has the meaning specified in Regulation S.
"Vice President," when used with respect to the Company, means any vice
president, whether or not designated by a number or a word or words added before
or after the title "vice president."
<TABLE>
<CAPTION>
Section 1.2 Other Definitions.
-----------------
DEFINED IN
TERM SECTION
<S> <C>
"Agent Members"............................................... 2.1
"Bankruptcy Custodian"........................................ 8.1
"Bankruptcy Law".............................................. 8.1
"Cedel"....................................................... 2.1
"Certificated Notes".......................................... 2.1
"Change of Control Notice".................................... 4.7
"Change of Control Offer"..................................... 4.7
"Change of Control Payment"................................... 4.7
"Change of Control Payment Date".............................. 4.7
"Commencement Date"........................................... 4.7
"Conversion Agent"............................................ 2.3
"Conversion Notice"........................................... 5.2
</TABLE>
7
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<TABLE>
<CAPTION>
<S> <C>
"Euroclear"................................................... 2.1
"Event of Default"............................................ 8.1
"Expiration Time"............................................. 5.4
"Legal Holiday"............................................... 12.7
"Non-Global Purchaser"........................................ 2.1
"Offer Amount"................................................ 4.7
"Paying Agent"................................................ 2.3
"Payment Blockage Notice"..................................... 6.3
"Payment Default"............................................. 8.1
"Purchase Agreement".......................................... 2.1
"Purchased Shares"............................................ 5.4
"QIBs"........................................................ 2.1
"Registrar"................................................... 2.3
"Tender Period"............................................... 4.7
</TABLE>
Section 1.3 Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC;
"indenture securities" means the Notes;
"indenture security holder" means a Noteholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes means the Company or any other obligor on the Notes.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
Section 1.4 Rules of Construction.
---------------------
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
8
<PAGE>
(b) an accounting term not otherwise defined has the meaning assigned to it
in accordance with GAAP;
(c) references to "GAAP" shall mean GAAP in effect as of the time when and
for the period as to which such accounting principles are to be applied;
(d) "or" is not exclusive;
(e) words in the singular include the plural, and words in the plural
include the singular; and
(f) provisions apply to successive events and transactions.
ARTICLE 2
THE NOTES
---------
Section 2.1 Form and Dating.
---------------
The Notes and the Trustee's certificate of authentication relating thereto
shall be substantially in the form of Exhibit A hereto, which Exhibit A is
--------- ---------
hereby incorporated in and expressly made a part of this Indenture. The Notes
may have notations, legends or endorsements required by law, stock exchange
rule, agreements to which the Company is subject, if any, or usage. The Company
shall furnish any such legend not contained in Exhibit A to the Trustee in
---------
writing. Each Note shall be dated the date of its authentication.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
The Notes shall be issued only in denominations of $1,000 and integral
multiples thereof.
(a) Global Notes. Notes offered and sold to qualified institutional buyers
------------
as defined in Rule 144A ("QIBs") in reliance on Rule 144A shall be issued
initially in the form of one or more Rule 144A Global Notes in definitive, fully
registered form, which shall be deposited on behalf of the purchasers of the
Notes represented thereby with the Trustee, as Custodian for the Depositary, and
registered in the name of the Depositary or a nominee of the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the Rule 144A Global Notes may from
time to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee as hereinafter provided.
Notes offered and sold in reliance on Regulation S shall be issued in the
form of one or more Regulation S Global Notes in definitive, fully registered
form, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Trustee, as Custodian for the Depositary, and
registered in the name of the Depositary or a nominee of the Depositary, duly
executed by the Company
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<PAGE>
and authenticated by the Trustee as hereinafter provided, for the accounts of
designated agents holding on behalf of the Euroclear System ("Euroclear") or
Cedel Bank, societe anonyme ("Cedel"). The aggregate principal amount of the
Regulation S Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its nominee
as hereinafter provided.
Each Global Note shall represent such of the outstanding Notes as shall be
specified therein and each shall provide that it shall represent the aggregate
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate amount of outstanding Notes represented thereby may from time to time
be reduced or increased, as appropriate, to reflect exchanges and redemptions.
Any endorsement of a Global Note to reflect the amount of any increase or
decrease in the amount of outstanding Notes represented thereby shall be made by
the Trustee or the Custodian, at the direction of the Trustee, in accordance
with instructions given by the Holder thereof as required by Section 2.6 hereof.
The provisions of the "Operating Procedures of the Euroclear System" and
"Terms and Conditions Governing Use of Euroclear" and the "Management
Regulations" and "Instructions to Participants" of Cedel Bank shall be
applicable to interests in the Regulation S Global Notes that are held by the
Agent Members through Euroclear or Cedel Bank.
Except as set forth in Section 2.6 hereof, the Global Notes may be
transferred, in whole and not in part, only to another nominee of the Depositary
or to a successor of the Depositary or its nominee.
Upon effectiveness of the Shelf Registration Statement, the Notes resold or
transferred pursuant to the prospectus forming part of the Shelf Registration
Statement may be represented by one or more permanent global Notes in
definitive, fully registered form without interest coupons with the Global
Securities Legend but not the Restricted Securities Legend set forth in
Exhibit A hereto, registered in the name of the Depositary or a nominee of the
- ---------
Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of such global Notes may
from time to time be increased or decreased by adjustments made on the records
of the Trustee and the Depositary or its nominee to reflect transfers of
beneficial interests from the Regulation S Global Notes and the Rule 144A Global
Notes, subject to the rules and procedures of Euroclear and Cedel, as the case
may be, and the Depositary.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to the
---------------------
Rule 144A Global Note and the Regulation S Global Note deposited with or on
behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with this
Section 2.1(b), authenticate and deliver initially the Global Notes that (a)
shall be registered in the name of the Depositary or the nominee of the
Depositary and (b) shall be delivered by the Trustee to the Depositary or
pursuant to the Depositary's instructions or held by the Trustee as Custodian
for the Depositary.
Members of, or participants in, the Depositary ("Agent Members") shall have
no rights either under this Indenture with respect to any Global Note held on
their behalf by the Depositary or by the Trustee as Custodian for the Depositary
or under such Global Note, and the Depositary may be treated
10
<PAGE>
by the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Note for all purposes whatsoever. Notwithstanding
the foregoing, nothing herein shall prevent the Company, the Trustee or any
agent of the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or
impair, as between the Depositary and its Agent Members, the operation of
customary practices of such Depositary governing the exercise of the rights of
an owner of a beneficial interest in any Global Note.
(c) Certificated Notes. Except as provided in Sections 2.6 and 2.10,
------------------
owners of beneficial interests in Global Notes will not be entitled to receive
physical delivery of certificated Notes. Purchasers of Notes who are
institutional "accredited investors" (within the meaning of Rule 501(a)(1), (2),
(3) or (7) of the Securities Act) who are not QIBs and did not purchase Notes
sold in reliance on Regulation S under the Securities Act (referred to herein as
the "Non-Global Purchasers") will receive certificated Notes bearing the
Restricted Securities Legend set forth in Exhibit A hereto ("Certificated
---------
Notes"). Certificated Notes will bear the Restricted Securities Legend set forth
on Exhibit A unless removed in accordance with Section 2.6(b) hereof. A
Certificated Note may be exchanged for a beneficial interest in a Global Note in
accordance with the provisions of Section 2.6(a)(vii).
After a transfer of any Notes during the period of the effectiveness of a
Shelf Registration Statement with respect to the Notes, all requirements
pertaining to the Restricted Security Legend on such Notes will cease to apply,
the requirements requiring any such Note issued to certain holders be issued in
global form will cease to apply, and a Certificated Note without the Restricted
Securities Legend will be available to the holder of such Notes who transfers
such Notes pursuant to a prospectus which is part of such Shelf Registration
Statement.
Section 2.2 Execution and Authentication.
----------------------------
Two Officers shall sign the Notes for the Company by manual or facsimile
signature. The Company's seal shall be reproduced, either manually or by
facsimile, on the Notes.
If an Officer whose signature is on a Note no longer holds that office at
the time the Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of an
authorized signatory of the Trustee. Such signature shall be conclusive
evidence that the Note has been authenticated under this Indenture.
Upon a written order of the Company signed by two Officers, the Trustee
shall authenticate the Notes for original issue up to an aggregate principal
amount of $100,000,000 (plus up to $15,000,000 aggregate principal amount of
Notes that may be sold by the Company pursuant to the over-allotment option
granted pursuant to the Purchase Agreement). The aggregate principal amount of
Notes outstanding at any time shall not exceed such amount except as provided in
Section 2.7.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference
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in this Indenture to authentication by the Trustee includes authentication by
such agent. An authenticating agent has the same rights as an Agent to deal with
the Company or an Affiliate of the Company.
Section 2.3 Registrar, Paying Agent and Conversion Agent.
--------------------------------------------
The Notes may be presented at the corporate trust office of the Trustee for
(i) registration of transfer or exchange ("Registrar"), (ii) payment ("Paying
Agent") and (iii) conversion ("Conversion Agent"). The Company shall also
maintain in the Borough of Manhattan, City of New York, State of New York an
office or agency where Notes may be presented for (i) registration of transfer
or for exchange, (ii) payment ("Paying Agent") and (iii) conversion ("Conversion
Agent"), which office or agency shall initially be the office of State Street
Bank and Trust Company, N.A., an Affiliate of the Trustee, located at 61
Broadway, Concourse Level, Corporate Trust Window, New York, New York 10006.
The Registrar shall keep a register of the Notes and of their transfer and
exchange. The Company may appoint one or more co-registrars, one or more
additional Paying Agents and one or more additional conversion agents in such
other locations as it shall determine. The term "Paying Agent" includes any
additional Paying Agent and the term "Conversion Agent" includes any additional
conversion agent. The Company may change any Paying Agent, Registrar, co-
registrar or Conversion Agent without prior notice to any Noteholder; provided
--------
the Company shall maintain an office or agency for payment, conversion and
exchange in the Borough of Manhattan, City of New York, State of New York. The
Company shall notify the Trustee of the name and address of any Agent not a
party to this Indenture. If the Company fails to appoint or maintain another
entity as Registrar, Paying Agent or Conversion Agent, the Trustee shall act as
such. The Company or any of its Affiliates may act as Paying Agent, Registrar,
co-registrar or Conversion Agent.
Section 2.4 Paying Agent to Hold Money in Trust.
-----------------------------------
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of
Noteholders or the Trustee all money held by the Paying Agent for the payment of
principal or interest on the Notes, and will notify the Trustee of any default
by the Company in making any such payment. While any such default continues,
the Trustee may require a Paying Agent to pay all money held by it to the
Trustee. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee and to account for any money disbursed by it. Upon
payment over to the Trustee, the Paying Agent (if other than the Company or an
Affiliate of the Company) shall have no further liability for the money. If the
Company or an Affiliate of the Company acts as Paying Agent, it shall segregate
and hold in a separate trust fund for the benefit of the Noteholders all money
held by it as Paying Agent.
Section 2.5 Noteholder Lists.
----------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee on or before each
Interest Payment Date and at such other times as the Trustee may request in
writing a list in such
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form and as of such date as the Trustee may reasonably require of the names and
addresses of Noteholders.
Section 2.6 Transfer and Exchange.
---------------------
Where Notes are presented to the Registrar or a co-registrar with a request
to register a transfer or to exchange them for an equal principal amount of
Notes of other denominations, the Registrar shall register the transfer or make
the exchange if its requirements for such transactions are met. To permit
registrations of transfers and exchanges, the Company shall issue and deliver to
the Trustee and the Trustee shall authenticate Notes at the Registrar's request.
No service charge shall be made to a Noteholder for any registration of transfer
or exchange (except as otherwise expressly permitted herein), but the Company
may require payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer tax or similar governmental charge payable upon exchanges pursuant to
Sections 2.10, 3.6 or 11.5 hereof).
The Company shall not be required (i) to issue, register the transfer of or
exchange Notes during a period beginning at the opening of business fifteen (15)
days before the day of any selection of Notes for redemption under Section 3.2
and ending at the close of business on the day of selection, (ii) to register
the transfer or exchange of any Notes so selected for redemption in whole or in
part, except the unredeemed portion of any Notes being redeemed in part or (iii)
to register the transfer of any Notes surrendered for repurchase (and not
withdrawn) pursuant to Section 4.7.
All Notes issued upon any transfer or exchange of Notes in accordance with
this Indenture shall be the valid and binding obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this Indenture
as the Notes surrendered upon such registration of transfer or exchange.
(a) Notwithstanding any provision to the contrary in this Indenture, so
long as a Global Note remains outstanding and is held by or on behalf of the
Depositary, transfers of a Global Note, in whole or in part, or of any
beneficial interest therein, shall only be made in accordance with Section
2.1(b) and this Section 2.6(a); provided, however, that beneficial interests in
-------- -------
a Global Note may be transferred to persons who take delivery thereof in the
form of a beneficial interest in the same Global Note in accordance with the
transfer restrictions set forth in the Restricted Securities Legend and under
the heading "Notice to Investors" near the end of the Offering Memorandum.
(i) Except for transfers or exchanges made in accordance with any of
clauses (ii) through (iv) of this Section 2.6(a), transfers of a Global
Note shall be limited to transfers of such Global Note in whole, but not in
part, to nominees of the Depositary or to a successor of the Depositary or
such successor's nominee.
(ii) Rule 144A Global Note to Regulation S Global Note. If, at any
time on or prior to the termination of the Restricted Period, an owner of a
beneficial interest in a Rule 144A Global Note deposited with the
Depositary or the Trustee as Custodian for the Depositary wishes to
transfer its interest in such Rule 144A Global Note to a person who is
required or permitted to take delivery thereof in the form of an interest
in a Regulation S Global Note, such owner shall,
13
<PAGE>
subject to the Applicable Procedures, exchange or cause the exchange of
such interest for an equivalent beneficial interest in a Regulation S
Global Note as provided in this Section 2.6(a)(ii). Upon receipt by the
Trustee of (1) instructions given in accordance with the Applicable
Procedures from an Agent Member directing the Trustee to credit or cause to
be credited a beneficial interest in the Regulation S Global Note in an
amount equal to the beneficial interest in the Rule 144A Global Note to be
exchanged, (2) a written order given in accordance with the Applicable
Procedures containing information regarding the participant account of the
Depositary and the Euroclear or Cedel account to be credited with such
increase and (3) a certificate in the form of Exhibit B attached hereto
---------
given by the owner of such beneficial interest stating that the transfer of
such interest has been made in compliance with the transfer restrictions
applicable to the Global Notes and pursuant to and in accordance with Rule
903 or Rule 904 of Regulation S, then the Trustee shall instruct the
Depositary to reduce or cause to be reduced the aggregate principal amount
at maturity of the applicable Rule 144A Global Note and to increase or
cause to be increased the aggregate principal amount at maturity of the
applicable Regulation S Global Note by the principal amount at maturity of
the beneficial interest in the Rule 144A Global Note to be exchanged, to
credit or cause to be credited to the account of the person specified in
such instructions a beneficial interest in the Regulation S Global Note
equal to the reduction in the aggregate principal amount at maturity of the
Rule 144A Global Note, and to debit or cause to be debited from the account
of the person making such exchange or transfer the beneficial interest in
the Rule 144A Global Note that is being exchanged or transferred.
(iii) Regulation S Global Note to Rule 144A Global Note. If, at any
time on or prior to the termination of the Restricted Period, an owner of a
beneficial interest in a Regulation S Global Note deposited with the
Depositary or with the Trustee as Custodian for the Depositary wishes to
transfer its interest in such Regulation S Global Note to a person who is
required or permitted to take delivery thereof in the form of an interest
in a Rule 144A Global Note, such owner shall, subject to the Applicable
Procedures, exchange or cause the exchange of such interest for an
equivalent beneficial interest in a Rule 144A Global Note as provided in
this Section 2.6(a)(iii). Upon receipt by the Trustee of (1) instructions
from Euroclear or Cedel, if applicable, and the Depositary, directing the
Trustee, as Registrar, to credit or cause to be credited a beneficial
interest in the Rule 144A Global Note equal to the beneficial interest in
the Regulation S Global Note to be exchanged, such instructions to contain
information regarding the participant account with the Depositary to be
credited with such increase, (2) a written order given in accordance with
the Applicable Procedures containing information regarding the participant
account of the Depositary and (3) a certificate in the form of Exhibit C
---------
attached hereto given by the owner of such beneficial interest and stating
(A) if the transfer is pursuant to Rule 144A, that the person transferring
such interest in a Regulation S Global Note reasonably believes that the
person acquiring such interest in a Rule 144A Global Note is a QIB and is
obtaining such beneficial interest in a transaction meeting the
requirements of Rule 144A and any applicable blue sky or securities laws of
any state of the United States, (B) that the transfer complies with the
requirements of Rule 144A under the Securities Act and any applicable blue
sky or securities laws of any state of the United States or (C) if the
transfer is pursuant to any other exemption from the registration
requirements of the Securities Act, that the transfer of such interest has
been made in compliance with the transfer restrictions applicable to the
Global Notes
14
<PAGE>
and pursuant to and in accordance with the requirements of the exemption
claimed, such statement to be supported by an Opinion of Counsel from the
transferee or the transferor in form reasonably acceptable to the Company
and to the Registrar, then the Trustee, as Registrar, shall instruct the
Depositary to reduce or cause to be reduced the Regulation S Global Note
and to increase or cause to be increased the aggregate principal amount at
maturity of the applicable Rule 144A Global Note by the principal amount at
maturity of the beneficial interest in the Regulation S Global Note to be
exchanged, and the Trustee, as Registrar, shall instruct the Depositary,
concurrently with such reduction, to credit or cause to be credited to the
account of the person specified in such instructions a beneficial interest
in the applicable Rule 144A Global Note equal to the reduction in the
aggregate principal amount at maturity of the Regulation S Global Note and
to debit or cause to be debited from the account of the person making such
transfer the beneficial interest in the Regulation S Global Note that is
being transferred.
(iv) Global Note to Certificated Note. If an owner of a beneficial
interest in a Global Note deposited with the Depositary or with the Trustee
as Custodian for the Depositary wishes at any time to transfer its interest
in such Global Note to a person who is required or permitted to take
delivery thereof in the form of a Certificated Note, such owner may,
subject to the Applicable Procedures, cause the exchange of such interest
for one or more Certificated Notes of any authorized denomination or
denominations and of the same aggregate principal amount at maturity. Upon
receipt by the Trustee of (1) instructions from Euroclear or Cedel, if
applicable, and the Depositary directing the Trustee, as Registrar, to
authenticate and deliver one or more Certificated Notes of the same
aggregate principal amount at maturity as the beneficial interest in the
Global Note to be exchanged, such instructions to contain the name or names
of the designated transferee or transferees, the authorized denomination or
denominations of the Certificated Notes to be so issued and appropriate
delivery instructions, (2) a certificate in the form of Exhibit D attached
---------
hereto given by the owner of such beneficial interest and stating that the
person transferring such interest in such Global Note reasonably believes
that the person acquiring the Certificated Notes for which such interest is
being exchanged is an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and is acquiring
such Certificated Notes having an aggregate principal amount of not less
than $100,000 for its own account or for one or more accounts as to which
the transferee exercises sole investment discretion, if requested by the
Trustee, (3) a certificate in the form of Exhibit E attached hereto given
---------
by the person acquiring the Certificated Notes for which such interest is
being exchanged, to the effect set forth therein, if requested by the
Trustee, and (4) such other certifications, legal opinions or other
information as the Company or the Trustee may reasonably require to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act, then Euroclear or Cedel, if applicable, or the Trustee, as Registrar,
shall instruct the Depositary to reduce or cause to be reduced such Global
Note by the aggregate principal amount at maturity of the beneficial
interest therein to be exchanged and to debit or cause to be debited from
the account of the person making such transfer the beneficial interest in
the Global Note that is being transferred, and concurrently with such
reduction and debit the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Certificated Notes of the same
aggregate principal amount at maturity in accordance with the instructions
referred to above.
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<PAGE>
(v) reserved.
(vi) Certificated Note to Certificated Note. If a holder of a
Certificated Note wishes at any time to transfer such Certificated Note to
a person who is required to take delivery thereof in the form of a
Certificated Note, such holder may, subject to the restrictions on transfer
set forth herein and in such Certificated Note, cause the exchange of such
Certificated Note for one or more Certificated Notes of any authorized
denomination or denominations and of the same aggregate principal amount at
maturity. Upon receipt by the Trustee, as Registrar, of (1) such
Certificated Note, duly endorsed as provided herein, (2) instructions from
such holder directing the Trustee, as Registrar, to authenticate and
deliver one or more Certificated Notes of the same aggregate principal
amount at maturity as the Certificated Note to be exchanged, such
instructions to contain the name or authorized denomination or
denominations of the Certificated Notes to be so issued and appropriate
delivery instructions, (3) such certificate having the applicable box on
the Assignment Form of the Certificated Note checked by such holder, (4) a
certificate in the form of Exhibit E attached hereto given by the person
---------
acquiring the Certificated Notes for which such interest is being
exchanged, to the effect set forth therein, if requested by the Trustee,
and (5) such other certifications, legal opinions or other information as
the Company may reasonably require to confirm that such transfer is being
made pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act, then the Trustee, as
Registrar, shall cancel or cause to be canceled such Certificated Note and
concurrently therewith, the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Certificated Notes of the same
aggregate principal amount at maturity, in accordance with the instructions
referred to above.
(vii) Certificated Note to Global Note. A Certificated Note may be
exchanged for a beneficial interest in a Global Note in accordance with the
provisions of this Section. Upon receipt by the Trustee, as Registrar, of
(1) such Certificated Note, duly endorsed as provided herein, (2)
instructions from such holder directing the Trustee, as Registrar, to
exchange such Certificated Note for a beneficial interest in the applicable
Global Note, such instructions to contain the name or authorized
denomination or denominations and appropriate delivery instructions, (3)
such certificate having the applicable box on the Assignment Form of the
Certificated Note checked by such holder, (4) a certificate in the form of
Exhibit E attached hereto given by the person acquiring such interest, to
the effect set forth therein, if requested by the Trustee, and (5) such
other certifications, legal opinions or other information as the Company
may reasonably require to confirm that such transfer is being made pursuant
to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act, then the Trustee, as Registrar, shall
cancel or cause to be canceled such Certificated Note and concurrently
therewith the Company shall credit the applicable Global Note with the same
aggregate principal amount at maturity, in accordance with the instructions
referred to above.
(viii) Other Exchanges. In the event that a beneficial interest in a
Global Note is exchanged for Notes in definitive registered form pursuant
to Section 2.10, prior to the effectiveness of a Shelf Registration
Statement with respect to such Notes, such Notes may be exchanged only in
accordance with such procedures as are substantially consistent with the
16
<PAGE>
provisions of clauses (ii) through (iv) above (including the certification
requirements, if any, intended to ensure that such transfers comply with
Rule 144A or Regulation S under the Securities Act, as the case may be) and
such other procedures as may from time to time be adopted by the Company
and furnished in an Officers' Certificate to the Trustee.
(ix) Restricted Period. Prior to the termination of the Restricted
Period with respect to the issuance of the Notes, transfers of interests in
the Regulation S Global Note to "U.S. persons" (as defined in Regulation S
under the Securities Act) shall be limited to transfers made pursuant to
the provisions of Section 2.6(a)(iii). The Company shall provide an
Officers' Certificate to advise the Trustee as to the termination of the
restricted period and the Trustee may rely conclusively thereon.
(b) Except in connection with a Shelf Registration Statement contemplated
by and in accordance with the terms of the Registration Rights Agreement, if
Notes are issued upon the transfer, exchange or replacement of Notes bearing the
Restricted Securities Legend set forth in Exhibit A hereto, or if a request is
---------
made to remove such Restricted Securities Legend on Notes, the Notes so issued
shall bear the Restricted Securities Legend, or the Restricted Securities Legend
shall not be removed, as the case may be, unless there is delivered to the
Company such satisfactory evidence, which may include an opinion of counsel, as
may be reasonably required by the Company or the Trustee, that neither the
legend nor the restrictions on transfer set forth therein are required to ensure
that transfers thereof comply with the provisions of Rule 144A, Rule 144 or
Regulation S under the Securities Act or, with respect to Certificated Notes,
that such Notes are not "restricted" within the meaning of Rule 144 under the
Securities Act. Upon provision of such satisfactory evidence, the Trustee, at
the direction of the Company, shall authenticate and deliver Notes that do not
bear the legend.
(c) Neither the Company nor the Trustee shall have any responsibility for
any actions taken or not taken by the Depositary.
Section 2.7 Replacement Notes.
-----------------
If the holder of a Note claims that the Note has been lost, destroyed or
wrongfully taken or if such Note is mutilated and is surrendered to the Trustee,
the Company shall issue and the Trustee shall authenticate a replacement Note if
the Trustee's and the Company's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be sufficient in the judgment of
both to protect the Company, the Trustee, any Agent or any authenticating agent
from any loss which any of them may suffer if a Note is replaced. The Company
may charge the relevant holder for its expenses in replacing a Note.
In case any such mutilated, destroyed, lost or stolen Note has become or is
about to become due and payable, or is about to be purchased by the Company
pursuant to Article 3 hereof, the Company in its discretion may, instead of
issuing a new Note, pay or purchase such Note, as the case may be.
Every replacement Note is an additional obligation of the Company.
17
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Section 2.8 Outstanding Notes.
-----------------
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
and those described in this Section as not outstanding.
If a Note is replaced, paid or purchased in accordance with the terms of
this Indenture, it ceases to be outstanding unless the Trustee receives proof
satisfactory to it that the replaced, paid or purchased Note is held by a bona
fide purchaser.
If Notes are considered paid under Section 4.1 hereof or converted under
Article 5 hereof, they cease to be outstanding and interest on them ceases to
accrue.
Subject to Section 2.9 hereof, a Note does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Note.
Section 2.9 Treasury Securities.
-------------------
In determining whether the Noteholders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or an Affiliate of the Company shall be considered as though they are
not outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes identified to the Trustee as so owned shall be so disregarded.
Section 2.10 Temporary Notes.
---------------
(a) Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee, upon receipt of a written order of the Company as set forth in
Section 2.2, shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes. Without unreasonable delay,
the Company shall prepare and the Trustee shall authenticate definitive Notes in
exchange for temporary Notes. Until so exchanged, the temporary Notes shall in
all respects be entitled to the same benefits under this Indenture as definitive
Notes.
(b) A Global Note deposited with the Depositary or with the Trustee as
Custodian for the Depositary pursuant to Section 2.1 shall be transferred to the
beneficial owners thereof in the form of Certificated Notes only if such
transfer complies with Section 2.6 and (i) the Depositary notifies the Company
that it is unwilling or unable to continue as Depositary for such Global Note or
if at any time such Depositary ceases to be a "clearing agency" registered under
the Exchange Act and a successor depositary is not appointed by the Company
within 90 days of such notice, or (ii) the Company, at its option, notifies the
Trustee in writing that it elects to cause the issuance of Notes in the form of
Certificated Notes under the Indenture, then upon surrender by the Global Note
holder of its Global Notes, Notes in certificated form will be issued to each
person that the Global Note holder and the Depositary identify as being a
beneficial owner of the related Notes.
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<PAGE>
(c) Any Global Note that is transferable to the beneficial owners thereof
in the form of Certificated Notes pursuant to this Section 2.10 shall be
surrendered by the Depositary to the Trustee to be so transferred, in whole or
from time to time in part, without charge, and the Trustee shall authenticate
and deliver, upon such transfer of each portion of such Global Note, an equal
aggregate principal amount at maturity of Notes of authorized denominations in
the form of Certificated Notes. Any portion of a Global Note transferred
pursuant to this Section shall be executed, authenticated and delivered only in
denominations of $1,000 and any integral multiple thereof and registered in such
names as the Depositary shall direct. Any Note in the form of Certificated
Notes delivered in exchange for an interest in the Global Note shall, except as
otherwise provided by Section 2.6(b), bear the Restricted Securities Legend set
forth in Exhibit A hereto.
(d) Subject to the provisions of Section 2.10(c), the registered holder of
a Global Note may grant proxies and otherwise authorize any person, including
Agent Members and persons that may hold interests through Agent Members, to take
any action which a holder is entitled to take under this Indenture or the Notes.
(e) In the event of the occurrence of either of the events specified in
Section 2.10(b), the Company will promptly make available to the Trustee a
reasonable supply of Certificated Notes in definitive, fully registered form
without interest coupons.
Section 2.11 Cancellation.
------------
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar, Paying Agent and Conversion Agent shall forward to the Trustee
any Notes surrendered to them for registration of transfer, redemption,
conversion, exchange or payment. The Trustee shall promptly cancel all Notes
surrendered for registration of transfer, redemption, conversion, exchange,
payment, replacement or cancellation and shall dispose of canceled Notes in
accordance with its standard procedures or as the Company directs. The Company
may not issue new Notes to replace Notes that it has paid or redeemed or that
have been delivered to the Trustee for cancellation or that any holder has
converted.
Section 2.12 Defaulted Interest.
------------------
If the Company fails to make a payment of interest on the Notes, it shall
pay such defaulted interest plus any interest payable on the defaulted interest,
in any lawful manner. It may pay such defaulted interest, plus any such
interest payable on it, to the persons who are holders of Notes on a subsequent
special record date. The Company shall fix any such record date and payment
date. At least 15 days before any such record date, the Company shall mail or
cause to be mailed to Noteholders a notice that states such record date, payment
date and amount of such interest to be paid.
19
<PAGE>
Section 2.13 CUSIP Numbers.
-------------
The Company in issuing the Notes may use one or more "CUSIP" numbers, and
if so, such CUSIP number(s) shall be included in notices of redemption,
repurchase or exchange as a convenience to holders of Notes; provided, however,
-------- -------
that any such notice may state that no representation is made as to the
correctness or accuracy of any CUSIP number printed in the notice or on the
Notes and that reliance may be placed only on the other identification numbers
printed on the Notes. The Company will promptly notify the Trustee of any
change in the CUSIP number(s).
ARTICLE 3
REDEMPTION
----------
Section 3.1 Notices to Trustee.
------------------
If the Company elects to redeem Notes pursuant to the optional redemption
provision of the Notes (Section 5 of the Notes) and Section 3.7 hereof, it shall
furnish to the Trustee at least 35 days but not more than 60 days before the
redemption date (unless a shorter notice period shall be satisfactory to the
Trustee) an Officers' Certificate setting forth (i) the Section of this
Indenture pursuant to which the redemption shall occur, (ii) the redemption
date, (iii) the principal amount of Notes (if less than all) to be redeemed and
(iv) the redemption price.
Section 3.2 Selection of Notes to Be Redeemed.
---------------------------------
If less than all the Notes are to be redeemed, the Trustee shall select the
Notes to be redeemed pro rata, by lot or such other method that the Trustee
considers fair and appropriate (as long as such method complies with the
requirements of the principal national securities exchange or national market
system on which the Notes are listed, if any). The Trustee shall make the
selection not less than 30 days and not more than 60 days before the redemption
date from Notes outstanding and not previously called for redemption. The
Trustee may select for redemption portions of the principal of Notes that have
denominations larger than $1,000. Notes and portions thereof that the Trustee
selects shall be in amounts of $1,000 or integral multiples of $1,000.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption. The Trustee shall notify the
Company promptly upon selection by the Trustee of the Notes or portions of Notes
to be called for redemption.
If any Note selected for partial redemption is converted in part after such
selection, the converted portion of such Note shall be deemed (so far as may be)
to be the portion to be selected for redemption. The Notes (or portions thereof)
so selected shall be deemed duly selected for redemption for all purposes
hereof, notwithstanding that any such Note is converted in whole or in part
before the mailing of the notice of redemption. Upon any redemption of less
than all the Notes, the Company and the Trustee may treat as outstanding any
Notes surrendered for conversion during the period 15 days next preceding the
mailing of a notice of redemption and need not treat as outstanding any Note
authenticated and delivered during such period in exchange for the unconverted
portion of any Note converted in part during such period.
20
<PAGE>
Section 3.3 Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a redemption date, the
Company shall mail a notice of redemption to each holder whose Notes are to be
redeemed at such holder's registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) the amount of accrued interest to be paid to, but excluding, the
redemption date;
(d) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date, upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion will be issued;
(e) the name and address of the Paying Agent;
(f) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(g) that interest on Notes called for redemption ceases to accrue on and
after the redemption date (unless the Company defaults in the payment of the
redemption price);
(h) the section of the Notes and/or Section of this Indenture pursuant to
which the Notes called for redemption are being redeemed;
(i) the aggregate principal amount of Notes (if less than all) that are
being redeemed;
(j) the CUSIP number(s), if any, of the Notes (provided that the disclaimer
permitted by Section 2.13 may be made); and
(k) that Notes called for redemption may be converted at any time prior to
the close of business on the last Business Day immediately preceding the
redemption date and if not converted prior to the close of business on such
date, the right of conversion will be lost.
Such notice shall also state the current Conversion Price and the date on
which the right to convert such Notes or portions thereof into Common Stock of
the Company will expire.
At the Company's request, the Trustee shall give notice of redemption in
the Company's name and at the Company's expense.
21
<PAGE>
Section 3.4 Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed, Notes called for redemption become due
and payable by the Company on the redemption date at the price set forth in the
Note.
Section 3.5 Deposit of Redemption Price.
---------------------------
On to prior to the redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money in immediately available funds sufficient
to pay the redemption price of and accrued interest on all Notes to be redeemed
on that date unless theretofore converted into Common Stock pursuant to the
provisions hereof; provided if such payment is made on the redemption date it
--------
must be received by the Trustee or Paying Agent, as the case may be, by 10:00
a.m. New York City time, on such date. Promptly after the redemption date, the
Trustee or the Paying Agent shall return to the Company any money not required
for that purpose.
On and after the redemption date, unless the Company shall default in the
payment of the redemption price, interest will cease to accrue on the principal
amount of the Notes or portions thereof called for redemption and for which
funds have been set apart for payment. In the case of Notes or portions thereof
redeemed on a redemption date which is also an Interest Payment Date, the
interest payment due on such date shall be paid to the person in whose name the
Note is registered at the close of business on the relevant Record Date.
Section 3.6 Notes Redeemed in Part.
----------------------
Upon surrender of a Note that is redeemed in part, the Company shall issue
and the Trustee shall authenticate for the holder at the sole expense of the
Company a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
Section 3.7 Optional Redemption.
-------------------
The Notes are not redeemable by the Company prior to November 5, 2000. On
or after November 5, 2000, the Notes are redeemable upon 30 days' notice at the
option of the Company, in whole, or from time to time, in part, at the
redemption prices set forth below (expressed as percentages of the principal
amount), in each case together with accrued and unpaid interest to, but
excluding, the date fixed for redemption.
If redeemed during the 12-month period beginning November 1 (November 5,
2000 through October 31, 2001 in the case of the first such period):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2000............................................................. 101.70%
2001............................................................. 100.85
</TABLE>
22
<PAGE>
and 100% on November 1, 2002; provided any semi-annual payment of interest
--------
becoming due on the date fixed for redemption shall be payable to the holders
of record on the relevant Record Date of the Notes being redeemed.
Notwithstanding the foregoing, the Company may not redeem any Notes unless all
accrued and unpaid interest has been paid on all outstanding Notes for all
interest periods terminating on or prior to the last Interest Payment Date
before the date of redemption. Any redemption pursuant to this Section 3.7
shall be made pursuant to the provisions of Section 3.1 through 3.6 hereof.
Section 3.8 Conversion Arrangement on Call for Redemption.
---------------------------------------------
In connection with any redemption of Notes, the Company may arrange for the
purchase and conversion of any Notes by an agreement with one or more investment
bankers or other purchasers to purchase such Notes by paying to the Trustee in
trust for the holders, on or before the date fixed for redemption, an amount not
less than the applicable redemption price, together with interest accrued to
(but excluding) the date fixed for redemption, of such Notes. Notwithstanding
anything to the contrary contained in this Article 3, the obligation of the
Company to pay the redemption price of such Notes, together with interest
accrued to (but excluding) the date fixed for redemption, shall be deemed to be
satisfied and discharged to the extent such amount is so paid by such
purchasers. If such an agreement is entered into, a copy of which will be filed
with the Trustee prior to the date fixed for redemption, any Notes not duly
surrendered for conversion by the holders hereof may, at the option of the
Company, be deemed, to the fullest extent permitted by law, acquired by such
purchasers from such holders and (notwithstanding anything to the contrary
contained in Article 5) surrendered by such purchasers for conversion, all as of
immediately prior to the close of business on the date fixed for redemption (and
the right to convert any such Notes shall be extended through such time),
subject to payment of the above amount as aforesaid. At the direction of the
Company, the Trustee shall hold and dispose of any such amount paid to it in the
same manner as it would monies deposited with it by the Company for the
redemption of Notes. Without the Trustee's prior written consent, no
arrangement between the Company and such purchasers for the purchase and
conversion of any Notes shall increase or otherwise affect any of the powers,
duties, responsibilities or obligations of the Trustee as set forth in this
Indenture.
ARTICLE 4
COVENANTS
---------
Section 4.1 Payment of Notes.
----------------
The Company shall pay the principal of, interest and Liquidated Damages (if
any) on, the Notes on the dates and in the manner provided in the Notes.
Principal and interest and Liquidated Damages, if any, shall be considered paid
on the date due if the Paying Agent (other than the Company or a Subsidiary of
the Company) holds as of 10:00 a.m. New York City time on that date money
designated for and sufficient to pay all principal and interest and Liquidated
Damages, if any, then due unless such money is paid to holders of Senior
Indebtedness pursuant to Article 6. To the extent lawful, the Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law, to the extent allowed under such Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace period) at the
rate borne by the Notes, compounded semiannually.
23
<PAGE>
Section 4.2 Maintenance of Office.
---------------------
The Company shall maintain in the Borough of Manhattan, The City of New
York, an office or agency (which may be an office or agency of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served, which office or agency shall initially be the office of State Street
Bank and Trust Company, N.A., an Affiliate of the Trustee, located at 61
Broadway, Concourse Level, Corporate Trust Window, New York, New York 10006.
The Company shall give prompt written notice to the Trustee of the location, and
any change in the location, of 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 Administration
Office of the Trustee specified in Section 12.10.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
-------- -------
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York, for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
Section 4.3 SEC Reports.
-----------
(a) Whether or not required by the rules and regulations of the SEC and
within the applicable time periods that are (or would be) prescribed thereby, so
long as any Notes are outstanding, the Company shall furnish to the Trustee and
all holders if requested by the Trustee or such holders (i) all quarterly and
annual financial information that would be required to be contained in a filing
with the SEC on Forms 10-Q and 10-K if the Company were required to file such
forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, an
audit report thereon by the Company's certified independent accountants and (ii)
all current reports that would be required to be filed with the SEC on Form 8-K
if the Company were required to file such reports. In addition, whether or not
required by the rules and regulations of the SEC, the Company shall file a copy
of all such information with the SEC for public availability (unless the SEC
will not accept such a filing) and shall promptly make such information
available to all prospective investors and Noteholders who request it in
writing. The Company shall at all times comply with TIA Section 314(a).
(b) For so long as any Transfer Restricted Securities (as defined in the
Registration Rights Agreement) remain outstanding, the Company shall furnish to
all holders or beneficial holders and prospective purchasers of the Notes
designated by the holders of Transfer Restricted Securities, promptly upon their
written request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
24
<PAGE>
Section 4.4 Compliance Certificate.
----------------------
The Company shall deliver to the Trustee, within 120 days after the end of
each fiscal year of the Company, an Officers' Certificate stating that a review
of the activities of the Company and its subsidiaries during the preceding
fiscal year has been made under the supervision of the signing Officers with a
view to determining whether the Company has kept, observed, performed and
fulfilled all of its obligations under, and complied with the covenants and
conditions contained in, this Indenture, and further stating, as to each such
Officer signing such certificate, that to the best of his knowledge the Company
has kept, observed, performed and fulfilled each and every covenant, and
complied with the covenants and conditions contained in this Indenture and is
not in default in the performance or observance of any of the terms, provisions
and conditions hereof (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which such Officer may have
knowledge) and that to the best of such Officer's knowledge no event has
occurred and remains in existence by reason of which payments on account of the
principal of, interest and Liquidated Damages (if any) on, the Notes are
prohibited.
One of the Officers signing such Officers' Certificate shall be either the
Company's principal executive officer, principal financial officer or principal
accounting officer.
The Company will, so long as any of the Notes are outstanding, deliver to
the Trustee, forthwith upon becoming aware of:
(a) any Default or Event of Default; or
(b) any event of default under any other mortgage, indenture or instrument
of the Company or any of its Significant Subsidiaries
an Officers' Certificate specifying such Default, Event of Default or other
default.
Section 4.5 Corporate Existence.
-------------------
Subject to Article 7 hereof, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate, partnership or other existence of each Significant
Subsidiary of the Company in accordance with the respective organizational
documents of each Significant Subsidiary and the rights (charter and statutory),
licenses and franchises of the Company and its Significant Subsidiaries;
provided, however, that the Company shall not be required to preserve any such
- -------- -------
right, license or franchise, or the corporate, partnership or other existence of
any subsidiary, if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
its subsidiaries taken as a whole and that the loss thereof is not adverse in
any material respect to the Noteholders.
25
<PAGE>
Section 4.6 Taxes.
-----
The Company shall, and shall cause each of its subsidiaries to, pay prior
to delinquency all taxes, assessments and governmental levies, except as
contested in good faith and by appropriate proceedings and except when the
failure to make such payment will not have a material adverse effect on the
Company and its subsidiaries taken as a whole or be adverse in any material
respect to the Noteholders.
Section 4.7 Change of Control.
-----------------
(a) Upon the occurrence of a Change of Control, each holder of Notes shall
have the right, in accordance with this Section 4.7, to require the Company to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
such holder's Notes (the "Change of Control Offer") at a cash purchase price
equal to 100% of the principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to, but excluding, the Change of Control
Payment Date (the "Change of Control Payment").
(b) The Change of Control Offer shall remain open for a period specified by
the Company which shall be no less than 20 Business Days following the delivery
of a Change of Control Notice (as defined below) (the "Commencement Date"),
except to the extent that a longer period is required by applicable law (the
"Tender Period"). The Change of Control Payment Date and the Tender Period may
be extended to the extent required by law; however, if so extended, it shall
constitute an Event of Default if the Change of Control Payment Date does not
occur within 90 days of the Change of Control. Upon the expiration of the
Tender Period (the "Change of Control Payment Date"), the Company shall purchase
the principal amount of Notes required to be purchased pursuant to this Section
4.7 (the "Offer Amount").
(c) If the Change of Control Payment Date is on or after a Record Date and
on or before the related Interest Payment Date, any accrued interest will be
paid to the person in whose name a Note is registered at the close of business
on such Record Date, and no additional interest will be payable to Noteholders
who tender Notes pursuant to the Change of Control Offer.
(d) The Company shall provide the Trustee with notice of the Change of
Control Offer at least 10 days before the Commencement Date.
(e) Within 30 days following any Change of Control, the Company or the
Trustee (at the expense of the Company) shall send, by first-class mail, a
notice (the "Change of Control Notice") to each of the Noteholders, which shall
govern the terms of the Change of Control Offer and shall state:
(i) that the Change of Control Offer is being made pursuant to this
Section 4.7 hereof and the Tender Period;
(ii) the Offer Amount, the Change of Control Payment (as determined
in accordance with this Section 4.7), the Change of Control Payment Date,
and that all Notes tendered will be accepted for payment;
26
<PAGE>
(iii) that Noteholders electing to have a Note or portion thereof
purchased pursuant to any Change of Control Offer will be required to
surrender the Note, with the form entitled "Option of Noteholder To Elect
Purchase" on the reverse of the Note completed, to the Company, a
depositary, if appointed by the Company, or a Paying Agent at the address
specified in the notice prior to the close of business on the Change of
Control Payment Date;
(iv) that Noteholders will be entitled to withdraw their election if
the Company, depositary or Paying Agent, as the case may be, receives, not
later than the close of business on the Business Day preceding the Change
of Control Payment Date, or such longer period as may be required by law, a
letter or a telegram, telex, facsimile transmission (receipt of which is
confirmed and promptly followed by a letter) setting forth the name of the
Noteholder, the principal amount of the Note or portion thereof the
Noteholder delivered for purchase and a statement that such Noteholder is
withdrawing his election to have the Note or portion thereof purchased;
(v) that any Note or portion thereof not tendered or accepted for
payment will continue to accrue interest;
(vi) that, unless the Company defaults in the payment of the Change
of Control Payment, any Note or portion thereof accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date; and
(vii) that Noteholders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, which unpurchased portion must be equal
to $1,000 in principal amount or an integral multiple thereof.
The Change of Control Notice shall contain all instructions and materials
necessary to enable such Noteholders to tender Notes pursuant to the Change of
Control Offer.
(f) On or prior to the Change of Control Payment Date, the Company shall
irrevocably deposit with the Trustee or a Paying Agent in immediately available
funds an amount equal to the Offer Amount to be held for payment in accordance
with the terms of this Section; provided if such payment is made on the Change
--------
of Control Payment Date it must be received by the Trustee or Paying Agent, as
the case may be by 10:00 a.m. New York City time, on such date. On the Change
of Control Payment Date, the Company shall, to the extent lawful, (i) accept for
payment the Notes or portions thereof tendered pursuant to the Change of Control
Offer, (ii) deliver or cause the depositary or Paying Agent to deliver to the
Trustee Notes so accepted and (iii) deliver to the Trustee an Officers'
Certificate stating such Notes or portions thereof have been accepted for
payment by the Company in accordance with the terms of this Section 4.7. The
depositary, the Paying Agent or the Company, as the case may be, shall promptly
(but in any case not later than 10 calendar days after the Change of Control
Payment Date) mail or deliver to each tendering Noteholder an amount equal to
the purchase price of the Notes tendered by such Noteholder, and the Trustee
shall promptly authenticate and mail or deliver to such Noteholders a new Note
equal in principal amount to any unpurchased portion of the Note surrendered.
Any Notes not so accepted shall be promptly mailed or delivered by or on behalf
of the Company to the holder thereof.
27
<PAGE>
The Company will publicly announce in a newspaper of general circulation the
results of the Change of Control Offer on, or as soon as practicable after, the
Change of Control Payment Date.
(g) The Change of Control Offer shall be made by the Company in compliance
with all applicable provisions of the Exchange Act, and all applicable tender
offer rules promulgated thereunder.
Section 4.8 Stay, Extension and Usury Laws.
------------------------------
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture, including, without limitation, the payment
of the Notes; and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law has been enacted.
ARTICLE 5
CONVERSION
----------
Section 5.1 Conversion Privilege.
--------------------
Subject to and upon compliance with the provisions of this Article 5, the
holder of any Note shall have the right, at his option, at any time on or prior
to the close of business on the Maturity Date (or, if such Note or portion
thereof is called for redemption pursuant to Article 3, then in respect of such
Note or portion thereof, on or prior to the close of business on the Business
Day immediately preceding the date fixed for redemption, unless the Company
shall default in payment due upon redemption thereof in which case such
conversion right will terminate at the close of business on the date such
default is cured), to convert the principal amount of any such Note, or any
portion of such principal amount which is $1,000 or an integral multiple
thereof, into that number of fully paid and nonassessable whole shares of Common
Stock obtained by dividing the principal amount of the Note or portion thereof
to be converted by the Conversion Price in effect at such time and by surrender
of the Note so to be converted in whole or in part, such surrender to be made in
the manner provided in Section 5.2. A Note in respect of which a holder has
exercised its option to require repurchase upon a Change of Control pursuant to
Section 4.7 may be converted only if such holder withdraws such election to
exercise in accordance with Section 4.7. In case a holder thereof exercises its
right to require the Company to repurchase the Note, such conversion right in
respect of the Note, or portion thereof, shall expire at the close of business
on the Business Day prior to the Change of Control Payment Date unless the
Company defaults in making the payment due upon repurchase.
28
<PAGE>
Section 5.2 Manner of Exercise of Conversion Privilege.
------------------------------------------
In order to exercise the conversion privilege, the holder of any Note to be
converted in whole or in part shall surrender such Note, duly endorsed or
assigned to the Company or in blank, at any of the offices or agencies to be
maintained for such purpose by the Company pursuant to Section 4.2, accompanied
by the funds, if any, required by the third from the last paragraph of this
Section, and shall give irrevocable written notice of conversion in the form
provided on the Notes (or such other notice as is acceptable to the Company) to
the Company (a "Conversion Notice") at such office or agency that the holder
elects to convert such Note or the portion thereof specified in said notice.
Such Conversion Notice shall also state the name or names, together with the
address or addresses, in which the certificate or certificates for shares of
Common Stock which shall be issuable in such conversion shall be issued. Each
Note surrendered for conversion shall, unless the shares issuable on conversion
are to be issued in the same name as the name in which such Note is registered,
be accompanied by instruments of transfer, in form satisfactory to the Company,
duly executed by the holder or his duly authorized attorney and in amount
sufficient to pay any transfer or similar tax. As promptly as practicable after
the surrender of such Note and the receipt of such Conversion Notice,
instruments of transfer and funds, if any, as aforesaid, the Company shall issue
and shall deliver at such office or agency to such holder, or on his written
order, a certificate or certificates for the number of whole shares of Common
Stock issuable upon the conversion of such Note or portion thereof in accordance
with the provisions of this Article 5 and a check or cash in respect of any
fractional interest in a share of Common Stock arising upon such conversion, as
provided in Section 5.3. In case any Note of a denomination greater than $1,000
shall be surrendered for partial conversion, the Company shall execute and the
Trustee shall register or cause to be registered and shall authenticate and
deliver to or upon the order of the holder of the Note so surrendered at the
expense of the Company, a new Note or Notes in authorized denominations in an
aggregate principal amount equal to the unconverted portion of the surrendered
Note.
Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date on which such Note shall have been surrendered
and such Conversion Notice (and any applicable instruments of transfer and any
required funds) received by the Company as aforesaid, and the Person or Persons
in whose name or names any certificate or certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares represented thereby at such time on
such date and such conversion shall be at the Conversion Price in effect at such
time on such date, unless the stock transfer books of the Company shall be
closed on that date, in which event such Person or Persons shall be deemed to
have become such holder or holders of record at the close of business on the
next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such Note shall have been surrendered and such Conversion Notice received by the
Company.
Any Note or portion thereof surrendered for conversion after the close of
business on a Record Date for payment of interest and prior to the opening of
business on the next succeeding Interest Payment Date shall be accompanied by
payment, in funds acceptable to the Company, of an amount equal to the interest
thereon that is to be paid on such Interest Payment Date on the principal amount
being converted (unless any such Note or portion thereof being converted shall
have been called for redemption on a redemption date occurring between the close
of business on such Record Date and the opening of
29
<PAGE>
business on such Interest Payment Date, in which case no such payment shall be
required); provided, however, that no such payment need be made if there shall
-------- -------
exist at the time of conversion a default in the payment of interest on the
Notes. An amount equal to such payment shall be paid by the Company on such
Interest Payment Date to the holder of such Notes at the close of business on
such Record Date; provided, however, that, if the Company shall default in the
-------- -------
payment of interest on such Interest Payment Date, such amount shall be paid to
the Person who made such required payment. Except as provided for above in this
Section, no payments or adjustments shall be made upon conversion on account of
accrued interest on the Notes or for any dividends or distributions on any
shares of Common Stock delivered upon the conversion of such Notes as provided
in this Article.
In order to exercise the conversion privilege with respect to any interest
in a Global Note, the beneficial holder must complete the appropriate
instruction form for conversion pursuant to the Depositary's book-entry
conversion program and follow the other procedures set forth in such program.
Upon the conversion of a Global Note, the Trustee, or the Custodian at the
direction of the Trustee, shall make a notation on such Global Note as to the
reduction in the principal amount represented thereby.
All shares of Common Stock delivered upon such conversion of Notes that
bear the Restricted Securities Legend shall, if required by the Company upon
written notice to the Trustee, bear restrictive legends substantially in the
form of the legends required to be set forth on the Notes hereunder and shall be
subject to the restrictions on transfer provided in such Restricted Securities
Legend. Neither the Trustee nor any Conversion Agent shall have any
responsibility for the inclusion or content of any such Restricted Securities
Legends on such Common Stock; provided, however, that the Trustee or any
-------- -------
Conversion Agent shall have provided, to the Company or to the Company's
transfer agent for such Common Stock, prior to or concurrently with a request to
the Company to deliver such Common Stock, written notice that the Notes
delivered for conversion are subject to restrictions on transfer.
Section 5.3 Cash Payments in Lieu of Fractional Shares.
------------------------------------------
No fractional shares or scrip representing fractions of shares of Common
Stock shall be issued upon conversion of the Notes. If more than one Note shall
be surrendered for conversion at one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on the
basis of the aggregate principal amount of the Notes, or specified portions
thereof to be converted, so surrendered. Instead of any fractional interest in
a share of Common Stock which would otherwise be deliverable upon the conversion
of any Note or Notes, the Company shall pay to the holder of such Note an amount
in cash (computed to the nearest cent) equal to the Daily Market Price thereof
at the close of business on the Business Day next preceding the day of
conversion multiplied by the fractional interest (expressed as a percentage)
that otherwise would have been deliverable to such holder upon such conversion
of the Notes.
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Section 5.4 Adjustment of Conversion Price.
------------------------------
The Conversion Price shall be as specified in Section 9 of the form of
Note, subject to adjustment as provided below. The Conversion Price shall be
adjusted from time to time by the Company as follows:
(a) In case the Company, after the date of this Indenture, shall (i) pay a
dividend or make a distribution on its Common Stock in shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a greater number of
shares, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares, or (iv) issue by reclassification of its Common Stock any
shares of Capital Stock of the Company, the Conversion Price in effect
immediately prior to such action shall be adjusted so that the holder of any
Note thereafter surrendered for conversion shall be entitled to receive the
number of shares of Common Stock or other Capital Stock of the Company that it
would have owned or been entitled to receive immediately following such action
had such Note been converted immediately prior to the occurrence of such event.
An adjustment made pursuant to this subsection (a) shall become effective
immediately after the record date, in the case of a dividend or distribution, or
immediately after the effective date, in the case of a subdivision, combination
or reclassification. If, as a result of an adjustment made pursuant to this
subsection (a), the holder of any Note thereafter surrendered for conversion
shall become entitled to receive shares of two or more classes of Capital Stock
or shares of Common Stock and other Capital Stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described in a
statement filed by the Company with the Trustee and with any Conversion Agent as
soon as practicable) shall determine the allocation of the adjusted Conversion
Price between or among shares of such classes of Capital Stock or shares of
Common Stock and other Capital Stock.
(b) In case the Company, after the date of this Indenture, shall issue
rights, warrants or options to all or substantially all holders of its
outstanding shares of Common Stock entitling them (for a period expiring within
45 days after the date fixed for determination for shareholders entitled to
receive such rights, warrants or options) to subscribe for or purchase shares of
Common Stock (or securities convertible into Common Stock) at a price per share
less than the current market price per share (as determined pursuant to
subsection (h) of this Section 5.4) of the Common Stock, the Conversion Price in
effect immediately prior thereto shall be adjusted so that it shall equal the
price determined by multiplying the Conversion Price in effect immediately prior
to the date of issuance of such rights, warrants or options by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding on
the date of issuance of such rights, warrants or options (immediately prior to
such issuance), plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so offered for
subscription or purchase (or the aggregate conversion price of the convertible
securities so offered for subscription or purchase) would purchase at such
current market price, and of which the denominator shall be the number of shares
of Common Stock outstanding on the date of issuance of such rights, warrants or
options (immediately prior to such issuance) plus the number of additional
shares of Common Stock so offered for subscription or purchase (or into which
the convertible securities so offered for subscription or purchase are
convertible). Such adjustment shall be made successively whenever any such
rights, warrants or options are issued, and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such rights, warrants or options. In determining whether any rights, warrants
or options entitle the holders to
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subscribe for or purchase shares of Common Stock (or securities convertible into
Common Stock) at less than such current market price, and in determining the
aggregate offering price of such shares of Common Stock (or conversion price of
such convertible securities), there shall be taken into account any
consideration received by the Company for such rights, warrants or options (and
for such convertible securities), the value of such consideration, if other than
cash, to be determined by the Board of Directors (whose determination shall be
conclusive and shall be described in a certificate filed with the Trustee and
with any Conversion Agent by the Company as soon as practicable). If at the end
of the period during which such warrants, rights or options are exercisable not
all such warrants, rights or options shall have been exercised, the adjusted
Conversion Price shall be immediately readjusted to what it would have been
based on the number of additional shares of Common Stock actually issued (or the
number of shares of Common Stock issuable upon conversion of convertible
securities actually issued).
(c) In case the Company, after the date of this Indenture, shall distribute
to all or substantially all holders of its outstanding Common Stock any shares
of Capital Stock (other than Common Stock), evidences of its indebtedness or
assets (excluding dividends payable exclusively in cash and any issuance of
Capital Stock pursuant to reclassifications for which adjustment is required
pursuant to subsection (a) of this Section 5.4) or rights, warrants or options
to subscribe for or purchase Capital Stock of the Company (excluding those
referred to in subsection (b) of this Section 5.4) entitling them to subscribe
for or purchase Capital Stock at a price per share less than the fair market
value of such Capital Stock (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution), then in
each such case the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to the record date of such distribution by a fraction of which
the numerator shall be the current market price per share (as determined
pursuant to subsection (h) of this Section 5.4) of the Common Stock less the
fair market value on such record date (as determined by the Board of Directors,
whose determination shall be conclusive and shall be described in a certificate
filed with the Trustee and with any Conversion Agent by the Company as soon as
practicable) of the portion of the Capital Stock or the evidences of
indebtedness or the assets so distributed to the holder of one share of Common
Stock or of such subscription rights, warrants or options applicable to one
share of Common Stock and of which the denominator shall be such current market
price per share of Common Stock. Such adjustment shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such distribution. If at the end of the period during which
warrants, rights or options described in this subsection (c) are exercisable not
all such warrants, rights or options shall have been exercised, the adjusted
Conversion Price shall be immediately readjusted to what it would have been
based on the number of warrants, rights or options actually exercised.
Notwithstanding the foregoing, in the event that the fair market value of the
Capital Stock, evidences of indebtedness, assets, subscription rights, warrants
or options so distributed exceeds the current market price per share of Common
Stock, or such current market price exceeds such fair market value by less than
$0.10 per share, the Company may, in lieu of making an adjustment in the
Conversion Price pursuant to this subsection (c), make adequate provision so
that each Noteholder who converts such Note after the record date for such
distribution will be entitled to receive upon such conversion, in addition to
shares of Common Stock, the amount of Capital Stock, evidences of indebtedness,
assets, subscription rights, warrants or options such Noteholder would have
received had such Note been converted immediately prior to the record date for
such distribution.
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(d) Notwithstanding anything in subsection (b) or (c) of this Section 5.4
to the contrary, with respect to any rights, warrants or options covered by
subsection (b) or (c) of this Section 5.4, if such rights, warrants or options
are only exercisable upon the occurrence of certain triggering events, then for
purposes of this Section 5.4 such rights, warrants or options shall not be
deemed issued or distributed, and any adjustment to the Conversion Price
required by subsection (b) or (c) of this Section 5.4 shall not be made until
such triggering events occur and such rights, warrants or options become
exercisable.
(e) In case the Company, after the date of this Indenture, shall (i) issue
shares of its Common Stock (excluding those issuances referred to in subsection
(a) or (b) to this Section 5.4) at a price per share less than the current
market price per share (as determined pursuant to subsection (h) of this Section
5.4) on the date the Company fixes the offering price of such additional shares
or (ii) issue any options, warrants or other securities convertible into or
exchangeable or exercisable for Common Stock (such options, warrants or other
securities being collectively referred to herein as "Equity Interests") for a
consideration per share of Common Stock initially deliverable upon conversion,
exchange or exercise of such securities less than the current market price per
share (as determined pursuant to subsection (h) of this Section 5.4) then, in
either case, the Conversion Price shall be reduced immediately thereafter so
that it shall equal the price determined by multiplying such Conversion Price in
effect immediately prior thereto by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding immediately prior to the
issuance of such additional shares plus the number of shares of Common Stock
which the aggregate offering price of the total number of shares of Common Stock
so offered, or, in the case of clause (ii) above, the aggregate consideration
for the issuance of such Equity Interests, would purchase at the current market
price and the denominator shall be the number of shares of Common Stock that
would be outstanding immediately after the issuance of such additional shares,
or, in the case of clause (ii) above, such number of outstanding shares plus the
maximum number of shares of Common Stock deliverable upon conversion or in
exchange for or upon exercise of such Equity Interests at the initial
conversion, exchange or exercise price. Such adjustment shall be made
successively whenever such an issuance is made.
This subsection (e) does not apply to:
(1) any transaction described in subsections (a), (b) or (c) of this
Section 5.4; or
(2) the issuance of the Notes or the issuance of Common Stock upon
conversion of the Notes; or
(3) the issuance of Common Stock upon (i) the exercise of any Equity
Interests issued after the date of the Indenture, to the extent that any
required adjustment to the Conversion Price has been made pursuant to this
subsection (e); (ii) the issuance of Common Stock pursuant to the exercise of
any Equity Interest outstanding on the date of this issuance, or pursuant to any
contract or other arrangement described in the Offering Memorandum; or
(4) any Common Stock or Equity Interests issued to the Company's (or
any Subsidiary's) employees, consultants or directors pursuant to any plan or
agreement approved by either the stockholders of the Company or a majority of
the Company's independent directors; or
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(5) the issuance of any Common Stock or Equity Interests in any bona
fide underwritten public offering.
(f) In case the Company, after the date of this Indenture, shall, by
dividend or otherwise, at any time distribute to all holders of its Common Stock
cash (including any cash that is distributed as part of a distribution referred
to in subsection (c) of this Section) in an aggregate amount that, together with
(i) 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 fixed for
determining the stockholders entitled to such distribution and in respect of
which no Conversion Price adjustment pursuant to this subsection (f) has been
made and (ii) the aggregate of any cash plus the fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a Board Resolution), as of such date of determination, of
consideration payable in respect of any tender offer by the Company or a
subsidiary for all or any portion of the Common Stock consummated within 12
months preceding the date fixed for determining the stockholders entitled to
such distribution and in respect of which no Conversion Price adjustment
pursuant to subsection (g) of this Section has been made, exceeds 15% of the
product of the current market price per share (determined as provided in
subsection (h) of this Section) on the date fixed for the determination of
stockholders entitled to receive such distribution times the number of shares of
Common Stock outstanding on such date, the Conversion Price shall be reduced by
multiplying such Conversion Price by a fraction of which the numerator shall be
the current market price per share (determined as provided in subsection (h) of
this Section) on the date fixed for such determination less the amount of cash
so distributed during such period applicable to one share of Common Stock and
the denominator shall be such current market price, such reduction to become
effective immediately prior to the opening of business on the date after the
date fixed for such determination. Notwithstanding the foregoing, in the event
that the amount of cash and the fair market value of such consideration so
distributed exceeds the current market price per share of Common Stock, or such
current market price exceeds such fair market value by less than $0.10 per
share, the Company may, in lieu of making an adjustment in the Conversion Price
pursuant to this subsection (f), make adequate provision so that each Noteholder
who converts such Note after the record date for such distribution will be
entitled to receive upon such conversion, in addition to shares of Common Stock,
the amount of cash or other consideration such Noteholder would have received
had such Note been converted immediately prior to the record date for such
distribution.
(g) In case a tender offer made by the Company or any subsidiary, after the
date of this Indenture, for all or any portion of the Common Stock shall be
consummated and such tender offer shall involve an aggregate consideration
having a fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) as of the
last time (the "Expiration Time") that tenders may be made pursuant to such
tender offer (as it may be amended) that, together with (i) aggregate of the
cash plus the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution), as of
the consummation of such tender offer, of other consideration paid or payable in
respect of any tender offer by the Company or a subsidiary for all or any
portion of the Common Stock consummated within the 12 months preceding
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<PAGE>
the consummation of such tender offer and in respect of which no Conversion
Price adjustment pursuant to this subsection (g) has been made and (ii) the
aggregate amount of any distributions to all holders of Common Stock made
exclusively in cash within the 12 months preceding the consummation of such
tender offer and in respect of which no Conversion Price adjustment pursuant to
subsection (f) of this Section has been made, exceeds 15% of the product of the
current market price per share (determined as provided in subsection (h) of this
Section) immediately prior to the Expiration Time times the number of shares of
Common Stock outstanding (including any tendered shares) at the Expiration Time,
the Conversion Price shall be reduced by multiplying the Conversion Price in
effect immediately prior to the Expiration Time by a fraction of which the
numerator shall be (i) the product of the current market price per share
(determined as provided in subsection (h) of this Section) immediately prior to
the Expiration Time times the number of shares of Common Stock outstanding
(including any tendered shares) at the Expiration Time minus (ii) the fair
market value (determined as aforesaid) of the aggregate consideration payable to
stockholders upon consummation of such tender offer (the shares accepted for
payment in the tender offer being referred to as the "Purchased Shares") and the
denominator shall be the product of (x) such current market price per share
times (y) such number of outstanding shares at the Expiration Time minus the
number of Purchased Shares, such reduction to become effective immediately prior
to the opening of business on the day following the Expiration Time; provided,
--------
if the number of Purchased Shares or the aggregate consideration payable
therefor have not been finally determined by such opening of business, the
adjustment required by this subsection (g) shall, pending such final
determination, be made based upon the preliminary announced results of such
tender offer, and, after such final determination shall have been made, the
adjustment required by this subsection (g) shall be made based upon the number
of Purchased Shares and the aggregate consideration payable therefor as so
finally determined.
(h) For the purpose of any computation under subsections (b) through (g) of
this Section 5.4, the current market price per share of Common Stock on any date
shall be deemed to be the average of the Daily Market Prices for the shorter of
(i) 30 consecutive Business Days ending on the last full trading day on the
exchange or market referred to in determining such Daily Market Prices prior to
the Time of Determination or (ii) the period commencing on the date next
succeeding the first public announcement of the issuance of such rights or
warrants or such distribution through such last full trading day prior to the
Time of Determination.
(i) In any case in which this Section 5.4 shall require that an adjustment
be made immediately following a record date or an effective date, the Company
may elect to defer (but only until five business days following the filing by
the Company with the Trustee and any Conversion Agent of the certificate
required by subsection (k) of this Section 5.4) issuing to the holder of any
Note converted after such record date or effective date the shares of Common
Stock issuable upon such conversion over and above the shares of Common Stock
issuable upon such conversion on the basis of the Conversion Price prior to
adjustment, and paying to such holder any amount of cash in lieu of a fractional
share.
(j) No adjustment in the Conversion Price shall be required to be made
unless such adjustment would require an increase or decrease of at least 1% in
such price; provided, however, that any adjustments which by reason of this
-------- -------
subsection (j) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
5.4 shall be made to the nearest cent or to the nearest 1/100th of a share, as
the case may be. No adjustment to the Conversion Price need be made if only the
par value of the Common Stock is changed (including any change to no par value
Common Stock). To the extent that the Notes become convertible into cash,
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no adjustment need be made thereafter as to such cash and interest will not
accrue on such cash. Anything in this Section 5.4 to the contrary
notwithstanding, the Company shall be entitled to make such reduction in the
Conversion Price, in addition to those required by this Section 5.4, as it in
its discretion shall determine to be advisable in order that any stock dividend,
subdivision of shares, distribution of rights to purchase stock or securities,
or distribution of securities convertible into or exchangeable for stock
hereafter made by the Company to its stockholders shall not be taxable to the
recipients.
(k) Whenever the Conversion Price is adjusted as herein provided, (i) the
Company shall promptly file with the Trustee and any Conversion Agent other than
the Trustee a certificate signed by the President, any Vice President or the
Treasurer of the Company setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment and the manner of computing the same, which certificate shall be
conclusive evidence of the correctness of such adjustment, and (ii) a notice
stating that the Conversion Price has been adjusted and setting forth the
adjusted Conversion Price shall forthwith be given by the Company to the holders
of Notes in the manner provided in Section 12.2. The Company may correct any
previous certificate and notice given pursuant to this subsection (k) by (i)
promptly filing with the Trustee and any Conversion Agent other than the Trustee
a new certificate in the form required by this subsection (k) and (ii) giving a
new notice to the holders of Notes in the form and manner required by this
subsection (k). Such new certificate and notice shall state that such
certificate and notice are being provided to correct the previous certificate
and notice. Except as otherwise provided in Section 9.1, neither the Trustee nor
any Conversion Agent shall be under any duty or responsibility with respect to
the certificate required by this subsection (k) except to exhibit the same to
any holder of Notes who requests to inspect it. Unless and until the Trustee or
any Conversion Agent shall receive such certificate, it shall not be deemed to
have knowledge of any adjustment of the Conversion Price, and may assume,
without inquiry, that the last Conversion Price of which it has knowledge
remains in effect. The certificate required by this subsection (k) shall be
filed at each office or agency maintained for the purposes of conversion of
Notes pursuant to Section 2.3.
(l) In the event that at any time, as a result of an adjustment made
pursuant to subsection (a) of this Section 5.4, the holder of any Note
thereafter surrendered for conversion shall become entitled to receive any
shares of the Company other than shares of Common Stock, thereafter the
Conversion Price of such other shares so receivable upon conversion of any Note
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to Common Stock
contained in this Article 5 and the other provisions of this Article 5
applicable to Common Stock shall apply to such other shares.
(m) Consideration Received
For purposes of any computation respecting consideration received pursuant
to subsection (e) of this Section 5.4, the following shall apply:
(1) in the case of the issuance of shares of Common Stock for cash,
the consideration shall be the amount of such cash, provided in no case
--------
shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
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(2) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof (irrespective
of the accounting treatment thereof) as determined in good faith by the
Board of Directors; and
(3) in the case of the issuance of Equity Interests, the aggregate
consideration received therefor shall be deemed to be the consideration
received by the Company for the issuance of such Equity Interests plus the
additional minimum consideration, if any, to be received by the Company
upon the conversion, exchange or exercise thereof (the consideration in
each case to be determined in the same manner as provided in clauses (1)
and (2) of this subsection).
Section 5.5 Notice to Holders Prior to Certain Corporate Actions.
----------------------------------------------------
In case:
(a) the Company shall take any action that would require an adjustment in
the Conversion Price pursuant to Section 5.4(c); or
(b) the Company shall authorize the granting to the holders of all or
substantially all of its Common Stock rights, warrants or options to subscribe
for or purchase any shares of stock of any class or of any other rights; or
(c) there shall be any reorganization or reclassification of the Common
Stock (other than a subdivision or combination of the outstanding Common Stock
and other than a change in the par value of the Common Stock), or any
consolidation or merger to which the Company is a party and for which approval
of any stockholders of the Company is required, or any conveyance, transfer,
sale or lease of the Company's properties and assets as, or substantially as, an
entirety; or
(d) the Company takes any action which would require a supplemental
indenture pursuant to Section 5.9; or
(e) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed with the Trustee and any Conversion
Agent, and shall cause to be given to the holders of Notes, in the manner
provided in Section 12.2, as promptly as possible, but in any event at least 10
days prior to the applicable date hereinafter specified, a notice stating (i)
the date on which a record is to be taken for the purpose of such dividend, or
distribution or rights or warrants, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
distribution or rights are to be determined, or (ii) the date on which such
reorganization, reclassification, consolidation, merger, conveyance, transfer,
sale, lease, dissolution, liquidation or winding up is expected to become
effective or occur, and, if applicable, 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
reorganization, reclassification, consolidation,
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merger, conveyance, transfer, sale, lease, liquidation or winding up. Failure to
give such notice or any defect therein shall not affect the legality or validity
of the proceedings described in subsection (a), (b), (c) or (d) of this Section
5.5.
Section 5.6 Reservation of Shares of Common Stock.
-------------------------------------
The Company shall at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued shares of
Common Stock or its issued shares of Common Stock held in its treasury, or both,
for the purpose of effecting conversions of Notes, the full number of shares of
Common Stock deliverable upon the conversion of all outstanding Notes not
theretofore converted.
Before taking any action that would cause an adjustment reducing the
Conversion Price below the then par value (if any) of the shares of Common Stock
deliverable upon conversion of the Notes, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock at such adjusted Conversion Price.
Section 5.7 Taxes upon Conversion.
---------------------
The Company shall pay any and all documentary, stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of shares of Common
Stock on conversions of Notes pursuant hereto; provided, however, that the
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Company shall not be required to pay any tax 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 Note or Notes to be converted and no
such issue or delivery shall be made unless and until the Person requesting such
issue or delivery has paid to the Company the amount of any such tax or has
established to the satisfaction of the Company that such tax has been paid. The
Company may make such reductions in the Conversion Price, in addition to those
required by Sections 5.4 (a), (b), (c), (d), (e), (f) or (g) as the Board of
Directors considers to be advisable to avoid or diminish any income tax to
holders of Common Stock or rights to purchase Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes.
Section 5.8 Covenants as to Common Stock.
----------------------------
The Company covenants that all shares of Common Stock which may be
delivered upon conversions of Notes will upon delivery be duly and validly
issued and fully paid and nonassessable, free of all liens, encumbrances and
charges and not subject to any preemptive rights. Shares of Common Stock
issuable upon conversion of a Transfer Restricted Security shall bear such
restrictive legends as the Company shall provide in accordance with applicable
law. If shares of Common Stock are to be issued upon conversion of a Transfer
Restricted Security and they are to be registered in a name other than that of
the holder of such Transfer Restricted Security, then the person in whose name
such shares of Common Stock are to be registered must deliver to the Trustee a
certificate satisfactory to the Company and signed by such person as to
compliance with the restrictions on transfer contained in such restrictive
legends.
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The Company further covenants that, for so long as the Common Stock shall
be listed on the Nasdaq National Market or any national securities exchange, the
Company will, if permitted by the rules of Nasdaq National Market or such
national securities exchange, list and keep listed all Common Stock issuable
upon conversion of the Notes.
Section 5.9 Consolidation or Merger or Sale of Assets.
-----------------------------------------
Notwithstanding any other provision herein to the contrary, in case of any
consolidation or merger to which the Company is a party (other than a merger or
consolidation which does not result in any reclassification, conversion,
exchange or cancellation of the outstanding shares of Common Stock of the
Company), or in case of any conveyance, transfer, sale or lease to another
corporation of the properties and assets of the Company as, or substantially as,
an entirety, the corporation formed by such consolidation, or the corporation
whose securities, cash or other property will immediately after the merger or
consolidation be owned, by virtue of the merger or consolidation, by the holders
of Common Stock of the Company immediately prior to the merger or the
corporation which shall have acquired such properties and assets of the Company,
as the case may be, shall promptly execute and deliver to the Trustee a
supplemental indenture providing that the holder of each Security then
outstanding shall have the right thereafter to convert such Note, during the
period such Note is convertible as specified in this Article 5, into the kind
and amount of securities, cash or other property receivable upon such
consolidation, merger, conveyance, transfer, sale or lease by a holder of the
number of shares of Common Stock into which such Note might have been converted
immediately prior to such consolidation, merger, conveyance, transfer, sale or
lease, assuming such holder of Common Stock (i) is not a Person with which the
Company consolidated or into which the Company merged or was merged or to which
such conveyance, transfer, sale or lease was made or an Affiliate of such Person
and (ii) did not exercise statutory rights of election, if any, as to the kind
or amount of securities, cash or other property receivable upon such
consolidation, merger, conveyance, transfer, sale or lease (provided that, if
the kind or amount of securities, cash or other property receivable upon such
consolidation, merger, conveyance, transfer, sale or lease is not the same for
each share of Common Stock in respect of which such rights of election shall not
have been exercised ("non-electing share"), then for the purposes of this
Section 5.9 the kind and amount of securities, cash or other property receivable
upon such consolidation, merger, conveyance, transfer, sale or lease for each
non-electing share shall be deemed to be the kind and amount so receivable per
share by the holders of a plurality of the non-electing shares). Such
supplemental indenture shall provide for adjustments which, for events
subsequent to the effective date of such supplemental indenture, shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Article 5 in relation to any shares of stock or other securities or property
thereafter deliverable on the conversion of the Notes.
The above provisions of this Section 5.9 shall similarly apply to
successive consolidations, mergers, conveyances, transfers, sales or leases.
The Company shall give notice of the execution of such a supplemental
indenture to the holders of Notes in the manner provided in Section 12.2 within
30 days after the execution thereof; provided, however, that such notice need
-------- -------
not be given if such information has been provided prospectively in the notice
given pursuant to Section 5.5. Failure to give such notice, or any defects
therein, shall not affect
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the legality or validity of any such supplemental indenture or any transaction
contemplated in this Section 5.9.
Section 5.10 Disclaimer of Responsibility for Certain Matters.
------------------------------------------------
Neither the Trustee nor any Conversion Agent shall at any time be under any
duty or responsibility to any holder of Notes to determine whether any facts
exist which may require any adjustment of the Conversion Price, or with respect
to the nature or extent of any such adjustment when made, or with respect to the
method employed, or herein or in any supplemental indenture provided to be
employed, in making the same. Neither the Trustee nor any Conversion Agent
shall be accountable with respect to the listing or registration referred to in
Section 5.8 or the validity or value (or the kind or amount) of any shares of
Common Stock, or of any securities, cash or other property, which may at any
time be issued or delivered upon the conversion of any Note; and neither the
Trustee nor any Conversion Agent makes any representation with respect thereto.
Neither the Trustee nor any Conversion Agent shall be responsible for any
failure of the Company to issue, transfer or deliver any shares of Common Stock
or stock certificates or other securities or property or to make any cash
payment upon the surrender of any Note for the purpose of conversion or, subject
to the provisions of Section 9.1, to comply with any of the covenants of the
Company contained in this Article 5.
Section 5.11 Cancellation of Converted Notes.
-------------------------------
All Notes delivered for conversion shall be delivered to the Trustee to be
cancelled by or at the direction of the Trustee, which shall dispose of the same
as provided in Section 2.11.
Section 5.12 Voluntary Reduction.
-------------------
The Company from time to time may reduce the Conversion Price by any amount
for any period of time if the period is at least 20 days or such longer period
as may be required by law and if the reduction is irrevocable during such
period; provided the Company shall give 15 days' prior notice to the Trustee and
--------
each holder of Notes of such decrease and the Board of Directors has made a
determination that such decrease would be in the best interests of the Company,
which determination shall be conclusive.
ARTICLE 6
SUBORDINATION
-------------
Section 6.1 Agreement to Subordinate.
------------------------
The Company agrees, and each holder of Notes by accepting a Note agrees,
that the indebtedness evidenced by the Note is subordinated in right of payment,
to the extent and in the manner provided in this Article 6, to the prior payment
in full of all Senior Indebtedness (whether outstanding on the date hereof or
hereafter created, incurred, assumed or guaranteed), and that the subordination
is for the benefit of the holders of Senior Indebtedness.
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Section 6.2 Liquidation; Dissolution; Bankruptcy.
------------------------------------
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, in
an assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities:
(1) holders of Senior Indebtedness shall be entitled to receive
payment in full of all Obligations due in respect of such Senior
Indebtedness in cash or U.S. Government Obligations or other payment
satisfactory to the holders of the Senior Indebtedness before holders of
Notes shall be entitled to receive any payment with respect to the Notes;
and
(2) until all Senior Indebtedness then due and payable is paid in full
in cash or U.S. Government Obligations or other payment satisfactory to the
holders of the Senior Indebtedness, any distribution to which holders of
Notes would be entitled but for this Article 6 shall be made to holders of
Senior Indebtedness, as their interests may appear.
Section 6.3 Default on Senior Indebtedness.
------------------------------
The Company may not make any payment or distribution to the Trustee, any
Paying Agent or any holder of Notes in respect of Obligations with respect to
the Notes and may not acquire from the Trustee or any holder of Notes any Notes
until all Senior Indebtedness has been paid in full in cash or U.S. Government
Obligations or other payment satisfactory to the holders of the Senior
Indebtedness if:
(i) a default in the payment of any principal of, premium, if any,
interest, rent or other Obligations in respect of Senior Indebtedness
occurs and is continuing beyond any applicable grace period in the
agreement, indenture or other document governing such Senior Indebtedness;
or
(ii) a default, other than a payment default, on Designated Senior
Indebtedness occurs and is continuing that then permits holders of such
Designated Senior Indebtedness to accelerate its maturity and the Trustee
receives a notice of the default (a "Payment Blockage Notice") from the
Company or a Representative or holder of Designated Senior Indebtedness.
If the Trustee receives any Payment Blockage Notice pursuant to this
Section 6.3, no subsequent Payment Blockage Notice shall be effective for
purposes of such Section unless and until (i) at least 365 days shall have
elapsed since the effectiveness of the immediately prior Payment Blockage Notice
and (ii) all scheduled payments of principal, premium, if any, and interest on
the Notes that have 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 Notes and may acquire them upon the earlier of:
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(1) 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 Section 6.3(ii) hereof,
179 days pass after notice is received if the maturity of such Designated Senior
Indebtedness has not been accelerated, if this Article otherwise permits the
payment, distribution or acquisition at the time of such payment, distribution
or acquisition.
Section 6.4 Acceleration of Notes.
---------------------
In the event of the acceleration of the Notes because of an Event of
Default, the Company may not make any payment or distribution to the Trustee or
any holder of Notes in respect of Obligations with respect to Notes and may not
acquire or purchase any Notes from the Trustee or any holder of Notes until all
Senior Indebtedness then due and payable has been paid in full in cash or U.S.
Government Obligations or other payment satisfactory to the holders of Senior
Indebtedness or such acceleration is rescinded in accordance with the terms of
this Indenture. If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Indebtedness of the
acceleration.
Section 6.5 When Distribution Must Be Paid Over.
-----------------------------------
In the event the Company shall have made distributions of assets of the
Company of any kind for any Obligations with respect to the Notes to the
Trustee, Paying Agent or directly to any holder of Notes whether in cash,
property or securities, including without limitation by way of set-off or
otherwise, at a time when such payment or distribution is prohibited by this
Indenture, such payment shall be held by the Trustee, Paying Agent or such
holder, in trust for the benefit of, and shall be paid forthwith over and
delivered, to the extent necessary to make payment in full of any Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness; provided the
--------
foregoing shall apply to the Trustee and any Paying Agent only if the Trustee or
such Paying Agent has actual knowledge (as determined in accordance with Section
6.11) that such payment or distribution is prohibited by this Indenture.
With respect to the holders of Senior Indebtedness, the Trustee undertakes
to perform only such obligations on the part of the Trustee as are specifically
set forth in this Article 6, and no implied covenants or obligations with
respect to the holders of Senior Indebtedness shall be read into this Indenture
against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty
to the holders of Senior Indebtedness, and shall not be liable to any such
holders if the Trustee shall pay over or distribute to or on behalf of holders
of Notes or the Company or any other person money or assets to which any holders
of Senior Indebtedness shall be entitled by virtue of this Article 6, except if
such payment is made as a result of the wilful misconduct or gross negligence of
the Trustee.
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Section 6.6 Notice by Company.
-----------------
The Company shall promptly notify the Trustee of any facts known to the
Company that would cause a payment of any Obligations with respect to the Notes
or the purchase of any Notes by the Company to violate this Article, but failure
to give such notice shall not affect the subordination of the Notes to the
Senior Indebtedness as provided in this Article.
Section 6.7 Subrogation.
-----------
After all Senior Indebtedness is paid in full and until the Notes are paid
in full, holders of Notes shall be subrogated (equally and ratably with all
other indebtedness pari passu with the Notes) to the rights of holders of Senior
Indebtedness to receive distributions applicable to Senior Indebtedness to the
extent that distributions otherwise payable to the holders of Notes have been
applied to the payment of Senior Indebtedness. A distribution made under this
Article to holders of Senior Indebtedness that otherwise would have been made to
holders of Notes is not, as between the Company and holders of Notes, a payment
by the Company on the Notes.
Section 6.8 Relative Rights.
---------------
This Article defines the relative rights of holders of Notes and holders of
Senior Indebtedness. Nothing in this Indenture shall:
(a) impair, as between the Company and holders of Notes, the obligation of
the Company, which is absolute and unconditional, to pay principal of, and
interest and Liquidated Damages (if any) on, the Notes in accordance with their
terms;
(b) affect the relative rights of holders of Notes and creditors (other
than with respect to Senior Indebtedness) of the Company other than their rights
in relation to holders of Senior Indebtedness; or
(c) prevent the Trustee or any holder of Notes from exercising its
available remedies upon a Default or Event of Default, subject to the rights of
holders and owners of Senior Indebtedness to receive distributions and payments
otherwise payable to holders of Notes.
If the Company fails because of this Article to pay principal of, or
interest or Liquidated Damages (if any) on, a Note on the due date, the failure
is still a Default or Event of Default.
Section 6.9 Subordination May Not Be Impaired by Company.
--------------------------------------------
No right of any holder of Senior Indebtedness to enforce the subordination
of the indebtedness evidenced by the Notes shall be impaired by any act or
failure to act by the Company or any holder of Notes or by the failure of the
Company or any such holder to comply with this Indenture.
43
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Section 6.10 Distribution or Notice to Representative.
----------------------------------------
Whenever a distribution is to be made or a notice given to holders of
Senior Indebtedness, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to in
this Article 6, the Trustee and the holders of Notes shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other person making any distribution to the Trustee or to the holders of Notes
for the purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
6.
Section 6.11 Rights of Trustee and Paying Agent.
----------------------------------
Notwithstanding the provisions of this Article 6 or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts that would prohibit the making of any payment or distribution by
the Trustee (other than pursuant to Section 6.5), and the Trustee may continue
to make payments on the Notes, unless the Trustee shall have received at least
two Business Days prior to the date of such payment or distribution written
notice directing that such payment or distribution not be made and setting forth
the facts that would cause such payment or distribution with respect to the
Notes to violate this Article. Only the Company or a Representative may give
the notice.
Nothing in this Article 6 shall impair the claims of, or payments to, the
Trustee under or pursuant to Section 9.7 hereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
Section 6.12 Authorization to Effect Subordination.
-------------------------------------
Each holder of a Note by the holder's acceptance thereof authorizes and
directs the Trustee on the holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 6, and appoints the Trustee to act as the holder's attorney-in-fact for
any and all such purposes. If the Trustee does not file a proper proof of claim
or proof of debt in the form required in any proceeding referred to in Section
6.2 hereof at least 30 days before the expiration of the time to file such
claim, the holders of any Senior Indebtedness or their Representatives are
hereby authorized to file an appropriate claim for and on behalf of the holders
of the Notes.
Section 6.13 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 6 shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent
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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 the second and third paragraphs of Section 6.11 shall not apply to
- -------
the Company or any subsidiary of the Company if it or such subsidiary acts as
Paying Agent.
Section 6.14 Senior Indebtedness Entitled to Rely.
------------------------------------
The holders of Senior Indebtedness shall have the right to rely upon this
Article 6, and no amendment or modification of the provisions contained herein
shall diminish the rights of such holders unless such holders shall have agreed
in writing thereto.
Section 6.15 Certain Conversions Not Deemed Payment.
--------------------------------------
For purposes of this Article 6 only, (1) the issuance and delivery of
junior securities upon conversion of Notes in accordance with Article 5 shall
not be deemed to constitute a payment or distribution on account of the
principal of, premium, if any, or interest (including Liquidated Damages, if
any) on Notes or on account of the purchase or other acquisition of Notes, and
(2) the payment, issuance or delivery of cash (except in satisfaction of
fractional shares pursuant to Section 5.3), property or securities (other than
junior securities) upon conversion of a Note shall be deemed to constitute
payment on account of the principal of, premium, if any, or interest (including
Liquidated Damages, if any) on such Note. For the purposes of this Section
6.15, the term "junior securities" means (a) shares of any stock of any class of
the Company or (b) securities of the Company that are subordinated in right of
payment to all Senior Indebtedness that may be outstanding at the time of
issuance or delivery of such securities to substantially the same extent as, or
to a greater extent than, the Notes are so subordinated as provided in this
Article. Nothing contained in this Article 6 or elsewhere in this Indenture or
in the Notes is intended to or shall impair, as among the Company, its creditors
(other than holders of Senior Indebtedness) and the Noteholders, the right,
which is absolute and unconditional, of the holder of any Note to convert such
Note in accordance with Article 5.
ARTICLE 7
SUCCESSORS
----------
Section 7.1 Merger, Consolidation or Sale of Assets.
---------------------------------------
The Company may not consolidate or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to, another
corporation, person or entity unless:
(a) the Company is the surviving corporation or the entity or the person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
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(b) the entity or person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or person to which such sale,
assignment, transfer, lease, conveyance or other disposition will have been made
expressly assumes all the Obligations of the Company, pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee, under the Notes and
the Indenture;
(c) immediately after such transaction no Default or Event of Default
exists; and
(d) the Company or such person shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance, transfer or lease and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture, comply with this provision of this Indenture and that all conditions
precedent in this Indenture relating to such transaction have been satisfied.
Section 7.2 Successor Corporation Substituted.
---------------------------------
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company in accordance with Section 7.1 hereof, the successor corporation formed
by such consolidation or into or with which the Company is merged or to which
such sale, assignment, transfer, lease, conveyance or other disposition is made
shall succeed to, and be substituted for and may exercise every right and power
of, the Company under this Indenture with the same effect as if such successor
person has been named as the Company herein; and the Company shall be released
from its obligations under this Indenture and the Securities, except as to any
obligation that arises from or as a result of such transaction.
Section 7.3 Purchase Option on Change of Control.
------------------------------------
This Article 7 does not affect the obligations of the Company (including
without limitation any successor to the Company) under Section 4.7.
ARTICLE 8
DEFAULTS AND REMEDIES
---------------------
Section 8.1 Events of Default.
-----------------
An "Event of Default" occurs if:
(a) the Company defaults in the payment of interest or Liquidated Damages,
if any on any Note when the same becomes due and payable and the Default
continues for a period of 30 days after the date due and payable; or
(b) the Company defaults in the payment of the principal of any Note when
the same becomes due and payable at maturity, upon redemption or otherwise; or
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(c) the Company fails to observe or perform any covenant or agreement
contained in Section 4.7; or
(d) the Company fails to observe or perform any other covenant or agreement
contained in this Indenture or the Notes required by any of them to be performed
and the Default continues for a period of 60 days after notice from the Trustee
to the Company or from the holders of 25% in aggregate principal amount of the
outstanding Notes to the Company and the Trustee stating that such notice is a
"Notice of Default"; or
(e) there is a default under any mortgage, indenture or instrument under
which there is issued or by which there is secured or evidenced any indebtedness
for money borrowed by the Company or any of its Subsidiaries (or the payment of
which is guaranteed by the Company or any of its Subsidiaries), whether such
indebtedness or guarantee now exists or is created after the Issuance Date,
which default (i) is caused by a failure to pay when due principal of or
interest on such indebtedness within the grace period provided for in such
indebtedness (which failure continues beyond any applicable grace period) (a
"Payment Default") or (ii) results in the acceleration of such indebtedness
prior to its express maturity and, in each case, the principal amount of any
such indebtedness, together with the principal amount of any other such
indebtedness under which there is a Payment Default or the maturity of which has
been so accelerated, aggregates $15 million or more, and such indebtedness is
not discharged or such Payment Default is not cured or waived, or such
acceleration is not rescinded or annulled, within a period of 30 days after
there shall have been given, by registered or certified mail, to the Company by
the Trustee or to the Company and the Trustee by the holders of at least 25% in
principal amount of the Notes then outstanding a written notice specifying such
default and requiring the Company to cause such indebtedness to be discharged or
cause such Payment Default to be cured or waived or such acceleration to be
rescinded or annulled and stating that such notice is a "Notice of Default"
hereunder; or
(f) a final judgment or judgments for the payment of money are entered by a
court or courts of competent jurisdiction against the Company or any Subsidiary
of the Company which remains undischarged for a period (during which such
judgment (s) shall not be bonded or execution shall not be effectively stayed)
of 60 days, provided the aggregate of all such judgments which are not fully
--------
insured by a reputable insurance company exceeds $15 million; or
(g) the Company or any Significant Subsidiary pursuant to or within the
meaning of any Bankruptcy Law; (i) commences a voluntary case, (ii) consents to
the entry of an order for relief against it in an involuntary case in which it
is the debtor, (iii) consents to the appointment of a Bankruptcy Custodian of it
or for all or substantially all of its property, (iv) makes a general assignment
for the benefit of its creditors, or (v) generally is unable to pay its debts as
the same become due; or
(h) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that: (i) is for relief against the Company or any Significant
Subsidiary in an involuntary case, (ii) appoints a Bankruptcy Custodian of the
Company or any Significant Subsidiary or for all or substantially all of its
property, or (iii) orders the liquidation of the Company or any Significant
Subsidiary, and the order or decree remains unstayed and in effect for 60 days.
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The term "Bankruptcy Custodian" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law. The term "Bankruptcy
Law" means Title 11, U.S. Code or any similar federal or state law for the
relief of debtors.
Section 8.2 Acceleration.
------------
If an Event of Default (other than an Event of Default specified in clauses
(g) and (h) of Section 8.1 hereof with respect to the Company) occurs and is
continuing, the Trustee by notice to the Company, or the Noteholders of at least
25% in principal amount of the then outstanding Notes by notice to the Company
and the Trustee, may declare all the Notes to be due and payable. Upon such
declaration, the principal of, premium, if any, and interest and Liquidated
Damages, if any, on the Notes shall be due and payable immediately. If an Event
of Default specified in clause (g) or (h) of Section 8.1 hereof occurs with
respect to the Company, such an amount shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Noteholder. The Noteholders of a majority in aggregate
principal amount of the then outstanding Notes by notice to the Trustee may
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of the acceleration.
Section 8.3 Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal of, or interest or
Liquidated Damages (if any) on, the Notes or to enforce the performance of any
provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 8.4 Waiver of Past Defaults.
-----------------------
The holders of a majority in aggregate principal amount of the then
outstanding Notes by notice to the Trustee may waive an existing Default or
Event of Default and its consequences except a continuing Default or Event of
Default in the payment of the principal of, or interest or Liquidated Damages
(if any) on, any Note (other than the non-payment of principal of the Notes
which has become due solely by virtue of an acceleration which has been duly
rescinded as provided above), or in respect of a covenant or provision of this
Indenture which cannot be modified or amended without the consent of all holders
of Notes. When a Default or Event of Default is waived, it is cured and ceases;
but no such waiver shall extend to any subsequent or other Default or impair any
right consequent thereon.
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Section 8.5 Control by Majority.
-------------------
The holders of a majority in principal amount of the then outstanding Notes
may direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
it. However, the Trustee may refuse to follow any direction that conflicts with
law or this Indenture, is unduly prejudicial to the rights of other Noteholders,
or would involve the Trustee in personal liability.
Section 8.6 Limitation on Suits.
-------------------
A Noteholder may pursue a remedy with respect to this Indenture or the
Notes only if:
(a) the Noteholder gives to the Trustee notice of a continuing Event of
Default;
(b) the Noteholders of at least 25% in principal amount of the then
outstanding Notes make a request to the Trustee to pursue the remedy;
(c) such Noteholder or Noteholders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(e) during such 60-day period the Noteholders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Noteholder may not use this Indenture to prejudice the rights of another
Noteholder or to obtain a preference or priority over another Noteholder.
Section 8.7 Rights of Noteholders to Receive Payment.
----------------------------------------
Subject to the provisions of Article 6 hereof, the right of any Noteholder
of a Note to receive payment of principal of, and interest and Liquidated
Damages (if any) on, the Note, on or after the respective due dates expressed in
the Note, or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
the Noteholder made pursuant to this Section.
Section 8.8 Collection Suit by Trustee.
--------------------------
If an Event of Default specified in Section 8.1(a) or (b) occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company for the whole amount of principal of, and
interest and Liquidated Damages (if any) on, on the Notes remaining unpaid and,
to the extent lawful, interest on overdue principal and interest and Liquidated
Damages, if any, and
49
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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.
Section 8.9 Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee and the
Noteholders allowed in any judicial proceedings relative to the Company, its
creditors or its property. Nothing contained herein shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Noteholder thereof, or to
authorize the Trustee to vote in respect of the claim of any Noteholder in any
such proceeding.
Section 8.10 Priorities.
----------
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee for all amounts due under Section 9.7 hereof;
Second: to the holders of Senior Indebtedness to the extent required
by Article 6;
Third: to Noteholders for amounts due and unpaid on the Notes for
principal and interest and Liquidated Damages, if any, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Notes for principal and interest and Liquidated Damages, if
any, respectively; and
Fourth: to the Company.
The Trustee may fix a record date and payment date for any payment to
Noteholders made pursuant to this Section.
Section 8.11 Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a holder pursuant to Section 8.7
hereof, or a suit by Noteholders of more than 10% in principal amount of the
then outstanding Notes.
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ARTICLE 9
THE TRUSTEE
-----------
Section 9.1 Duties of Trustee.
-----------------
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default of which the
Trustee has been charged with knowledge pursuant to Section 9.2(e): (i) the
Trustee need perform only those duties that are specifically set forth in this
Indenture and no others and (ii) the Trustee may in good faith 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. However, the Trustee shall
examine the certificates and opinions to determine whether or not they conform
to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own wilful misconduct, except
that: (i) this paragraph does not limit the effect of paragraph (b) of this
Section 9.1; (ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts and (iii) the Trustee shall not be
liable with respect to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section 8.5 hereof.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 9.1.
(e) The Trustee may refuse to perform any duty or exercise any right or
power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 9.2 Rights of Trustee.
-----------------
(a) The Trustee may rely, and shall be protected in acting or refraining
from acting, on any document believed by it to be genuine and to have been
signed or presented by the proper person. The Trustee need not investigate any
fact or matter stated in the document.
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(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible for the
misconduct or negligence of any agent appointed by the Trustee with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers.
(e) The Trustee shall not be charged with knowledge of any Event of Default
under subsection (c), (d), (e), (f), (g) or (h) of Section 8.1 unless either (1)
a Trust Officer assigned to Corporate Trust Administration shall have actual
knowledge thereof, or (2) the Trustee shall have received notice thereof in
accordance with Section 12.2 hereof from the Company or any holder.
(f) The Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture or
other paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see fit.
Section 9.3 Individual Rights of Trustee.
----------------------------
Subject to Sections 9.10 and 9.11 hereof, the Trustee in its individual or
any other capacity may become the owner or pledgee of Notes and may otherwise
deal with the Company or an Affiliate of the Company with the same rights it
would have if it were not Trustee. Any Agent may do the same with like rights.
Section 9.4 Trustee's Disclaimer.
--------------------
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes, and it shall
not be responsible (i) for any statement of the Company in the Indenture or any
statement in the Notes other than its authentication or (ii) for compliance by
the Company with the Registration Rights Agreement.
Section 9.5 Notice of Defaults.
------------------
If a Default or Event of Default occurs and is continuing and if the
Trustee is charged with knowledge thereof pursuant to Section 9.2(e), the
Trustee shall mail to Noteholders a notice of the Default or Event of Default
within 60 days after it occurs. Except in the case of a Default or Event of
Default in payment on any Note, the Trustee may withhold the notice if and so
long as the Trustee in good faith determines that withholding the notice is in
the interests of Noteholders.
52
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Section 9.6 Reports by Trustee to Noteholders.
---------------------------------
Within 60 days after the reporting date stated in Section 12.10, the
Trustee shall mail to Noteholders a brief report dated as of such reporting date
that complies with TIA Section 313(a) if and to the extent required by such
Section 313(a). The Trustee also shall comply with TIA Section 313(b)(2). The
Trustee shall also transmit by mail all reports as required by TIA Section
313(c).
A copy of each report at the time of its mailing to Noteholders shall be
filed with the SEC and each stock exchange or securities market on which the
Notes are listed. The Company shall timely notify the Trustee when the Notes
are listed or quoted on any stock exchange or securities market.
Section 9.7 Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee from time to time compensation for its
services hereunder in accordance with a written agreement between the Company
and the Trustee. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by it. Such disbursements and expenses may include the
reasonable disbursements, compensation and expenses of the Trustee's agents and
counsel.
The Company shall indemnify the Trustee against any loss, liability or
reasonable expense incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture and the trusts
hereunder, including the reasonable costs and expenses of defending itself
against or investigating any claim of liability in the premises, except as set
forth in the next paragraph. The Trustee shall notify the Company promptly of
any claim for which it may seek indemnity. Failure by the Trustee to so notify
the Company shall not relieve the Company of its obligations hereunder. The
Company shall defend the claim with counsel designated by the Company, who may
be outside counsel to the Company but shall in all events be reasonably
satisfactory to the Trustee, and the Trustee shall cooperate in the defense. In
addition, the Trustee may retain separate counsel and, if the Trustee shall have
been advised by such counsel that there may be one or more legal defenses
available to the Trustee which are different from or in addition to those
available to the Company and which the counsel designated by the Company would
be precluded from asserting or that the Trustee has one or more interests that
conflict with those of the Company, the Company shall pay the reasonable fees
and expenses of such separate counsel. The indemnification herein extends to
any settlement, provided the Company will not be liable for any settlement made
--------
without its consent, provided, further, that such consent will not be
unreasonably withheld.
The Company need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee through its negligence, lack of good faith or
wilful misconduct.
The obligations of the Company under this Section 9.7 shall survive the
satisfaction and discharge of this Indenture.
53
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When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 8.1(g) or (h) occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
Section 9.8 Replacement of Trustee.
----------------------
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign by so notifying the Company. The holders of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 9.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA Section 310(b);
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the
Noteholders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Noteholders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 9.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA Section 310(b), any
Noteholder who has been a bona fide holder of a Note for at least six months may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Noteholders. The retiring Trustee shall promptly transfer all property held by
it as Trustee to the successor Trustee. Notwithstanding
54
<PAGE>
replacement of the Trustee pursuant to this Section 9.8, the Company's
obligations under Section 9.7 hereof shall continue for the benefit of the
retiring trustee with respect to expenses and liabilities incurred by it prior
to such replacement.
Section 9.9 Successor Trustee by Merger, Etc.
--------------------------------
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business (including the trust created
by this Indenture) to, another corporation, the successor corporation without
any further act shall be the successor Trustee.
Section 9.10 Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the requirements
of TIA Section 310(a)(1) and (5). The Trustee or its parent shall always have a
combined capital and surplus as stated in Section 12.10 hereof. The Trustee is
subject to TIA Section 310(b).
Section 9.11 Preferential Collection of Claims Against Company.
-------------------------------------------------
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 10
DISCHARGE OF INDENTURE
----------------------
Section 10.1 Termination of Company's Obligations.
------------------------------------
This Indenture shall cease to be of further effect (except that the
Company's obligations under Sections 9.7 and 10.2 hereof shall survive) when all
outstanding Notes theretofore authenticated and issued have been delivered to
the Trustee for cancellation and the Company has paid all sums payable
hereunder.
Thereupon, the Trustee upon request of the Company, shall acknowledge in
writing the discharge of the Company's obligations under this Indenture, except
for those surviving obligations specified above.
Section 10.2 Repayment to Company.
--------------------
The Trustee and the Paying Agent shall promptly pay to the Company upon
request any excess money or securities held by them at any time.
Upon the earlier of (i) two years after the date upon which such payment
shall have become due and (ii) such money would escheat to the state, the
Trustee and the Paying Agent shall pay to the Company any money held by them for
the payment of principal of, or interest or Liquidated Damages (if
55
<PAGE>
any) on, the Notes; provided, however, that the Company shall have first caused
-------- -------
notice of such payment to the Company to be mailed to each Noteholder entitled
thereto no less than 30 days prior to such payment, if practicable. After
payment to the Company, the Trustee and the Paying Agent shall have no further
liability with respect to such money and Noteholders entitled to the money must
look to the Company for payment as general creditors unless any applicable
abandoned property law designates another person.
ARTICLE 11
AMENDMENTS, SUPPLEMENTS AND WAIVERS
-----------------------------------
Section 11.1 Without Consent of Noteholders.
------------------------------
The Company and the Trustee may amend or supplement this Indenture or the
Notes without the consent of any Noteholder:
(a) to cure any ambiguity, defect or inconsistency in a manner not adverse
to the interests of any Noteholder;
(b) to comply with Sections 5.12 and 7.1 hereof;
(c) to provide for uncertificated Notes in addition to certificated Notes;
(d) to make any change that does not adversely affect the interests
hereunder of any Noteholder;
(e) to make any changes to or add to the covenants of the Company for the
benefit of the holders of Notes; or
(f) to qualify this Indenture under the TIA or to comply with the
requirements of the SEC in order to maintain the qualification of the Indenture
under the TIA.
Section 11.2 With Consent of Noteholders.
---------------------------
Subject to Section 8.7 hereof, the Company and the Trustee may amend or
supplement this Indenture or the Notes with the written consent (including
consents obtained in connection with any tender offer) of the Noteholders of at
least a majority in principal amount of the then outstanding Notes. Subject to
Sections 8.4 and 8.7 hereof, the Noteholders of a majority in principal amount
of the Notes then outstanding may also waive compliance in a particular instance
by the Company with any provision of this Indenture or the Notes. However,
without the consent of each Noteholder affected, an amendment, supplement or
waiver under this Section may not:
(a) reduce the principal amount of Notes whose holders must consent to an
amendment, supplement or waiver;
56
<PAGE>
(b) reduce the rate of or change the time for payment of interest on any
Note;
(c) reduce the principal of or change the fixed maturity of any Note or
alter the redemption provisions of Sections 5 and 6 of the Notes or alter the
repurchase provisions of Section 7 of the Notes.
(d) make any Note payable in money other than that stated in the Note;
(e) make any change in Section 8.4, 8.7 or 11.2 hereof (including this
sentence);
(f) waive a default in the payment of the principal of, or interest or
Liquidated Damages (if any) on, any Note (except a rescission of acceleration of
the Notes by the holders of at least a majority in aggregate principal amount of
the outstanding Notes and a waiver of the payment default that resulted from
such acceleration);
(g) waive a redemption payment or repurchase payment payable on any Note;
or
(h) make any change in Articles 5 and 6 hereof that adversely affects the
interests of the Noteholders.
To secure a consent of the Noteholders under this Section 11.2, it shall
not be necessary for the Noteholders to approve the particular form of any
proposed amendment, supplement or waiver, but it shall be sufficient if such
consent approves the substance thereof.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of Notes or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Notes unless such consideration is offered to be paid or agreed to be
paid to all holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to Noteholders a notice briefly describing the
amendment or waiver.
Section 11.3 Compliance with Trust Indenture Act.
-----------------------------------
Every amendment to this Indenture or the Notes shall be set forth in a
supplemental indenture that complies with the TIA as then in effect.
Section 11.4 Revocation and Effect of Consents.
---------------------------------
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Noteholder of a Note is a continuing consent by the Noteholder and every
subsequent Noteholder of a Note or portion of a Note that evidences the same
debt as the consenting Noteholder's Note, even if notation of the consent is not
made on any Note. However, any such Noteholder or subsequent Noteholder may
revoke
57
<PAGE>
the consent as to such Noteholder's Note or portion of a Note if the Trustee
receives the notice of revocation before the date on which the Trustee receives
an Officers' Certificate certifying that the Noteholders of the requisite
principal amount of Notes have consented to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Noteholders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those persons who were
Noteholders at such record date (or their duly designated proxies), and only
those persons, shall be entitled to consent to such amendment, supplement or
waiver or to revoke any consent previously given, whether or not such persons
continue to be Noteholders after such record date. No consent shall be valid or
effective for more than 90 days after such record date unless consents from
Noteholders of the principal amount of Notes required hereunder for such
amendment or waiver to be effective shall have also been given and not revoked
within such 90-day period.
After an amendment, supplement or waiver becomes effective it shall bind
every Noteholder, unless it is of the type described in any of clauses (a)
through (h) of Section 11.2 hereof. In such case, the amendment or waiver shall
bind each Noteholder who has consented to it and every subsequent Noteholder
that evidences the same debt as the consenting Noteholder's Note.
Section 11.5 Notation on or Exchange of Notes.
--------------------------------
The Trustee may place an appropriate notation about an amendment or waiver
on any Note thereafter authenticated. The Company in exchange for all Notes may
issue, and the Trustee shall authenticate, new Notes that reflect the amendment
or waiver.
Section 11.6 Trustee Protected.
-----------------
The Trustee shall sign all supplemental indentures, except that the Trustee
may, but need not, sign any supplemental indenture that adversely affects its
rights.
ARTICLE 12
MISCELLANEOUS
-------------
Section 12.1 Trust Indenture Act Controls.
----------------------------
If any provision of this Indenture limits, qualifies, or conflicts with
another provision which is automatically deemed to be incorporated in this
Indenture by the TIA, the incorporated provision shall control.
58
<PAGE>
Section 12.2 Notices.
-------
Any notice or communication by the Company or the Trustee to the other is
duly given if in writing and delivered in person or mailed by first-class mail
with postage prepaid (registered or certified, return receipt requested) to the
other's address stated in Section 12.10 hereof. The Company or the Trustee by
notice to the other may designate additional or different addresses for
subsequent notices or communications.
Any notice or communication to a Noteholder shall be mailed by first-class
mail, with postage prepaid, to his address shown on the register kept by the
Registrar. Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its validity or sufficiency with respect to other
Noteholders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
Notwithstanding the foregoing, notices to the Trustee shall be effective only
upon receipt.
If the Company mails a notice or communication to Noteholders, it shall
mail a copy to the Trustee and each Agent at the same time.
All other notices or communications shall be in writing.
In case by reason of the suspension of regular mail service, or by reason
of any other cause, it shall be impossible to mail any notice as required by the
Indenture, then such method of notification as shall be made with the approval
of the Trustee shall constitute a sufficient mailing of such notice.
Section 12.3 Communication by Noteholders with Other Noteholders.
---------------------------------------------------
Noteholders may communicate pursuant to TIA Section 312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
Section 12.4 Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate, in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 12.5),
stating that, in the opinion of the signers, all conditions precedent and
covenants, if any, provided for in this Indenture relating to the proposed
action have been satisfied; and
59
<PAGE>
(b) an Opinion of Counsel, in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 12.5),
stating that, in the opinion of such counsel, all such conditions precedent and
covenants have been satisfied.
Section 12.5 Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than pursuant to Section 4.3)
shall include:
(a) a statement that the person signing such certificate or rendering such
opinion has read such covenant or condition;
(b) 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;
(c) a statement that, in the opinion of such person, such person has made
such examination or investigation as is necessary to enable such person to
express an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(d) a statement as to whether or not, in the opinion of such person, such
condition or covenant has been satisfied.
Section 12.6 Rules by Trustee and Agents.
---------------------------
The Trustee may make reasonable rules for action by, or a meeting of,
Noteholders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.7 Legal Holidays.
--------------
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in the State of New York or the place of payment are not required
to be open. If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period. If any other
operative date for purposes of this Indenture shall occur on a Legal Holiday
then for all purposes the next succeeding day that is not a Legal Holiday shall
be such operative date.
Section 12.8 No Recourse Against Others.
--------------------------
No director, officer, employee or shareholder, as such, of the Company
shall have any liability for any obligations of the Company under the Notes or
the Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Noteholder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
60
<PAGE>
Section 12.9 Counterparts.
------------
This Indenture may be executed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
Section 12.10 Other Provisions.
----------------
The Company initially appoints the Trustee as Paying Agent, Registrar,
Conversion Agent and authenticating agent, as provided in Section 2.2.
The first certificate pursuant to Section 4.3 hereof shall be for the
fiscal year ending on December 31, 1997.
The reporting date for Section 9.6 hereof is May 15 of each year. The
first reporting date is May 15, 1998.
The Trustee (or, if it is a subsidiary of a bank holding company, its
parent) shall always have a combined capital and surplus of at least $50,000,000
as set forth in its most recent published annual report of condition.
The Company's address is:
P-Com, Inc.
3175 South Winchester Boulevard
Campbell, California 95008
Telephone: (408) 866-3666
Facsimile: (408) 866-3678
with a copy to Company's counsel:
Warren T. Lazarow
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303-0913
Telephone: (650) 424-0160
Facsimile: (650) 496-2885
61
<PAGE>
The Trustee's address is:
State Street Bank and Trust Company of California, N.A.
725 South Figueroa Street
Los Angeles, California 90017
Attention: Corporate Trust Administration -- P-Com, Inc.
4 1/4% Convertible Subordinated Notes due 2002
Telephone: (213) 362-7373
Facsimile: (213) 362-7357
with a copy to Trustee's counsel:
Daniel Putnam Brown, Jr.
Shipman & Goodwin LLP
One American Row
Hartford, Connecticut 06103-2819
Telephone: (860) 251-5919
Facsimile: (860) 251-5999
Section 12.11 Governing Law.
-------------
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND
THE NOTES, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF.
Section 12.12 No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or an Affiliate. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
Section 12.13 Successors.
----------
All agreements of the Company in this Indenture and the Notes shall bind
its successor. All agreements of the Trustee in this Indenture shall bind its
successor.
Section 12.14 Severability.
------------
In case any provision in this Indenture or in the Notes 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.
62
<PAGE>
Section 12.15 Table of Contents, Headings, Etc.
---------------------------------
The Table of Contents, Cross-Reference Table, and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.
63
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
P-COM, INC.
By: /s/ Michael J. Sophie
----------------------
Name: Michael J. Sophie
Title:
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A.,
as Trustee
By: /s/ Mark Henson
----------------
Name: Mark Henson
Title: Assistant Vice President
64
<PAGE>
EXHIBIT A
[FORM OF FACE OF NOTE]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO
P-COM, INC. (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 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.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY
AND ANY SHARES OF COMMON STOCK ISSUED UPON CONVERSION HEREOF MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY
IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (a) SUCH SECURITY AND ANY SHARES OF COMMON STOCK ISSUED UPON
CONVERSION HEREOF MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a)
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
TRUSTEE, AS REGISTRAR FOR THE NOTES (OR IN THE CASE OF THE COMMON STOCK, THE
TRANSFER AGENT FOR THE COMMON STOCK (THE "TRANSFER AGENT")), A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON
1
<PAGE>
TRANSFER OF THE NOTES (OR THE COMMON STOCK, AS THE CASE MAY BE) (THE FORM OF
WHICH LETTER OF WHICH CAN BE OBTAINED FROM THE TRUSTEE FOR THE NOTES OR THE
TRANSFER AGENT FOR THE COMMON STOCK), (c) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (d) OUTSIDE THE UNITED STATES
TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER
THE SECURITIES ACT OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OR
ANY COMMON STOCK ISSUED UPON CONVERSION HEREOF OF THE RESALE RESTRICTIONS SET
FORTH IN (A) ABOVE.
2
<PAGE>
CUSIP No. ________________
[ISIN No._______________]
No. __________ $_________
P-COM, INC.
4 1/4% CONVERTIBLE SUBORDINATED NOTE DUE 2002
P-Com, Inc., a Delaware corporation (the "Company"), promises to pay to
________________________________________________________________ or registered
assigns, the principal sum of $________ [(or such lesser or greater amounts as
indicated on Schedule A hereof)]/(1)/ on November 1, 2002, subject 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.
Interest Payment Dates: May 1 and November 1, commencing May 1, 1998
Interest Record Dates: April 15 and October 15
IN WITNESS WHEREOF, P-Com, Inc. has caused this Note to be signed manually
or by facsimile by its duly authorized officers and a facsimile of its corporate
seal to be affixed hereto or imprinted hereon.
Dated: P-COM, INC.
By:_________________________________________
By:_________________________________________
[Seal]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 4 1/4% Convertible Subordinated
Notes due 2002 described in the within-mentioned Indenture.
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Trustee
By:______________________________________
Authorized Signatory
___________________
(1) Applicable to Global Securities only.
<PAGE>
P-COM, INC.
1. INTEREST. P-Com, Inc., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at the rate of 4
1/4% per annum. The Company will pay interest semiannually on each May 1 and
November 1 (each an "Interest Payment Date"), commencing on May 1, 1998, to
holders of record on the immediately preceding April 15 and October 15 (each a
"Record Date").
Interest on the Notes will accrue from the most recent date to which
interest has been paid, or if no interest has been paid, from November 10, 1997.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. To the extent lawful, the Company shall pay interest (including post-
petition interest in any proceeding under any Bankruptcy Law, to the extent
allowed under such Bankruptcy Law) on overdue installments of interest (without
regard to any applicable grace period) at the rate borne by the Notes,
compounded semiannually.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except
defaulted interest) to the Persons who are registered holders of the Notes at
the close of business on the Record Date immediately preceding the relevant
Interest Payment Date (other than with respect to a Note or portion thereof
called for redemption on a redemption date, or repurchased in connection with a
Change of Control on a Change of Control Payment Date, during the period from
the close of business on a Record Date to (but excluding) the next succeeding
Interest Payment Date (in which case accrued interest shall be payable, unless
such Note is converted, to the holder of the Note or portion thereof redeemed or
repurchased in accordance with the applicable redemption or repurchase
provisions of the Indenture)). Holders must surrender Notes to a Paying Agent
to collect principal payments. The Company will pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. The Company may pay principal and interest
by check payable in such money, and may mail such check to the holder's
registered address; provided all payments with respect to Notes the holders of
--------
which have given wire transfer instructions to the Company and to the Trustee at
least five Business Days prior to the applicable Interest Payment Date will be
required to be made by wire transfer of immediately available funds to the
accounts specified by the holders thereof.
3. PAYING AGENT, REGISTRAR AND CONVERSION AGENT. Initially, the Trustee
will act as Paying Agent, Registrar and Conversion Agent. The Company may
change any Paying Agent, Registrar, co-registrar or Conversion Agent without
prior notice. The Company or any of its Affiliates may act in any such
capacity.
4. INDENTURE. The Company issued the Notes under an indenture, dated as
of November 1, 1997 (the "Indenture"), between the Company and State Street Bank
and Trust Company of California, N.A., as Trustee. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
the Trust Indenture Act of 1939, as amended (15 U.S. Code Section 77aaa-77bbbb)
as in effect on the date of the Indenture. The Notes are subject to, and
qualified by, all such terms, certain of which are summarized hereon, and
holders are referred to the Indenture and such Act for a statement of such
terms. The Notes are unsecured general obligations of the Company limited in
aggregate principal amount to $100,000,000 (or, if the Initial Purchasers' over-
allotment option is exercised in full, $115,000,000) and subordinated in right
of payment to all existing and future Senior
<PAGE>
Indebtedness of the Company. Capitalized terms not defined herein have the same
meaning as is given to them in the Indenture.
5. OPTIONAL REDEMPTION. The Notes are not redeemable by the Company
prior to November 5, 2000. On or after November 5, 2000, the Notes are
redeemable upon 30 days' notice at the option of the Company, in whole, or from
time to time, in part, at the redemption prices set forth below, in each case
together with accrued and unpaid interest to, but excluding, the date fixed for
redemption.
If redeemed during the 12-month period beginning November 1 (November 5,
2000 through October 31, 2001 in the case of the first such period):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2000........................................................ 101.70%
2001........................................................ 100.85
</TABLE>
and 100% on November 1, 2002; provided any semi-annual payment of interest
--------
becoming due on the date fixed for redemption shall be payable to the holders
of record on the relevant Record Date of the Notes being redeemed.
Notwithstanding the foregoing, the Company may not redeem any Notes unless all
accrued and unpaid interest has been paid on all outstanding Notes for all
interest periods terminating on or prior to the last Interest Payment Date
before the date of redemption.
6. NOTICE OF REDEMPTION. Notice of redemption will be mailed, by first-
class mail, at least 30 days but not more than 60 days prior to the date fixed
for redemption to the holder of each Note to be redeemed at such holder's last
address of record on the books of the Registrar. The Notes in denominations
larger than $1,000 may be redeemed in part but only in integral multiples of
$1,000. In the event of a redemption of less than all of the Notes, the Notes
will be chosen for redemption by the Trustee in accordance with the Indenture.
If this Note is redeemed subsequent to a Record Date with respect to any
Interest Payment Date specified above and on or prior to such Interest Payment
Date, then any accrued interest will be paid to the person in whose name this
Note is registered at the close of business on such Record Date.
7. REPURCHASE AT OPTION OF HOLDER. If there is a Change of Control, the
Company shall be required to offer to purchase on the Change of Control Payment
Date all outstanding Notes at a cash purchase price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the Change of Control Payment Date. Holders of Notes that
are subject to an offer to purchase will receive a Change of Control Offer from
the Company at least 20 Business Days prior to any related Change of Control
Payment Date and may elect to have such Notes or portions thereof in authorized
denominations purchased by completing the form entitled "Option of Holder To
Elect Purchase" appearing below. Holders have the right to withdraw their
election by delivering a written notice of withdrawal to the Company or the
Paying Agent in accordance with the terms of the Indenture.
2
<PAGE>
8. SUBORDINATION. The payment of the principal of, interest on or any
other amounts due on the Notes is subordinated in right of payment to all
existing and future Senior Indebtedness of the Company, as described in the
Indenture. Each holder, by accepting a Note, agrees to such subordination and
authorizes and directs the Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate the subordination so provided and
appoints the Trustee as its attorney-in-fact for such purpose.
9. CONVERSION. The holder of any Note has the right, exercisable at any
time prior to the close of business (New York time) on the date of the Note's
maturity, to convert the principal amount thereof (or any portion thereof that
is an integral multiple of $1,000) into fully paid and nonassessable whole
shares of Common Stock at the initial Conversion Price of $27.46 per share,
subject to adjustment under certain circumstances, except that if a Note is
called for redemption or repurchase, as the case may be, the conversion right
will terminate at the close of business on the Business Day immediately
preceding the date fixed for redemption or repurchase, as the case may be. A
Note in respect of which a holder has delivered an "Option of Holder to Elect
Purchase" form appearing below exercising the option of such holder to require
the Company to purchase such Note may be converted only if the notice of
exercise is withdrawn as provided above and in accordance with the terms of the
Indenture.
To convert a Note, a holder must (1) complete and sign a conversion notice
substantially in the form set forth below, (2) surrender the Note to a
Conversion Agent, (3) furnish appropriate endorsements or transfer documents if
required by the Registrar or Conversion Agent and (4) pay any transfer or
similar tax, if required. The number of shares issuable upon conversion of a
Note is determined by dividing the principal amount of the Note converted by the
Conversion Price in effect on the Conversion Date. No fractional shares will be
issued upon conversion but a cash adjustment will be made for any fractional
interest.
Any Note or portion thereof surrendered for conversion after the close of
business on a Record Date for payment of interest and prior to the opening of
business on the next succeeding Interest Payment Date shall be accompanied by
payment, in funds acceptable to the Company, of an amount equal to the interest
thereon that is to be paid on such Interest Payment Date on the principal amount
being converted (unless any such Note or portion thereof being converted shall
have been called for redemption on a redemption date occurring between the close
of business on such Record Date and the opening of business on such Interest
Payment Date, in which case no such payment shall be required); provided,
--------
however, that no such payment need be made if there shall exist at the time of
- -------
conversion a default in the payment of interest on the Notes. An amount equal
to such payment shall be paid by the Company on such Interest Payment Date to
the holder of such Notes at the close of business on such Record Date; provided,
--------
however, that, if the Company shall default in the payment of interest on such
- -------
Interest Payment Date, such amount shall be paid to the Person who made such
required payment. Except as provided in the Indenture, no payments or
adjustments shall be made upon conversion on account of accrued interest on the
Notes or for any dividends or distributions on any shares of Common Stock
delivered upon the conversion of such Notes.
The above description of conversion of the Notes is qualified by reference
to, and is subject in its entirety by, the more complete description thereof
contained in the Indenture.
3
<PAGE>
In order to exercise the conversion privilege with respect to any interest
in a Global Note, the beneficial holder must complete the appropriate
instruction form for conversion pursuant to the Depositary's book-entry
conversion program and follow the other procedures set forth in such program.
Upon the conversion of a Global Note, the Trustee, or the Custodian at the
direction of the Trustee, shall make a notation on such Global Note as to the
reduction in the principal amount represented thereby.
10. REGISTRATION RIGHTS. The holder of this Note is entitled to the
benefits of a Registration Rights Agreement, dated as of November 1, 1997, among
the Company and the Initial Purchasers (the "Registration Rights Agreement").
11. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form,
without coupons, in denominations of $1,000 and integral multiples of $1,000.
The transfer of Notes may be registered, and Notes may be exchanged, as provided
in the Indenture. The Registrar may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption (except the unredeemed portion of any Note being redeemed in part).
Also, it need not exchange or register the transfer of any Note for a period of
15 days before a selection of Notes to be redeemed.
12. PERSONS DEEMED OWNERS. The registered holder of a Note may be treated
as its owner for all purposes.
13. UNCLAIMED MONEY. Upon the earlier of (i) two years after the date
such payment became due and (ii) when such monies would escheat to the state,
money for the payment of principal of, or interest or Liquidated Damages, if
any, on the Notes shall be paid back to the Company by the Trustee and the
Paying Agent. After that, holders of Notes entitled to the money must look to
the Company for payment unless the applicable abandoned property law designates
another Person and, in either case, all liability of the Trustee and the Paying
Agent with respect to such money shall cease.
14. DEFAULTS AND REMEDIES. The Notes shall have the Events of Default as
set forth in Section 8.1 of the Indenture. Subject to certain limitations in
the Indenture, if an Event of Default occurs and is continuing, the Trustee by
notice to the Company, or the holders of at least 25% in aggregate principal
amount of the then outstanding Notes by notice to the Company and the Trustee,
may declare all the Notes to be due and payable immediately, except that in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, all Notes shall become due and payable immediately without further
action or notice.
The holders of a majority in principal amount of the Notes then outstanding
by written notice to the Trustee may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, holders of a
majority in principal amount of the then outstanding Notes issued under the
Indenture may direct the Trustee in its exercise of any trust or power. The
Company must furnish annually compliance certificates
4
<PAGE>
to the Trustee. The above description of Events of Default and remedies is
qualified by reference to, and subject in its entirety by, the more complete
description thereof contained in the Indenture.
15. AMENDMENTS, SUPPLEMENTS AND WAIVERS. Subject to certain exceptions
set forth in Section 11.2, the Indenture or the Notes may be amended or
supplemented with the consent of the holders of at least a majority in principal
amount of the then outstanding Notes (including consents obtained in connection
with a tender offer or exchange offer for Notes), and any existing default may
be waived with the consent of the holders of a majority in principal amount of
the then outstanding Notes. The Indenture and the Notes may be amended without
the consent of any holder under certain circumstances set forth in Section 11.1
of the Indenture.
16. TRUSTEE DEALINGS WITH THE COMPANY. The Trustee, in its individual or
any other capacity, may become the owner or pledgee of the Notes and may
otherwise deal with the Company or an Affiliate of the Company with the same
rights it would have, as if it were not Trustee, subject to certain limitations
provided for in the Indenture and in the TIA. Any Agent may do the same with
like rights.
17. NO RECOURSE AGAINST OTHERS. A director, officer, employee or
shareholder of the Company, as such, shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation. Each
holder of the Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for the issue of the Notes.
18. GOVERNING LAW. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL
GOVERN THE INDENTURE AND THE NOTES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS
THEREOF.
19. AUTHENTICATION. The Notes shall not be valid until authenticated by
the manual signature of an authorized signatory of the Trustee or an
authenticating agent.
20. ABBREVIATIONS. Customary abbreviations may be used in the name of a
holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
21. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
one or more CUSIP numbers to be printed on the Notes and the Trustee may use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
The Company will furnish to any holder of the Notes upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Request may be made to:
5
<PAGE>
P-Com, Inc.
3175 South Winchester Boulevard
Campbell, California 95008
Telephone: (408) 866-3666
Facsimile: (408) 866-3655
Attention: Chief Financial Officer
or to Company's counsel:
Warren T. Lazarow
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303-0913
Telephone: (650) 424-0160
Facsimile: (650) 496-2885
6
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to
________________________________________________________________________________
(Insert assignee's social security or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________ agent to transfer this
Note on the books of the Company. The agent may substitute another to act for
him.
Date:____________________________________
In connection with any transfer of any of the Notes evidenced by this
certificate (other than pursuant to any transfer pursuant to a Shelf
Registration Statement that is effective at such time of transfer) occurring
prior to the date that is two years after the later of the date of original
issuance of such Notes and the last date, if any, on which such Notes were owned
by the Company or any Affiliate of the Company, the undersigned confirms, to the
best of his or her knowledge, that such Notes are being transferred:
<TABLE>
<CAPTION>
CHECK ONE BOX BELOW
<S> <C> <C>
(1) [_] to the Company; or
(2) [_] pursuant to and in compliance with Rule 144A
under the Securities Act of 1933; or
(3) [_] pursuant to and in compliance with Regulation S
under the Securities Act of 1933; or
(4) [_] to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act of 1933 that has furnished to
the Trustee a signed letter containing certain
representations and agreements (the form of
which letter is attached as Exhibit E to the
Indenture); or
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(5) [_] pursuant to another available exemption from the
registration requirements of the Securities Act
of 1933; or
(6) [_] pursuant to an effective registration statement
under the Securities Act of 1933.
</TABLE>
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Notes evidenced by this certificate in the name of any person other
than the registered holder thereof; provided, however, that if box (2),
-------- -------
(3), (4) or (5) is checked, the Trustee may require, prior to registering
any such transfer of the Notes such legal opinions, certifications and
other information as the Company has reasonably requested to confirm that
such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act of 1933, such as the exemption provided by Rule 144 under such Act.
__________________________________________________
__________________________________________________
Signature(s)
Signature must be guaranteed by an eligible
Guarantor Institution (banks, stock brokers,
savings and loan associations and credit unions)
with membership in an approved signature guarantee
medallion program pursuant to Securities and
Exchange Commission Rule 17Ad-15.
__________________________________________________
Signature Guarantee
2
<PAGE>
[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE A
The initial principal amount of this Global Note shall be $_______. The
following increases or decreases in the principal amount of this Global Note
have been made:
<TABLE>
<CAPTION>
Amount of increase in
Principal Amount of this Principal Amount of Signature of
global Note including upon Amount of decrease this Global Note authorized signatory
exercise of over-allotment in Principal Amount following such of Trustee or
Date Made option of this Global Note decrease or increase Securities Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note or a portion thereof repurchased by
the Company pursuant to Section 4.7 of the Indenture, check the box: [_]
If the purchase is in part, indicate the portion (in denominations of
$1,000 or any integral multiple thereof) to be purchased:_______________________
Your Signature:____________________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Date:______________________________________________________________________
Signature Guarantee:/(1)/__________________________________________________
___________________
/(1)/ Signature must be guaranteed by an eligible Guarantor Institution (banks,
stock brokers, savings and loan associations and credit unions) with
membership in an approved signature guarantee medallion program pursuant to
Securities and Exchange Commission Rule 17Ad-15.
<PAGE>
ELECTION TO CONVERT
To P-Com, Inc.:
The undersigned owner of this Note hereby irrevocably exercises the option
to convert this Note, or the portion below designated, into Common Stock of P-
Com, Inc. in accordance with the terms of the Indenture referred to in this
Note, and directs that the shares issuable and deliverable upon conversion,
together with any check in payment for fractional shares, be issued in the name
of and delivered to the undersigned, unless a different name has been indicated
in the assignment below. If shares are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto.
Date:
Convert in whole:____________________
Portions of Note to be converted ($1,000 or
integral multiples thereof):
$________________________
_________________________________________________
Signature (for conversion only)
_________________________________________________
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or Other
Identifying Number
_________________________________________________
_________________________________________________
_________________________________________________
Signature Guarantee:/(1)/________________________
__________________
/(1)/ Signature must be guaranteed by an eligible Guarantor Institution (banks,
stock brokers, savings and loan associations and credit unions) with
membership in an approved signature guarantee medallion program pursuant to
Securities and Exchange Commission Rule 17Ad-15.
<PAGE>
EXHIBIT B
FORM OF TRANSFER CERTIFICATE
FOR TRANSFER FROM
RULE 144A GLOBAL NOTE
TO REGULATION S GLOBAL NOTE
(TRANSFERS PURSUANT TO SECTION 2.6(a)(ii)
OF THE INDENTURE)
State Street Bank and Trust Company of California, N.A., as Trustee
725 South Figueroa Street
Los Angeles, California 90017
Attention: Corporate Trust Department
Re: P-Com, Inc. 4 1/4% Convertible Subordinated Notes due 2002 (the
"Notes")
Reference is hereby made to the Indenture dated as of October 15, 1997 (the
"Indenture") between P-Com, Inc., as Issuer, and State Street Bank and Trust
Company of California, N.A., as Trustee. Capitalized terms used but not defined
herein shall have the meanings given them in the Indenture.
This letter relates to U.S. $____________ aggregate principal amount of
Notes which are held in the form of the Rule 144A Global Note (CUSIP No.
___________) with the Depositary in the name of _______________________ [name of
transferor] (the "Transferor") to effect the transfer of the Notes in exchange
for an equivalent beneficial interest in the Regulation S Global Note.
In connection with such request, the Transferor does hereby certify that
such transfer has been effected in accordance with the transfer restrictions set
forth in the Notes and (i) with respect to transfers made in reliance on
Regulation S, does certify that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither the Transferor nor any
person acting on its behalf knows that the transaction was pre-arranged
with a buyer in the United States;
(3) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the United States Securities Act of 1933 (the
"Securities Act");
B-1
<PAGE>
(ii) with respect to transfers made in reliance on Rule 144 certify that
the Notes are being transferred in a transaction permitted by Rule 144 under the
Securities Act; and (iii) with respect to transfers made in reliance on Rule
144A, that such Notes are being transferred in accordance with Rule 144A under
the Securities Act to a transferee that the Transferor reasonably believes is
purchasing the Notes for its own account or an account with respect to which the
transferee exercises sole investment discretion and the transferee and any such
account is a "qualified institutional buyer" within the meaning of Rule 144A, in
a transaction meeting the requirements of Rule 144A and in accordance with
applicable securities laws of any state of the United States or any other
jurisdiction.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1) of Regulation S are
applicable thereto, we confirm that such sale has been made in accordance with
the applicable provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1), as the
case may be.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
[Name of Transferor]
By:_______________________________________________
Name:
Title:
Date:
B-2
<PAGE>
EXHIBIT C
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
FROM REGULATION S GLOBAL NOTE
TO RULE 144A GLOBAL NOTE
(TRANSFERS PURSUANT TO SECTION 2.6(a)(iii)OF THE INDENTURE)
State Street Bank and Trust Company of California, N.A., as Trustee
725 South Figueroa Street
Los Angeles, California 90017
Attention: Corporate Trust Department
Re: P-Com, Inc. 4 1/4% Convertible Subordinated Notes due 2002 (the
"Notes")
Reference is hereby made to the Indenture dated as of October 15, 1997 (the
"Indenture") between P-Com, Inc., as Issuer, and State Street Bank and Trust
Company of California, N.A., as Trustee. Capitalized terms used but not defined
herein shall have the meanings given them in the Indenture.
This letter relates to U.S. $__________ aggregate principal amount of Notes
which are held in the form of the Regulation S Global Note with the Depositary
(ISIN No.__________) in the name of ____________________ [name of transferor]
(the "Transferor") to effect the transfer of the Notes in exchange for an
equivalent beneficial interest in the Rule 144A Global Note.
In connection with such request, and in respect of such Notes the
Transferor does hereby certify that such Notes are being transferred in
accordance with (i) the transfer restrictions set forth in the Notes and (ii)
Rule 144A under the United States Securities Act of 1933 to a transferee that
the Transferor reasonably believes is purchasing the Notes for its own account
or an account with respect to which the transferee exercises sole investment
discretion and the transferee and any such account is a "qualified institutional
buyer" within the meaning of Rule 144A, in a transaction meeting the
requirements of Rule 144A and in accordance with applicable securities laws of
any state of the United States or any other jurisdiction.
[Name of Transferor],
By:______________________________________________
Name:
Title:
Dated:
C-1
<PAGE>
EXHIBIT D
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
FROM GLOBAL NOTE OR CERTIFICATED
SECURITY TO CERTIFICATED SECURITY
(TRANSFERS PURSUANT TO SECTION 2.6(a)(iv)
OR SECTION 2.6(a)(vi) OF THE INDENTURE)
State Street Bank and Trust Company of California, N.A., as Trustee
725 South Figueroa Street
Los Angeles, California 90017
Attention: Corporate Trust Department
Re: P-Com, Inc. 4 1/4% Convertible Subordinated Notes due 2002 (the
"Notes")
Reference is hereby made to the Indenture dated as of October 15, 1997 (the
"Indenture") between P-Com, Inc., as Issuer, and State Street Bank and Trust
Company of California, N.A., as Trustee. Capitalized terms used but not defined
herein shall have the meanings given them in the Indenture.
This letter relates to U.S. $___________ aggregate principal amount of
Notes which are held [in the form of the [Rule 144A/Regulation S] [Global] Note
(CUSIP No. __________ (_________)/ISIN No. _________) with the Depositary](1) in
the name of ________________ [name of transferor] (the "Transferor") to effect
the transfer of the Notes.
In connection with such request, and in respect of such Notes, the
Transferor does hereby certify that such Notes are being transferred in
accordance with (i) the transfer restrictions set forth in the Notes and (ii) to
a transferee that the Transferor reasonably believes is an institutional
"accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act of 1933) and is acquiring at least
$100,000 principal amount of Notes for its own account or for one or more
accounts as to which the transferee exercises sole investment discretion and
(iii) in accordance with applicable securities laws of any state of the United
States or any other jurisdiction.
[Name of Transferor],
By:______________________________________________
Name:
Title:
Dated:
________________
/(1)/ Insert, if appropriate.
D-1
<PAGE>
EXHIBIT E
FORM OF ACCREDITED INVESTOR TRANSFEREE CERTIFICATE
(TRANSFERS PURSUANT TO SECTION 2.6(a)(iv), SECTION 2.6(a)(vi) AND SECTION
2.6(a)(vii))
State Street Bank and Trust Company of California, N.A., as Trustee
725 South Figueroa Street
Los Angeles, California 90017
Attention: Corporate Trust Department
Re: P-Com, Inc. 4 1/4% Convertible Subordinated Notes due 2002 (the
"Notes")
Reference is hereby made to the Indenture dated as of October 15, 1997 (the
"Indenture") between P-Com, Inc., as Issuer, and State Street Bank and Trust
Company of California, N.A., as Trustee. Capitalized terms used but not defined
herein shall have the meanings given them in the Indenture.
This letter relates to U.S. $____________ aggregate principal amount of
Notes which are held [in the form of the [Rule 144A/Regulation S] Global Note
(CUSIP No. _________ /ISIN No._______) with the Depositary](1) in the name of
_______________________ [name of transferor] (the "Transferor") to effect the
transfer of the Notes to the undersigned.
In connection with such request, and in respect of such Notes we confirm
that:
1. We understand that the Notes were originally offered in a
transaction not involving any public offering in the United States within
the meaning of the United States Securities Act of 1933, as amended (the
"Securities Act"), that the Notes have not been registered under the
Securities Act and that (A) the Notes may be offered, resold, pledged or
otherwise transferred only (i) to a person who the seller reasonably
believes is a "qualified institutional buyer" (as defined in Rule 144A
under the Securities Act) in a transaction meeting the requirements of Rule
144A, to an institutional "accredited investor" (as defined in Rule
501(a)(1)(2)(3) or (7) under the Securities Act of 1933) that prior to such
transfer furnishes the Trustee a signed letter containing certain
representations and agreements, in a transaction meeting the requirements
of Rule 144 under the Securities Act, outside the United States to a
foreign person in a transaction meeting the requirements of Rule 904 under
the Securities Act or in accordance with another exemption from the
registration requirements of the Securities Act (and based upon an opinion
of counsel if the Company so requests), (ii) to the Company or (iii)
pursuant to an effective registration statement, and, in each case, in
accordance with any applicable securities laws of any State of the United
States or any other applicable jurisdiction and (B) the purchaser will, and
each subsequent holder is required to, notify any subsequent purchaser from
it of the resale restrictions set forth in (A) above.
2. We are a corporation, partnership or other entity having such
knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of
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<PAGE>
an investment in the Notes, and we are (or any account for which we are
purchasing under paragraph 4 below is) an institutional accredited investor
as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act,
able to bear the economic risk of our proposed investment in the Notes.
3. We are acquiring the Notes for our own account (or for accounts
as to which we exercise sole investment discretion and have authority to
make, and do make, the statements contained in this letter) and not with a
view to any distribution of the Notes, subject, nevertheless, to the
understanding that the disposition of our property shall at all times be
and remain within our control.
4. We are, and each account (if any) for which we are purchasing
Notes is, purchasing Notes having an aggregate principal amount of not less
than $100,000.
5. We understand that (a) the Notes will be delivered to us in
registered form only and that the certificate delivered to us in respect of
the Notes will bear a legend substantially to the following effect:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY
AND ANY SHARES OF COMMON STOCK ISSUED UPON CONVERSION HEREOF MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY
IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (a) SUCH SECURITY AND ANY SHARES OF COMMON STOCK ISSUED UPON
CONVERSION HEREOF MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a)
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
TRUSTEE, AS REGISTRAR FOR THE NOTES (OR IN THE CASE OF THE COMMON STOCK, THE
TRANSFER AGENT FOR THE COMMON STOCK (THE "TRANSFER AGENT")), A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THE NOTES (OR THE COMMON STOCK, AS THE CASE MAY BE) (THE FORM OF
WHICH LETTER OF WHICH CAN BE OBTAINED FROM THE TRUSTEE FOR THE NOTES OR THE
TRANSFER AGENT FOR THE COMMON STOCK), (c) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (d) OUTSIDE THE UNITED STATES
TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER
THE SECURITIES ACT OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3)
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<PAGE>
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE
WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED
HEREBY OR ANY COMMON STOCK ISSUED UPON CONVERSION HEREOF OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
and (b) such certificates will be reissued without the foregoing legend
only in accordance with the terms of the Indenture.
6. We agree that in the event that at some future time we wish to
dispose of any of the Notes, we will not do so unless:
(a) the Notes are sold to the Company or any Subsidiary thereof;
(b) the Notes are sold to a qualified institutional buyer in
compliance with Rule 144A under the Securities Act;
(c) the Notes are sold to an institutional accredited investor, as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act,
acquiring at least $100,000 principal amount of the Notes that, prior to
such transfer, furnishes to the Trustee a signed letter containing certain
representations and agreements substantially similar to those set forth
herein relating to the restrictions on transfer of the Notes;
(d) the Notes are sold outside the United States in compliance with
Rule 903 or Rule 904 under the Securities Act;
(e) the Notes are sold by us pursuant to Rule 144 under the Securities
Act; or
(f) the Notes are sold pursuant to an effective registration statement
under the Securities Act.
Very truly yours,
[PURCHASER]
By:______________________________________________
Name:
Title:
Dated:
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<PAGE>
EXHIBIT 4.4
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of November 1, 1997 by and among P-Com, Inc., a Delaware corporation
(the "Company"), and PaineWebber Incorporated, BancAmerica Robertson Stephens,
NationsBanc Montgomery Securities, Inc. and Pacific Growth Equities, Inc., as
initial purchasers (the "Initial Purchasers").
The Company proposes to issue and sell to the Initial Purchasers (the
"Initial Placement") $100,000,000 aggregate principal amount (plus up to an
additional $15,000,000 principal amount to cover over-allotments, if any) of its
4 1/4% Convertible Subordinated Notes due 2002 (the "Notes"), pursuant to the
terms of a purchase agreement, dated as of November 5, 1997 (the "Purchase
Agreement"). As an inducement to the Initial Purchasers to enter into the
Purchase Agreement, and in satisfaction of a condition to the Initial
Purchasers' obligations thereunder, the Company agrees with the Initial
Purchasers, (i) for the benefit of the Initial Purchasers and (ii) for the
benefit of the holders from time to time of the Transfer Restricted Securities
(as defined) whose names appear in the register maintained by the Company's
registrar in accordance with the provisions of the Indenture (as defined in
Section 1 hereof) (including the Initial Purchasers) (each of the foregoing a
"Holder," and collectively, the "Holders"), as follows:
1. DEFINITIONS. Capitalized terms used herein without definition shall
-----------
have their respective meanings set forth in the Purchase Agreement. As used in
this Agreement, the following capitalized terms shall have the following
meanings:
"Advice" means the receipt by such Holder of written notice from the
------
Company (the "Advice") that the use of the Prospectus may be resumed, and
receipt of copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus.
"Affiliate" of any specified person means any other person which, directly
---------
or indirectly, is in control of, is controlled by, or is under common control
with, such specified person. For purposes of this definition, control of a
person means the power, direct or indirect, to direct or cause the direction of
the management and policies of such person whether by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Business Day" means any day other than a Saturday, a Sunday or a day on
------------
which banking institutions in the State of New York are not required to be open.
"Closing Date" has the meaning set forth in the Purchase Agreement.
------------
"Commission" means the Securities and Exchange Commission.
----------
"Common Stock" means the common stock of the Company.
------------
<PAGE>
"Damages Payment Date" means each regular interest payment date with
--------------------
respect to the Notes provided for in the Indenture and the Notes.
"Effectiveness Target Date" has the meaning set forth in Section 3(a)
-------------------------
hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
------------
time to time, and the rules and regulations of the Commission promulgated
thereunder.
"Holder" has the meaning set forth in the preamble hereto.
------
"Indenture" means the Indenture dated as of November 1, 1997, between the
---------
Company and State Street Bank and Trust Company of California, N.A., as trustee,
pursuant to which the Notes are to be issued, as the same may be amended,
modified or supplemented from time to time in accordance with the terms thereof.
"Initial Purchasers" has the meaning set forth in the preamble hereto.
------------------
"Initial Placement" has the meaning set forth in the preamble hereto.
-----------------
"Losses" has the meaning set forth in Section 9(d) hereof.
------
"Majority Holders" means the Holders of a majority of the aggregate
----------------
principal amount of securities registered under a Shelf Registration Statement
(provided that Holders of Common Stock issued upon conversion of Notes shall be
deemed to be Holders of the aggregate principal amount of Notes from which such
Common Stock was converted).
"Managing Underwriters" means the investment banker or investment bankers
---------------------
and manager or managers that shall administer an Underwritten Offering pursuant
to Section 6 hereof of the securities covered by the Shelf Registration
Statement.
"Notes" means the 4 1/4% Convertible Subordinated Notes due 2002 of the
-----
Company.
"Offering Memorandum" has the meaning set forth in the Purchase Agreement.
-------------------
"Person" means any individual, partnership, corporation, limited liability
------
company, trust or unincorporated organization, or a government or agency or
political subdivision thereof.
"Prospectus" means the prospectus included in any Shelf Registration
----------
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of Transfer Restricted Securities, covered by
such Shelf Registration Statement, and all amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference into such Prospectus.
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<PAGE>
"Registration Default" has the meaning set forth in Section 5 hereto.
--------------------
"Requisite Information" has the meaning set forth in Section 5(m) hereto.
---------------------
"Securities Act" means the Securities Act of 1933, as amended from time to
--------------
time, and the rules and regulations of the Commission promulgated thereunder.
"Shelf Registration Period" has the meaning set forth in Section 3(b)
-------------------------
hereof.
"Shelf Registration Statement" means a "shelf" registration statement of
----------------------------
the Company pursuant to the provisions of Section 3 hereof which covers the
Transfer Restricted Securities, on an appropriate form under Rule 415 under the
Securities Act, or any similar rule that may be adopted by the Commission,
amendments and supplements to such registration statement, including post-
effective amendments, in each case including the Prospectus contained therein,
all exhibits thereto and all material incorporated by reference therein.
"Special Counsel" means Wilson Sonsini Goodrich & Rosati, Professional
---------------
Corporation, as special counsel to the Holders, or such successor counsel as
shall be specified by the Holders of a majority of Transfer Restricted
Securities.
"Transfer Restricted Securities" means each Note and the Common Stock
------------------------------
issuable upon conversion thereof until (i) the date on which such Note or the
Common Stock issuable upon conversion thereof has been effectively registered
under the Securities Act and disposed of pursuant to an effective registration
statement, (ii) the date on which such Note or the Common Stock issuable upon
conversion thereof is distributed to the public pursuant to Rule 144 under the
Securities Act (or any similar provision then in effect) or is saleable pursuant
to Rule 144(k) under the Securities Act and all legends thereon relating to
transfer restrictions have been or are capable of being removed, or (iii) the
date on which such Note or the Common Stock issuable upon conversion thereof
ceases to be outstanding.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
-------------------
"Trustee" means the trustee with respect to the Notes under the Indenture.
-------
"Underwritten Offering" or "Underwritten Registration" means a registration
--------------------- -------------------------
in which securities of the Company are sold to one or more underwriters for
reoffering to the public pursuant to Section 6.
2. SECURITIES SUBJECT TO THIS AGREEMENT. The securities entitled to the
------------------------------------
benefits of this Agreement are the Transfer Restricted Securities.
3. SHELF REGISTRATION.
------------------
(a) The Company shall, within 90 days after Closing Date, file with
the Commission and thereafter shall use its best efforts to cause to be declared
effective under the Securities Act by the 180th day after the Closing Date (the
"Effectiveness Target Date"), a Shelf Registration Statement relating
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<PAGE>
to the offer and sale of the Transfer Restricted Securities by the Holders from
time to time in accordance with the methods of distribution elected by such
Holders and set forth in such Shelf Registration Statement.
(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the Prospectus
forming a part thereof to be usable by Holders for a period of two years from
the later of (a) the Closing Date or (b) the last date of original issuance of
the Securities or such shorter period that will terminate when (i) all the
Transfer Restricted Securities covered by the Shelf Registration Statement have
been sold pursuant to the Shelf Registration Statement, or (ii) the date on
which there ceases to be outstanding any Transfer Restricted Securities (in any
such case, such period being called the "Shelf Registration Period"). The
Company shall be deemed not to have used its best efforts to keep the Shelf
Registration Statement effective during the requisite period if it voluntarily
takes any action that would result in Holders of Transfer Restricted Securities
covered thereby not being able to offer and sell such securities during that
period, unless (i) such action is required by applicable law, (ii) the continued
effectiveness of the Shelf Registration Statement would require the Company to
disclose a material financing, acquisition or other corporate transaction, and
the Board of Directors shall have determined in good faith that such disclosure
is not in the best interests of the Company and the holders of its outstanding
Common Stock, or (iii) the Board of Directors shall have determined in good
faith that there is a valid business purpose or reason for such suspension, and
(x), in the case of clause (i) above, the Company thereafter promptly complies
with the requirements of paragraph 5(i) below and (y) the Company complies with
its obligations, if any, to pay Liquidated Damages pursuant to Section 4 hereof.
(c) The Company shall prepare and file with the Commission such
amendments, including post-effective amendments, to the Shelf Registration
Statement as may be necessary to keep such Registration Statement continuously
effective for the applicable time period; cause the related Prospectus to be
supplemented by any required Prospectus supplement and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply with the provisions of the Securities Act and the
Exchange Act with respect to the disposition of all securities covered by such
Shelf Registration Statement during the applicable period in accordance with the
intended methods of disposition by the sellers thereof set forth in such Shelf
Registration Statement as so amended or in such Prospectus as so supplemented.
(d) Certain Notices; Suspension of Sales. Each Holder agrees by
------------------------------------
acquisition of such Transfer Restricted Securities that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 5(c)(2)(ii), 5(c)(2)(iii), 5(c)(2)(iv) or 5(c)(2)(v) hereof, such Holder
will forthwith discontinue disposition of such Transfer Restricted Securities
covered by such Registration Statement and Prospectus (other than in
transactions exempt from the registration requirements under the Securities Act)
until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 5(i) hereof, or until Advice by the Company
that the use of the applicable Prospectus may be resumed, and, in either case,
has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus.
-4-
<PAGE>
4. LIQUIDATED DAMAGES.
------------------
(a) The Company and the Initial Purchasers agree that the Holders will
suffer damages if the Company fails to fulfill its obligations pursuant to this
Agreement and that it would not be possible to ascertain the extent of such
damages. Accordingly, the Company hereby agrees to pay liquidated damages
("Liquidated Damages") to each Holder under the circumstances and to the extent
set forth below:
(i) the Company fails to file the Shelf Registration Statement
required by Section 3 of this Agreement on or before the date specified for
such filing under Section 3(a) hereof; or
(ii) such Shelf Registration Statement is not declared effective
by the Commission on or prior to the Effectiveness Target Date; or
(iii) the Shelf Registration Statement is declared effective but
thereafter ceases to be continuously effective or usable in connection with
resales of Transfer Restricted Securities during the Shelf Registration
Period for a period of time that shall exceed 90 days in the aggregate in
any period of 365 consecutive days (with no Liquidated Damages being due
for such period of time up to and including 90 days in any period of 365
consecutive days);
(each such event referred to in clauses (a) through (c) above a "Registration
Default"); provided a particular Holder shall not be entitled to receive
Liquidated Damages pursuant to 4(a)(iii) in the event that the Shelf
Registration Statement is not usable by such Holder as a result of the failure
of such Holder to provide Requisite Information with respect to it (unless such
Holder shall have provided such Requisite Information to the Company and the
Company shall have failed to file an appropriate Prospectus supplement pursuant
to Section 5(m) hereof). In the event of any such Registration Default, the
Company shall accrue Liquidated Damages to each Holder during the first 90-day
period immediately in an amount equal to $.05 per week per $1,000 principal
amount of Notes held by such Holder and, if applicable, on an equivalent basis
per share (subject to adjustment in the event of any stock split, stock
combination, stock dividends and the like) of Common Stock constituting Transfer
Restricted Securities held by such Holder for each week or portion thereof that
the Registration Default continues. The weekly rate at which such Liquidated
Damages accrue shall increase by an additional $.05 per $1,000 principal amount
of Notes and, if applicable, an equivalent amount per week per share (subject to
adjustment as set forth above) of Common Stock constituting Transfer Restricted
Securities for each subsequent continuing 90-day period following the occurrence
of such Registration Default until all Registration Defaults have been cured;
provided, however, that Liquidated Damages shall not at any time exceed $.25 per
- -------- -------
week per $1,000 principal amount of Notes or, as applicable, an equivalent
amount per week per share (subject to adjustment as set forth above) of Common
Stock constituting Transfer Restricted Securities. In no event shall the
Company pay Liquidated Damages in excess of such maximum amount set forth in the
preceding sentence, regardless of whether one or multiple Registration Defaults
exist. A Registration Default under clause (a) above shall be cured on the date
that the Shelf Registration Statement is filed with the Commission; a
Registration Default under clause (b) above shall be cured on the date that the
Shelf Registration Statement is declared effective by the Commission; and a
Registration Default under clause
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<PAGE>
(c) above shall be cured on the date of the Shelf Registration Statement is
declared effective or usable. All accrued Liquidated Damages will be paid by the
Company on each Damages Payment Date in cash. Such payment will be made to the
Holder(s) of the Global Notes (as defined in the Indenture) by wire transfer of
immediately available funds or by federal funds check and to Holders of Transfer
Restricted Securities represented by Certificated Notes, if any, by wire
transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the cure
of all Registration Defaults, the accrual of Liquidated Damages will cease.
(b) The parties hereto agree that the Liquidated Damages provided for
in this Section 4 constitute a reasonable estimate of the damages that may be
incurred by Holders of Transfer Restricted Securities by reason of the failure
of the Shelf Registration Statement to be filed, declared effective or
maintained effective, as the case may be, in accordance with the provisions
hereof.
5. REGISTRATION PROCEDURES. In connection with any Shelf Registration
-----------------------
Statement, the following provisions shall apply:
(a) The Company shall furnish to the Initial Purchasers, the Holders,
the Managing Underwriters, if any, and their respective counsel, not less than
five Business Days prior to the filing thereof with the Commission, a copy of
any Shelf Registration Statement and each amendment thereof, and each amendment
or supplement, if any, to the Prospectus included therein, and shall use its
best efforts to reflect in each such document, when so filed with the
Commission, such comments as the Initial Purchasers and the Holders or their
counsel may reasonably propose.
(b) The Company shall use its best efforts to ensure that (i) any
Shelf Registration Statement and any amendment thereto and any Prospectus
forming part thereof and any amendment or supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) assuming the Requisite Information provided by Holders is true
and correct, any Shelf Registration Statement and any amendment or supplement
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) assuming the
Requisite Information provided by Holders of Transfer Restricted Securities is
true and correct, any Prospectus forming part of any Shelf Registration
Statement, and any amendment or supplement to such Prospectus, does not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements, in the light of the circumstances
under which they were made, not misleading.
(c) (1) The Company shall advise the Initial Purchasers, the Holders
of Transfer Restricted Securities named in the Shelf Registration Statement and
the Managing Underwriters, if any, and, if requested by the Initial Purchasers,
any such Holder or the Managing Underwriters, if any, confirm such advice in
writing, when a Shelf Registration Statement or any amendment thereto has been
filed with the Commission and when the Shelf Registration Statement or any post-
effective amendment thereto has become effective.
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<PAGE>
(2) The Company shall advise the Initial Purchasers, the Holders of
Transfer Restricted Securities named in the Shelf Registration Statement, the
Managing Underwriters, if any, and their respective counsel and, if requested by
any such person, confirm such advice in writing:
(i) of any request by the Commission for amendments or
supplements to the Shelf Registration Statement or the Prospectus included
therein or for additional information;
(ii) of the initiation by the Commission of proceedings
relating to a stop order suspending the effectiveness of the Shelf
Registration Statement;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the securities included
therein for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and
(v) of the occurrence of the existence of any fact and the
happening of any event (including, without limitation, pending negotiations
relating to, or the consummation of, a transaction or the occurrence of any
event which would require additional disclosure of material non-public
information by the Company in the Shelf Registration Statement as to which
the Company has a bona fide business purpose for preserving confidential or
which renders the Company unable to comply with Commission requirements)
that, in the opinion of the Company, makes untrue any statement of a
material fact made in its Shelf Registration Statement, the Prospectus or
any amendment or supplement thereto or any document incorporated by
reference therein or requires the making of any changes in the Shelf
Registration Statement or the Prospectus so that, as of such date, the
statements therein are not misleading and do not omit to state a material
fact required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of the circumstances under
which they were made) not misleading.
Such Advice may be accompanied by an instruction to suspend the use of the
Prospectus until the requisite changes have been made.
(d) The Company shall use its best efforts to obtain the withdrawal of
any order suspending the effectiveness of the Shelf Registration Statement, or
the lifting of any suspension of the qualification (or exemption from
qualification) of the Transfer Restricted Securities for sale in any
jurisdiction, at the earliest possible time.
(e) The Company shall furnish to each selling Holder named in the
Shelf Registration Statement and each Managing Underwriter, if any, without
charge, at least one conformed copy of such Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and schedules.
Upon written request, the Company shall furnish to each selling Holder named in
the Shelf
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<PAGE>
Registration Statement and each Managing Underwriter, if any, without charge,
one copy of all exhibits to such Shelf Registration Statement (including those
incorporated by reference).
(f) The Company shall, during the Shelf Registration Period, deliver
to each Holder of Transfer Restricted Securities named in the Shelf Registration
Statement and each Managing Underwriter, if any, without charge, as many copies
of the Prospectus (including each preliminary Prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder or
Managing Underwriters may reasonably request; and, subject to any notice by the
Company in accordance with Section 7(b), the Company consents to the use of the
Prospectus or any amendment or supplement thereto by each of the selling Holders
and such underwriters for the purposes of offering and resale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or supplement
thereto.
(g) Prior to the offering of Transfer Restricted Securities pursuant
to the Shelf Registration Statement, the Company shall use its best efforts to
register or qualify or cooperate with the Holders of Transfer Restricted
Securities named therein, the Managing Underwriters, if any, and their
respective counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Transfer Restricted
Securities for offer and sale under the securities or blue sky laws of such
jurisdictions of the United States as any such Holders or Managing Underwriters,
if any, reasonably request in writing; keep each such registration or
qualification (or exemption therefrom) effective during the period the Shelf
Registration Statement is required to be kept effective and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the Shelf
Registration Statement; provided, however, that the Company will not be required
to qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process or to taxation in any such jurisdiction where it is not then so subject.
(h) The Company shall cooperate with the Holders of Transfer
Restricted Securities and underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold pursuant to the Shelf Registration Statement, free of any
restrictive legends and in such denominations and registered in such names as
such Holders or underwriters may request in writing at least two Business Days
prior to sales of securities pursuant to such Shelf Registration Statement.
(i) Upon the occurrence of any event contemplated by Section
5(c)(2)(v) hereof, subject to Section 5(s), the Company shall promptly prepare a
post-effective amendment to the Shelf Registration Statement or an amendment or
supplement to the related Prospectus or any document incorporated therein by
reference or file any other required document so that as thereafter delivered to
purchasers of the Transfer Restricted Securities covered thereby, the Prospectus
will not include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(j) Not later than the effective date of any such Shelf Registration
Statement hereunder, the Company shall cause to be provided CUSIP numbers for
the Transfer Restricted Securities
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<PAGE>
registered under such Shelf Registration Statement, and provide the Trustee with
printed certificates for such Transfer Restricted Securities where necessary, in
a form eligible for deposit with The Depository Trust Company.
(k) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make generally
available to its security holders in a regular filing on Form 10-Q or Form 10-K
an earnings statement satisfying the provisions of Rule 158 (which need not be
audited) for the twelve-month period commencing after effectiveness of the Shelf
Registration Statement.
(l) The Company shall cause the Indenture to be qualified under the
Trust Indenture Act in a timely manner.
(m) The Company shall file, within five Business Days of the receipt
from any Holder with respect to such information regarding the distribution of
such Holder's Transfer Restricted Securities with respect to such Holder as is
required by law to be disclosed in the applicable Shelf Registration Statement
(the "Requisite Information"), a Prospectus supplement pursuant to Rule 424 to
amend or supplement such Shelf Registration Statement to include in the Shelf
Registration Statement the Requisite Information as to such Holder (and the
Transfer Restricted Securities held by such Holder), and the Company shall
provide such Holder and the Special Counsel within ten (10) Business Days of
such notice with a copy of such Prospectus as so amended or supplemented
containing the Requisite Information in order to permit such Holder to comply
with the Prospectus delivery requirements of the Securities Act in a timely
manner with respect to any proposed disposition of such Holder's Transfer
Restricted Securities. No Holder of Transfer Restricted Securities shall be
entitled to the benefit of any Liquidated Damages under Section 4 of this
Agreement or be entitled to use the Prospectus unless and until such Holder
shall have furnished the Company the Requisite Information.
(n) The Company shall, if requested, promptly incorporate in the Shelf
Registration Statement or Prospectus, if necessary, pursuant to a supplement or
post-effective amendment to the Shelf Registration Statement, such information
as the Managing Underwriters, if any, or the Majority Holders reasonably request
to have included therein and shall make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the Company
is notified of the matters to be incorporated in such Prospectus supplement or
post-effective amendment.
(o) The Company shall enter into such agreements on terms reasonably
acceptable to the Company (including underwriting agreements) in form, scope and
substance as are customary in underwritten offerings, and take all other
reasonable actions necessary to facilitate the registration or the disposition
of the Transfer Restricted Securities included in the Shelf Registration
Statement.
(p) The Company shall make reasonably available at reasonable times
for inspection by the Holders of Transfer Restricted Securities to be registered
thereunder, any Managing Underwriter, and any attorney, accountant or other
agent retained by the Holders or such Managing Underwriters, at the office where
normally kept during normal business hours, all financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the Company's
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officers, directors and employees to supply all relevant information reasonably
requested by the Holders, Managing Underwriters, attorney, accountant or other
agent in connection with the Shelf Registration Statement as is customary for
similar due diligence examinations, provided, however, that such persons shall
first agree in writing with the Company that any information that is reasonably
and in good faith designated by the Company in writing as confidential at the
time of delivery of such information shall be kept confidential by such persons.
(q) The Company shall (i) list all Common Stock covered by such Shelf
Registration Statement on any securities exchange on which the Common Stock is
then listed or (ii) authorize for quotation on the National Association of
Securities Dealers Automated Quotation System ("Nasdaq") or the National Market
System of Nasdaq all Common Stock covered by such Shelf Registration Statement
if the Common Stock is then so authorized for quotation.
(r) The Company shall use its reasonable efforts to take all other
steps necessary to effect the registration, offering and sale of the Transfer
Restricted Securities covered by the Shelf Registration Statement contemplated
hereby.
(s) Notwithstanding any provision of this Section 5 to the contrary,
the Company shall not be required to amend or supplement the Shelf Registration
Statement pursuant to the requirements of Sections 5(b), 5(c), 5(i) or 5(r)
hereof if (i) such amendment or supplement would require the Company to disclose
a material financing, acquisition or corporate transaction and the Board of
Directors shall have determined that such disclosure is not in the best
interests of the Company and the holders of its outstanding Common Stock or (ii)
the Board of Directors shall have determined in good faith that there is a valid
business purpose or reason for suspending the use of the Prospectus included in
such Shelf Registration Statement in accordance with Section 5(i) hereof instead
of making such amendment or supplement, provided that in each such case the
Company complies with its obligations, if any, to pay Liquidated Damages
pursuant to Section 4 hereof.
6. UNDERWRITTEN OFFERING. The Holders who desire to do so may sell
---------------------
Transfer Restricted Securities in an Underwritten Offering. In any such
Underwritten Offering, the investment banker or bankers and manager or managers
that will administer the offering will be selected by, and the underwriting
arrangements with respect thereto will be approved by the Holders of a majority
of the Transfer Restricted Securities to be included in such offering; provided,
however, that (i) such investment bankers and managers and underwriting
arrangements must be reasonably satisfactory to the Company and (ii) the Company
shall not be obligated to arrange for more than one Underwritten Offering during
the effectiveness period of the Shelf Registration Statement. No Holder may
participate in any Underwritten Offering contemplated hereby unless such Holder
(a) agrees to sell such Holder's Transfer Restricted Securities in accordance
with any approved underwriting arrangements, (b) completes and executes all
reasonable questionnaires, powers of attorney, indemnities, underwriting
agreements, lock-up letters and other documents required under the terms of such
approved underwriting arrangements and (c) at least 50% of the outstanding
Transfer Restricted Securities are included in such Underwritten Offering. The
Holders participating in any Underwritten Offering shall be responsible for any
expenses customarily borne by selling securityholders, including underwriting
discounts and commissions and fees and expenses of counsel to the selling
securityholders and shall reimburse the Company for the fees and
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disbursements of their counsel, their independent public accountants and any
printing expenses incurred in connection with such Underwritten Offerings.
Notwithstanding the foregoing or the provisions of Section 6(a) hereof, upon
receipt of a request from the Managing Underwriter or a representative of
Holders of a majority of the Transfer Restricted Securities outstanding to
prepare and file an amendment or supplement to the Shelf Registration Statement
and Prospectus in connection with an Underwritten Offering, the Company may
delay the filing of any such amendment or supplement for up to 90 days if the
Company in good faith has a valid business reason for such delay.
The Company shall in connection with an Underwritten Offering in accordance
with the provisions of this Section:
(a) The Company shall, if requested, promptly include or incorporate
in a Prospectus supplement or post-effective amendment to a Shelf Registration
Statement, such information as the Managing Underwriters administering an
Underwritten Offering of Transfer Restricted Securities registered thereunder
reasonably request to be included therein and to which the Company does not
reasonably object and shall make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after they are
notified of the matters to be included or incorporated in such Prospectus
supplement or post-effective amendment;
(b) make such representations and warranties to the Holders and the
underwriters in form, substance and scope as are customarily made by the Company
to underwriters in primary underwritten offerings and covering matters,
including, but not limited to, those set forth in the Purchase Agreement;
(c) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the Managing Underwriters) addressed to each Holder and the
underwriters covering such matters as are customarily covered in opinions
requested in underwritten offerings and such other matters as may be reasonably
requested by such Holders and underwriters (it being agreed that the matters to
be covered by such opinion or written statement by such counsel delivered in
connection with such opinions shall include in customary form, without
limitation, as of the date of the opinion and as of the effective date of the
Shelf Registration Statement or most recent post-effective amendment thereto, as
the case may be, the absence from such Shelf Registration Statement and the
prospectus included therein, as then amended or supplemented, including the
documents incorporated by reference therein, of an untrue statement of a
material fact or the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading);
(d) obtain "cold comfort" letters and updates thereof from the
independent public accountants of the Company (and, if necessary, any other
independent public accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial statements and financial
data are, or are required to be, included in the Shelf Registration Statement),
addressed to each Holder and the underwriters in customary form and covering
matters of the type customarily covered in "cold comfort" letters in connection
with primary underwritten offerings; and
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(e) deliver such documents and certificates as may be reasonably
requested by any such Holders and the Managing Underwriters, including those to
evidence compliance with Section 3(c)(2)(v) and with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
Company.
7. HOLDERS' AGREEMENTS. Each Holder of Transfer Restricted Securities,
-------------------
by the acquisition of such Transfer Restricted Securities agrees:
(a) To furnish the Requisite Information required to be furnished
pursuant to Section 5(m) hereof. The Company may exclude from any Shelf
Registration Statement the Transfer Restricted Securities of any Holder who does
not furnish such Requisite Information. Each Holder of Transfer Restricted
Securities shall promptly furnish to the Company all such information required
to be disclosed in order to make the Requisite Information previously furnished
to the Company by such Holder not materially misleading.
(b) That upon receipt of a notice from the Company that the Prospectus
and Shelf Registration Statement is unavailable for resales of Transfer
Restricted Securities forthwith discontinue disposition of its Transfer
Restricted Securities, as the case may be, pursuant to the Shelf Registration
Statement, and will not deliver any Prospectus forming a part thereof until
receipt of the amended or supplemented Shelf Registration Statement or
Prospectus, as applicable, as contemplated by Section 5(i) hereof, or until
receipt of the Advice.
(c) Sales of such Transfer Restricted Securities pursuant to a Shelf
Registration Statement shall only be made in the manner set forth in such
currently effective Shelf Registration Statement.
8. REGISTRATION EXPENSES. The Company shall bear all expenses incurred
---------------------
in connection with the performance of its obligations under Sections 2, 3, 4 and
5 hereof and will reimburse the Holders for the reasonable fees and
disbursements of Special Counsel. Notwithstanding the foregoing or anything in
this Agreement to the contrary, each Holder shall pay all underwriting discounts
and commissions of any underwriters with respect to any Transfer Restricted
Securities sold by it.
9. INDEMNIFICATION AND CONTRIBUTION.
--------------------------------
(a) In connection with the Shelf Registration Statement, the Company
will indemnify and hold harmless each Holder of Transfer Restricted Securities
covered thereby, the directors, officers, employees and agents of each such
Holder and each person who controls any such Holder within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all losses, claims, liabilities, expenses and damages, joint or
several (including any and all investigative, legal and other expenses
reasonably incurred in connection with, and any amount paid in settlement of,
any action, suit or proceeding or any claim asserted), to which they, or any of
them, may become subject under the Securities Act, the Exchange Act or other
federal, state or foreign statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, liabilities, expenses and damages
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact
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<PAGE>
contained in the Shelf Registration Statement as originally filed or in any
amendment thereof, or in any preliminary Prospectus or Prospectus, or in any
amendment thereof or supplement thereto, or the omission or alleged omission to
state in such documents a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, that (i) the
Company will not be liable to the extent that any such loss, claim, liability
expense or damage arises out of or is based on any such untrue statement or
omission or alleged untrue statement or omission made therein in reliance on and
in conformity with information relating to any Holder of Transfer Restricted
Securities furnished in writing to the Company by any such Holder expressly for
inclusion therein and (ii) the Company will not be liable to any Holder of
Transfer Restricted Securities under the indemnity agreement in this Section
9(a) with respect to any preliminary Prospectus or a Prospectus that is
subsequently amended or supplemented to the extent that any such loss, claim,
liability, expense or damage of such Holder results from an untrue statement of
a material fact contained in, or the omission of a material fact from, the
preliminary Prospectus or Prospectus which untrue statement or omission was
corrected in the final Prospectus or the Prospectus as amended or supplemented,
as the case may be, if the Company had previously furnished copies thereof to
such Holder within a reasonable amount of time prior to such sale or such
confirmation. This indemnity agreement will be in addition to any liability
which the Company might otherwise have.
The Company also agrees to indemnify or contribute to the losses, claims,
liabilities, expenses and damages, joint or several (including any and all
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted) of any underwriters of Transfer Restricted Securities registered
under the Shelf Registration Statement, their officers and directors and each
person who controls such underwriters on substantially the same basis as that of
the indemnification of the selling Holders provided in this Section 9(a) and
shall, if requested by any Holder, enter into a customary underwriting agreement
reflecting such agreement, as provided in Section 5(o) hereof.
(b) Each Holder of Transfer Restricted Securities covered by the Shelf
Registration Statement will severally indemnify and hold harmless the Company,
each person who controls the Company within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act, each director of the
Company and each officer of the Company to the same extent as the foregoing
indemnity from the Company to each such Holder, but only insofar as losses,
claims, liabilities, expenses or damages arise out of or are based on any untrue
statement or omission or alleged untrue statement or omission made in reliance
on and in conformity with information relating to such Holder furnished to the
Company by or on behalf of such Holder expressly for use in the Shelf
Registration Statement as originally filed or in any amendment thereof, or in
any preliminary Prospectus or Prospectus, or in any amendment thereof or
supplement thereto. This indemnity agreement will be in addition to any
liability that such Holder might otherwise have.
(c) Any party that proposes to assert the right to be indemnified
under this Section 9 will, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim is to be made against
an indemnifying party or parties under this Section 9, notify each indemnifying
party of the commencement of such action, enclosing a copy of all papers served,
but the omission so to notify such indemnifying party (i) will not relieve it
from any liability that it may have to any indemnified party under the foregoing
provisions of this Section 9 unless, and only to the extent that,
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it did not otherwise learn of such action and such omission results in the
forfeiture of substantive rights or defenses by the indemnifying party and (ii)
will not, in any event relieve the indemnifying party from any obligations to
any indemnified party other than the indemnification obligations in Sections
9(a) and 9(b) hereof. If any such action is brought against any indemnified
party and it notifies the indemnifying party of its commencement, the
indemnifying party will be entitled to participate in and, to the extent that it
elects by delivering written notice to the indemnified party promptly after
receiving notice of the commencement of the action from the indemnified party,
jointly with any other indemnifying party similarly notified, to assume the
defense of the action, with counsel satisfactory to the indemnified party, and
after notice from the indemnifying party to the indemnified party of its
election to assume the defense, the indemnifying party will not be liable to the
indemnified party for any legal or other expenses except as provided below and
except for the reasonable costs of investigation subsequently incurred by the
indemnified party in connection with the defense. The indemnified party will
have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of such
indemnified party unless (1) the employment of counsel by the indemnified party
has been authorized in writing by the indemnifying party, (2) the indemnified
party has reasonably concluded (based on advice of counsel to the indemnified
party) that there may be legal defense available to it or other available
indemnified parties that are different from or in addition to those available to
the indemnifying party, (3) a conflict or potential conflict exists (based on
advice of counsel to the indemnified party) between the indemnified party and
the indemnifying party (in which case the indemnifying party will not have the
right to direct the defense of such action on behalf of the indemnified party)
or (4) the indemnifying party has not in fact employed counsel to assume the
defense of such action within a reasonable time after receiving notice of the
commencement of the action, in each of which cases the reasonable fees,
disbursements and other charges of counsel will be at the expense of the
indemnifying party or parties. It is understood that the indemnifying party or
parties shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm admitted to practice in such
jurisdiction at any one time for all such indemnified party or parties. Such
firm shall be designated in writing by the Majority Holders in the case of
parties indemnified pursuant to Section 9(a) and by the Company, in the case of
parties indemnified pursuant to Section 9(b). All such fees, disbursements and
other charges will be reimbursed by the indemnifying party promptly as they are
incurred. No indemnifying party shall, without the prior written consent of each
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding relating to the matters
contemplated by this Section 9 (whether or not any indemnified party is a party
thereto), unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising or
that may arise out of such claim, action or proceeding.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 9 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or the Holders of Transfer
Restricted Securities, or insufficient, the Company and such Holders will
contribute to the total losses, claims, liabilities, expenses and damages
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted, but after deducting any contribution received
by the Company from persons other than such Holders, such as persons who control
the Company within the meaning of the Securities Act or the
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Exchange Act and officers and directors of the Company, who also may be liable
for contribution) (collectively, "Losses") to which the Company and any one or
more of such Holders of Transfer Restricted Securities may be subject in such
proportion as shall be appropriate to reflect the relative benefits received by
the Company on the one hand and such Holders on the other. The relative benefits
received by the Company shall be deemed to be equal to the sum of (x) the total
net proceeds from the Initial Placement (before deducting expenses) as set forth
on the cover page of the Offering Memorandum and (y) the total amount of
Liquidated Damages, if any, which the Company was not required to pay as a
result of registering the securities covered by the Shelf Registration Statement
which resulted in such Losses. Benefits received by the Initial Purchasers shall
be deemed to be equal to the total purchase discounts and commissions as set
forth on the cover page of the Offering Memorandum, and benefits received by any
other Holders shall be deemed to be equal to the value of receiving Notes or
Common Stock issuable upon conversion thereof, as applicable, registered under
the Securities Act. Benefits received by any underwriter shall be deemed to be
equal to the total underwriting discounts and commissions, as set forth on the
cover page of the Prospectus forming a part of the Shelf Registration Statement
which resulted in such Losses. If, but only if, the allocation provided by the
foregoing sentence is not permitted by applicable law, the allocation of
contribution shall be made in such proportion as is appropriate to reflect not
only the relative benefits referred to in the foregoing sentence but also the
relative fault of the Company, on the one hand, and the Holders, on the other,
with respect to the statements or omissions which resulted in such loss, claim,
liability, expense or damage, or action in respect thereof, as well as any other
relevant equitable considerations with respect to such offering. Such relative
fault shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company or the Holders, the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Holders agree that it would not be just and equitable if contributions
pursuant to this Section 9(d) were to be determined by pro rata allocation (even
if the Holders were treated as one entity for such purpose) or by any other
method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, liability, expense or damage, or action in
respect thereof, referred to above in this Section 9(d) shall be deemed to
include, for purpose of this Section 9(d), any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 9(d), in no case shall any Initial Purchaser or any subsequent Holder of
any Transfer Restricted Securities be responsible, in the aggregate, for any
amount in excess of the purchase discount or commission applicable to such
Notes, as set forth on the cover page of the Offering Memorandum, nor shall any
underwriter be responsible for any amount in excess of the underwriting discount
or commission applicable to the securities purchased by such underwriter under
the Shelf Registration Statement which resulted in such Losses. No person found
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) will be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Holders' obligations to
contribute as provided in this Section 9(d) are several and not joint. For
purposes of this Section 9(d), any person who controls the Company or a Holder
within the meaning of the Securities Act will have the same rights to
contribution as that party, and each officer or director of the Company or such
Holder will have the same rights to contribution, as the Company or such Holder,
as applicable, subject in each case to the provisions hereof. Any party entitled
to contribution promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for
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contribution may be made under this Section 9(d), will notify any such party or
parties from whom contribution may be sought, but the omission so to notify will
not relieve the party or parties from whom contribution may be sought from any
other obligation it or they may have under this Section 9(d). No party will be
liable for contribution with respect to any action or claim settled without its
written consent (which consent will not be unreasonably withheld or delayed).
(e) The indemnity and contribution agreements contained in this
Section 9 will remain in full force and effect, regardless of any investigation
made by or on behalf of any Holder or the Company or any of the officers,
directors or controlling persons referred to in this Section 9, and will survive
the sale by a Holder of securities covered by the Shelf Registration Statement.
10. RULES 144 AND 144A. The Company shall use its best efforts to file
------------------
the reports required to be filed by it under the Securities Act and the Exchange
Act in a timely manner and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any holder of Transfer Restricted Securities, make available
other information as reasonably required by, and so long as necessary to permit,
sales of its Transfer Restricted Securities pursuant to Rule 144 and Rule 144A.
Notwithstanding the foregoing, nothing in this Section 10 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
11. MISCELLANEOUS.
-------------
(a) Remedies. In the event of a breach by the Company of its
--------
obligations under this Agreement, each Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The
Company agrees that monetary damages (including the Liquidated Damages
contemplated hereby) would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law; provided, that monetary damages
relating solely to a Registration Default shall be limited to the amount of
Liquidated Damages calculated in accordance with Section 4 hereof.
(b) No Inconsistent Agreements. The Company has not, as of the date
--------------------------
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
(c) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Holders of at least a majority of the then outstanding aggregate
principal amount of Transfer Restricted Securities; provided that, with respect
to any matter that directly or indirectly affects the rights of any Initial
Purchaser hereunder, the Company shall obtain the written consent of each such
Initial Purchaser against which such amendment, qualification, supplement,
waiver or consent is to be effective. Notwithstanding the foregoing (except the
foregoing proviso), a waiver or consent to
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departure from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders whose securities are being sold pursuant to
a Shelf Registration Statement and that does not directly or indirectly affect
the rights of other Holders may be given by the Majority Holders, determined on
the basis of Notes being sold rather than registered under such Shelf
Registration Statement.
(d) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, registered or
certified first-class mail, telex, telecopier, or air courier guaranteeing
overnight delivery:
(1) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section 11(d),
which address initially is, with respect to each Holder, the address of such
Holder maintained by the registrar under the Indenture, with a copy in like
manner to PaineWebber Incorporated;
(2) if to the Initial Purchasers, initially at the address set
forth in the Purchase Agreement; and
(3) if to the Company, initially at its address set forth in the
Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next Business Day, if timely delivered to an air courier guaranteeing overnight
delivery.
The Initial Purchasers or the Company by notice to the other may designate
additional or different addresses for subsequent notices or communications.
(e) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties hereto,
including, without the need for an express assignment or any consent by the
Company thereto, subsequent Holders of Transfer Restricted Securities. The
Company hereby agrees to extend the benefits of this Agreement to any Holder of
Transfer Restricted Securities and any such Holder may specifically enforce the
provisions of this Agreement as if an original party hereto. The Company may
not assign its rights or obligations hereunder without the prior written consent
of each Holder of Transfer Restricted Securities.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof. All
references made in this Agreement to "Section" and "paragraph" refer to such
Section or paragraph of this Agreement, unless expressly stated otherwise.
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(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE (WITHOUT REFERENCE TO THE
CONFLICT OF LAW RULES THEREOF).
(i) Severability. In the event that any one of more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.
(j) Attorneys' Fees. In any action or proceeding brought to enforce
---------------
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the prevailing party, as determined by the court, shall
be entitled to recover its reasonable attorneys' fees in addition to any other
available remedy.
(k) Approval of Holders. Whenever the consent or approval of holders
-------------------
of a specified percentage of Transfer Restricted Securities is required
hereunder, Transfer Restricted Securities held by the Company or its affiliates
(as such term is defined in Rule 405 under the Securities Act) shall not be
counted in determining whether such consent or approval was given by the holders
of such required percentage. For purposes of calculating the consent or
approval of holders of a majority of the then outstanding aggregate principal
amount of Transfer Restricted Securities, Transfer Restricted Securities which
have been converted into shares of Common Stock shall be deemed to bear the
principal amount at which such securities were converted.
(l) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement relating to the registration under the
Securities Act of the Transfer Restricted Securities and is intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and the
registration rights granted by the Company with respect to the Notes sold
pursuant to the Purchase Agreement and the Common Stock issuable upon conversion
of the Notes. There are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein, with respect to the
registration rights granted by the Company with respect to the Notes or the
Common Stock issuable upon conversion of the Notes. This Agreement supersedes
all prior agreements and understandings among the parties with respect to such
registration rights.
(m) Further Assurances. Each of the parties hereto shall use all
------------------
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things reasonably necessary, proper or advisable under
applicable law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and the other
documents contemplated hereby and consummate and make effective the transactions
contemplated hereby.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
P-COM, INC.
By: /s/ Michael J. Sophie
----------------------
Name: Michael J. Sophie
------------------
Title: Chief Financial Officer and Vice President,
------------------------------------------
Finance and Administration
The foregoing Registration Rights Agreement
is hereby confirmed and agreed to as of the
date first written above:
PAINEWEBBER INCORPORATED
BANCAMERICA ROBERTSON STEPHENS
NATIONSBANC MONTGOMERY SECURITIES, INC.
PACIFIC GROWTH EQUITIES, INC.
By: PAINEWEBBER INCORPORATED
Acting on behalf of itself and other Initial Purchasers
By: /s/ Frank J. Drazka
--------------------
Authorized Signatory
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EXHIBIT 5.1
January 30, 1998
P-Com, Inc.
3175 S. Winchester Boulevard
Campbell, CA 95008
Ladies and Gentlemen:
We have acted as counsel to P-Com, Inc. (the "Company"), a Delaware
corporation, in connection with its registration of $100,000,000 in aggregate
principal amount of 4 1/2% convertible subordinated notes due 2002 (the
"Notes") and the shares of Common Stock issuable upon conversion thereof (the
"Common Stock") as described in the Company's Registration Statement on Form
S-3, as amended, filed with the Securities and Exchange Commission under the
Securities Act of 1933. The Notes and Common Stock consist of securities that
may be offered by certain stockholders of the Company or by pledgees, donees,
transferees or other successors in interest that receive such shares as a
gift, partnership distribution or other non-sale related transfer (the "Resale
Securities").
We are familiar with the corporate proceedings taken by the Company in
connection with the issuance and sale of the Resale Securities. It is our
opinion that the Resale Securities have been duly authorized and are validly
issued, fully paid and nonassessable.
We consent to the filing of this opinion as Exhibit 5.1 to the Registration
Statement and to the reference to this firm under the caption "Legal Matters"
in the Prospectus which is part of the registration Statement.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
_____________________________________
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
Exhibit 12.1
COMPUTATION OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Fiscal Year
-------------------------------------------------------------------- Nine Months
1992 1993 1994 1995 1996 ended September 30, 1997
------ ------ ------ ------ ------ ------------------------
(in thousands except ratio data)
<S> <C> <C> <C> <C> <C> <C>
Net income before tax (1,944) (6,249) (6,333) 3,043 9,794 17,031
Minority interest in
net (loss) income of
subsidiary -- -- -- -- (15) 32
Rental expense 99 123 170 295 625 897
Interest expense 17 37 231 370 160 1,121
------ ------ ------ ------ ------ ------
Earnings before interest,
taxes, depreciation and
amortization and fixed
charges (1,828) (6,089) (5,932) 3,708 10,564 19,081
====== ====== ====== ===== ====== ======
Total fixed charges 116 160 401 665 770 2,050
Ratio of earnings to
fixed charges (15.78) (38.06) (14.79) 5.58 13.46 9.46
Coverage surplus
(deficiency) (1,944) (6,249) (6,333) 3,043 9,794 17,031
</TABLE>
Page 1
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated January 22, 1997 (except for the pooling of interests with Control
Resources Corporation and other 1997 acquisitions described in Note 4, which
is as of May 29, 1997, and except for the second paragraph of Note 1 which is
as of September 26, 1997) which appears in the Current Report on Form 8-K
dated October 17, 1997. We also consent to the reference to us under the
heading "Experts."
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Jose, California
January 29, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in this
Registration Statement on Form S-3 (No. 333- ) and related prospectus of P-
-----
COM, Inc. for the registration of 3,641,660 shares of its common stock, and to
the incorporation by reference therein of our report dated April 14, 1997,
with respect to the financial statements of Columbia Spectrum Management, L.P.
as of and for the years ended December 31, 1996 and 1995, included in P-COM,
Inc.'s March 21, 1997 Current Report on Form 8-K, as amended, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Vienna, VA
January 29, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF KPMG PEAT MARWICK LLP, INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus constituting
part of this registration statement on Form S-3 of P-COM, Inc. of our report
dated February 7, 1997, relating to the balance sheets of Control Resources
Corporation ("CRC") as of December 31, 1996 and 1995, and the related
statements of operations and (accumulated deficit) retained earnings, and cash
flows for each of the years in the two-year period ended December 31, 1996,
which report appears in the Form 8-K of P-COM, Inc. dated June 13, 1997, as
amended. The report of KPMG Peat Marwick LLP covering the December 31, 1996
and 1995 financial statements contains an explanatory paragraph that states
that CRC's 1996 losses from operations and net stockholders' deficit raise
substantial doubt about CRC's ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of that uncertainty. We also consent to the reference to our firm
under the heading "Experts" in such Prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Short Hills, New Jersey
January 29, 1998
<PAGE>
EXHIBIT 25.1
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [X]
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
________________________________________________________________________________
(Exact name of trustee as specified in its charter)
UNITED STATES
________________________________________________________________________________
(Jurisdiction of incorporation or organization if not a U.S. national bank)
06-1143380
________________________________________________________________________________
(IRS Employer Identification No.)
725 SOUTH FIGUEROA STREET, SUITE 3100, LOS ANGELES, CALIFORNIA
________________________________________________________________________________
(Address of principal executive offices)
90017
________________________________________________________________________________
(Zip code)
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
725 SOUTH FIGUEROA STREET, SUITE 3100, LOS ANGELES, CALIFORNIA, 90017
213-362-7338
________________________________________________________________________________
(Name, address and telephone number of agent for service)
P-COM, INC.
________________________________________________________________________________
(Exact Name of Obligor as specified in its charter)
DELAWARE
________________________________________________________________________________
(State or other jurisdiction of incorporation or organization)
77-0289371
________________________________________________________________________________
(IRS Employer Identification No.)
3175 S. WINCHESTER BOULEVARD
CAMPBELL, CALIFORNIA
________________________________________________________________________________
(Address of principal executive offices)
95008
________________________________________________________________________________
(Zip code)
4-1/4% Convertible Subordinated Notes due 2002
________________________________________________________________________________
(Title of the indenture securities)
<PAGE>
Item 1. General Information.
(a) The trustee is subject to the supervision of the Comptroller of the
Currency, Western District Office, 50 Fremont Street, Suite 3900, San
Francisco, CA 94105-2292.
(b) The trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with the obligor.
The Trustee is not affiliated with the obligor.
No responses are included for Items 3-15 of this form T-1 because the obligor is
not in default on securities issued under indentures under which State Street
Bank and Trust Company of California, N.A. is trustee.
Item 16. List of Exhibits.
1. Articles of Association of State Street Bank and Trust Company of
California, N.A..*
2. Certificate of Corporate Existence (with fiduciary powers) from the
Comptroller of the Currency, Administrator of National Banks.*
3. Authorization of the Trustee to exercise fiduciary powers (included in
Exhibits 1 and 2; no separate instrument).
4. By-laws of State Street Bank and Trust company of California, N.A..*
5. Consent of State Street Bank and Trust Company of California, N.A. required
by Section 321(b) of the Act.*
6. Consolidated Report of Income at the close of business March 31, 1997,
Federal Financial Institutions Examination Council, Consolidated Reports
of Condition and Income for A Bank With Domestic Offices Only and Total
Assets of Less Than $100 Million - FEI 034.**
* The indicated documents have been filed as exhibits with corresponding
exhibit numbers to the Form T-1 of Oasis Residential, Inc., filed pursuant
to Section 305(b)(2) of the Act, filed with the Securities and Exchange
Commission on November 18, 1996 (Registration No. 033-90488), and are
incorporated herein by reference.
** The indicated document was filed as an exhibit with a corresponding exhibit
number to the Form T-1 filed as Exhibit 25 to a Registration Statement on
Form S-4 of Silicon Graphics, Inc., filed with the Securities and Exchange
Commission on July 30, 1997 (Registration No. 333-32379), and is
incorporated herein by reference.
-2-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the trustee,
State Street Bank and Trust company of California, N.A., 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 28th day of January, 1998.
STATE STREET BANK AND TRUST COMPANY OF
CALIFORNIA, N.A.
/s/ Mark D. Henson
By:______________________________
Mark D. Henson
Assistant Vice President
-3-
