Exhibit 4.3
SCHOOL SPECIALTY, INC.
and
----------------
BNY MIDWEST TRUST COMPANY
as Trustee
----------------
$110,000,000
3.75% Convertible Subordinated Notes due 2023*
----------------
INDENTURE
Dated as of July 18, 2003
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* Plus an over-allotment option to purchase up to $25,000,000 original principal
amount of 3.75% Convertible Subordinated Notes due 2023.
TABLE OF CONTENTS
Page
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ARTICLE 1
DEFINITIONS
Section 1.01 Definitions....................................................1
Section 1.02 Other Definitions..............................................8
Section 1.03 Incorporation by Reference of Trust Indenture Act..............9
Section 1.04 Rules of Construction.........................................10
ARTICLE 2
THE CONVERTIBLE SUBORDINATED NOTES
Section 2.01 Form and Dating...............................................10
Section 2.02 Execution and Authentication..................................11
Section 2.03 Registrar, Paying Agent and Conversion Agent..................12
Section 2.04 Paying Agent to Hold Money in Trust...........................13
Section 2.05 Holder Lists..................................................13
Section 2.06 Transfer and Exchange.........................................13
Section 2.07 Replacement Convertible Subordinated Notes....................15
Section 2.08 Outstanding Convertible Subordinated Notes....................16
Section 2.09 When Treasury Convertible Subordinated
Notes Disregarded.............................................16
Section 2.10 Temporary Convertible Subordinated Notes; Transfers
of Global Security to Beneficial Owners.......................17
Section 2.11 Cancellation..................................................18
Section 2.12 Defaulted Interest............................................18
Section 2.13 CUSIP Number..................................................18
Section 2.14 Regulation S..................................................19
Section 2.15 Tax Treatment of Convertible Subordinated Notes...............19
ARTICLE 3
REDEMPTION AND PURCHASES
Section 3.01 Optional Redemption...........................................20
Section 3.02 Notices to Trustee............................................20
Section 3.03 Selection of Convertible Subordinated Notes to Be
Redeemed......................................................20
Section 3.04 Notice of Redemption..........................................21
Section 3.05 Effect of Notice of Redemption................................22
Section 3.06 Deposit of Redemption Price...................................22
Section 3.07 Convertible Subordinated Notes Redeemed in Part...............23
Section 3.08 Conversion Arrangement on Call for Redemption.................23
Section 3.09 Repurchase of Convertible Subordinated Notes at Option
of the Holder.................................................24
Section 3.10 Repurchase Upon Designated Event..............................27
ARTICLE 4
COVENANTS
Section 4.01 Payment of Convertible Subordinated Notes.....................29
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TABLE OF CONTENTS
(continued)
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Section 4.02 Commission Reports............................................30
Section 4.03 Compliance Certificate........................................30
Section 4.04 Maintenance of Office or Agency...............................30
Section 4.05 Continued Existence...........................................30
Section 4.06 Appointments to Fill Vacancies in Trustee's Office............31
Section 4.07 Stay, Extension and Usury Laws................................31
Section 4.08 Taxes.........................................................31
Section 4.09 Investment Company Act........................................31
Section 4.10 Optional Conversion to Semiannual Coupon Note Upon
Tax Event.....................................................31
ARTICLE 5
SUCCESSORS
Section 5.01 When the Company May Merge, Etc...............................32
Section 5.02 Successor Corporation Substituted.............................33
Section 5.03 Purchase Option on Change of Control..........................33
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default.............................................33
Section 6.02 Acceleration..................................................36
Section 6.03 Other Remedies................................................36
Section 6.04 Waiver of Past Defaults.......................................36
Section 6.05 Control by Majority...........................................37
Section 6.06 Limitation on Suits...........................................37
Section 6.07 Rights of Holders to Receive Payment..........................38
Section 6.08 Collection Suit by Trustee....................................38
Section 6.09 Trustee May File Proofs of Claim..............................38
Section 6.10 Priorities....................................................38
Section 6.11 Undertaking for Costs.........................................39
ARTICLE 7
THE TRUSTEE
Section 7.01 Duties of the Trustee.........................................39
Section 7.02 Rights of the Trustee.........................................40
Section 7.03 Individual Rights of the Trustee..............................41
Section 7.04 Trustee's Disclaimer..........................................42
Section 7.05 Notice of Defaults............................................42
Section 7.06 Reports by the Trustee to Holders.............................42
Section 7.07 Compensation and Indemnity....................................42
Section 7.08 Replacement of the Trustee....................................43
Section 7.09 Successor Trustee by Merger, etc..............................44
Section 7.10 Eligibility, Disqualification.................................45
ii
TABLE OF CONTENTS
(continued)
Page
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Section 7.11 Preferential Collection of Claims Against Company.............45
ARTICLE 8
SATISFACTION AND DISCHARGE OF INDENTURE
Section 8.01 Discharge of Indenture........................................45
Section 8.02 Deposited Monies to Be Held in Trust by Trustee...............46
Section 8.03 Paying Agent to Repay Monies Held.............................46
Section 8.04 Return of Unclaimed Monies....................................46
Section 8.05 Reinstatement.................................................46
ARTICLE 9
AMENDMENTS
Section 9.01 Without the Consent of Holders................................47
Section 9.02 With the Consent of Holders...................................47
Section 9.03 Compliance With the Trust Indenture Act.......................49
Section 9.04 Revocation and Effect of Consents.............................49
Section 9.05 Notation on or Exchange of Convertible Subordinated
Notes.........................................................50
Section 9.06 Trustee Protected.............................................50
ARTICLE 10
GENERAL PROVISIONS
Section 10.01 Trust Indenture Act Controls..................................50
Section 10.02 Notices.......................................................50
Section 10.03 Communication by Holders With Other Holders...................51
Section 10.04 Certificate and Opinion as to Conditions Precedent............51
Section 10.05 Statements Required in Certificate or Opinion.................51
Section 10.06 Rules by Trustee and Agents...................................52
Section 10.07 Legal Holidays................................................52
Section 10.08 No Recourse Against Others....................................53
Section 10.09 Counterparts..................................................53
Section 10.10 Other Provisions..............................................53
Section 10.11 Governing Law.................................................54
Section 10.12 No Adverse Interpretation of Other Agreements.................54
Section 10.13 Successors....................................................54
Section 10.14 Severability..................................................54
Section 10.15 Table of Contents, Headings, etc..............................54
ARTICLE 11
SUBORDINATION
Section 11.01 Agreement to Subordinate......................................54
Section 11.02 Liquidation; Dissolution; Bankruptcy..........................54
Section 11.03 Default on Senior Debt and/or Designated Senior Debt..........55
Section 11.04 Acceleration of Convertible Subordinated Notes................56
Section 11.05 When Distribution Must Be Paid Over...........................56
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TABLE OF CONTENTS
(continued)
Page
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Section 11.06 Notice by Company.............................................57
Section 11.07 Subrogation...................................................57
Section 11.08 Relative Rights...............................................57
Section 11.09 Subordination May Not Be Impaired by Company..................58
Section 11.10 Distribution or Notice to Representative......................58
Section 11.11 Rights of Trustee and Paying Agent............................58
Section 11.12 Authorization to Effect Subordination.........................58
Section 11.13 Article Applicable to Paying Agents...........................59
Section 11.14 Senior Debt Entitled to Rely..................................59
Section 11.15 Permitted Payments............................................59
ARTICLE 12
CONVERSION OF CONVERTIBLE SUBORDINATED NOTES
Section 12.01 Right to Convert..............................................59
Section 12.02 Exercise of Conversion Privilege; Issuance of Common
Stock on Conversion; No Adjustment for Interest
or Dividends..................................................60
Section 12.03 Cash Payments in Lieu of Fractional Shares....................61
Section 12.04 Taxes on Shares Issued........................................62
Section 12.05 Reservation of Shares; Shares to Be Fully Paid; Listing
of Common Stock...............................................62
Section 12.06 Adjustment for Change in Capital Stock........................62
Section 12.07 [Reserved]....................................................66
Section 12.08 [Reserved]....................................................66
Section 12.09 When Adjustment May Be Deferred...............................66
Section 12.10 When No Adjustment is Required................................66
Section 12.11 Notice of Adjustment..........................................67
Section 12.12 Voluntary Increase............................................67
Section 12.13 Notice of Certain Transactions................................67
Section 12.14 Reorganization of Company; Special Distributions..............68
Section 12.15 Company Determination Final...................................69
Section 12.16 Trustee's Adjustment Disclaimer...............................69
Section 12.17 Simultaneous Adjustments......................................69
Section 12.18 Successive Adjustments........................................69
Section 12.19 Restriction on Common Stock Issuable Upon Conversion..........69
Section 12.20 Company's Right to Elect to Pay Cash or Common Stock..........71
EXHIBITS
Exhibit A Form of Convertible Subordinated Note........................A-1
Exhibit B Form of Transfer Certificate for Transfer of
Restricted Common Stock......................................B-1
Exhibit C Projected Payment Schedule...................................C-1
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CROSS-REFERENCE TABLE*
Trust Indenture Indenture
Act Section Section
----------- -------
310(a)(1)..................................................... 7.10
(a)(2)................................................... 7.10
(a)(3)................................................... n/a
(a)(4)................................................... n/a
(b)......................................................7.08, 7.10, 10.02
(c)...................................................... n/a
311(a)........................................................ 7.11
(b)...................................................... 7.11
(c)...................................................... n/a
312(a)........................................................ 2.05
(b)...................................................... 10.03
(c)...................................................... 10.03
313(a)........................................................ 7.06
(b)(1)................................................... n/a
(b)(2)................................................... 5.7, 7.06
(c)...................................................... 7.06, 10.02
(d)...................................................... 7.06
314(a)........................................................ 4.02, 10.02,
10.05
(b)...................................................... n/a
(c)(1)................................................... 10.04
(c)(2)................................................... 10.04
(c)(3)................................................... n/a
(d)...................................................... n/a
(e)...................................................... 10.05
(f)...................................................... n/a
315(a)........................................................ 7.01(b)
(b)...................................................... 7.05, 10.02
(c)...................................................... 7.01(a)
(d)...................................................... 7.01(c)
(e)...................................................... 6.11
316(a)(last sentence)......................................... 2.09
(a)(1)(A)................................................ 6.05
(a)(1)(B)................................................ 6.04
(a)(2)................................................... n/a
(b)...................................................... 11.08
(c)...................................................... 9.04
317(a)(1)..................................................... 6.08
(a)(2)................................................... 6.09
(b)...................................................... 2.04
318(a)........................................................ 10.01
(b)...................................................... n/a
(c)...................................................... 10.01
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"n/a" means not applicable.
*This Cross-Reference Table shall not, for any purpose, be deemed to be a part
of the Indenture.
v
THIS INDENTURE, dated as of July 18, 2003, is between School Specialty,
Inc., a Wisconsin corporation (the "Company"), and BNY Midwest Trust Company, an
Illinois trust company (the "Trustee"). The Company has duly authorized the
creation of its 3.75% Convertible Subordinated Notes due 2023 (the "Convertible
Subordinated Notes"), and to provide therefor the Company and the Trustee have
duly authorized the execution and delivery of this Indenture. Each party agrees
as follows for the benefit of the other party and for the equal and ratable
benefit of the holders from time to time of the Convertible Subordinated Notes:
ARTICLE 1
DEFINITIONS
SECTION 1.01 Definitions.
-----------
"Accreted Conversion Price" has the meaning specified in paragraph 9 of the
Convertible Subordinated Notes.
"Accreted Principal Amount" has the meaning specified in paragraph 1(b) of
the Convertible Subordinated Notes.
"Affiliate" means, when used with reference to any person, any other person
directly or indirectly controlling, controlled by, or under direct or indirect
common control of, the referent person. For the purposes of this definition,
"control" when used with respect to any specified person means the power to
direct or cause the direction of management or policies of the referent person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise. The terms "controlling" and "controlled" have meanings
correlative of the foregoing.
"Agent" means any Registrar, Paying Agent, Conversion Agent or
co-registrar.
"Agent Member" means any member of, or participant in, the Depositary.
"Applicable Procedures" means, with respect to any transfer or transaction
involving a Global Security or beneficial interest therein, the rules and
procedures of the Depositary for such Global Security to the extent applicable
to such transaction and as in effect from time to time.
"Board of Directors" means the Board of Directors of the Company or any
authorized committee of the Board of Directors.
"Capital Stock" of any person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such person, but excluding any debt
securities convertible into such equity.
"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 becomes the "beneficial owner" (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act) of shares representing more
than 50% of the combined voting power of the then outstanding Voting Stock of
the Company, (b) the Company consolidates with or merges into any other
corporation, any other corporation merges into the Company, or the Company
effects a
1
share exchange, and, in the case of any such transaction, the outstanding Common
Stock of the Company is reclassified into or exchanged for any other property or
securities, unless the shareholders 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 then outstanding Voting
Stock of the corporation resulting from such transaction in substantially the
same proportion as their ownership of the Voting Stock of the Company
immediately before such transaction, (c) the Company or the Company and its
subsidiaries, taken as a whole, sells, assigns, conveys, transfers or leases all
or substantially all assets of the Company or of the Company and its
subsidiaries, taken as a whole, as applicable (other than to one or more
wholly-owned subsidiaries of the Company), or (d) 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); provided, that a
Change of Control under (a), (b) and (c) above shall not be deemed to have
occurred if either (y) the Closing Sale Price per share of Common Stock for any
five trading days within the period of ten consecutive trading days ending
immediately after the later of the Change of Control or the public announcement
of the Change of Control (in the case of a Change of Control under clause (a)
above) or the period of ten consecutive trading days ending immediately before
the Change of Control (in the case of a Change of Control under clause (b) or
(c) above) shall equal or exceed 110% of the Accreted Conversion Price in effect
on the date of such Change of Control or the public announcement of such Change
of Control, as applicable or (z) at least 90% of the consideration (excluding
cash payments for fractional shares) in the transaction or transactions
constituting the Change of Control consists of shares of common stock that are,
or upon issuance will be, traded on the New York Stock Exchange or quoted on The
Nasdaq National Market and, as a result of the transaction, the Convertible
Subordinated Notes become convertible solely into such common stock.
"Closing Sale Price" of a security on any date means (a) the last reported
per share sale price (or, if the last sale price is not reported, the average of
the bid and ask prices or, if more than one in either case, the average of the
average bid and the average ask prices) on such date as reported on The Nasdaq
National Market or if such security is not then quoted on The Nasdaq National
Market, then as reported by the principal U.S. exchange or quotation system such
security is then listed or quoted or (b) in the absence of such quotation, such
price as the Company shall determine on the basis of such quotations as the
Company considers appropriate.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company. Subject to the provisions
of Section 12.14, however, shares issuable on conversion of Convertible
Subordinated Notes shall include only shares of the class designated as Common
Stock of the Company at the date of this Indenture or shares of any class or
classes resulting from any reclassification or reclassifications thereof and
which have no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which are not subject to redemption by the Company; provided
that if at any time there shall be more than one such resulting class, the
shares of each such class then so issuable shall be substantially in the
proportion which the
2
total number of shares of such class resulting from all such reclassifications
bears to the total number of shares of all such classes resulting from all such
reclassifications.
"Company" means the party named as such above until a successor replaces it
in accordance with Article 5 and thereafter means the successor. References to
the Company shall not include any Subsidiary.
A "consolidated subsidiary" of any person means a subsidiary which for
financial reporting purposes is or, in accordance with GAAP, should be,
accounted for by such person as a consolidated subsidiary.
"Contingent Interest" has the meaning specified in paragraph 1(c) of the
form of Convertible Subordinated Note, which is attached as Exhibit A hereto.
"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 the
date of this Indenture 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 such Board of Directors at the time of such nomination or
election, including directors of a successor corporation resulting from a
transaction referred to in clause (a), (b) or (c) of the definition of "Change
of Control."
"Convertible Subordinated Notes" means the 3.75% Convertible Subordinated
Notes due 2023 issued, authenticated and delivered under this Indenture.
"Corporate Trust Office" means the corporate trust office of the Trustee at
which at any particular time the trust created by this Indenture shall
principally be administered; as of the date hereof, the Corporate Trust Office
is located at ▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
"Default" means any event that is, or after notice or passage of time, or
both, would be, an Event of Default.
"Depositary" means, with respect to any Global Securities, a clearing
agency that is registered as such under the Exchange Act and is designated by
the Company to act as Depositary for such Global Securities (or any successor
securities clearing agency so registered), which shall initially be DTC.
"Designated Event" means the occurrence of a Change of Control or a
Termination of Trading.
"Designated Senior Debt" means (a) the Senior Bank Credit Facility and (ii)
any particular Senior Debt which has at the time of the giving of the Payment
Blockage Notice an aggregate outstanding principal amount in excess of $25
million, if the instrument creating or evidencing the same or the assumption or
guarantee thereof (or related agreements or documents to which the Company is a
party) expressly provides that such Indebtedness shall be "Designated Senior
Debt" for purposes of the Indenture (provided that such instrument, agreement or
other document may place limitations and conditions on the right of such Senior
Debt to exercise the rights of Designated Senior Debt.)
3
"DTC" means The Depository Trust Company, a New York corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Ex-Dividend Date" for any issuance or distribution means the date
immediately prior to the commencement of "ex-dividend" trading for such issuance
or distribution on The Nasdaq National Market or the principal U.S. exchange or
quotation system on which the Common Stock is then listed or quoted.
"fair market value" means the amount which a willing buyer would pay an
unaffiliated willing seller in an arm's length transaction.
"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 may be approved by a significant segment of the accounting
profession of the United States, which are in effect from time to time.
"Global Securities Legend" means the legend labeled as such and that is set
forth in Exhibit A hereto.
"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 that 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 or under any lease or related document (including a purchase
agreement) that provides that the Company is contractually obligated to purchase
or cause a third party to purchase and thereby guarantee a minimum residual
value of the lease property to the lessor and the obligations of the Company
under such lease or related document to purchase or to cause a third party to
purchase such leased property, (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, (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 through an agreement to purchase (including, without
limitation, "take or pay" and similar arrangements), contingent or otherwise
(and the obligations of such person under any such assumptions, guarantees or
other such arrangements); and (iii) any and all deferrals, renewals,
4
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 Citigroup Global Markets Inc. and Banc of
America Securities LLC.
"Interest Payment Date" means February 1 and August 1 of each year,
beginning February 1, 2004.
"Issue Date" means the date on which Convertible Subordinated Notes are
first issued and authenticated under this Indenture.
"Liquidated Damages" has the meaning specified in paragraph 18 of the form
of Convertible Subordinated Note, which is attached as Exhibit A hereto.
"Material Subsidiary" means any subsidiary of the Company which at the date
of determination is a "significant subsidiary" as defined in Rule 1-02(w) of
Regulation S-X under the Securities Act and the Exchange Act.
"Maturity Date" means August 1, 2023, unless earlier redeemed, repurchased
or converted.
"Note Custodian" means BNY Midwest Trust Company, as custodian with respect
to any Global Security, or any successor entity thereto.
"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 dated July 14, 2003,
relating to the Convertible Subordinated Notes, including all amendments
thereto.
"Officer" means the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Financial Officer, the Chief Accounting Officer, any
Executive Vice President, Senior Vice President or Vice President (whether or
not designated by a number or numbers or word or words before or after the title
"Vice President"), the Treasurer and the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers, one of
whom is the Chairman of the Board, the Chief Executive Officer, the President,
the Chief Financial Officer or the Treasurer of the Company.
"Opinion of Counsel" means a written opinion from legal counsel who may be
an employee of or counsel to the Company or the Trustee except to the extent
otherwise indicated in this Indenture.
5
"Original Principal Amount" of each Convertible Subordinated Note means the
original principal amount as set forth on the face of the Convertible
Subordinated Note.
A "person" means any individual, corporation, partnership, joint venture,
trust, estate, unincorporated organization, limited liability company or
government or any agency or political subdivision thereof.
"Redemption Date" when used with respect to any of the Convertible
Subordinated Notes to be redeemed, means the date fixed by the Company for such
redemption pursuant to Article 3 of this Indenture and the Convertible
Subordinated Notes.
"Redemption Price" when used with respect to any of the Convertible
Subordinated Notes to be redeemed, means the price fixed for such redemption
pursuant to Article 3 of this Indenture and the Convertible Subordinated Notes.
"Registration Rights Agreement" means the Registration Rights Agreement
relating to the Convertible Subordinated Notes and Common Stock issuable upon
conversion of such Convertible Subordinated Notes dated July 18, 2003, between
the Company and the Initial Purchasers, as such agreement may be amended,
modified or supplemented from time to time.
"Regular Record Date" means the January 15 or July 15 immediately preceding
each Interest Payment Date.
"Representative" means (a) the indenture trustee or other trustee, agent or
representative for any Senior Debt or (b) with respect to any Senior Debt that
does not have any such trustee, agent or other representative, (i) in the case
of such Senior Debt issued pursuant to an agreement providing for voting
arrangements as among the holders or owners of such Senior Debt, any holder or
owner of such Senior Debt acting with the consent of the required persons
necessary to bind such holders or owners of such Senior Debt and (ii) in the
case of all other such Senior Debt, the holder or owner of such Senior Debt.
"Restricted Securities Legend" means the legend labeled as such and that is
set forth in Exhibit A hereto.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Senior Bank Credit Facility" means the Amended and Restated Credit
Agreement dated as of April 11, 2003 among the Company, as borrower, certain of
the Company's subsidiaries, as guarantors, the lenders identified therein, and
Bank of America, N.A., as administrative agent, including any deferrals,
renewals, extensions, replacements, refinancings or refundings thereof, or
amendments, modifications or supplements thereto and any agreement providing
therefor whether by or with the same or any other lender, creditor, group of
lenders or group of creditors and including the related notes, guarantee
agreements and other instruments and agreements executed in connection
therewith.
"Senior Debt" means the principal of, premium, if any, and interest on,
rent under, and any other amounts payable on or in respect of any Indebtedness
of the Company (including,
6
without limitation, any Obligations in respect of such 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,
refinancings or refundings of, or amendments, modifications or supplements to
the foregoing); provided, however, that Senior Debt does not include (u)
Indebtedness evidenced by the Convertible Subordinated Notes, (v) the Company's
6% convertible subordinated notes due 2008, (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 except to the extent such
Indebtedness is of a type described in clause (ii) of the definition of
Indebtedness, (y) trade payables of the Company for goods, services or materials
purchased in the ordinary course of business (other than, to the extent they may
otherwise constitute trade payables, any obligations of the type described in
clause (ii) of the definition of Indebtedness), and (z) any particular
Indebtedness in which the instrument creating or evidencing the same 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 Convertible
Subordinated Notes.
"Shelf Registration Statement" shall have the meaning set forth in the
Registration Rights Agreement.
A "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 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).
"Tax Event" means that the Company shall have received an opinion from
independent tax counsel experienced in such matters to the effect that as a
result of (i) any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, or (ii) any
amendment to, or change in, an interpretation or application of such laws or
regulations by any legislative body, court, governmental agency or regulatory
authority, in each case which amendment or change is enacted, promulgated,
issued or announced or which interpretation is issued or announced or which
action is taken, on or after the date of this Indenture, there is more than an
insubstantial risk that accruals of Accreted Principal Amount payable on the
notes either (x) would not be deductible on a current accrual basis or (y) would
not be deductible under any other method, in either case in whole or in part, by
the Company (by reason of deferral, disallowance, or otherwise) for U.S. federal
income tax purposes.
"Termination of Trading" will be deemed to have occurred if the Common
Stock (or other common stock into which the Convertible Subordinated Notes are
then convertible) is neither listed for trading on the New York Stock Exchange
nor approved for trading on The Nasdaq National Market.
7
"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, except as
provided in Sections 9.03 and 12.06.
"trading day" means any day on which trades may be made on The Nasdaq
National Market or, if the applicable security is then listed on the New York
Stock Exchange, any day on which the New York Stock Exchange is open for trading
or, if the applicable security is not so listed, admitted for trading or quoted,
any business day.
"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 an officer in the Corporate Trust Office of the
Trustee and having direct responsibility for the administration of this
Indenture.
"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 Convertible Subordinated 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.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
SECTION 1.02 Other Definitions.
-----------------
Defined in
Section
"Agent Members"............................................... 2.01
"Bankruptcy Law".............................................. 6.01
"business day"................................................ 10.07
"Cash Amount"................................................. 12.20
"Cash Settlement Averaging Period"............................ 12.20
"Cash Settlement Notice Period"............................... 12.20
"Clearstream"................................................. 2.01
"Commencement Date"........................................... 12.06
"Contingent Payment Regulations".............................. 2.15
"Conversion Agent"............................................ 2.03
"Conversion Date"............................................. 12.02
"Conversion Obligation"....................................... 12.20
"Conversion Rate"............................................. 12.01
"Conversion Retraction Period"................................ 12.20
"Conversion Shares"........................................... 12.02
"Custodian"................................................... 6.01
"Designated Event Date"....................................... 3.10
"Designated Event Offer"...................................... 3.10
"Designated Event Offer Termination Date"..................... 3.10
8
"Designated Event Payment".................................... 3.10
"Designated Event Payment Termination Date"................... 3.10
"Determination Date".......................................... 12.06
"Distribution Date"........................................... 12.06
"Euroclear"................................................... 2.01
"Event of Default"............................................ 6.01
"Expiration Time"............................................. 12.06
"Global Security"............................................. 2.01
"Investment Company Act"...................................... 4.09
"Legal Holiday"............................................... 10.07
"Measurement Date"............................................ 12.06
"Option Exercise Date"........................................ 4.10
"Paying Agent"................................................ 2.03
"Payment Blockage Notice"..................................... 11.03
"Payment Blockage Period"..................................... 11.03
"Payment Default"............................................. 6.01
"Purchase Agreement".......................................... 2.01
"Purchased Shares"............................................ 12.06
"Registrar"................................................... 2.03
"Register".................................................... 2.03
"Regulation S"................................................ 2.01
"Repurchase Date"............................................. 3.09
"Repurchase Notice"........................................... 3.09
"Repurchase Price"............................................ 3.09
"Restated Principal Amount"................................... 4.10
"Restricted Common Stock Legend".............................. 12.19
"Rights"...................................................... 12.06
"Rule 144A"................................................... 2.01
"Tax Event Date".............................................. 4.10
SECTION 1.03 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 Commission;
"indenture securities" means the Convertible Subordinated Notes;
"indenture security holder" means a holder of a Convertible
Subordinated Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
9
"obligor" on the Convertible Subordinated Notes means the Company or
any other obligor on the Convertible Subordinated Notes.
All other terms in this Indenture that are defined by the TIA, defined by
TIA reference to another statute or defined by Commission rule under the TIA
have the meanings so assigned to them.
SECTION 1.04 Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) the male, female and neuter genders include one another.
ARTICLE 2
THE CONVERTIBLE SUBORDINATED NOTES
SECTION 2.01 Form and Dating.
---------------
(a) GLOBAL SECURITIES. The Convertible Subordinated Notes are being
offered and sold by the Company pursuant to a Purchase Agreement relating to the
Convertible Subordinated Notes, dated July 14, 2003, among the Company and the
Initial Purchasers (the "Purchase Agreement").
The Convertible Subordinated Notes are being offered and sold (i) in
reliance on Regulation S under the Securities Act ("Regulation S") or (ii) to
"qualified institutional buyers" as defined in Rule 144A in reliance on Rule
144A under the Securities Act ("Rule 144A"), each as provided in the Purchase
Agreement, and shall be issued in the form of one or more permanent global
securities in definitive, fully registered form without interest coupons with
the Global Securities Legend and Restricted Securities Legend set forth in
Exhibit A hereto (each, a "Global Security"). Any Global Security shall be
deposited on behalf of the purchasers of the Convertible Subordinated 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 for the
accounts of participants in the Depositary (and, in the case of Convertible
Subordinated Notes held in accordance with Regulation S, registered with the
Depositary for the accounts of designated agents holding on behalf of the
Euroclear System ("Euroclear") or Clearstream Banking, societe anonyme
("Clearstream")), duly executed by the Company and authenticated by the Trustee
as hereinafter provided. The aggregate principal amount of a Global Security may
10
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.
(b) BOOK-ENTRY PROVISIONS. This Section 2.01(b) shall apply only to a
Global Security deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with this
Section 2.01(b) and the written order of the Company, authenticate and deliver
initially one or more Global Securities that (i) shall be registered in the name
of Cede & Co. or other nominee of such Depositary and (ii) shall be delivered by
the Trustee to such Depositary or pursuant to such Depositary's instructions or
held by the Trustee as custodian for the Depositary pursuant to a FAST Balance
Certificate Agreement between the Depositary and the Trustee.
Except as provided in Section 2.10, members of, or participants in, the
Depositary ("Agent Members") shall have no rights under this Indenture with
respect to any Global Security held on their behalf by the Depositary or by the
Trustee as the Note Custodian of the Depositary or under such Global Security,
and the Depositary may be treated by the Company, the Trustee and any agent of
the Company or the Trustee as the absolute owner of such Global Security for all
purposes whatsoever. Notwithstanding the foregoing, the registered holder of a
Global Security may grant proxies and otherwise authorize any person, including
Agent Members and persons that may hold interests through Agent Members, to take
any action that a Holder is entitled to take under this Indenture or the
Convertible subordinated Notes, and 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 a
holder of a beneficial interest in any Global Security.
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 Clearstream shall be applicable
to interests in any Global Securities that are held by participants through
Euroclear or Clearstream. The Trustee shall have no obligation to notify holders
of any such procedures or to monitor or enforce compliance with the same.
(c) DEFINITIVE SECURITIES. Except as provided in Section 2.10, owners of
beneficial interests in Global Securities will not be entitled to receive
physical delivery of certificated Convertible Subordinated Notes in definitive
form. If applicable, certificated Convertible Subordinated Notes in definitive
form will bear the Restricted Securities Legend set forth on Exhibit A unless
removed in accordance with Section 2.06(c).
SECTION 2.02 Execution and Authentication.
----------------------------
One Officer shall sign the Convertible Subordinated Notes for the Company
by manual or facsimile signature.
If an Officer whose signature is on a Convertible Subordinated Note no
longer holds that office at the time the Convertible Subordinated Note is
authenticated, the Convertible Subordinated Note shall nevertheless be valid.
11
A Convertible Subordinated Note shall not be valid until authenticated by
the manual signature of the Trustee. The signature shall be conclusive evidence
that the Convertible Subordinated Note has been authenticated under this
Indenture.
Upon a written order of the Company signed by an Officer of the Company,
the Trustee shall authenticate Convertible Subordinated Notes for original issue
up to an aggregate Original Principal Amount of $110,000,000 (plus up to
$25,000,000 aggregate Original Principal Amount of Convertible Subordinated
Notes that may be sold by the Company pursuant to the over-allotment option
granted to the Initial Purchasers pursuant to the Purchase Agreement) to the
Initial Purchasers. The aggregate Original Principal Amount of Convertible
Subordinated Notes outstanding at any time may not exceed that amount except as
provided in Section 2.07.
The Convertible Subordinated Notes shall be issuable only in registered
form without coupons and only in denominations of $1,000 or any integral
multiple thereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Convertible Subordinated Notes. An authenticating agent may
authenticate Convertible Subordinated Notes whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same right as an
Agent to deal with the Company or an Affiliate of the Company.
SECTION 2.03 Registrar, Paying Agent and Conversion Agent.
--------------------------------------------
The Company shall maintain or cause to be maintained in such locations as
it shall determine, which may be the Corporate Trust Office, an office or
agency: (i) where securities may be presented for registration of transfer or
for exchange ("Registrar"); (ii) where Convertible Subordinated Notes may be
presented for payment ("Paying Agent"); (iii) an office or agency where
Convertible Subordinated Notes may be presented for conversion (the "Conversion
Agent"); and (iv) where notices and demands to or upon the Company in respect of
Convertible Subordinated Notes and this Indenture may be served by the holders
of the Convertible Subordinated Notes. The Registrar shall keep a Register
("Register") of the Convertible Subordinated 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. 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, Conversion Agent or co-registrar without prior notice.
The Company shall notify the Trustee of the name and address of any Agent not a
party to this Indenture and shall enter into an appropriate agency agreement
with any Registrar, Paying Agent, Conversion Agent or co-registrar not a party
to this Indenture. The agreement shall implement the provisions of this
Indenture that relate to such Agent. The Company or any of its subsidiaries may
act as Paying Agent, Registrar, Conversion Agent or co-registrar, except that
for purposes of Articles 3 and 8, neither the Company nor any of its
subsidiaries shall act as Paying Agent. If the Company fails to appoint or
maintain another entity as Registrar, or Paying Agent or Conversion Agent, the
Trustee shall act as such, and the Trustee shall initially act as such.
12
SECTION 2.04 Paying Agent to Hold Money in Trust.
-----------------------------------
The Company shall require each Paying Agent (other than the Trustee, who
hereby so agrees), to agree in writing that the Paying Agent will hold in trust
for the benefit of holders of the Convertible Subordinated Notes or the Trustee
all money held by the Paying Agent for the payment of principal or interest
(including Contingent Interest, if any) and Liquidated Damages, if any, on the
Convertible Subordinated Notes, and will notify the Trustee of any default by
the Company in respect of 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. Upon payment over to the Trustee, the Paying Agent
(if other than the Company or a subsidiary of the Company) shall have no further
liability for the money. If the Company or a subsidiary of the Company acts as
Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the holders of the Convertible Subordinated Notes all money held by
it as Paying Agent.
SECTION 2.05 Holder 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
holders of Convertible Subordinated Notes and shall otherwise comply with TIA
Section 312(a). If the Trustee is not the Registrar, the Company shall furnish
to the Trustee at least seven business days before each Interest Payment Date,
and as the Trustee may request in writing within fifteen (15) days after receipt
by the Company of any such request (or such lesser time as the Trustee may
reasonably request in order to enable it to timely provide any notice to be
provided by it hereunder), a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of holders of
Convertible Subordinated Notes.
SECTION 2.06 Transfer and Exchange.
---------------------
(a) When Convertible Subordinated Notes are presented to the Registrar or
a co-registrar with a request to register a transfer or to exchange them for an
equal Original Principal Amount of Convertible Subordinated Notes for 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 the Trustee shall
authenticate Convertible Subordinated Notes at the Registrar's request, bearing
registration numbers not contemporaneously outstanding. No service charge shall
be made to a holder for any registration of transfer or exchange (except as
otherwise expressly permitted herein), but the Company and the Registrar may
require payment of a sum sufficient to cover any transfer tax or other
governmental charge payable upon exchanges pursuant to Sections 2.10, 3.07, 9.05
or 12.02.
The Company or the Registrar shall not be required (i) to issue, register
the transfer of or exchange Convertible Subordinated Notes during a period
beginning at the opening of business fifteen (15) days before the day of any
selection of Convertible Subordinated Notes for redemption under Section 3.03
and ending at the close of business on the day of selection, (ii) to register
the transfer or exchange of any Convertible Subordinated Note so selected for
redemption in whole or in part, except the unredeemed portion of any Convertible
Subordinated
13
Note being redeemed in part or (iii) to register the transfer of any Convertible
Subordinated Notes surrendered for repurchase pursuant to Section 3.09 or
Section 3.10.
All Convertible Subordinated Notes issued upon any transfer or exchange of
Convertible Subordinated Notes in accordance with this Indenture shall be the
valid obligations of the Company, evidencing the same debt, and entitled to the
same benefits under this Indenture as the Convertible Subordinated Notes
surrendered upon such registration of transfer or exchange.
(b) Notwithstanding any provision to the contrary herein, so long as a
Global Security remains outstanding and is held by or on behalf of the
Depositary, transfers of a Global Security, in whole or in part, or of any
beneficial interest therein, shall only be made in accordance with Sections
2.01(b) and 2.10; provided, however, that beneficial interests in a Global
Security may be transferred to persons who take delivery thereof in the form of
a beneficial interest in the Global Security in accordance with the transfer
restrictions set forth under the heading "Notice to Investors" in the Offering
Memorandum and, if applicable, in the Restricted Securities Legend.
Except for transfers or exchanges made in accordance with Section 2.10,
transfers of a Global Security shall be limited to transfers of such Global
Security in whole, but not in part, to nominees of the Depositary or to a
successor of the Depositary or such successor's nominee.
In the event that a Global Security is exchanged for Convertible
Subordinated Notes in definitive form pursuant to Section 2.10 prior to the
effectiveness of a Shelf Registration Statement with respect to such Convertible
Subordinated Notes, such exchange may occur, and such Convertible Subordinated
Notes may be further exchanged or transferred, only upon receipt by the
Registrar of (1) such Global Security or such Convertible Subordinated Notes in
definitive form, duly endorsed as provided herein, as applicable, (2)
instructions from the holder directing the Trustee to authenticate and deliver
one or more Convertible Subordinated Notes in definitive form of the same
aggregate principal amount as the Global Security or the Convertible
Subordinated Notes in definitive form (or portion thereof), as applicable, to be
transferred, such instructions to contain the name or names of the designated
transferee or transferees, the authorized denomination or denominations of the
Convertible Subordinated Notes in definitive form to be so issued and
appropriate delivery instructions, and (3) such certifications or other
information and, in the case of transfers pursuant to Rule 144 under the
Securities Act, legal opinions 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
(including the certification requirements intended to ensure that such transfers
comply with Rule 144A or Regulation S under the Securities Act, as the case may
be), and upon compliance with such other procedures as may from time to time be
adopted by the Company and the Registrar.
(c) Except in connection with a Shelf Registration Statement contemplated
by and in accordance with the terms of the Registration Rights Agreement, if
Convertible Subordinated Notes are issued upon the registration of transfer,
exchange or replacement of Convertible Subordinated Notes bearing a Restricted
Securities Legend, or if a request is made to remove such a Restrictive
Securities Legend on Convertible Subordinated Notes, the Convertible
Subordinated Notes so issued shall bear the Restricted Securities Legend, or a
Restricted Securities Legend shall not be removed, as the case may be, unless
there is delivered to the
14
Company such satisfactory evidence, which, in the case of a transfer made
pursuant to Rule 144 under the Securities Act, may include an opinion of counsel
given in accordance with the laws in the State of New York, as may be reasonably
required by the Company, 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 that such Convertible Subordinated Notes are not "restricted" within the
meaning of Rule 144 under the Securities Act. Upon provision to the Company of
such satisfactory evidence, the Trustee, at the written direction of the
Company, shall authenticate and deliver Convertible Subordinated Notes that do
not bear the legend. The Company shall not otherwise be entitled to require the
delivery of a legal opinion in connection with any transfer or exchange of
Securities.
(d) Neither the Trustee nor any Agent shall have any responsibility for
any actions taken or not taken by the Depositary.
(e) The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Convertible Subordinated Notes (including any transfers between or among
the Depositary's participants or beneficial owners of interests in any Global
Security) other than to require delivery of such certificates and other
documentation as is expressly required by, and to do so if and when expressly
required by, the terms of this Indenture and to examine the same to determine
substantial compliance as to form with the express requirements hereof.
SECTION 2.07 Replacement Convertible Subordinated Notes.
------------------------------------------
If the holder of a Convertible Subordinated Note claims that its
Convertible Subordinated Note has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Convertible
Subordinated Note if the Trustee's and the Company's requirements are met. If
required by the Trustee or the Company as a condition of receiving a replacement
Convertible Subordinated Note, the holder of a Convertible Subordinated Note
must provide a certificate of loss and an indemnity and/or an indemnity bond
sufficient, in the judgment of both the Company and the Trustee, to fully
protect the Company, the Trustee, any Agent and any authenticating agent from
any loss, liability, cost or expense which any of them may suffer or incur if
the Convertible Subordinated Note is replaced. The Company and the Trustee may
charge the relevant holder for their expenses in replacing any Convertible
Subordinated Note.
The Trustee or any authenticating agent may authenticate any such
substituted Convertible Subordinated Note, and deliver the same upon the receipt
of such security or indemnity as the Trustee, the Company and, if applicable,
such authenticating agent may require. Upon the issuance of any substituted
Convertible Subordinated Note, the Company and the Trustee may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses connected therewith.
In case any Convertible Subordinated Note which has matured or is about to
mature, or has been called for redemption pursuant to Article 3, submitted for
repurchase pursuant to Section 3.09 or Section 3.10 or is about to be converted
into Common Stock pursuant to Article 12, shall become mutilated or be
destroyed, lost or stolen, the Company may, instead of issuing a substitute
15
Convertible Subordinated Note, pay or authorize the payment of or convert or
authorize the conversion of the same (without surrender thereof except in the
case of a mutilated Convertible Subordinated Note), as the case may be, if the
applicant for such payment or conversion shall furnish to the Company, to the
Trustee and, if applicable, to the authenticating agent such security or
indemnity as may be required by them to save each of them harmless for any loss,
liability, cost or expense caused by or connected with such substitution, and,
in case of destruction, loss or theft, evidence satisfactory to the Company, the
Trustee and, if applicable, any paying agent or conversion agent of the
destruction, loss or theft of such Convertible Subordinated Note and of the
ownership thereof.
Every replacement Convertible Subordinated Note is an additional obligation
of the Company and shall be entitled to all the benefits provided under this
Indenture equally and proportionately with all other Convertible Subordinated
Notes duly issued, authenticated and delivered hereunder.
SECTION 2.08 Outstanding Convertible Subordinated Notes.
------------------------------------------
The Convertible Subordinated Notes outstanding at any time are all the
Convertible Subordinated Notes properly authenticated by the Trustee except for
those canceled by the Trustee, those delivered to it for cancellation, and those
described in this Section as not outstanding.
If a Convertible Subordinated Note is replaced pursuant to Section 2.07, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Convertible Subordinated Note is held by a bona fide
purchaser.
If Convertible Subordinated Notes are considered paid under Section 4.01 or
converted under Article 12, they cease to be outstanding, and interest
(including Contingent Interest and Liquidated Damages, if any) on them ceases to
accrue.
Subject to Section 2.09 hereof, a Convertible Subordinated Note does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Convertible Subordinated Note.
SECTION 2.09 When Treasury Convertible Subordinated Notes Disregarded.
--------------------------------------------------------
In determining whether the holders of the required principal amount of
Convertible Subordinated Notes have concurred in any direction, waiver or
consent, Convertible Subordinated 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 Convertible Subordinated
Notes which a Trust Officer of the Trustee actually knows are so owned shall be
so disregarded.
16
SECTION 2.10 Temporary Convertible Subordinated Notes; Transfers of Global
-------------------------------------------------------------
Security to Beneficial Owners.
-----------------------------
(a) Until definitive Convertible Subordinated Notes are ready for
delivery, the Company may prepare and the Trustee shall authenticate temporary
Convertible Subordinated Notes. Temporary Convertible Subordinated Notes shall
be substantially in the form of definitive Convertible Subordinated Notes but
may have variations that the Company considers appropriate for temporary
Convertible Subordinated Notes and shall be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate definitive Convertible Subordinated Notes in exchange for
temporary Convertible Subordinated Notes.
(b) A Global Security deposited with the Depositary or with the Trustee as
Note Custodian for the Depositary pursuant to Section 2.01 shall be transferred
to the beneficial owners thereof in the form of certificated Convertible
Subordinated Notes in definitive form only if such transfer complies with
Section 2.06 and (i) the Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for such Global Security 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) an Event of Default has occurred and is continuing and the
Registrar has received a request from the Depositary to effect such a transfer.
In connection with the exchange of an entire Global Security for
certificated Convertible Subordinated Notes pursuant to this subsection (b),
such Global Security shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and upon Company order the Trustee
shall authenticate and deliver, to each beneficial owner identified by the
Depositary in exchange for its beneficial interest in such Global Security, an
equal aggregate principal amount of certificated Convertible Subordinated Notes
of authorized denominations. In the event that the certificated Convertible
Subordinated Notes are not issued to each such beneficial owner promptly after
the Registrar has received a request from the Depositary to issue such
certificated Convertible Subordinated Notes, the Company expressly acknowledges,
with respect to the right of any holder to pursue a remedy pursuant to Sections
6.06 or 6.07 hereof, the right of any beneficial owner of the Convertible
Subordinated Notes to pursue such remedy with respect to the portion of the
Convertible Subordinated Notes that represents such beneficial owner's
Convertible Subordinated Notes as if such certificated Convertible Subordinated
Notes had been issued, provided, however, that such beneficial owner provides
evidence reasonably satisfactory to the Company of such beneficial owner's
continuing beneficial ownership.
(c) Any Global Security or interest thereon that is transferable to the
beneficial owners thereof in the form of certificated Convertible Subordinated
Notes in definitive form shall, if held by the Depository, be surrendered by the
Depositary to the Trustee, without charge, and the Trustee shall authenticate
and deliver, upon such transfer of each portion of such Global Security, an
equal aggregate Original Principal Amount of Convertible Subordinated Notes of
authorized denominations in the form of certificated Convertible Subordinated
Notes in definitive form. Any portion of a Global Security transferred pursuant
to this Section shall be executed, authenticated and delivered only in
denominations of $1,000 of Original Principal Amount and any integral multiple
thereof and registered in such names as the Depositary shall
17
direct. Any Convertible Subordinated Notes in the form of certificated
Convertible Subordinated Notes in definitive form delivered in exchange for an
interest in the Global Security shall, except as otherwise provided by Section
2.06(c), bear the Restricted Securities Legend.
(d) Prior to any transfer pursuant to Section 2.10(b), the registered
holder of a Global Security may grant proxies and otherwise authorize any
person, including Agent Members and persons that may hold interests through
Agent Members, to take any action that a holder is entitled to take under this
Indenture or the Convertible Subordinated Notes.
SECTION 2.11 Cancellation.
------------
The Company at any time may deliver Convertible Subordinated Notes to the
Trustee for cancellation. The Registrar and Paying Agent shall forward to the
Trustee any Convertible Subordinated Notes surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else may cancel
Convertible Subordinated Notes surrendered for registration of transfer,
exchange, payment, replacement, conversion, redemption, repurchase or
cancellation. Upon written instructions of the Company, the Trustee shall
destroy and dispose of canceled Convertible Subordinated Notes as the Company
directs and, after such destruction, shall deliver a certificate of destruction
to the Company. The Company may not issue new Convertible Subordinated Notes to
replace Convertible Subordinated Notes that it has paid, redeemed or repurchased
or that have been delivered to the Trustee for cancellation or that any holder
has (i) converted pursuant to Article 12 hereof, (ii) submitted for redemption
pursuant to Article 3 hereof or (iii) submitted for repurchase pursuant to
Section 3.09 or Section 3.10 hereof (unless revoked).
SECTION 2.12 Defaulted Interest.
------------------
If the Company fails to make a payment of interest (including Contingent
Interest, if any) on the Convertible Subordinated Notes, it shall pay such
defaulted interest plus, to the extent lawful, any interest payable on the
defaulted interest. It may pay such defaulted interest, plus any such interest
payable on it, to the persons who are holders of Convertible Subordinated 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 to holders of the Convertible Subordinated Notes a notice that states
the record date, payment date and amount of such interest to be paid.
SECTION 2.13 CUSIP Number.
------------
The Company in issuing the Convertible Subordinated Notes may use a "CUSIP"
number, and if so, such CUSIP number shall be included in notices of redemption,
repurchase or exchange as a convenience to holders of Convertible Subordinated
Notes; provided, however, that any such notice may state that no representation
is made as to the correctness or accuracy of the CUSIP number printed in the
notice or on the Convertible Subordinated Notes and that reliance may be placed
only on the other identification numbers printed on the Convertible Subordinated
Notes. The Company will promptly notify the Trustee of any change in the CUSIP
number.
18
SECTION 2.14 Regulation S.
------------
The Company agrees that it will refuse to register any transfer of
Convertible Subordinated Notes or any shares of Common Stock issued upon
conversion of Convertible Subordinated Notes that is not made in accordance with
the provisions of Regulation S under the Securities Act, pursuant to a
registration statement which has been declared effective under the Securities
Act or pursuant to an available exemption from the registration requirements of
the Securities Act; provided that the provisions of this paragraph shall not be
applicable to any Convertible Subordinated Notes which do not bear a Restricted
Securities Legend or to any shares of Common Stock evidenced by certificates
which do not bear a Restricted Common Stock Legend.
SECTION 2.15 Tax Treatment of Convertible Subordinated Notes.
-----------------------------------------------
The Company agrees, and by purchasing a beneficial ownership interest in
the Convertible Subordinated Notes each Holder, and any person that acquires a
direct or indirect beneficial interest in the Convertible Subordinated Notes,
will be deemed to have agreed (i) for United States federal income tax purposes
to treat the Convertible Subordinated Notes as indebtedness of the Company that
is subject to Treas. Reg. Sec. 1.1275-4 (the "Contingent Payment Regulations"),
(ii) for all tax purposes to treat the Convertible Subordinated Notes as
indebtedness of the Company, (iii) for purposes of the Contingent Payment
Regulations, to treat the fair market value of any Common Stock beneficially
received by a beneficial holder upon any conversion of the Convertible
Subordinated Notes (or cash in lieu of Common Stock) as a contingent payment,
(iv) to be bound by the Company's determination that the Convertible
Subordinated Notes are contingent payment debt instruments subject to the
"noncontingent bond method" of accruing original issue discount within the
meaning of the Contingent Payment Regulations with respect to the Convertible
Subordinated Notes, and (v) to be bound by the Company's projected payment
schedule with respect to the Convertible Subordinated Notes. The provisions of
this Indenture shall be interpreted to further this intention and agreement of
the parties. The comparable yield and the schedule of projected payments are not
determined for any purpose other than for the determination of interest accruals
and adjustment thereof in respect of the Convertible Subordinated Notes for
United States federal income tax purposes. The comparable yield and the schedule
of projected payments do not constitute a projection or representation regarding
the future stock price or the amounts payable on the Convertible Subordinated
Notes. For purposes of the foregoing, the Company's determination of the
"comparable yield" is 8.00% per annum, compounded semiannually. A Holder of
Convertible Subordinated Notes may obtain the yield to maturity, issue date,
comparable yield and projected payment schedule (which schedule is attached
hereto as Exhibit C) by submitting a written request to: School Specialty, Inc.,
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Financial
Officer.
19
ARTICLE 3
REDEMPTION AND PURCHASES
SECTION 3.01 Optional Redemption.
-------------------
The Company, at its option, may redeem all or any portion of the
Convertible Subordinated Notes upon the terms and at the Redemption Prices set
forth in each of the Convertible Subordinated Notes. Any redemption shall be
made in accordance with the provisions of Paragraph 6 the Convertible
Subordinated Notes and this Article 3.
SECTION 3.02 Notices to Trustee.
------------------
If the Company elects to redeem Convertible Subordinated Notes pursuant to
the optional redemption provisions of paragraph 6 of the Convertible
Subordinated Notes, it shall furnish to the Trustee, at least 15 (20 if less
than all of the then outstanding Convertible Subordinated Notes are to be
redeemed or if the Company requests the Trustee to give notice of redemption
pursuant to Section 3.04) days but not more than 60 days before a Redemption
Date (unless a shorter 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 Convertible Subordinated Notes (if less than all) to be
redeemed, (iv) the Redemption Price and (v) the CUSIP number of the Convertible
Subordinated Notes being redeemed.
SECTION 3.03 Selection of Convertible Subordinated Notes to Be Redeemed.
----------------------------------------------------------
If less than all the Convertible Subordinated Notes are to be redeemed, the
Trustee shall select the Convertible Subordinated Notes to be redeemed pro rata
or by lot or by any other method the Trustee considers fair and appropriate (so
long as such method is not prohibited by the rules of any stock exchange on
which the Securities are then listed). The Trustee shall make the selection at
least 15 days but not more than 60 days before the Redemption Date from
outstanding Convertible Subordinated Notes not previously called for redemption.
Convertible Subordinated Notes and any portions thereof that the Trustee
selects shall be in Original Principal Amounts of $1,000 or an integral multiple
of $1,000. Provisions of this Indenture that apply to Convertible Subordinated
Notes called for redemption also apply to portions of Convertible Subordinated
Notes called for redemption. The Trustee shall notify the Company promptly of
the Convertible Subordinated Notes or portions of Convertible Subordinated Notes
to be redeemed.
If any Convertible Subordinated Note selected for partial redemption is
converted in part before termination of the conversion right with respect to the
portion of the Convertible Subordinated Note so selected, the converted portion
of such Convertible Subordinated Note shall be deemed (so far as may be) to be
the portion selected for redemption. The Convertible Subordinated Notes (or
portion thereof) so selected shall be deemed duly selected for redemption for
all purposes hereof, notwithstanding that any such Convertible Subordinated Note
is converted in whole or in part before the mailing of the notice of redemption.
20
SECTION 3.04 Notice of Redemption.
--------------------
At least 15 days but not more than 60 days before a Redemption Date, the
Company shall mail by first-class mail a notice of redemption to each holder
whose Convertible Subordinated Notes are to be redeemed, at such holder's
registered address.
The notice shall identify the Convertible Subordinated Notes to be redeemed
and shall state:
(1) the Redemption Date;
(2) the Redemption Price and accrued and unpaid interest, if any,
payable on the Redemption Date;
(3) the Conversion Rate;
(4) the name and address of the Paying Agent and Conversion Agent;
(5) that Convertible Subordinated Notes called for redemption may be
converted at any time prior to the close of business on the last trading 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;
(6) that holders who want to convert Convertible Subordinated Notes
must satisfy the requirements set forth in Paragraph 9 of the Convertible
Subordinated Notes;
(7) that Convertible Subordinated Notes called for redemption must be
surrendered to the Paying Agent to collect the Redemption Price and accrued and
unpaid cash interest (including Contingent Interest, if any) and Liquidated
Damages, if any;
(8) if fewer than all the outstanding Convertible Subordinated Notes
are to be redeemed, the certificate number and Original Principal Amounts of the
particular Convertible Subordinated Notes to be redeemed;
(9) that, unless the Company defaults in making payment of such
Redemption Price and any cash interest (including Contingent Interest) or
Liquidated Damages which are due and payable, the Accreted Principal Amount will
cease to increase and cash interest (including Contingent Interest, if any) and
Liquidated Damages, if any, will cease to accrue on and after the Redemption
Date;
(10) the CUSIP number of the Convertible Subordinated Notes (provided
that the disclaimer permitted by Section 2.13 may be made);
(11) that in the case of Convertible Subordinated Notes or portions
thereof called for redemption on a date that is also an Interest Payment Date,
the interest payment (including Contingent Interest, if any) and Liquidated
Damages, if any, due on such date shall be paid to the person in whose name the
Convertible Subordinated Notes are registered at the close of business on the
relevant Regular Record Date; and
21
(12) any other information that the Company wants to present.
The notice if mailed in the manner herein provided shall be conclusively
presumed to have been given, whether or not the holder receives such notice. In
any case, failure to give such notice by mail or any defect in the notice to the
holder of any Convertible Subordinated Note designated for redemption as a whole
or in part shall not affect the validity of the proceedings for the redemption
of any Convertible Subordinated Note.
At the Company's request, the Trustee shall give the notice of redemption
to holders in the Company's name and at the Company's expense, provided that the
Company makes such request at least three Business days (unless a shorter period
shall be satisfactory to the Trustee) prior to the date such notice of
redemption must be mailed.
SECTION 3.05 Effect of Notice of Redemption.
------------------------------
Once notice of redemption is given, Convertible Subordinated Notes called
for redemption become due and payable on the Redemption Date and at the
Redemption Price (together with accrued and unpaid interest (including
Contingent Interest, if any) and Liquidated Damages, if any, stated in the
notice except for Convertible Subordinated Notes which are converted in
accordance with the terms of this Indenture. Upon surrender to the Paying Agent,
such Convertible Subordinated Notes shall be paid at the Redemption Price,
together with accrued and unpaid interest (including Contingent Interest, if
any) and Liquidated Damages, if any, as stated in the notice.
SECTION 3.06 Deposit of Redemption Price.
---------------------------
On or before the Redemption Date, the Company shall deposit with the Paying
Agent (or if the Company or a Subsidiary or an Affiliate of either of them is
the Paying Agent, shall segregate and hold in trust) in immediately available
funds sufficient to pay the Redemption Price of, and any accrued and unpaid
interest (including Contingent Interest, if any) and any Liquidated Damages on,
all Convertible Subordinated Notes to be redeemed on that date other than
Convertible Subordinated Notes or portions of Convertible Subordinated Notes
called for redemption which on or prior thereto have been delivered by the
Company to the Trustee for cancellation or have been converted. The Paying Agent
shall as promptly as practicable 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, no amount shall accrete on the Convertible
Subordinated Notes and interest (including Contingent Interest, if any) and
Liquidated Damages, if applicable, will cease to accrue on the Original
Principal Amount of the Convertible Subordinated Notes or portions thereof
called for redemption and for which funds have been set apart for payment, and
such Convertible Subordinated Notes, or portions thereof, shall cease after the
close of business on the trading day immediately preceding the Redemption Date
to be convertible into Common Stock and, except as provided in this Section 3.06
and Section 8.04, to be entitled to any benefit or security under this
Indenture, and the holders thereof shall have no right in respect of such
Convertible Subordinated Notes, or portions thereof, except the right to receive
the Redemption Price thereof and unpaid interest (including Contingent Interest,
if any) and Liquidated Damages,
22
if any, to (but excluding) the Redemption Date. In the case of Convertible
Subordinated Notes or portions thereof redeemed on a Redemption Date which is
also an Interest Payment Date, the interest payment (including Contingent
Interest, if any) and Liquidated Damages, if any, due on such date shall be paid
to the person in whose name the Convertible Subordinated Note is registered at
the close of business on the relevant Regular Record Date.
SECTION 3.07 Convertible Subordinated Notes Redeemed in Part.
-----------------------------------------------
Upon surrender of a Convertible Subordinated Note that is redeemed in part
only, the Company shall issue and the Trustee shall authenticate and deliver to
the holder of a Convertible Subordinated Note a new Convertible Subordinated
Note equal in Original Principal Amount to the unredeemed portion of the
Convertible Subordinated Note surrendered, at the expense of the Company, except
as specified in Section 2.06.
SECTION 3.08 Conversion Arrangement on Call for Redemption.
---------------------------------------------
In connection with any redemption of Convertible Subordinated Notes, the
Company may arrange for the purchase and conversion of any Convertible
Subordinated Notes by an arrangement with one or more investment banks or other
purchasers to purchase such Convertible Subordinated Notes by paying to the
Trustee in trust for the holders, on or before 10:00 a.m. New York City time on
the Redemption Date, an amount not less than the applicable Redemption Price,
together with interest (including Contingent Interest, if any) and Liquidated
Damages, if any, accrued to the Redemption Date, of such Convertible
Subordinated Notes. Notwithstanding anything to the contrary contained in this
Article 3, the obligation of the Company to pay the Redemption Price of such
Convertible Subordinated Notes, together with interest (including Contingent
Interest, if any) and Liquidated Damages, if any, accrued to the Redemption
Date, shall be deemed to be satisfied and discharged to the extent such amount
is so paid by such purchasers. If such an agreement is entered into, a copy of
which will be filed with the Trustee prior to the Redemption Date, any
Convertible Subordinated Notes not duly surrendered for conversion by the
holders thereof may, at the option of the Company, be deemed, to the fullest
extent permitted by law, acquired by such purchasers from such holders and
(notwithstanding anything to the contrary contained in Article 12) surrendered
by such purchasers for conversion, all as of immediately prior to the close of
business on the Redemption Date (and the right to convert any such Convertible
Subordinated Notes shall be deemed to have been extended through such time),
subject to payment of the above amount as aforesaid. At the direction of the
Company, the Trustee shall hold and dispose of any such amount paid to it in the
same manner as it would monies deposited with it by the Company for the
redemption of Convertible Subordinated Notes. Without the Trustee's prior
written consent, no arrangement between the Company and such purchasers for the
purchase and conversion of any Convertible Subordinated Notes shall increase or
otherwise affect any of the powers, duties, responsibilities or obligations of
the Trustee as set forth in this Indenture, and the Company agrees to indemnify
the Trustee from, and defend and hold it harmless against, any loss, liability
or expense arising out of or in connection with any such arrangement for the
purchase and conversion of any Convertible Subordinated Notes between the
Company and such purchasers to which the Trustee has not consented in writing,
including the costs and expenses incurred by the Trustee in the defense of any
claim or liability arising out of or in connection with the exercise or
performance of any of its powers, duties, responsibilities or obligations under
this Indenture.
23
SECTION 3.09 Repurchase of Convertible Subordinated Notes at Option of the
-------------------------------------------------------------
Holder.
------
(a) Convertible Subordinated Notes shall be purchased by the Company
pursuant to the terms of the Convertible Subordinated Notes at the option of the
holder on August 1 of 2010, 2013 and 2018 (each, a "Repurchase Date"), at a
purchase price of 100% of the Accreted Principal Amount plus any accrued and
unpaid interest (including Contingent Interest, if any) and any Liquidated
Damages (the "Repurchase Price"), in each case, to, but excluding, such
Repurchase Date, subject to the provisions of this Section 3.09(a). The Accreted
Principal Amount of the Convertible Subordinated Notes on each of the Repurchase
Dates is as follows:
(3)
(2) Accreted
Repurchase Date (1) Accreted Principal
August 1: Note Issue Price Amount Amount (1)+(2)
------------------------- ---------------- ------------- --------------
2010 .................... $ 1,000.00 $ 0.00 $ 1,000.00
2013 .................... $ 1,000.00 $ 117.91 $ 1,117.91
2018 .................... $ 1,000.00 $ 346.11 $ 1,346.11
If the Company has converted the Convertible Subordinated Notes to
semiannual coupon notes following the occurrence of a Tax Event, the Repurchase
Price will be equal to 100% of the Restated Principal Amount plus accrued and
unpaid interest (including Contingent Interest, if any) and Liquidated Damages,
if any, from the date of conversion to, but excluding, the Repurchase Date.
Notice of an upcoming Repurchase Date shall be mailed by or at the
direction of the Company to the holders of Convertible Subordinated Notes as
shown on the Register of such holders maintained by the Registrar not less than
20 business days prior to the Repurchase Date at the addresses as shown on the
Register of holders maintained by the Registrar. The Company will also give
notice to beneficial owners as required by applicable law. Such notice will
describe, among other things, the repurchase right at the option of the holder,
the Repurchase Date, the Repurchase Price, that the holder must exercise the
repurchase right at any time from the opening of business on the date that is 20
business days prior to the Repurchase Date until the close of business on the
third business day prior to the Repurchase Date, that the holder shall have the
right to withdraw any Convertible Subordinated Notes surrendered prior to the
close of business on the Repurchase Date, the procedures that a holder of
Convertible Subordinated Notes must follow in order to require the Company to
repurchase such holder's Convertible Subordinated Notes and to withdraw any
surrendered Convertible Subordinated Notes, the place or places where the holder
is to surrender such holder's Convertible Subordinated Notes, the amount of
interest (including Contingent Interest), if any, and Liquidated Damages, if
any) accrued on each Convertible Subordinated Note to (but excluding) the
Repurchase Date, and subject to Section 2.13, the CUSIP number or numbers of the
Convertible Subordinated Notes (if then generally in use).
No failure of the Company to give the foregoing notices and no defect
therein shall limit the Convertible Subordinated Note holders' repurchase rights
or affect the validity of the proceedings for the repurchase of the Convertible
Subordinated Notes pursuant to this Section 3.09.
24
Repurchases of Convertible Subordinated Notes under this Section 3.09 shall
be made, at the option of the holder thereof, upon:
(1) delivery to the Paying Agent by a holder of a written notice (a
"Repurchase Notice") during the period beginning at any time from the
opening of business on the date that is 20 business days prior to the
applicable relevant Repurchase Date until the close of business on the
third business day prior to such Repurchase Date stating:
(A) if certificated Convertible Subordinated Notes have been
issued, the certificate numbers of the Convertible Subordinated
Notes which the holder will deliver to be purchased (or if a
holder's Convertible Subordinated Notes are not certificated,
such holder's Repurchase Notice must comply with appropriate
Depositary procedures),
(B) the portion of the Original Principal Amount of the
Convertible Subordinated Notes which the holder will deliver to
be purchased, which portion must be an Original Principal Amount
of $1,000 or an integral multiple thereof,
(C) that such Convertible Subordinated Note shall be purchased
as of the Repurchase Date pursuant to the terms and conditions
specified in paragraph 7 of the Convertible Subordinated Notes
and in this Indenture, and
(2) delivery or book-entry transfer of the Convertible Subordinated
Notes to Paying Agent at any time after delivery of the applicable
Repurchase Notice (together with all necessary endorsements) at the office
of the Paying Agent, such delivery being a condition to receipt by the
holder of the Repurchase Price therefor; provided that such Repurchase
Price shall be so paid pursuant to this Section 3.09 only if the
Convertible Subordinated Note so delivered to Paying Agent shall conform in
all respects to the description thereof in the related Repurchase Notice.
The Company shall purchase from the holder thereof, pursuant to this
Section 3.09, a portion of a Convertible Subordinated Note if the Original
Principal Amount of such portion is $1,000 or an integral multiple of $1,000.
Provisions of this Indenture that apply to the purchase of all of a Convertible
Subordinated Note also apply to the purchase of such portion of such Convertible
Subordinated Note.
The Paying Agent shall promptly notify the Company of the receipt by it of
any Repurchase Notice or written notice of withdrawal thereof.
(b) Upon receipt by the Paying Agent of the Repurchase Notice specified in
Section 3.09(a), the holder of the Convertible Subordinated Note in respect of
which such Repurchase Notice was given shall (unless such Repurchase Notice is
validly withdrawn) thereafter be entitled to receive solely the Repurchase Price
with respect to such Convertible Subordinated Note. Such Repurchase Price shall
be paid to such holder, subject to receipt of funds and/or Convertible
Subordinated Notes by the Paying Agent, promptly following the later of (x) the
25
Repurchase Date with respect to such Convertible Subordinated Note (provided the
holder has satisfied the conditions in Section 3.09(a)) and (y) the time of
delivery of such Convertible Subordinated Note to the Paying Agent by the holder
thereof in the manner required by Section 3.09(a). Notwithstanding anything
herein to the contrary, Convertible Subordinated Notes in respect of which a
Repurchase Notice has been given by the holder thereof may not be converted
pursuant to Article 12 hereof on or after the date of the delivery of such
Repurchase Notice unless such Repurchase Notice has first been validly
withdrawn.
A Repurchase Notice may be withdrawn by means of a written notice of
withdrawal delivered to the office of the Paying Agent in accordance with the
Repurchase Notice at any time prior to the close of business on the Repurchase
Date so long as delivery or book-entry transfer of the Convertible Subordinated
Notes in exchange for the Repurchase Price has not occurred, specifying:
(1) the certificate number, if any, of the Convertible Subordinated
Note in respect of which such notice of withdrawal is being submitted,
or the appropriate Depositary information if the Convertible
Subordinated Note in respect of which such notice of withdrawal is
being submitted is represented by a Global Security,
(2) the Original Principal Amount of the Convertible Subordinated
Note with respect to which such notice of withdrawal is being
submitted, and
(3) the Original Principal Amount, if any, of such Convertible
Subordinated Note which remains subject to the original Repurchase
Notice and which has been or will be delivered for purchase by the
Company.
(c) On or prior to the Repurchase Date, the Company shall deposit with the
Paying Agent (or, if the Company or a Subsidiary or an Affiliate of either of
them is acting as the Paying Agent, shall segregate and hold in trust as
provided in Section 2.04) an amount of cash (in immediately available funds if
deposited on such business day) sufficient to pay the aggregate Repurchase Price
of all the Convertible Subordinated Notes or portions thereof that are to be
purchased as of the Repurchase Date.
(d) Upon presentation of any Convertible Subordinated Note repurchased
only in part, the Company shall execute and the Trustee shall authenticate and
make available for delivery to the holder thereof, at the expense of the
Company, a new Convertible Subordinated Note or Convertible Subordinated Notes,
of any authorized denomination, in aggregate Original Principal Amount equal to
the unrepurchased portion of the Convertible Subordinated Notes presented.
(e) The Paying Agent shall return to the Company any cash that remains
unclaimed, together with interest, if any, thereon, held by them for the payment
of the Repurchase Price; provided that to the extent that the aggregate amount
of cash deposited by the Company pursuant to Section 3.09 exceeds the aggregate
Repurchase Price of the Convertible Subordinated Notes or portions thereof which
the Company is obligated to purchase as of the Repurchase Date then, unless
otherwise agreed in writing with the Company, promptly after the business day
following the Repurchase Date, the Paying Agent shall return any such excess to
the Company together
26
with interest, if any, thereon. If the Paying Agent holds money sufficient to
pay the Repurchase Price of a Convertible Subordinated Note on the business day
following the Repurchase Date, then on or after that date, such Convertible
Subordinated Note shall cease to be outstanding, and no amount shall accrete on
such Convertible Subordinated Note and interest (including Contingent Interest,
if any) and Liquidated Damages, if applicable, will cease to accrue on the
Original Principal Amount of the Convertible Subordinated Note and the holders
thereof shall have no right in respect of such Convertible Subordinated Note
except the right to receive the Repurchase Price thereof and unpaid interest
(including Contingent Interest, if any) and Liquidated Damages, if any, to (but
excluding) the Repurchase Date.
SECTION 3.10 Repurchase Upon Designated Event.
--------------------------------
Following a Designated Event (the date of each such occurrence being the
"Designated Event Date"), the Company shall notify the holders of Convertible
Subordinated Notes in writing of such occurrence and shall make an offer (the
"Designated Event Offer") to repurchase all Convertible Subordinated Notes then
outstanding at a repurchase price in cash (the "Designated Event Payment") equal
to 100% of the Accreted Principal Amount thereof, plus accrued and unpaid
interest (including Contingent Interest, if any) and Liquidated Damages, if any,
to, but excluding, the Designated Event Payment Date (as defined below).
Notice of a Designated Event shall be mailed by or at the direction of the
Company to the holders of Convertible Subordinated Notes as shown on the
Register of such holders maintained by the Registrar not more than 20 days after
the applicable Designated Event Date at the addresses as shown on the Register
of holders maintained by the Registrar, with a copy to the Trustee and the
Paying Agent. The Designated Event Offer shall remain open until a specified
date (the "Designated Event Offer Termination Date") which is at least 20
business days from the date such notice is mailed. During the period specified
in such notice, holders of Convertible Subordinated Notes may elect to tender
their Convertible Subordinated Notes in whole or in part in integral multiples
of $1,000 of Original Principal Amount in exchange for cash. Payment shall be
made by the Company in respect of Convertible Subordinated Notes properly
tendered pursuant to this Section on a specified business day (the "Designated
Event Payment Date") which shall be no later than 60 days after the applicable
Designated Event.
The notice, which shall govern the terms of the Designated Event Offer,
shall include such disclosures as are required by law and shall state:
(a) that a Designated Event Offer is being made pursuant to this Section
3.10 and that all Convertible Subordinated Notes will be accepted for payment;
(b) the event, transaction or transactions that constitute the Designated
Event;
(c) the Designated Event Payment for each Convertible Subordinated Note,
the Designated Event Offer Termination Date and the Designated Event Payment
Date;
(d) that any Convertible Subordinated Note not accepted for payment will
continue to accrue interest (including Contingent Interest, if any) and
Liquidated Damages, if applicable, in accordance with the terms thereof;
27
(e) that, unless the Company defaults on making the Designated Event
Payment, any Convertible Subordinated Note accepted for payment pursuant to the
Designated Event Offer shall cease to accrue interest (including Contingent
Interest, if any) and Liquidated Damages, if applicable, on the Designated Event
Payment Date and no further interest (including Contingent Interest, if any) or
Liquidated Damages shall accrue on or after such date;
(f) that holders electing to have Convertible Subordinated Notes
repurchased pursuant to a Designated Event Offer will be required to surrender
their Convertible Subordinated Notes to the Paying Agent at the address
specified in the notice prior to 5:00 p.m., New York City time, on the
Designated Event Offer Termination Date and must complete any form letter of
transmittal proposed by the Company and acceptable to the Trustee and the Paying
Agent;
(g) that holders of Convertible Subordinated Notes will be entitled to
withdraw their election if the Paying Agent receives, not later than 5:00 p.m.,
New York City time, on the Designated Event Offer Termination Date, a facsimile
transmission or letter setting forth the name of the holder, the principal
amount of Convertible Subordinated Notes the holder delivered for purchase, the
Convertible Subordinated Note certificate number (if any) and a statement that
such holder is withdrawing his election to have such Convertible Subordinated
Notes purchased;
(h) that holders whose Convertible Subordinated Notes are repurchased only
in part will be issued Convertible Subordinated Notes equal in Original
Principal Amount to the unpurchased portion of the Convertible Subordinated
Notes surrendered;
(i) the instructions that holders must follow in order to tender their
Convertible Subordinated Notes; and
(j) that in the case of a Designated Event Offer Termination Date that is
also an interest payment date, the interest payment (including Contingent
Interest, if any) and Liquidated Damages, if any, due on such date shall be paid
to the person in whose name the Convertible Subordinated Note is registered at
the close of business on the relevant Designated Event Offer Termination Date.
On the Designated Event Offer Termination Date, the Company shall (i)
accept for payment all Convertible Subordinated Notes or portions thereof
properly tendered pursuant to the Designated Event Offer, (ii) deposit with the
Paying Agent money sufficient to pay the Designated Event Payment with respect
to all Convertible Subordinated Notes or portions thereof so tendered and
accepted and (iii) deliver or cause to be delivered to the Trustee the
Convertible Subordinated Notes so accepted together with an Officers'
Certificate setting forth the aggregate principal amount of Convertible
Subordinated Notes or portions thereof tendered to and accepted for payment by
the Company. On the Designated Event Payment Date, the Paying Agent shall send
or deliver the Designated Event Payment to the holders of Convertible
Subordinated Notes so accepted and the Trustee shall promptly authenticate and
send or cause to be transferred by book entry to such holders a new Convertible
Subordinated Note equal in principal amount to any unpurchased portion of the
Convertible Subordinated Note surrendered, if any; provided that such new
Convertible Subordinate Notes will be in an Original Principal
28
Amount of $1,000 or an integral multiple thereof. Any Convertible Subordinated
Notes not so accepted shall be promptly mailed or delivered by the Company to
the holder thereof.
In the case of any reclassification, change, consolidation, merger, share
exchange, combination or sale or conveyance to which Section 12.14 applies in
which the Common Stock of the Company is changed or exchanged as a result into
the right to receive stock, securities or other property or assets (including
cash) which includes shares of common stock of the Company or another person
that are, or upon issuance will be, traded on a United States national
securities exchange or approved for trading on an established automated
over-the-counter trading market in the United States and such shares constitute
at the time such change or exchange becomes effective in excess of 50% of the
aggregate fair market value of such stock, securities other property and assets
(including cash) (as determined by the Company, which determination shall be
conclusive and binding), then the person formed by such consolidation or
resulting from such merger or share exchange or which acquires such assets, as
the case may be, shall execute and deliver to the Trustee a supplemental
indenture (which shall comply with the TIA as in force at the date of execution
of such supplemental indenture) modifying the provisions of this Indenture
relating to the right of holders of Convertible Subordinated Notes to cause the
Company to repurchase Convertible Subordinated Notes following a Designated
Event, including the applicable provisions of this Section 3.10 and the
definitions of Designated Event, Change of Control and Termination of Trading,
as appropriate, as determined in good faith by the Company (which determination
shall be conclusive and binding), to make such provision apply to such common
stock and the issuer thereof if different from the Company and Common Stock of
the Company (in lieu of the Company and the Common Stock of the Company).
The Designated Event 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, to the extent such laws and regulations are then
applicable and shall include all instructions and materials that the Company
shall reasonably deem necessary to enable such holders of Convertible
Subordinated Notes to tender their Convertible Subordinated Notes.
ARTICLE 4
COVENANTS
SECTION 4.01 Payment of Convertible Subordinated Notes.
-----------------------------------------
The Company shall pay the principal of and interest (including Contingent
Interest, if any) and Liquidated Damages, if any, on the Convertible
Subordinated Notes on the dates and in the manner provided in the Convertible
Subordinated Notes. Principal, interest (including Contingent Interest, if any)
and Liquidated Damages, if any, the Redemption Price, Repurchase Price and the
Designated Event Payment shall be considered paid on the date due if the Trustee
or 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 immediately available funds
designated for and sufficient to pay all principal, interest (including
Contingent Interest), Liquidated Damages, if any, the Redemption Price,
Repurchase Price or the Designated Event Payment then due, provided, however,
that money held by the Agent for the benefit of holders of Senior Debt pursuant
to the provisions of Article 11 hereof or the payment of which to the holders of
the Convertible
29
Subordinated Notes is prohibited by Article 11 shall not be considered to be
designated for the payment of any principal of or interest (including Contingent
Interest, if any) or any Liquidated Damages on the Convertible Subordinated
Notes within the meaning of this Section 4.01.
To the extent lawful, the Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on (i)
overdue principal, at the rate borne by Convertible Subordinated Notes,
compounded semiannually; and (ii) overdue installments of interest (without
regard to any applicable grace period) at the same rate, compounded
semiannually.
SECTION 4.02 Commission Reports.
------------------
The Company shall comply with Section 314(a) of the TIA.
SECTION 4.03 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 fully performed its obligations
under this Indenture and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge, the Company is not in
default in the performance or observance of any of the terms and conditions
hereof (or, if any Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge)
and, that to the best of his or her knowledge, no event has occurred and remains
in existence by reason of which payments on account of the principal of or
interest (including Contingent Interest, if any) or Liquidated Damages, if any,
on the Convertible Subordinated Notes are prohibited.
The Company shall, so long as any of the Convertible Subordinated Notes are
outstanding, deliver to the Trustee, forthwith upon becoming aware of any
Default or Event of Default, an Officers' Certificate specifying such Default or
Event of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.04 Maintenance of Office or Agency.
-------------------------------
The Company shall maintain or cause to be maintained the office or agency
required under Section 2.03. The Company shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency not maintained by the Trustee. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, presentations, surrenders, notices and demands with
respect to the Convertible Subordinated Notes may be made or served at the
Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Convertible Subordinated Notes may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designation.
30
SECTION 4.05 Continued Existence.
-------------------
Subject to Article 5, the Company shall do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence.
SECTION 4.06 Appointments to Fill Vacancies in Trustee's Office.
--------------------------------------------------
The Company, whenever necessary to avoid or fill a vacancy in the office of
Trustee, will appoint, in the manner provided in Section 7.08, a Trustee, so
that there shall at all times be a Trustee hereunder.
SECTION 4.07 Stay, Extension and Usury Laws.
------------------------------
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter enforced, that may affect the Company's
obligation to pay the Convertible Subordinated Notes; and the Company (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law insofar as such law applies to the Convertible
Subordinated Notes, and covenants that it shall not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law has been enacted.
SECTION 4.08 Taxes.
-----
The Company shall, and shall cause each of its subsidiaries to, pay prior
to delinquency all taxes, assessments and government levies; provided, however,
that the Company shall not be required to pay or cause to be paid any such tax,
assessment or levy (A) if the failure to do so will not, in the aggregate, have
a material adverse impact on the Company and its subsidiaries taken as a whole,
or (B) if the amount, applicability or validity is being contested in good faith
by appropriate proceedings.
SECTION 4.09 Investment Company Act.
----------------------
As long as any Convertible Subordinated Notes are outstanding, the Company
will conduct its business and operations so as not to become an "investment
company" within the meaning of the Investment Company Act of 1940, as amended
(the "Investment Company Act"), and will take all steps required in order for it
to continue not to be an "investment company" and not to be required to be
registered under the Investment Company Act, including, if necessary,
redeployment of the assets of the Company.
SECTION 4.10 Optional Conversion to Semiannual Coupon Note Upon Tax Event.
------------------------------------------------------------
From and after the date (the "Tax Event Date") of the occurrence of a Tax
Event following July 31, 2010, the Company shall have the option to elect, in
lieu of having the Original Principal Amount of the Convertible Subordinated
Notes accrete, to have interest accrue and be paid in cash at the rate of 3.75%
per annum, on a Restated Principal Amount, per $1,000 Original Principal Amount
(the "Restated Principal Amount") equal to the accrued Accreted
31
Principal Amount through the date the Company exercises the option provided for
in this Section 4.10 (the "Option Exercise Date"). Such interest shall be
payable semiannually on the interest payment dates of February 1 and August 1 of
each year to holders of record at the close of business on the January 15 and
July 15 immediately preceding such interest payment date. From and after the
Option Exercise Date, interest will accrue from such date or such later date to
which interest has been paid or provided for, whichever is later. Within 15 days
of the occurrence of a Tax Event, the Company shall deliver a written notice of
such Tax Event by facsimile and first-class mail to the Trustee and within 15
days of its exercise of such option the Company shall deliver a written notice
of the Option Exercise Date by facsimile and first-class mail to the Trustee and
by first-class mail to the holders of the Convertible Subordinated Notes. From
and after the Option Exercise Date, (i) the Company shall be obligated to pay at
Stated Maturity, in lieu of the Accreted Principal Amount of a Convertible
Subordinated Note, the Restated Principal Amount thereof plus accrued and unpaid
interest on such Convertible Subordinated Note and (ii) "Accreted Principal
Amount" or similar words, as used herein, shall mean Restated Principal Amount
plus accrued and unpaid interest with respect to any Convertible Subordinated
Note. Convertible Subordinated Notes authenticated and delivered after the
Option Exercise Date may bear a notation as to the conversion of the Convertible
Subordinated Notes to semiannual coupon notes. No other changes to this
Indenture shall result as a result of the events described in this Section 4.10.
ARTICLE 5
SUCCESSORS
SECTION 5.01 When the Company May Merge, Etc.
-------------------------------
The Company may not, in a single transaction or series of related
transactions, consolidate or merge with or into or effect a share exchange with
(whether or not the Company is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets to, any person as an entirety or substantially as an
entirety unless:
(a) either
(i) the Company shall be the surviving or continuing corporation or
(ii) the person formed by or surviving any such consolidation or share
exchange or into which the Company is merged (if other than the Company) or
the person which acquires by sale, assignment, transfer, lease, conveyance
or other disposition the properties and assets of the Company substantially
as an entirety
(1) shall be a corporation organized and validly existing under
the laws of the United States or any State thereof or the District of Columbia
and
(2) shall expressly assume, by supplemental indenture in form
reasonably satisfactory to the Trustee, executed and delivered to the Trustee,
the due and punctual payment of the principal of, and premium, if any, and
interest (including Contingent Interest, if any) and Liquidated Damages, if any,
on all of the Convertible Subordinated Notes
32
and the performance of every covenant of the Convertible Subordinated Notes and
this Indenture and the Registration Rights Agreement on the part of the Company
to be performed or observed, including, without limitation, modifications to
rights of holders to cause the repurchase of Convertible Subordinated Notes upon
a Designated Event in accordance with the penultimate paragraph of Section 3.10
and conversion rights in accordance with Section 12.14 to the extent required by
such Sections;
(b) immediately after giving effect to such transaction no Default and no
Event of Default shall have occurred and be continuing and
(c) 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, share exchange, 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.
For purposes of this Section 5.01, the transfer (by lease, assignment, sale
or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more subsidiaries of the
Company, the capital stock of which constitutes all or substantially all of the
properties and assets of the Company, shall be deemed to be the transfer of all
or substantially all of the properties and assets of the Company.
SECTION 5.02 Successor Corporation Substituted.
---------------------------------
Upon any such consolidation, merger, share exchange, sale, assignment,
conveyance, lease, transfer or other disposition in accordance with Section
5.01, the successor person formed by such consolidation, or share exchange or
into which the Company is merged or to which such assignment, conveyance, lease,
transfer or other disposition is made will succeed to, and be substituted for,
and may exercise every right and power of, the Company under this Indenture with
the same effect as if such successor had been named as the Company therein, and
thereafter (except in the case of a sale, assignment, transfer, lease,
conveyance or other disposition) the predecessor corporation will be relieved of
all further obligations and covenants under this Indenture and the Convertible
Subordinated Notes.
SECTION 5.03 Purchase Option on Change of Control.
------------------------------------
This Article 5 does not affect the obligations of the Company (including
without limitation any successor to the Company) under Section 3.10.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default.
-----------------
An "Event of Default" with respect to any Convertible Subordinated Notes
occurs if:
33
(a) the Company defaults in the payment (whether or not such payment is
prohibited by the subordination provisions set forth in Article 11 of this
Indenture) of principal of, or premium, if any, on the Convertible Subordinated
Notes when due at maturity, upon repurchase, upon acceleration or otherwise,
including, without limitation, failure of the Company to make any optional
redemption payment when required pursuant to Article 3; or
(b) the Company defaults in the payment (whether or not such payment is
prohibited by the subordination provisions set forth in Article 11 of this
Indenture) of any installment of interest (including Contingent Interest, if
any) or Liquidated Damages on the Convertible Subordinated Notes when due
(including any interest (including Contingent Interest, if any) or Liquidated
Damages, if any, payable in connection with a repurchase pursuant to Section
3.09 or Section 3.10 or in connection with any optional redemption payment
pursuant to Article 3) and continuance of such default for 30 days or more; or
(c) the Company defaults (other than a default set forth in clauses (a)
and (b) above and clauses (d) and (e) below) in the performance of, or breaches,
any other covenant or warranty of the Company set forth in this Indenture or the
Convertible Subordinated Notes and fails to remedy such default or breach within
a period of 60 days after the receipt of written notice from the Trustee or the
holders of at least 25% in aggregate Accreted Principal Amount of the then
outstanding Convertible Subordinated Notes; or
(d) the Company defaults in the payment of the Designated Event Payment in
respect of the Convertible Subordinated Notes on the date therefor, whether or
not such payment is prohibited by the subordination provisions set forth in
Article 11 of this Indenture; or
(e) the Company fails to provide timely notice of any Designated Event in
accordance with Section 3.10; or
(f) a default under any credit agreement, mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any Material
Subsidiary of the Company (or the payment of which is guaranteed by the Company
or any of its Material Subsidiaries), whether such Indebtedness or guarantee
exists on the date of this Indenture or is created thereafter, which default (i)
is caused by a failure to pay when due any 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 (without such acceleration being rescinded or annulled) and, in each
case, the principal amount of 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 $15,000,000 or more
and such Payment Default is not cured or such acceleration is not annulled
within 30 days after receipt of written notice by the Company from the Trustee
or by the Company and the Trustee from any holder of Convertible Subordinated
Notes; or
(g) a final, non-appealable judgment or final, non-appealable judgments
(other than any judgment as to which a reputable insurance company has accepted
full liability) for the payment of money are entered by a court or courts of
competent jurisdiction against the
34
Company or any Material Subsidiaries of the Company and remain unstayed,
unbonded or undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate amount of all such
judgments exceeds $15,000,000; or
(h) the Company or any Material 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,
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors,
(v) makes the admission in writing that it generally is unable to
pay its debts as the same become due; or
(i) a court of competent jurisdiction enters a judgment, order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company or any Material Subsidiary in
an involuntary case,
(ii) appoints a Custodian of the Company or any Material Subsidiary,
and the order or decree remains unstayed and in effect for 90 days or
(iii) orders the liquidation of the Company or any Material
Subsidiary, and the order or decree remains unstayed and in effect for 90 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal
or state law for the relief of debtors. The term "Custodian" means any receiver,
trustee, assignee, liquidator or similar official under any Bankruptcy Law.
In the case of any Event of Default, pursuant to the provisions of this
Section 6.01, occurring by reason of any willful action (or inaction) taken (or
not taken) by or on behalf of the Company with the intention of avoiding payment
of the premium which the Company would have had to pay if the Company then had
elected to redeem the Convertible Subordinated Notes pursuant to Paragraph 6 of
the Convertible Subordinated Notes, an equivalent premium shall also become and
be immediately due and payable to the extent permitted by law, upon the
acceleration of the Convertible Subordinated Notes notwithstanding anything
contained in this Indenture or in the Convertible Subordinated Notes to the
contrary.
If an Event of Default occurs prior to any date on which the Company is
prohibited from redeeming the Convertible Subordinated Notes pursuant to
Paragraph 6 of the Convertible Subordinated Notes, by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding the prohibition on redemption of the
35
Convertible Subordinated Notes prior to such date, then the premium specified in
this Indenture shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the Convertible Subordinated Notes.
SECTION 6.02 Acceleration.
------------
If an Event of Default (other than an Event of Default with respect to the
Company specified in clauses (h) and (i) of Section 6.01) occurs and is
continuing, then and in every such case the Trustee, by written notice to the
Company, or the holders of at least 25% in aggregate Accreted Principal Amount
of the then outstanding Convertible Subordinated Notes, by written notice to the
Company and the Trustee, may declare the unpaid Accreted Principal Amount of,
premium, if any, and accrued and unpaid interest (including Contingent Interest,
if any) and Liquidated Damages, if any, on all the Convertible Subordinated
Notes to be due and payable. Upon such declaration such Accreted Principal
amount, premium, if any, and accrued and unpaid interest (including Contingent
Interest, if any) and Liquidated Damages, if any, shall become immediately due
and payable, notwithstanding anything contained in this Indenture or the
Convertible Subordinated Notes to the contrary, but subject to the provisions of
Article 11 hereof. If any Event of Default with respect to the Company specified
in clauses (h) or (i) of Section 6.01 occurs, all unpaid Accreted Principal
Amount of and premium, if any, and accrued and unpaid interest (including
Contingent Interest, if any) and Liquidated Damages, if any, on the Convertible
Subordinated Notes then outstanding shall become automatically due and payable
subject to the provisions of Article 11 hereof, without any declaration or other
act on the part of the Trustee or any holder of Convertible Subordinated Notes.
The holders of a majority in aggregate Accreted Principal Amount of the
then outstanding Convertible Subordinated Notes by notice to the Trustee may
rescind an acceleration of the Convertible Subordinated Notes and its
consequences if all existing Events of Default (other than nonpayment of
principal of or premium, if any, and interest (including Contingent Interest, if
any) and Liquidated Damages, if any, on the Convertible Subordinated Notes which
has become due solely by virtue of such acceleration) have been cured or waived
and if the rescission would not conflict with any judgment or decree of any
court of competent jurisdiction. No such rescission shall affect any subsequent
Default or Event of Default or impair any right consequent thereto.
SECTION 6.03 Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
Accreted Principal Amount of or interest (including Contingent Interest, if any)
or Liquidated Damages, if applicable, on the Convertible Subordinated Notes or
to enforce the performance of any provision of the Convertible Subordinated
Notes or this Indenture. The Trustee may maintain a proceeding even if it does
not possess any of the Convertible Subordinated Notes or does not produce any of
them in the proceeding. A delay or omission by the Trustee or any holder of a
Convertible Subordinated Note in exercising any right or remedy occurring 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.
36
SECTION 6.04 Waiver of Past Defaults.
-----------------------
The holders of a majority in aggregate Accreted Principal Amount of the
Convertible Subordinated Notes then outstanding may, on behalf of the holders of
all the Convertible Subordinated Notes, waive an existing Default or Event of
Default and its consequences, except a Default or Event of Default in the
payment of the principal of, premium, if any, or interest (including Contingent
Interest, if any) or Liquidated Damages, if applicable, on the Convertible
Subordinated Notes (other than the non-payment of principal of and premium, if
any, and interest (including Contingent Interest, if any) and Liquidated
Damages, if any, on the Convertible Subordinated 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 Convertible
Subordinated Notes. When a Default or Event of Default is waived, it is cured
and stops continuing. No waiver shall extend to any subsequent or other Default
or Event of Default or impair any right consequent thereon.
SECTION 6.05 Control by Majority.
-------------------
The holders of a majority in aggregate Accreted Principal Amount of the
then outstanding Convertible Subordinated 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 that the
Trustee determines may be unduly prejudicial to the rights of other holders of
Convertible Subordinated Notes or that may involve the Trustee in personal
liability; provided that the Trustee shall have no duty or obligation (subject
to Section 7.01) to ascertain whether or not such actions of forebearances are
unduly prejudicial to such holders; provided, further, that the Trustee may take
any other action the Trustee deems proper that is not inconsistent with such
directions.
SECTION 6.06 Limitation on Suits.
-------------------
A holder of a Convertible Subordinated Note may not pursue any remedy with
respect to this Indenture or the Convertible Subordinated Notes unless:
(1) the holder gives to the Trustee notice of a continuing Event of
Default;
(2) the holders of at least 25% in Accreted Principal Amount of the
then outstanding Convertible Subordinated Notes make a request to the Trustee to
pursue the remedy;
(3) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(4) during such 60-day period the holders of a majority in Accreted
Principal Amount of the then outstanding Convertible Subordinated Notes do not
give the Trustee a direction inconsistent with the request.
A holder of a Convertible Subordinated Note may not use this Indenture to
prejudice the rights of another holder or to obtain a preference or priority
over another holder.
37
SECTION 6.07 Rights of Holders to Receive Payment.
------------------------------------
Subject to the provisions of Article 11 hereof, notwithstanding any other
provision of this Indenture, the right of any holder of a Convertible
Subordinated Note to receive payment of principal, premium, if any, and interest
(including Contingent Interest, if any) and Liquidated Damages, if any, on the
Convertible Subordinated Note, on or after the respective due dates expressed in
the Convertible Subordinated Note, or to bring suit for the enforcement of any
such payment on or after such respective dates, or to bring suit for the
enforcement of the right to convert the Convertible Subordinated Note shall not
be impaired or affected without the consent of the holder of a Convertible
Subordinated Note.
SECTION 6.08 Collection Suit by Trustee.
--------------------------
If an Event of Default specified in Section 6.01(a), (b) or (d) 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 and
interest (including Contingent Interest, if any) and Liquidated Damages, if any,
remaining unpaid on the Convertible Subordinated Notes and interest on overdue
principal and interest (including Contingent Interest, if any) and Liquidated
Damages, if any, and such further amount as shall be sufficient to cover the
costs and, to the extent lawful, expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.09 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
holders of Convertible Subordinated Notes 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 holder of a Convertible Subordinated Note any plan of
reorganization, arrangement, adjustment or composition affecting the Convertible
Subordinated Notes or the rights of any holder thereof, or to authorize the
Trustee to vote in respect of the claim of any holder in any such proceeding.
SECTION 6.10 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 amounts due under Section 7.07, including
payment of all compensation, expenses and liabilities incurred, and all
advances made, by the Trustee, and the costs and expenses of collection;
Second: to holders of Senior Debt to the extent required by Article
11;
Third: to holders of Convertible Subordinated Notes for amounts due
and unpaid on the Convertible Subordinated Notes for principal, premium, if
any, and interest (including Contingent Interest, if any) and Liquidated
Damages, if any, ratably, without preference or priority of any kind,
according to the amounts due and payable on the
38
Convertible Subordinated Notes for principal, premium, if any, and interest
(including Contingent Interest, if any) and Liquidated Damages, if any,
respectively; and
Fourth: to the Company.
Except as otherwise provided in Section 2.12, the Trustee may fix a record
date and payment date for any payment to holders of Convertible Subordinated
Notes.
SECTION 6.11 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, other than the Trustee, 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 6.07 or a suit by holders of more than 10% in
aggregate Accreted Principal Amount of the then outstanding Convertible
Subordinated Notes.
ARTICLE 7
THE TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture and
covenants and agrees to perform the same, as herein expressed. Whether or not
herein expressly so provided, every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Article 7.
SECTION 7.01 Duties of the Trustee.
---------------------
(a) If an Event of Default known to a Trust Officer of the Trustee 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 person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(b) Except during the continuance of an Event of Default known to the
Trustee:
(1) The duties of the Trustee shall be determined solely by the
express provisions of this Indenture, and the Trustee need perform only those
duties that are specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any statements, 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 form required by this Indenture.
39
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct, except
that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section;
(2) 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
(3) 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 6.05.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that is in any way related to the Trustee is subject to paragraphs
(a), (b) and (c) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any financial liability in the performance of any of
its duties or the exercise of any of its rights and powers hereunder, if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk of liability is not reasonably assured to
it.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree 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 7.02 Rights of the Trustee.
---------------------
(a) The Trustee may rely on and shall be protected in acting or refraining
from acting upon any resolution, Officers' Certificate, or any other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, security or other 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 contained therein.
(b) Any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof is herein specifically prescribed). In addition,
before the Trustee acts or refrains from acting, it may require an Officers'
Certificate, 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. The Trustee may consult with counsel and the
written advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection from liability in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through its attorneys and
agents and other persons not
40
regularly in its employ and shall not be responsible for the misconduct or
negligence of any attorney or agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith without negligence or willful misconduct which it believes to
be authorized or within its discretion, rights or powers.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
Officers of the Company.
(f) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(g) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request, order or discretion of
any of the holders of Convertible Subordinated Notes pursuant to the provisions
of this Indenture, unless such holders have offered to the Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities which
might be incurred therein or thereby.
(h) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, security or other document
unless requested in writing to do so by the holders of not less than a majority
in aggregate Accreted Principal Amount of the Convertible Subordinated Notes
then outstanding, provided that if the Trustee determines in its discretion to
make any such investigation, then it shall be entitled, upon reasonable prior
notice and during normal business hours, to examine the books and records and
the premises of the Company, personally or by agent or attorney, and the
reasonable expenses of every such examination shall be paid by the Company or,
if paid by the Trustee or any predecessor Trustee, shall be reimbursed by the
Company upon demand.
(i) The permissive rights of the Trustee to do things enumerated in this
Indenture shall not be construed as a duty, and the Trustee shall not be
answerable for other than its negligence or willful misconduct.
(j) The Trustee shall not be responsible for the computation of any
adjustment to the Conversion Rate or for any determination as to whether an
adjustment is required and shall not be deemed to have knowledge of any
adjustment unless and until it shall have received the notice from the Company
contemplated by Section 12.11.
SECTION 7.03 Individual Rights of the Trustee.
--------------------------------
Subject to Sections 7.10 and 7.11, the Trustee in its individual or any
other capacity may become the owner or pledgee of Convertible Subordinated Notes
with the same rights it would have if it were not the Trustee and may otherwise
deal with the Company or an Affiliate of the Company and receive, collect, hold
and retain collections from the Company with the same rights it would have if it
were not Trustee. Any Agent may do the same with like rights.
41
SECTION 7.04 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 Convertible Subordinated
Notes. It shall not be accountable for the Company's use of the proceeds from
the Convertible Subordinated Notes or any money paid to the Company or upon the
Company's direction under any provision of this Indenture. It shall not be
responsible for the use or application of any money received by any Paying Agent
other than the Trustee, and it shall not be responsible for any statement or
recital herein or any statement in the Convertible Subordinated Notes or any
other document in connection with the sale of the Convertible Subordinated Notes
or pursuant to this Indenture other than its certificate of authentication.
SECTION 7.05 Notice of Defaults.
------------------
If a Default or Event of Default occurs and is continuing and if it is
known to a Trust Officer of the Trustee, the Trustee shall mail to each holder
of a Convertible Subordinated Note a notice of the Default or Event of Default
within 60 days after it occurs. A Default or an Event of Default shall not be
considered known to a Trust Officer of the Trustee unless it is a Default or
Event of Default in the payment of principal, interest (including Contingent
Interest, if any) or Liquidated Damages, if any, when due under Section 6.01(a),
(b) or (d), as applicable, or a Trust Officer of the Trustee shall have received
notice thereof, in accordance with this Indenture, from the Company or from the
holders of a majority in aggregate Accreted Principal Amount of the outstanding
Convertible Subordinated Notes. Except in the case of a Default or Event of
Default in payment of principal of, premium, if any, or interest (including
Contingent Interest, if any) or Liquidated Damages, if any, on any Convertible
Subordinated Note, the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interest of the holders of the Convertible Subordinated Notes.
SECTION 7.06 Reports by the Trustee to Holders.
---------------------------------
Within 60 days after the reporting date stated in Section 10.10, the
Trustee shall mail to holders of Convertible Subordinated Notes a brief report
dated as of such reporting date that complies with TIA Section 313(a) (but if no
event described in TIA Section 313(a) has occurred within twelve months
preceding the reporting date, no report need be transmitted). 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) and TIA Section 313(d).
A copy of each report at the time of its mailing to holders of Convertible
Subordinated Notes shall be filed, at the expense of the Company, by the Trustee
with the Commission and each stock exchange or securities market, if any, on
which the Convertible Subordinated Notes are listed. The Company shall timely
notify the Trustee when the Convertible Subordinated Notes are listed or quoted
on any stock exchange or securities market.
SECTION 7.07 Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee from time to time, and the Trustee
shall be entitled to, reasonable compensation for its acceptance of this
Indenture and its services hereunder. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an
42
express trust. The Company shall reimburse the Trustee promptly upon request for
all reasonable disbursements, advances and expenses incurred or made by or on
behalf of it in addition to the compensation for its services. Such expenses may
include the reasonable compensation, disbursements and expenses of the Trustee's
agents, counsel and other persons not regularly in its employ.
The Company shall indemnify the Trustee against, and defend and hold the
Trustee harmless from, any loss, liability or 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 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 one separate
counsel and, if deemed advisable by such counsel, local counsel, and the Company
shall pay the reasonable fees and expenses of such separate counsel and local
counsel. The indemnification herein extends to any settlement, provided that 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 own negligence or willful
misconduct.
The Trustee shall have a lien prior to the Convertible Subordinated Notes
on all money or property held or collected by the Trustee to secure the
Company's payment obligations in this Section 7.07, except that held in trust to
pay principal, interest (including Contingent Interest, if any) and Liquidated
Damages, if any, on Convertible Subordinated Notes. Such liens and the Company's
obligations under this Section 7.07 shall survive the satisfaction and discharge
of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(h) or (i) 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 7.08 Replacement of the 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 7.08.
The Trustee may resign at any time and be discharged from the trust hereby
created by so notifying the Company. The holders of a majority in aggregate
Accreted Principal Amount of the then outstanding Convertible Subordinated Notes
may remove the Trustee by so notifying the Trustee and the Company in writing.
The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
43
(2) 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;
(3) a Custodian or public officer takes charge of the Trustee or
its property; or
(4) 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 holders
of a majority in aggregate Accreted Principal Amount of the then outstanding
Convertible Subordinated 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
holders of at least 10% in aggregate Accreted Principal Amount of the then
outstanding Convertible Subordinated Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee after written request by any holder of a Convertible
Subordinated Note who has been a holder for at least six months fails to comply
with Section 7.10, such holder 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 holders of
Convertible Subordinated Notes. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided that all sums
owing to the retiring Trustee hereunder have been paid and subject to the lien
provided for in Section 7.07. Notwithstanding the replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
shall continue for the benefit of the retiring Trustee with respect to expenses
and liabilities incurred by it prior to such replacement.
Upon request of any such successor Trustee, the Company shall execute any
and all instruments for more fully and certainly vesting in and confirming to
such successor Trustee all such rights, powers and trusts referred to in the
preceding paragraph.
SECTION 7.09 Successor Trustee by Merger, etc.
--------------------------------
If the Trustee consolidates with, 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 or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act shall be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee
herein.
44
SECTION 7.10 Eligibility, Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the requirements
of TIA Section 310(a)(1). The Trustee shall always have a combined capital and
surplus as stated in Section 10.10. The Trustee is subject to TIA Section 310(b)
regarding the disqualification of a trustee upon acquiring a conflicting
interest.
SECTION 7.11 Preferential Collection of Claims Against Company.
-------------------------------------------------
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship set forth 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 8
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01 Discharge of Indenture.
----------------------
When (a) the Company delivers to the Trustee for cancellation all
Convertible Subordinated Notes theretofore authenticated (other than any other
Convertible Subordinated Notes which have been destroyed, lost or stolen and in
lieu of or in substitution for which other Convertible Subordinated Notes have
been authenticated and delivered) and not theretofore canceled, or (b) all the
Convertible Subordinated Notes not theretofore canceled or delivered to the
Trustee for cancellation have become due and payable, or are by their terms will
become due and payable within one year or are to be called for redemption within
one year under arrangements satisfactory to the Trustee for the giving of notice
of redemption, and the Company deposits with the Trustee, in trust, amounts
sufficient to pay at maturity or upon redemption of all of the Convertible
Subordinated Notes (other than any Convertible Subordinated Notes which have
been mutilated, destroyed, lost or stolen and in lieu of or in substitution for
which other Convertible Subordinated Notes have been authenticated and
delivered) not theretofore canceled or delivered to the Trustee for
cancellation, including principal and premium, if any, interest (including
Contingent Interest, if any) and Liquidated Damages, if any, due or to become
due to such Maturity Date or Redemption Date, as the case may be, and if in
either case the Company also pays, or causes to be paid, all other sums payable
hereunder by the Company, then this Indenture shall cease to be of further
effect (except as to (i) rights of registration of transfer, substitution,
replacement and exchange and conversion of Convertible Subordinated Notes, (ii)
rights hereunder of holders of Convertible Subordinated Notes to receive
payments of principal of and premium, if any, interest (including Contingent
Interest, if any), and Liquidated Damages, if any, on, the Convertible
Subordinated Notes, (iii) the obligations under Sections 2.03 and 8.05 hereof
and (iv) the rights, obligations and immunities of the Trustee hereunder), and
the Trustee, on demand of the Company accompanied by an Officers' Certificate
and an Opinion of Counsel as required by Section 10.04 and at the Company's cost
and expense, shall execute proper instruments acknowledging satisfaction of and
discharging this Indenture; the Company, however, hereby agrees to reimburse the
Trustee for any costs or expenses thereafter reasonably and properly incurred by
the Trustee and to compensate the Trustee for any
45
services thereafter reasonably and properly rendered by the Trustee in
connection with this Indenture or the Convertible Subordinated Notes.
SECTION 8.02 Deposited Monies to Be Held in Trust by Trustee.
-----------------------------------------------
Subject to Section 8.04, all monies deposited with the Trustee pursuant to
Section 8.01 shall be held in trust and applied by it to the payment,
notwithstanding the provisions of Article 11, either directly or through the
Paying Agent, to the holders of the particular Convertible Subordinated Notes
for the payment or redemption of which such monies have been deposited with the
Trustee, of all sums due and to become due thereon for principal, interest
(including Contingent Interest, if any) and Liquidated Damages, if any, and
premium, if any.
SECTION 8.03 Paying Agent to Repay Monies Held.
---------------------------------
Upon the satisfaction and discharge of this Indenture, all monies then held
by any Paying Agent (other than the Trustee) shall, upon the Company's demand,
be repaid to it or paid to the Trustee, and thereupon such Paying Agent shall be
released from all further liability with respect to such monies.
SECTION 8.04 Return of Unclaimed Monies.
--------------------------
Subject to the requirements of applicable law, any monies deposited with or
paid to the Trustee for payment of the principal of, premium, if any, interest
(including Contingent Interest, if any) or Liquidated Damages, if any, on
Convertible Subordinated Notes and not applied but remaining unclaimed by the
holders thereof for two years after the date upon which the principal of,
premium, if any, interest (including Contingent Interest, if any) or Liquidated
Damages, if any, on such Convertible Subordinated Notes, as the case may be,
have become due and payable, shall be repaid to the Company by the Trustee on
demand; provided, however, that the Company, or the Trustee at the request of
the Company, shall have first caused notice of such payment to the Company to be
mailed to each holder of a Convertible Subordinated Note entitled thereto no
less than 30 days prior to such payment and all liability of the Trustee shall
thereupon cease with respect to such monies; and the holder of any of the
Convertible Subordinated Notes shall thereafter look only to the Company for any
payment which such holder may be entitled to collect unless an applicable
abandoned property law designates another person.
SECTION 8.05 Reinstatement.
-------------
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 8.02 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Convertible
Subordinated Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.01 until such time as the Trustee or the Paying
Agent is permitted to apply all such money in accordance with Section 8.02;
provided, however, that if the Company makes any payment of interest (including
Contingent Interest, if any) or Liquidated Damages, if any, on or principal of
any Convertible Subordinated Note following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the holders
thereof to receive such payment from the money held by the Trustee or Paying
Agent.
46
ARTICLE 9
AMENDMENTS
SECTION 9.01 Without the Consent of Holders.
------------------------------
The Company and the Trustee may amend this Indenture or the Convertible
Subordinated Notes without notice to or the consent of any holder of a
Convertible Subordinated Note for the purposes of:
(a) curing any ambiguity or correcting or supplementing any defective or
inconsistent provision contained in this Indenture or making any other changes
in the provisions of this Indenture which the Company and the Trustee may deem
necessary or desirable provided such amendment does not materially and adversely
affect the legal rights under the Indenture of the holders of Convertible
Subordinated Notes.
(b) providing for uncertificated Convertible Subordinated Notes in
addition to or in place of certificated Convertible Subordinated Notes;
(c) evidencing the succession of another person to the Company and
providing for the assumption by such successor of the covenants and obligations
of the Company thereunder and in the Convertible Subordinated Notes as permitted
by Section 5.01;
(d) providing for conversion rights and/or repurchase rights of holders of
Convertible Subordinated Notes in the event of consolidation, merger, share
exchange or sale of all or substantially all of the assets of the Company as
required to comply with Sections 5.01 and/or 12.14;
(e) increasing the Conversion Rate;
(f) evidence and provide for the acceptance of appointment under this
Indenture of a successor Trustee;
(g) making any changes that would provide the holders of the Convertible
Subordinated Notes with any additional rights or benefits or that does not
adversely affect the legal rights under this Indenture of any such holder; or
(h) complying with the requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the TIA.
SECTION 9.02 With the Consent of Holders.
---------------------------
Subject to Section 6.07, the Company and the Trustee may amend this
Indenture or the Convertible Subordinated Notes with the written consent of the
holders of at least a majority in aggregate Accreted Principal Amount of the
then outstanding Convertible Subordinated Notes (including consents obtained in
connection with a tender offer or exchange offer for Convertible Subordinated
Notes).
47
Subject to Sections 6.04 and 6.07, the holders of a majority in aggregate
Accreted Principal Amount of the Convertible Subordinated Notes then outstanding
may also waive compliance in a particular instance by the Company with any
provision of this Indenture or the Convertible Subordinated Notes.
However, without the consent of each holder of a Convertible Subordinated
Note affected, an amendment or waiver under this Section may not (with respect
to any Convertible Subordinated Notes held by a non-consenting holder):
(a) reduce the principal amount of Convertible Subordinated Notes whose
holders must consent to an amendment, supplement or waiver;
(b) reduce the principal of or premium on or change the fixed maturity of
any Convertible Subordinated Note or, except as permitted pursuant to Section
9.01(a), (d), (g) or (h), alter the redemption or repurchase provisions with
respect thereto;
(c) reduce the rate of, or change the time for payment of, interest,
including defaulted interest or Contingent Interest, if any, or Liquidated
Damages on any Convertible Subordinated Note;
(d) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest (including Contingent Interest, if any) or
Liquidated Damages, if any, on the Convertible Subordinated Notes (except a
rescission of acceleration of the Convertible Subordinated Notes by the holders
of at least a majority in aggregate Accreted Principal Amount of the Convertible
Subordinated Notes then outstanding and a waiver of the payment default that
resulted from such acceleration);
(e) make the principal of, or premium, if any, or interest (including
Contingent Interest, if any) or Liquidated Damages, if any, on, any Convertible
Subordinated Note payable in money other than as provided for herein and in the
Convertible Subordinated Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or Events of Default or the rights of holders of
Convertible Subordinated Notes to receive payments of principal of, premium, if
any, or interest or Liquidated Damages on the Convertible Subordinated Notes;
(g) waive a redemption or repurchase payment with respect to any
Convertible Subordinated Notes;
(h) except as permitted herein (including Section 9.01(a)), decrease the
Conversion Rate or modify the provisions contained herein relating to conversion
of the Convertible Subordinated Notes in a manner adverse to the holders
thereof; or
(i) make any change to the abilities of holders of Convertible
Subordinated Notes to enforce their rights hereunder or the provisions of
clauses (a) through (i) of this Section 9.02.
48
To secure a consent of the holders of Convertible Subordinated Notes under
this Section, it shall not be necessary for such holders to approve the
particular form of any proposed amendment or waiver, but it shall be sufficient
if such consent approves the substance thereof.
After an amendment or waiver under this Section becomes effective, the
Company shall mail to holders of Convertible Subordinated Notes a notice briefly
describing the amendment or waiver.
In order to amend any provisions of Article 11, holders of at least 75% in
aggregate Accreted Principal Amount of Convertible Subordinated Notes then
outstanding must consent to such amendment if such amendment would adversely
affect the rights of holders of Convertible Subordinated Notes.
SECTION 9.03 Compliance With the Trust Indenture Act.
---------------------------------------
Every amendment to this Indenture or the Convertible Subordinated Notes
shall be set forth in a supplemental indenture that complies with the TIA as
then in effect.
SECTION 9.04 Revocation and Effect of Consents.
---------------------------------
Until an amendment or waiver becomes effective, a consent to it by a holder
of a Convertible Subordinated Note is a continuing consent by the holder and
every subsequent holder of a Convertible Subordinated Note or portion of a
Convertible Subordinated Note that evidences the same debt as the consenting
holder's Convertible Subordinated Note, even if notation of the consent is not
made on any Convertible Subordinated Note. However, any such holder or
subsequent holder may revoke the consent as to his or her Convertible
Subordinated Note or portion of a Convertible Subordinated Note if the Trustee
receives the notice of revocation before the date on which the Trustee receives
an Officers' Certificate certifying that the holders of the requisite principal
amount of Convertible Subordinated Notes have consented to the amendment or
waiver.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the holders of Convertible Subordinated Notes entitled to
consent to any amendment or waiver. If a record date is fixed, then
notwithstanding the provisions of the immediately preceding paragraph, those
persons who were holders of Convertible Subordinated Notes at such record date
(or their duly designated proxies), and only those persons, shall be entitled to
consent to such amendment or waiver or to revoke any consent previously given,
whether or not such persons continue to be holders after such record date. No
consent shall be valid or effective for more than 90 days after such record date
unless consents from holders of the principal amount of Convertible Subordinated
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 or waiver becomes effective it shall bind every holder
of a Convertible Subordinated Note, unless it is of the type described in
clauses (a) - (i) of Section 9.02. In such case, the amendment or waiver shall
bind each holder of a Convertible Subordinated Note who has consented to it and
every subsequent holder of a Convertible Subordinated Note or portion of a
Convertible Subordinated Note that evidences the same debt as the consenting
holder's Convertible Subordinated Note.
49
SECTION 9.05 Notation on or Exchange of Convertible Subordinated Notes.
---------------------------------------------------------
Convertible Subordinated Notes authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article 9 may, and
shall if required by the Trustee, bear a notation in the form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Company shall so determine, new Convertible Subordinated Notes so modified as to
conform, in the opinion of the Company and the Trustee, to any such supplemental
indenture may be prepared and executed by the Company and authenticated and
delivered by the Trustee in exchange for outstanding Convertible Subordinated
Notes without charge to the holders of the Convertible Subordinated Notes,
except as specified in Section 2.06.
SECTION 9.06 Trustee Protected.
-----------------
The Trustee shall sign any amendment or supplemental indenture authorized
pursuant to this Article 9 if such amendment or supplemental indenture does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If such amendment or supplemental indenture does adversely affect the rights,
duties, liabilities or immunities of the Trustee, the Trustee may, but need not,
sign it. In signing such amendment or supplemental indenture, the Trustee shall
be entitled to receive, and shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel as conclusive evidence that such
amendment or supplemental indenture is authorized or permitted by this
Indenture, that it is not inconsistent herewith, and that it will be valid and
binding upon the Company in accordance with its terms.
ARTICLE 10
GENERAL PROVISIONS
SECTION 10.01 Trust Indenture Act Controls.
----------------------------
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA Section 318(c), such duties imposed by such section of the
TIA shall control. If any provision of this Indenture expressly modifies or
excludes any provision of the TIA that may be so modified or excluded, the
Indenture provision so modifying or excluding such provision of the TIA shall be
deemed to apply.
SECTION 10.02 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), or
sent by facsimile or overnight air couriers guaranteeing next day delivery, to
the other's address as stated in Section 10.10. The Company or the Trustee by
notice to the other may designate additional or different addresses for
subsequent notices or communications.
All notices and communications (other than those sent to holders of
Convertible Subordinated Notes) 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 transmission is
confirmed, if transmitted by facsimile; and the next business day
50
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery. Notwithstanding the foregoing, all notices to
the Trustee shall be effective only upon receipt by a Trust Officer.
Any notice or communication to a holder of a Convertible Subordinated Note
shall be mailed by first-class mail, with postage prepaid, to his or her address
shown on the Register kept by the Registrar. Failure to mail a notice or
communication to a holder or any defect in it shall not affect its sufficiency
with respect to other holders.
If a notice or communication to a holder of a Convertible Subordinated Note
is sent in the manner provided above within the time prescribed, it is duly
given, whether or not the addressee receives it.
If the Company sends a notice or communication to holders of Convertible
Subordinated Notes, it shall send a copy to the Trustee and each Agent at the
same time.
All notices or communications shall be in writing.
SECTION 10.03 Communication by Holders With Other Holders.
-------------------------------------------
Holders may communicate pursuant to TIA Section 312(b) with other holders
with respect to their rights under this Indenture or the Convertible
Subordinated Notes. The Company, the Trustee, the Registrar and the paying agent
shall have the protection of TIA Section 312(c).
SECTION 10.04 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:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 10.05) stating that, in the opinion of such person, all conditions
precedent and covenants, if any, provided for in this Indenture relating to the
proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 10.05) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been complied with.
SECTION 10.05 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 a certificate provided
pursuant to TIA Section 314(a)(4)) shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
51
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he or she
has made such examination or investigation as is necessary to enable him or her
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Any Officers' Certificate may be based, insofar as it relates to legal
matters, upon an Opinion of Counsel, unless such Officer knows that the opinion
with respect to the matters upon which his or her certificate may be based as
aforesaid is erroneous. Any Opinion of Counsel may be based, insofar as it
relates to factual matters, upon certificates, statements or opinions of, or
representations by an officer or officers of the Company, or other persons or
firms deemed appropriate by such counsel, unless such counsel knows that the
certificates, statements or opinions or representations with respect to the
matters upon which his or her opinion may be based as aforesaid are erroneous.
Any Officers' Certificate, statement or Opinion of Counsel may be based,
insofar as it relates to accounting matters, upon a certificate or opinion of or
representation by an accountant (who may be an employee of the Company), or firm
of accountants, unless such Officer or counsel, as the case may be, knows that
the certificate or opinion or representation with respect to the accounting
matters upon which his or her certificate, statement or opinion may be based as
aforesaid is erroneous.
SECTION 10.06 Rules by Trustee and Agents.
---------------------------
The Trustee may make reasonable rules for action by, or a meeting of,
holders of Convertible Subordinated Notes. The Registrar or Paying Agent may
make reasonable rules and set reasonable requirements for its functions.
SECTION 10.07 Legal Holidays.
--------------
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in the City of New York or the city in which the Corporate Trust
Office of the Trustee is located are not required to be open, and a "business
day" is any day that is not a Legal Holiday. 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 date specified in this Indenture, including, without
limitation, a Redemption Date under Paragraph 6 of the Convertible Subordinated
Notes or a purchase by the Company under paragraph 7 of the Convertible
Subordinated Notes, is a Legal Holiday, then such date shall be the next
succeeding business day.
52
SECTION 10.08 No Recourse Against Others.
--------------------------
No director, officer, employee, shareholder or Affiliate, as such, of the
Company from time to time shall have any liability for any obligations of the
Company under the Convertible Subordinated Notes or this Indenture or for any
claim based on, in respect of, or by reason of such obligations or their
creation. Each holder by accepting a Convertible Subordinated Note waives and
releases all such liability. This waiver and release are part of the
consideration for the Convertible Subordinated Notes. Each of such directors,
officers, employees, shareholders and Affiliates is a third party beneficiary of
this Section 10.08.
SECTION 10.09 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 10.10 Other Provisions.
----------------
The Company initially appoints the Trustee as Paying Agent, Registrar and
authenticating agent.
The reporting date for Section 7.06 is April 30 of each year. The first
reporting date is the April 30 following the issuance of Convertible
Subordinated Notes hereunder.
The Trustee shall always have, or shall be a subsidiary of a bank or bank
holding company which has, 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:
School Specialty, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
The Trustee's address is:
BNY Midwest Trust Company
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
53
SECTION 10.11 Governing Law.
-------------
The internal laws of the State of New York shall govern this Indenture and
the Convertible Subordinated Notes, without regard to the conflict of laws
provisions thereof.
SECTION 10.12 No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or a subsidiary. Any such other indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 10.13 Successors.
----------
All agreements of the Company in this Indenture and the Convertible
Subordinated Notes shall bind its successor. All agreements of the Trustee in
this Indenture shall bind its successor.
SECTION 10.14 Severability.
------------
In case any provision in this Indenture or in the Convertible Subordinated
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.
SECTION 10.15 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.
ARTICLE 11
SUBORDINATION
SECTION 11.01 Agreement to Subordinate.
------------------------
The Company agrees, and each holder of Convertible Subordinated Notes by
accepting a Convertible Subordinated Note agrees, that the indebtedness
evidenced by the Convertible Subordinated Note is subordinated in right of
payment, to the extent and in the manner provided in this Article 11, to the
prior payment in full in cash or payment satisfactory to holders of Senior Debt
of all Senior Debt (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 Debt.
SECTION 11.02 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 marshaling of the Company's
assets and liabilities:
54
(1) holders of Senior Debt shall be entitled to receive payment
in full of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate specified in
the applicable Senior Debt) in cash or other payment satisfactory to the holders
of the Senior Debt before holders of Convertible Subordinated Notes shall be
entitled to receive any payment with respect to the Convertible Subordinated
Notes; and
(2) until all Senior Debt is paid in full in cash or other
payment satisfactory to the holders of the Senior Debt, any distribution to
which holders of Convertible Subordinated Notes would be entitled but for this
Article 11 shall be made to holders of Senior Debt, as their interests may
appear.
SECTION 11.03 Default on Senior Debt and/or Designated Senior Debt.
----------------------------------------------------
Anything in this Indenture to the contrary notwithstanding, no payment on
account of principal of or premium, if any, interest (including Contingent
Interest, if any) or Liquidated Damages, if any, on or other amounts due on the
Convertible Subordinated Notes (including without limitation the making of a
deposit pursuant to Section 3.06, 3.09 or 3.10), and no redemption, repurchase,
or other acquisition of the Convertible Subordinated Notes, shall be made by or
on behalf of the Company unless:
(a) full payment of all amounts then due for principal of and interest on,
and of all other amounts then due on, all Senior Debt has been made or duly
provided for pursuant to the terms of the instruments governing such Senior
Debt; and
(b) at the time for, and immediately after giving effect to, such payment,
redemption, repurchase or other acquisition, there shall not exist under any
Senior Debt, or any agreement pursuant to which any Senior Debt is issued, any
default which shall not have been cured or waived and which default shall have
resulted in the full amount of such Senior Debt being declared due and payable.
In addition, if the Trustee shall receive written notice from the holders
of Designated Senior Debt or their Representative (a "Payment Blockage Notice")
that there has occurred and is continuing under such Designated Senior Debt, or
any agreement pursuant to which such Designated Senior Debt is issued, any
default, which default shall not have been cured or waived, giving the holders
of such Designated Senior Debt the right to declare such Designated Senior Debt
immediately due and payable, then, anything in this Indenture to the contrary
notwithstanding, no payment on account of the principal of or premium, if any,
interest (including Contingent Interest, if any) or Liquidated Damages, if any,
on or any other amounts due on the Convertible Subordinated Notes (including
without limitation the making of a deposit pursuant to Section 3.06, 3.09 or
3.10), and no redemption, repurchase or other acquisition of the Convertible
Subordinated Notes, shall be made by or on behalf of the Company during the
period (the "Payment Blockage Period") commencing on the date of receipt of the
Payment Blockage Notice and ending (unless earlier terminated by notice given to
the Trustee by the holders or the Representative of the holders of such
Designated Senior Debt) on the earlier of (i) the date on which such default
shall have been cured or waived and (ii) 180 days from the receipt of the
Payment Blockage Notice. Notwithstanding the provisions described in the
immediately
55
preceding sentence (but subject to the provisions contained in Section 11.01 and
the first sentence of this Section 11.03), unless the holders of such Designated
Senior Debt or the Representative of such holders shall have accelerated the
maturity of such Designated Senior Debt, the Company may resume payments on the
Convertible Subordinated Notes after the end of such Payment Blockage Period.
Not more than one Payment Blockage Notice may be given in any consecutive
365-day period, irrespective of the number of defaults with respect to Senior
Debt during such period.
SECTION 11.04 Acceleration of Convertible Subordinated Notes.
----------------------------------------------
In the event of the acceleration of the Convertible Subordinated Notes
because of an Event of Default, the Company may not make any payment or
distribution to the Trustee or any holder of Convertible Subordinated Notes in
respect of Obligations with respect to Convertible Subordinated Notes and may
not acquire or purchase from the Trustee or any holder of Convertible
Subordinated Notes any Convertible Subordinated Notes until all Senior Debt has
been paid in full in cash or other payment satisfactory to the holders of Senior
Debt or such acceleration is rescinded in accordance with the terms of this
Indenture.
If payment of the Convertible Subordinated Notes is accelerated because of
an Event of Default, the Company or the Trustee shall promptly notify holders of
Senior Debt or trustee(s) of such Senior Debt of the acceleration.
SECTION 11.05 When Distribution Must Be Paid Over.
-----------------------------------
In the event that the Trustee, any holder of Convertible Subordinated Notes
or any other person receives any payment or distributions of assets of the
Company of any kind with respect to the Convertible Subordinated Notes in
contravention of any terms contained in this Indenture, whether in cash,
property or securities, including, without limitation by way of set-off or
otherwise, then such payment shall be held by the recipient in trust for the
benefit of holders of Senior Debt, and shall be immediately paid over and
delivered to the holders of Senior Debt or the representative(s), to the extent
necessary to make payment in full of all Senior Debt remaining unpaid, after
giving effect to any concurrent payment or distribution or provision therefor,
to or for the holders of Senior Debt; provided that the foregoing shall apply to
the Trustee only if a Trust Officer of the Trustee has actual knowledge (as
determined in accordance with Section 11.11) that such payment or distribution
is prohibited by this Indenture.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 11, and no implied covenants or obligations with respect
to the holders of Senior Debt 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 Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of holders of Convertible
Subordinated Notes or the Company or any other person money or assets to which
any holders of Senior Debt shall be entitled by virtue of this Article 11,
except if such payment is made as a result of the willful misconduct or gross
negligence of the Trustee.
56
SECTION 11.06 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
Convertible Subordinated Notes or the purchase of any Convertible Subordinated
Notes by the Company to violate this Article, but failure to give such notice
shall not affect the subordination of the Convertible Subordinated Notes to the
Senior Debt as provided in this Article.
SECTION 11.07 Subrogation.
-----------
After all Senior Debt is paid in full and until the Convertible
Subordinated Notes are paid in full, holders of Convertible Subordinated Notes
shall be subrogated (equally and ratably with all other indebtedness pari passu
with the Convertible Subordinated Notes) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the holders of Convertible Subordinated Notes
have been applied to the payment of Senior Debt. A distribution made under this
Article to holders of Senior Debt that otherwise would have been made to holders
of Convertible Subordinated Notes is not, as between the Company and holders of
Convertible Subordinated Notes, a payment by the Company on the Convertible
Subordinated Notes.
SECTION 11.08 Relative Rights.
---------------
This Article 11 defines the relative rights of holders of Convertible
Subordinated Notes and holders of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and holders of Convertible
Subordinated Notes, the obligation of the Company, which is absolute and
unconditional, to pay principal of, premium, if any, interest (including
Contingent Interest, if any) and Liquidated Damages, if any, on the Convertible
Subordinated Notes in accordance with their terms;
(2) affect the relative rights of holders of Convertible
Subordinated Notes and creditors (other than with respect to Senior Debt) of the
Company, other than their rights in relation to holders of Senior Debt; or
(3) prevent the Trustee or any holder of Convertible
Subordinated Notes from exercising its available remedies upon a Default or
Event of Default, subject to the rights of holders and owners of Senior Debt to
receive distributions and payments otherwise payable to holders of Convertible
Subordinated Notes.
If the Company fails because of this Article 11 to pay principal of or
interest (including Contingent Interest, if any) and Liquidated Damages, if any,
on a Convertible Subordinated Note on the due date, the failure is still a
Default or Event of Default.
SECTION 11.09 Subordination May Not Be Impaired by Company.
--------------------------------------------
No right of any holder of Senior Debt to enforce the subordination of the
indebtedness evidenced by the Convertible Subordinated Notes shall be impaired
by any act or failure to act
57
by the Company or any holder of Convertible Subordinated Notes or by the failure
of the Company or any such holder to comply with this Indenture.
SECTION 11.10 Distribution or Notice to Representative.
----------------------------------------
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative(s).
Upon any payment or distribution of assets of the Company referred to in
this Article 11, the Trustee and the holders of Convertible Subordinated 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 Convertible Subordinated Notes for the purpose of
ascertaining the persons entitled to participate in such distribution, the
holders of the Senior Debt and other indebtedness of the Company, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article 11.
SECTION 11.11 Rights of Trustee and Paying Agent.
----------------------------------
Notwithstanding the provisions of this Article 11 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 11.04), and the Trustee may continue
to make payments on the Convertible Subordinated Notes, unless a Trust Officer
shall have received at least two business days prior to the date of such payment
or distribution written notice of facts that would cause such payment or
distribution with respect to the Convertible Subordinated Notes to violate this
Article. Only the Company or a Representative may give the notice.
Nothing in this Article 11 shall impair the claims of, or payments to, the
Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.
SECTION 11.12 Authorization to Effect Subordination.
-------------------------------------
Each holder of a Convertible Subordinated 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 11, 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 6.09 hereof at least 30 days before the expiration of the
time to file such claim, the holders of any Senior Debt or their Representatives
are hereby authorized to file an appropriate claim for and on behalf of the
holders of the Convertible Subordinated Notes.
58
SECTION 11.13 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 shall in such case (unless the context otherwise requires)
be construed as extending to and including such Paying Agent within its meaning
as fully for all intents and purposes as if such Paying Agent were named in this
Article in addition to or in place of the Trustee; provided, however, that the
second and third paragraphs of Section 11.11 shall not apply to the Company or
any subsidiary of the Company if it or such subsidiary acts as Paying Agent.
SECTION 11.14 Senior Debt Entitled to Rely.
----------------------------
The holders of Senior Debt shall have the right to rely upon this Article
11, 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 11.15 Permitted Payments.
------------------
Notwithstanding anything to the contrary in this Article 11, the holders of
Convertible Subordinated Notes may receive and retain at any time on or prior to
the Maturity Date (i) securities that are subordinated to at least the same
extent as the Convertible Subordinated Notes to (a) Senior Debt and (b) any
securities issued in exchange for Senior Debt and (ii) payments and other
distributions made from any trust created pursuant to Section 8.01 hereof.
ARTICLE 12
CONVERSION OF CONVERTIBLE SUBORDINATED NOTES
SECTION 12.01 Right to Convert.
----------------
A holder of a Convertible Subordinated Note may convert such
Convertible Subordinated Note into shares of Common Stock at any time during the
periods and subject to the conditions stated in paragraph 9 of the Convertible
Subordinated Notes, subject to the provisions of this Article 12. The number of
shares of Common Stock issuable upon conversion of a Convertible Subordinated
Note per $1,000 of Original Principal Amount thereof (the "Conversion Rate")
shall be determined in accordance with the provisions of paragraph 9 of the
Convertible Subordinated Notes. The initial Conversion Rate shall equal 25
shares of Common Stock per $1,000 of Original Principal Amount of Convertible
Subordinated Notes, subject to adjustment as described in this Article 12.
A holder may convert a portion of the Original Principal Amount of a
Convertible Subordinated Note if the portion is $1,000 or an integral multiple
of $1,000. Provisions of this Indenture that apply to conversion of all of a
Convertible Subordinated Note also apply to conversion of a portion of a
Convertible Subordinated Note.
The Trustee (or other conversion agent appointed by the Company) shall, on
behalf of the Company, determine on a daily basis whether the Convertible
Subordinated Notes shall be
59
convertible as a result of the occurrence of an event specified above and, if
the Convertible Subordinated Notes shall be convertible, the Trustee (or other
conversion agent appointed by the Company) shall promptly deliver to the Company
and the Trustee (if the Trustee is not the conversion agent) written notice
thereof. Whenever the Convertible Subordinated Notes shall become convertible
pursuant to the foregoing condition, the Company or, at the Company's request,
the Trustee in the name and at the expense of the Company, shall notify the
holders of the event triggering such convertibility in the manner provided
herein, and, in connection with providing such notice, the Company will issue a
press release containing information regarding the event triggering such
convertibility or publish such information on the Company's then existing
website or through such other public medium as the Company shall determine. Any
notice so given shall be conclusively presumed to have been duly given, whether
or not the holder receives such notice.
SECTION 12.02 Exercise of Conversion Privilege; Issuance of Common Stock on
-------------------------------------------------------------
Conversion; No Adjustment for Interest or Dividends.
---------------------------------------------------
To convert a Convertible Subordinated Note into Common Stock (the
shares of Common Stock issuable upon such conversion, the "Conversion Shares"),
a holder must satisfy the requirements in paragraph 9 of the Convertible
Subordinated Notes. The date on which the holder satisfies all those
requirements is the conversion date (the "Conversion Date"). Following the
Conversion Date, the Company shall deliver to the holder through the Conversion
Agent, in accordance with Section 12.20, a certificate for the number of full
shares of Common Stock issuable upon the conversion (or, at the option of the
Company, cash in lieu thereof) and cash in lieu of any fractional share
determined pursuant to Section 12.03. The Company shall determine such full
number of shares and the amounts of the required cash with respect to any
fractional share, and shall set forth such information in an Officers'
Certificate delivered to the Conversion Agent. The Conversion Agent shall have
no duties under this paragraph unless and until it has received such
certificate.
The Person in whose name the certificate is registered shall be
treated as a stockholder of record on and after the Conversion Date; provided,
however, that no surrender of a Convertible Subordinated Note on any date when
the stock transfer books of the Company shall be closed shall be effective to
constitute the Person or Persons entitled to receive the shares of Common Stock
upon such conversion as the record holder or holders of such shares of Common
Stock on such date, but such surrender shall be effective to constitute the
Person or Persons entitled to receive such shares of Common Stock as the record
holder or holders thereof for all purposes at the close of business on the next
succeeding day on which such stock transfer books are open; such conversion
shall be at the Conversion Rate in effect on the date that such Security shall
have been surrendered for conversion, as if the stock transfer books of the
Company had not been closed. Upon conversion of a Convertible Subordinated Note,
such Person shall no longer be a holder of such Convertible Subordinated Note.
Holders may surrender a Convertible Subordinated Note for conversion
by means of book-entry delivery in accordance with paragraph 9 of the
Convertible Subordinated Notes and the regulations of the applicable book-entry
facility.
60
No payment or adjustment will be made for dividends on, or other
distributions with respect to, any Common Stock except as provided in this
Article 12. On conversion of a Convertible Subordinated Note, the increases in
Accreted Principal Amount and accrued cash interest (including Contingent
Interest, if any) attributable to the period from the Issue Date of the
Convertible Subordinated Note through the Conversion Date, with respect to the
converted Convertible Subordinated Note shall not be cancelled, extinguished or
forfeited, but rather shall be deemed to be paid in full to the holder thereof
through delivery of the Common Stock (together with the cash payment, if any, in
lieu of fractional shares) in exchange for the Convertible Subordinated Note
being converted pursuant to the provisions hereof; and the fair market value of
such shares of Common Stock (together with any such cash payment in lieu of
fractional shares) shall be treated as issued, to the extent thereof, first in
exchange for the increases in Accreted Principal Amount and accrued cash
interest (including Contingent Interest, if any) through the Conversion Date,
and the balance, if any, of such fair market value of such Common Stock (and any
such cash payment) shall be treated as issued in exchange for the Issue Price of
the Convertible Subordinated Note being converted pursuant to the provisions
hereof. Notwithstanding the foregoing, accrued cash interest will be payable
upon conversion of Convertible Subordinated Notes made concurrently with or
after acceleration of Convertible Subordinated Notes following an Event of
Default.
If the holder converts more than one Convertible Subordinated Note at
the same time, the number of shares of Common Stock issuable upon conversion
shall be based on the aggregate Original Principal Amount of the Convertible
Subordinated Notes converted.
A Convertible Subordinated Note surrendered for conversion based on
(a) the Common Stock price may be surrendered for conversion until the close of
business on July 31, 2023, (b) the Convertible Subordinated Note being called
for redemption may be surrendered for conversion at any time prior to the close
of business on the business day immediately preceding the Redemption Date, even
if it is not otherwise convertible at such time, and (c) the occurrence of
certain corporate transactions more fully described in paragraph 9 of the
Convertible Subordinated Notes under clause (a) of "Conversion Upon Occurrence
of Certain Corporate Transactions" may be surrendered for conversion at any time
from and after the date which is 15 days prior to the anticipated effective date
of such transaction until 15 days after the actual date of such transaction, and
if such day is not a business day, the next occurring business day following
such day.
Upon surrender of a Convertible Subordinated Note that is converted in
part, the Company shall execute, and the Trustee shall authenticate and deliver
to the holder, a new Convertible Subordinated Note in an authorized denomination
equal in Original Principal Amount to the unconverted portion of the Convertible
Subordinated Note surrendered.
Convertible Subordinated Note or portion thereof surrendered for
conversion during the period from the close of business on the Regular Record
Date next preceding any Interest Payment Date to the opening of business on such
Interest Payment Date (except for Convertible Subordinated Notes to be redeemed
within the period) shall be accompanied by payment, in funds acceptable to the
Company, of an amount equal to the interest (including Contingent Interest, if
any and interest payable upon the occurrence of a Tax Event, if any) otherwise
payable on such Interest Payment Date on the Accreted Principal Amount being
61
converted; provided however, that no such payment need be made if there exists
at the time of conversion a default in the payment of interest (including
Contingent Interest, if any and interest payable upon the occurrence of a Tax
Event, if any) on the Convertible Subordinated Notes. An amount equal to such
payment shall be paid by the Company on such Interest Payment Date to the holder
of such Convertible Subordinated Note at the close of business on such Regular
Record Date; provided, however, that if the Company defaults in the payment of
interest (including Contingent Interest, if any), on such Interest Payment Date,
such amount shall be paid to the person who made such required payment.
SECTION 12.03 Cash Payments in Lieu of Fractional Shares.
------------------------------------------
The Company will not issue a fractional share of Common Stock upon
conversion of a Convertible Subordinated Note. Instead, the Company will deliver
cash for the current market value of the fractional share. The current market
value of a fractional share shall be determined, to the nearest 1/1,000/th/ of a
share, by multiplying the per share Closing Sale Price of the Common Stock, on
the last trading day prior to the Conversion Date, by the fractional amount and
rounding the product to the nearest whole cent.
SECTION 12.04 Taxes on Shares Issued.
----------------------
If a holder converts a Convertible Subordinated Note, the Company shall pay
any documentary, stamp or similar issue or transfer tax due on the issue of
shares of Common Stock upon the conversion. However, the holder shall pay any
such tax which is due because the holder requests the shares to be issued in a
name other than the holder's name and any income tax which is imposed on the
holder as a result of the conversion. The Conversion Agent may refuse to deliver
the certificates representing the Common Stock being issued in a name other than
the holder's name until the Conversion Agent receives a sum sufficient to pay
any tax which will be due because the shares are to be issued in a name other
than the holder's name. Nothing herein shall preclude the Company from any tax
withholding or directing the withholding of any tax required by law or
regulations.
SECTION 12.05 Reservation of Shares; Shares to Be Fully Paid; Listing of
----------------------------------------------------------
Common Stock.
------------
The Company shall provide, free from preemptive rights, out of its
authorized but unissued shares or shares held in treasury, sufficient shares to
provide for the conversion of the Convertible Subordinated Notes from time to
time as such Convertible Subordinated Notes are presented for conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Rate below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Convertible Subordinated Notes, the Company
shall take all corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue shares of such
Common Stock at such adjusted Conversion Rate.
The Company covenants that all shares of Common Stock issued upon
conversion of Convertible Subordinated Notes shall be newly issued shares or
treasury shares, shall be duly and validly issued and fully paid and
nonassessable (except as provided in Wis. Stat.
62
Section 180.0622(2)(b) and successor provisions or court interpretations
thereof) and shall be free from preemptive rights and free of any tax, lien or
adverse claim created by the Company.
The Company further covenants that as long as the Common Stock is quoted on
the Nasdaq National Market, or its successor, the Company shall cause all Common
Stock issuable upon conversion of the Convertible Subordinated Notes to be
eligible for such quotation in accordance with, and at the times required under,
the requirements of such market, and if at any time the Common Stock becomes
listed any other national securities exchange, the Company shall cause all
Common Stock issuable upon conversion of the Convertible Subordinated Notes to
be so listed and kept listed.
SECTION 12.06 Adjustment for Change in Capital Stock.
--------------------------------------
The Conversion Rate shall be subject to adjustment from time to time as
follows:
(a) In case the Company shall (1) pay a dividend in shares of Common Stock
to all holders of Common Stock, (2) make a distribution in shares of Common
Stock to all or substantially all holders of Common Stock, (3) subdivide the
outstanding shares of Common Stock into a greater number of shares of Common
Stock or (4) combine the outstanding shares of Common Stock into a smaller
number of shares of Common Stock or (5) reclassify its outstanding Common Stock,
the Conversion Rate in effect immediately prior to such action shall be adjusted
so that the holder of any Convertible Subordinated Note thereafter surrendered
for conversion shall be entitled to receive the number of shares of Common Stock
which he would have owned immediately following such action had such Convertible
Subordinated Notes been converted immediately prior thereto. Any adjustment made
pursuant to this Section 12.06(a) shall become effective immediately after the
record date in the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination,
or reclassification.
(b) In case the Company shall issue rights, options or warrants to all or
substantially all holders of Common Stock, as the case may be, entitling them
(for a period commencing no earlier than the record date for the determination
of holders of Common Stock entitled to receive such rights, options or warrants
and expiring not more than 60 days after such record date) to subscribe for or
purchase shares of Common Stock (or securities convertible into Common Stock),
at a price per share less than the then current market price (as determined
pursuant to Section 12.06(f) below) of Common Stock at the time of the
announcement of the distribution, the Conversion Rate shall be increased by
multiplying the Conversion Rate in effect immediately prior to such record date
by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding on such record date, plus the number of shares of Common Stock
so offered for subscription or purchase, and the denominator of which shall be
the number of shares of Common Stock outstanding at the close of business on
such record date plus the number of shares of Common Stock which the aggregate
of the offering price of the total number of shares of Common Stock so offered
for subscription or purchase would purchase at such current market price. Such
adjustments shall become effective immediately after such record date. To the
extent that shares of Common Stock are not delivered pursuant to such rights,
options or warrants, upon the expiration or termination of such rights, options
or warrants the Conversion Rate shall be readjusted to be the Conversion Rate
which would then be in effect had the adjustments made
63
upon the issuance of such rights, options or warrants been made on the basis of
delivery of only the number of shares of Common Stock actually delivered. If
such rights, options or warrants are not so issued, the Conversion Rate shall
again be adjusted to be the Conversion Rate which would then be in effect if
such date fixed for the determination of shareholders entitled to receive such
rights, options or warrants had not been fixed. In determining whether any
rights, options or warrants entitle the holders to subscribe for or purchase
shares of Common Stock at less than such current market price, and in
determining the aggregate offering price of such shares of Common Stock, there
shall be taken into account any consideration received for such rights, options
or warrants, with the value of such consideration, if other than cash, to be
determined by the Board of Directors.
(c) In case the Company shall distribute to all holders of Common Stock
shares of capital stock of the Company, evidences of indebtedness or other
assets (including cash and securities), or shall distribute to all holders of
Common Stock rights, options or warrants to subscribe for securities (in each
case other than those referred to in Section 12.06(a) and (b) above and Section
12.06(d) and Section 12.14 below), then in each such case the Conversion Rate
shall be increased by multiplying the Conversion Rate in effect immediately
prior to the close of business on the record date for the determination of
shareholders entitled to such distribution by a fraction of which the numerator
shall be the current market price of Common Stock (determined as provided in
Section 12.06(f) below) on such date and the denominator shall be such current
market price less the fair market value (as determined by the Board of Directors
whose determination shall be conclusive and described in a Board Resolution) on
such date of the portion of the evidences of indebtedness, shares of capital
stock, cash and other assets to be distributed or of such subscription rights,
options or warrants applicable to one share of Common Stock, such increase to
become effective immediately prior to the opening of business on the day
following such record date. Notwithstanding the foregoing, in the event that the
Company shall distribute rights, options or warrants (other than those referred
to in Section 12.06(b) above) ("Rights") pro rata to holders of Common Stock,
the Company may, in lieu of making any adjustment pursuant to this Section
12.06(c), make proper provision so that each holder of a Convertible
Subordinated Note who converts such Convertible Subordinated Note (or any
portion thereof) after the record date for such distribution and prior to the
expiration or redemption of the Rights shall be entitled to receive upon such
conversion, in addition to the Conversion Shares, a number of Rights to be
determined as follows: (i) if such conversion occurs on or prior to the date for
the distribution to the holders of Rights of separate certificates evidencing
such Rights (the "Distribution Date"), the same number of Rights to which a
holder of a number of shares of Common Stock equal to the number of shares of
Conversion Shares is entitled at the time of such conversion in accordance with
the terms and provisions of and applicable to the Rights; and (ii) if such
conversion occurs after the Distribution Date, the same number of Rights to
which a holder of the number of shares of Common Stock into which the principal
amount of the Convertible Subordinated Note so converted was convertible
immediately prior to the Distribution Date would have been entitled on the
Distribution Date in accordance with the terms and provisions of and applicable
to the Rights.
(d) In case the Company shall make a distribution consisting exclusively
of cash to all or substantially all holders of Common Stock, then the Conversion
Rate shall be increased by multiplying the Conversion Rate in effect immediately
prior to the close of business on the record date for the determination of
shareholders entitled to such distribution by a fraction of
64
which the numerator shall be the current market price of Common Stock
(determined as provided in Section 12.06(f) below) on such date and the
denominator shall be such current market price less the amount of cash to be
distributed per share of Common Stock, such increase to become effective
immediately prior to the opening of business on the day following such record
date.
(e) If, after the Issue Date of the Convertible Subordinated Notes, the
Company or any Subsidiary of the Company pays holders of the Company's Common
Stock in respect of a tender or exchange offer for the Company's Common Stock
consideration per share of Common Stock having a fair market value, as
determined in good faith by the Board of Directors of the Company, whose
determination shall be conclusive, in excess of the Current Market Price of the
Common Stock as of the first business day (the "Measurement Date") next
succeeding the last business day tenders or exchanges may be made pursuant to
the offer (the "Expiration Time"), the Conversion Rate shall be increased so
that the same shall equal the rate determined by multiplying the Conversion Rate
in effect immediately prior to the effectiveness of the Conversion Rate
adjustment contemplated by this Section 12.06(e) by a fraction, the numerator of
which shall be the sum of (x) the fair market value of the aggregate
consideration payable to stockholders based on the acceptance of all shares
validly tendered or exchanged and not withdrawn as of the Expiration Time up to
the maximum specified in the tender or exchange offer (the "Purchased Shares")
and (y) the product of the number of shares of Common Stock outstanding (less
any Purchased Shares) at the Expiration Time and the Closing Sale Price of a
share of Common Stock on the Measurement Date, and the denominator of which
shall be the number of shares of Common Stock outstanding (including any
tendered or exchanged shares) at the Expiration Time (including the Purchased
Shares) multiplied by the Closing Sale Price of one share of Common Stock on the
Measurement Date. Such reduction shall become effective immediately prior to the
opening of business on the day following the Measurement Date.
To the extent such purchase pursuant to such tender or exchange offer
described in Section 12.06(e) does not occur, the Conversion Rate shall be
readjusted to eliminate any adjustment made to the Conversion Rate on account of
such purchase pursuant to such tender or exchange offer. If the application of
this Section 12.06(e) to any repurchase (including by way of tender offer or
exchange offer) would result in a decrease in the Conversion Rate, no adjustment
shall be made for such repurchase under this Section 12.06(e).
(f) For the purpose of any computation under subsections (a), (b), (c),
(d) and (e) above of this Section 12.06, the "current market price" per share of
Common Stock on the date fixed for determination of the stockholders entitled to
receive the issuance or distribution requiring such computation (the
"Determination Date") shall be deemed to be the average of the Closing Sale
Price for the ten consecutive trading days immediately preceding the
Determination Date; provided, however, that (i) if the "ex" date for any event
(other than the issuance or distribution requiring such computation) that
requires an adjustment to the Conversion Rate pursuant to subsection (a), (b),
(c), (d) or (e) above occurs on or after the tenth trading day prior to the
Determination Date and prior to the "ex" date for the issuance or distribution
requiring such computation, the Closing Sale Price for each trading day prior to
the "ex" date for such other event shall be adjusted by multiplying such Closing
Sale Price by the reciprocal of the fraction by which the Conversion Rate is so
required to be adjusted as a result of such other event, (ii) if the "ex" date
for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Rate pursuant to
subsection (a), (b),
65
(c), (d) or (e) above occurs on or after the "ex" date for the issuance or
distribution requiring such computation and on or prior to the Determination
Date, the Closing Sale Price for each business day on and after the "ex" date
for such other event shall be adjusted by multiplying such Closing Sale Price by
the same fraction by which the Conversion Rate is so required to be adjusted as
a result of such other event, and (iii) if the "ex" date for the issuance or
distribution requiring such computation is on or prior to the Determination
Date, after taking into account any adjustment required pursuant to clause (i)
or (ii) of this proviso, the Closing Sale Price for each trading day on and
after the "ex" date shall be adjusted by adding thereto the amount of any cash
and the fair market value (as determined by the Board of Directors in a manner
consistent with any determination of such value for the purposes of this Section
12.06, whose determination shall be conclusive and described in a Resolution of
the Board of Directors) of the evidences of indebtedness, shares of capital
stock or other securities or assets being distributed (in the distribution
requiring such computation) applicable to one share of Common Stock as of the
close of business on the day before such "ex" date. For the purpose of any
computation under subsection (e) of this Section 12.06, the current market price
per share of Common Stock at the expiration time for the repurchase requiring
such computation shall be deemed to be the average of the Closing Sale Price for
the ten consecutive trading days commencing on the business day immediately
following the expiration time of such repurchase (the "Commencement Date");
provided, however, that if the "ex" date for any event (other than the
repurchase requiring such computation) that requires an adjustment to the
Conversion Rate pursuant to subsection (a), (b), (c), (d) or (e) above occurs on
or after the expiration time for the repurchase requiring such computation and
prior to the day in question, the Closing Sale Price for each trading day on or
after the "ex" date for such other event shall be adjusted by multiplying such
Closing Sale Price by the same fraction by which the Conversion Rate is so
required to be adjusted as a result of such other event. For purposes of this
subsection, the term "ex" date, (i) when used with respect to any issuance or
distribution, means the first date on which the Common Stock trades regular way
on the relevant exchange or in the relevant market from which the Closing Sale
Price was obtained without the right to receive such issuance or distribution,
(ii) when used with respect to any subdivision or combination of shares of
Common Stock, means the first date on which the Common Stock trades regular way
on such exchange or in such market after the time at which such subdivision or
combination becomes effective, and (iii) when used with respect to any
repurchase means the first date on which the Common Stock trades regular way on
such exchange or in such market after the expiration time of such repurchase (as
it may be amended or extended).
(g) In case the Company shall have a rights plan in effect, upon
conversion of the Convertible Subordinated Notes into Common Stock, holders will
receive, in addition to the Common Stock, the rights under the rights plan,
unless the rights have separated from the Common Stock at the time of
conversion, in which case the Conversion Rate will be adjusted as if the Company
distributed to all holders of Common Stock shares of the Company's Capital
Stock, evidence of the Company's indebtedness or other assets, subject to
readjustment in the event of the expiration, termination or redemption of such
rights.
66
SECTION 12.07 [Reserved].
----------
SECTION 12.08 [Reserved].
----------
SECTION 12.09 When Adjustment May Be Deferred.
-------------------------------
No adjustment in the Conversion Rate need be made unless the adjustment
would require an increase or decrease of at least 1% in the Conversion Rate. Any
adjustments that are not made shall be carried forward and taken into account in
any subsequent adjustment and all adjustments that are made and carried forward
shall be taken in the aggregate in order to determine if the 1% threshold is
met.
All calculations under this Article 12 shall be made to the nearest cent or
to the nearest 1/1,000th of a share, as the case may be.
SECTION 12.10 When No Adjustment is Required.
------------------------------
No adjustment need be made for a transaction referred to in Section 12.06
or 12.14 if Convertible Subordinated Note holders are to participate in the
transaction on a basis and with notice that the Board of Directors determines to
be fair and appropriate in light of the basis and notice on which holders of
Common Stock participate in the transaction. Such participation by holders may
include participation upon conversion provided that an adjustment shall be made
at such time as the holders are no longer entitled to participate.
No adjustment need be made for rights to purchase Common Stock pursuant to
a Company plan for reinvestment of dividends or interest.
No adjustment need be made for a change in the par value of the Common
Stock.
To the extent the Convertible Subordinated Notes become convertible
pursuant to this Article 12 into cash, no adjustment need be made thereafter as
to the cash. Interest will not accrue on the cash.
No adjustment will be made pursuant to this Article 12 that would result,
through the application of two or more provisions hereof, in the duplication of
any adjustment.
SECTION 12.11 Notice of Adjustment.
--------------------
Whenever the Conversion Rate is adjusted, the Company shall promptly mail
to Convertible Subordinated Note holders a notice of the adjustment. The Company
shall file with the Trustee and the Conversion Agent such notice and a
certificate from the Company's independent public accountants briefly stating
the facts requiring the adjustment and the manner of computing it. Upon receipt
by it of such notice, and at the written request of the Company, the Conversion
Agent will promptly mail such notice to Convertible Subordinated Note holders at
the Company's expense. The certificate shall be conclusive evidence that the
adjustment is correct. Neither the Trustee nor any Conversion Agent shall be
under any duty or responsibility with respect to any such certificate except to
exhibit the same to any holder desiring inspection thereof.
67
SECTION 12.12 Voluntary Increase.
------------------
The Company from time to time may increase the Conversion Rate by any
amount for any period of time. Whenever the Conversion Rate is increased, the
Company shall mail to Convertible Subordinated Note holders and deliver to the
Trustee and the Conversion Agent a notice of the increase. The Company shall
mail the notice at least 20 days before the date the increased Conversion Rate
takes effect. The notice shall state the increased Conversion Rate and the
period it will be in effect.
A voluntary increase of the Conversion Rate does not change or adjust the
Conversion Rate otherwise in effect for purposes of Section 12.06 or 12.14.
SECTION 12.13 Notice of Certain Transactions.
------------------------------
If:
(a) the Company takes any action that would require an adjustment in the
Conversion Rate pursuant to Section 12.06 (unless no adjustment is to occur
pursuant to Section 12.10); or
(b) the Company takes any action that would require a supplemental
indenture pursuant to Section 12.14; or
(c) there is a liquidation or dissolution of the Company;
then the Company shall mail to Convertible Subordinated Note holders and deliver
to the Trustee and the Conversion Agent a notice stating the proposed record
date for a dividend or distribution or the proposed effective date of a
subdivision, combination, reclassification, consolidation, merger, binding share
exchange, transfer, liquidation or dissolution. The Company shall so deliver and
mail the notice at least 20 days before such date. Failure to deliver or mail
the notice or any defect in it shall not affect the validity of the transaction.
SECTION 12.14 Reorganization of Company; Special Distributions.
------------------------------------------------
If the Company is a party to a transaction subject to Article 5 (other than
a sale of all or substantially all of the assets of the Company in a transaction
in which the holders of Common Stock immediately prior to such transaction do
not receive securities, cash, property or other assets of the Company or any
other Person) or a merger or binding share exchange which reclassifies or
changes its outstanding Common Stock, the Person obligated to deliver
securities, cash or other assets upon conversion of Securities shall enter into
a supplemental indenture. If the issuer of securities deliverable upon
conversion of Convertible Subordinated Notes is an Affiliate of the successor
Company, that issuer shall join in the supplemental indenture.
The supplemental indenture shall provide that the holder of a Convertible
Subordinated Note may convert it into the kind and amount of securities, cash or
other assets which such holder would have received immediately after the
consolidation, merger, binding share exchange or transfer if such holder had
converted the Convertible Subordinated Note immediately before the effective
date of the transaction, assuming (to the extent applicable) that such holder
(i) was not a constituent Person or an Affiliate of a constituent Person to such
transaction; (ii) made no
68
election with respect thereto; and (iii) was treated alike with the plurality of
non-electing holders. The supplemental indenture shall provide for adjustments
which shall be as nearly equivalent as may be practical to the adjustments
provided for in this Article 12. The successor Company shall mail to Convertible
Subordinated Note holders a notice briefly describing the supplemental
indenture.
If this Section applies, Section 12.06 does not apply.
If the Company makes a distribution to all holders of its Common Stock of
any of its assets, or debt securities or any rights, warrants or options to
purchase securities of the Company that would otherwise result in an adjustment
in the Conversion Rate pursuant to the provisions of Section 12.06, then, from
and after the record date for determining the holders of Common Stock entitled
to receive the distribution, a holder of a Convertible Subordinated Note that
converts such Convertible Subordinated Note in accordance with the provisions of
this Indenture shall upon such conversion be entitled to receive, in addition to
the shares of Common Stock into which the Convertible Subordinated Note is
convertible, the kind and amount of securities, cash or other assets comprising
the distribution that such holder would have received if such holder had
converted the Convertible Subordinated Note immediately prior to the record date
for determining the holders of Common Stock entitled to receive the
distribution.
SECTION 12.15 Company Determination Final.
---------------------------
Any determination that the Company or the Board of Directors must make
pursuant to Section 12.03, 12.06, 12.09, 12.10, 12.14, 12.17 or 12.20 is
conclusive.
SECTION 12.16 Trustee's Adjustment Disclaimer.
-------------------------------
The Trustee has no duty to determine when an adjustment under this Article
12 should be made, how it should be made or what it should be. The Trustee has
no duty to determine whether a supplemental indenture under Section 12.14 need
be entered into or whether any provisions of any supplemental indenture are
correct. The Trustee shall not be accountable for and makes no representation as
to the validity or value of any securities or assets issued upon conversion of
Convertible Subordinated Notes. The Trustee shall not be responsible for the
Company's failure to comply with this Article 12. Each Conversion Agent (other
than the Company or an Affiliate of the Company) shall have the same protection
under this Section 12.16 as the Trustee.
SECTION 12.17 Simultaneous Adjustments.
------------------------
In the event that this Article 12 requires adjustments to the Conversion
Rate under more than one clause of Section 12.06, and the record dates for the
distributions giving rise to such adjustments shall occur on the same date, then
such adjustments shall be made by applying, first, the provisions of clause (a),
second, the provisions of clause (c) and, third, the provisions of Section
clause (b).
69
SECTION 12.18 Successive Adjustments.
----------------------
After an adjustment to the Conversion Rate under this Article 12, any
subsequent event requiring an adjustment under this Article 12 shall cause an
adjustment to the Conversion Rate as so adjusted.
SECTION 12.19 Restriction on Common Stock Issuable Upon Conversion.
----------------------------------------------------
(a) Shares of Common Stock to be issued upon conversion of the Convertible
Subordinated Notes prior to the effectiveness of a Shelf Registration Statement
shall be physically delivered in certificated form to the holders converting
such Convertible Subordinated Notes, and the certificate representing such
shares of Common Stock shall bear the following legend (the "Restricted Common
Stock Legend") unless removed in accordance with Section 12.19(c):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND
ANNIVERSARY, OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR
(Y) BY ANY HOLDER THAT WAS AN "AFFILIATE" (WITHIN THE MEANING OF RULE 144
UNDER THE SECURITIES ACT) OF THE COMPANY AT ANY TIME DURING THE THREE
MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1)
TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,
(3) IN AN OFFSHORE TRANSACTION (AS DEFINED IN REGULATION S UNDER THE
SECURITIES ACT) IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT,
(4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT OR (5)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES. PRIOR TO A TRANSFER OF THIS SECURITY, THE HOLDER OF
THIS SECURITY MUST FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES
AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY
TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS.
THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR
THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER
OR (2) NOT A U.S. PERSON AND IS OUTSIDE THE UNITED STATES
70
WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF
PARAGRAPH (k)(2) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT.
IN ANY CASE THE HOLDER HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN
ANY HEDGING TRANSACTION WITH REGARD TO THIS SECURITY EXCEPT AS PERMITTED BY
THE SECURITIES ACT.
(b) If (i) shares of Common Stock to be issued upon conversion of a
Convertible Subordinated Note prior to the effectiveness of a Shelf Registration
Statement are to be registered in a name other than that of the holder of such
Convertible Subordinated Note or (ii) shares of Common Stock represented by a
certificate bearing the Restricted Common Stock Legend are transferred
subsequently by such holder, then, unless the Shelf Registration Statement has
become effective and such shares are being transferred pursuant to the Shelf
Registration Statement, the holder must deliver to the transfer agent for the
Common Stock a certificate in substantially the form of Exhibit B as to
compliance with the restrictions on transfer applicable to such shares of Common
Stock, and neither the transfer agent nor the registrar for the Common Stock
shall be required to register any transfer of such Common Stock not so
accompanied by a properly completed certificate.
(c) Except for transfers in connection with a Shelf Registration
Statement, if certificates representing shares of Common Stock are issued upon
the registration of transfer, exchange or replacement of any other certificate
representing shares of Common Stock bearing the Restricted Common Stock Legend,
or if a request is made to remove such Restricted Common Stock Legend from
certificates representing shares of Common Stock, the certificates so issued
shall bear the Restricted Common Stock Legend, or the Restricted Common Stock
Legend shall not be removed, as the case may be, unless there is delivered to
the Company, the Conversion Agent and the Transfer Agent such satisfactory
evidence, which, in the case of a transfer made pursuant to Rule 144 under the
Securities Act, may include an opinion of counsel as may be reasonably required
by the Company, 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
that such shares of Common Stock are securities that are not "restricted" within
the meaning of Rule 144 under the Securities Act. Upon provision to the Company
of such reasonably satisfactory evidence, the Company shall cause the transfer
agent for the Common Stock to countersign and deliver certificates representing
shares of Common Stock that do not bear the legend.
SECTION 12.20 Company's Right to Elect to Pay Cash or Common Stock.
----------------------------------------------------
If a holder elects to convert all or any portion of a Convertible
Subordinated Note into shares of Common Stock as set forth in this Article 12,
the Company may choose to satisfy all or any portion of its conversion
obligation (the "Conversion Obligation") in cash. If the Company elects to
satisfy all or any portion of its Conversion Obligation in cash at any time
other than following the delivery of a notice of redemption or within 20 days of
the Maturity Date, the Company will notify such holder through the Trustee of
the dollar amount to be satisfied in cash (which must be expressed either as
100% of the Conversion Obligation or as a fixed dollar amount) at any time on or
before the date that is two business days following receipt of written notice of
conversion as specified in Sections 12.01 and 12.02 (such period, the "Cash
Settlement
71
Notice Period"). If the Company elects to pay cash for any portion of the shares
of Common Stock otherwise issuable to the holder, the holder may retract the
conversion notice at any time during the two business day period beginning on
the day after the final day of the Cash Settlement Notice Period (a "Conversion
Retraction Period"); no such retraction can be made (and a conversion notice
shall be irrevocable) if the Company does not elect to deliver cash in lieu of
shares of Common Stock (other than cash in lieu of fraction shares). Unless the
conversion notice has been retracted, settlement (in cash and/or shares) will
occur on the business day following the final day of the ten trading day period
beginning on the day after the final day of the Conversion Retraction Period
(the "Cash Settlement Averaging Period"). Cash to be paid in the event of the
election to pay all or a portion of the Conversion Obligation in cash will be
the product obtained by multiplying (x) the number of shares the holders would
have been entitled had the Company elected to pay all or such specified
percentage, as the case may be, of the Conversion Obligation in Common Stock and
(y) the average Closing Sale Price of a share of Common Stock during the Cash
Settlement Averaging Period (the "Cash Amount"). If the Company elects to
satisfy a fixed portion (other than 100%) of the Conversion Obligation in Cash,
the Company will deliver to such Holder such fixed percentage of the Cash Amount
and a number of shares equal to the excess, if any, of (A) the number of shares
equal to (1) the aggregate Original Principal Amount of the Convertible
Subordinated Notes to be converted divided by 1,000, multiplied by (2) the
Conversion Rate, over (B) the number of shares equal to the sum, for each day of
the Cash Settlement Averaging Period, of (x) the pro rated portion of the Cash
Amount each such day divided by (y) the Closing Sale Price of the Common Stock
on such day.
Notwithstanding the foregoing, a Convertible Subordinated Note in respect
of which a holder has delivered a Purchase Notice or Designated Event notice
exercising such holder's option to require the Company to repurchase such
Convertible Subordinated Note may be converted as described in Section 2.01 and
2.02 or this Section 2.13 only if such notice of exercise is withdrawn in
accordance with Sections 3.09 and 3.10 hereof.
If a holder elects to convert all or any portion of a Convertible
Subordinated Note into shares of Common Stock after the Company has delivered a
notice of redemption or within 20 days of the Maturity Date, the Company may
choose to satisfy all or any portion of the Conversion Obligation in Cash
provided the Company notified such holder through the Trustee of the dollar
amount to be satisfied in cash (which must be expressed either a 100% of the
Conversion Obligation or as a fixed dollar amount) at any time on or before the
date that is 20 days prior to Stated Maturity or Redemption Date. Cash
settlement amounts will be computed in the same manner as set forth above in
this Section 12.20.
72
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed and attested, all as of the date first above written, signifying their
agreements contained in this Indenture.
SCHOOL SPECIALTY, INC.
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: EVP/CFO
BNY MIDWEST TRUST COMPANY
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Assistant Vice President
73
EXHIBIT A
(Face of Security)
The following legend shall appear on the face of each Global Security:
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED, THIS SECURITY IS A CONTINGENT PAYMENT DEBT INSTRUMENT AND WILL
ACCRUE ORIGINAL ISSUE DISCOUNT AT THE ISSUER'S "COMPARABLE YIELD" FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES. PURSUANT TO SECTION 2.15 OF THE INDENTURE,
THE COMPANY AGREES, AND BY PURCHASING A BENEFICIAL OWNERSHIP INTEREST IN THE
CONVERTIBLE SUBORDINATED NOTES EACH HOLDER, AND ANY PERSON (INCLUDING AN ENTITY)
THAT ACQUIRES A DIRECT OR INDIRECT BENEFICIAL INTEREST IN THE CONVERTIBLE
SUBORDINATED NOTES, WILL BE DEEMED TO HAVE AGREED (I) FOR UNITED STATES FEDERAL
INCOME TAX PURPOSES TO TREAT THE CONVERTIBLE SUBORDINATED NOTES AS INDEBTEDNESS
OF THE COMPANY THAT IS SUBJECT TO TREAS. REG. SEC. 1.1275-4 (THE "CONTINGENT
PAYMENT REGULATIONS"), (II) FOR ALL TAX PURPOSES TO TREAT THE CONVERTIBLE
SUBORDINATED NOTES AS INDEBTEDNESS OF THE COMPANY, (III) FOR PURPOSES OF THE
CONTINGENT PAYMENT REGULATIONS, TO TREAT THE FAIR MARKET VALUE OF ANY COMMON
STOCK BENEFICIALLY RECEIVED BY A BENEFICIAL HOLDER UPON ANY CONVERSION OF THE
CONVERTIBLE SUBORDINATED NOTES (OR CASH IN LIEU OF COMMON STOCK) AS A CONTINGENT
PAYMENT, (IV) TO BE BOUND BY THE COMPANY'S DETERMINATION THAT THE CONVERTIBLE
SUBORDINATED NOTES ARE CONTINGENT PAYMENT DEBT INSTRUMENTS SUBJECT TO THE
"NONCONTINGENT BOND METHOD" OF ACCRUING ORIGINAL ISSUE DISCOUNT WITHIN THE
MEANING OF THE CONTINGENT PAYMENT REGULATIONS WITH RESPECT TO THE CONVERTIBLE
SUBORDINATED NOTES, AND (V) TO BE BOUND BY THE COMPANY'S PROJECTED PAYMENT
SCHEDULE WITH RESPECT TO THE CONVERTIBLE SUBORDINATED NOTES. THE PROVISIONS OF
THIS INDENTURE SHALL BE INTERPRETED TO FURTHER THIS INTENTION AND AGREEMENT OF
THE PARTIES. THE COMPARABLE YIELD AND THE SCHEDULE OF PROJECTED PAYMENTS ARE NOT
DETERMINED FOR ANY PURPOSE OTHER THAN FOR THE DETERMINATION OF INTEREST ACCRUALS
AND ADJUSTMENT THEREOF IN RESPECT OF THE CONVERTIBLE SUBORDINATED NOTES FOR
UNITED STATES FEDERAL INCOME TAX PURPOSES. THE COMPARABLE YIELD AND THE SCHEDULE
OF PROJECTED PAYMENTS DO NOT CONSTITUTE A PROJECTION OR REPRESENTATION REGARDING
THE FUTURE STOCK PRICE OR THE AMOUNTS PAYABLE ON THE CONVERTIBLE SUBORDINATED
NOTES. FOR PURPOSES OF THE FOREGOING, THE COMPANY'S DETERMINATION OF THE
"COMPARABLE YIELD" IS 8.00% PER ANNUM, COMPOUNDED SEMIANNUALLY. A HOLDER OF
CONVERTIBLE SUBORDINATED NOTES MAY OBTAIN THE YIELD TO MATURITY, ISSUE DATE,
COMPARABLE YIELD AND PROJECTED PAYMENT SCHEDULE (WHICH SCHEDULE IS ATTACHED AS
EXHIBIT C TO
A-1
THE INDENTURE) BY SUBMITTING A WRITTEN REQUEST TO: SCHOOL SPECIALTY, INC., ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ATTENTION: CHIEF FINANCIAL OFFICER.
[Global Securities Legend]
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE INDIVIDUAL
NOTES REPRESENTED HEREBY, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE
BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY.
The following legend shall appear on the face of each Global Security for
which The Depository Trust Company is to be the Depositary:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE
ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT
WAS AN "AFFILIATE" (WITHIN THE MEANING OF RULE 144 UNDER THE SECURITIES ACT) OF
THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH
TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A") TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (3) IN AN OFFSHORE
A-2
TRANSACTION (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN ACCORDANCE
WITH REGULATION S UNDER THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER
THE SECURITIES ACT OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. PRIOR TO A TRANSFER OF THIS SECURITY,
THE HOLDER OF THIS SECURITY MUST FURNISH TO THE COMPANY AND THE TRUSTEE SUCH
CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM
THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING
RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND
AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL
BUYER OR (2) NOT A U.S. PERSON AND IS OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (k)(2) OF
RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT. IN ANY CASE THE HOLDER
HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH
REGARD TO THIS SECURITY OR ANY COMMON STOCK ISSUABLE UPON CONVERSION OF THIS
SECURITY EXCEPT AS PERMITTED BY THE SECURITIES ACT.
A-3
SCHOOL SPECIALTY, INC.
3.75% Convertible Subordinated Note due 2023
No. ___ CUSIP: 807863 AD 7
Issue Date: July 18, 2003 Original Principal Amount: $__________
Issue Price: $1,000.00
(for each $1,000
Original Principal Amount)
SCHOOL SPECIALTY, INC., a Wisconsin corporation, promises to pay to
______________ or registered assigns, on August 1, 2023, the Accreted Principal
Amount of this Convertible Subordinated Note on such date. This Convertible
Subordinated Note is issued with an Original Principal Amount of
________________________ DOLLARS ($____________).
This Convertible Subordinated Note shall not bear interest except as
specified on the other side of this Convertible Subordinated Note. The Accreted
Principal Amount of this Convertible Subordinated Note will accrue as specified
on the other side of this Convertible Subordinated Note. This Convertible
Subordinated Note is convertible as specified on the other side of this
Convertible Subordinated Note.
Additional provisions of this Convertible Subordinated Note are set forth
on the other side of this Convertible Subordinated Note.
A-4
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.
Dated:
SCHOOL SPECIALTY, INC.
By:
------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
BNY MIDWEST TRUST COMPANY,
as Trustee, certifies that this
is one of the Convertible Subordinated Notes referred
to in the within-mentioned Indenture.
By:
-------------------------------
Authorized Officer
Dated:
A-5
(Back of Security)
SCHOOL SPECIALTY, INC.
3.75% CONVERTIBLE SUBORDINATED NOTE DUE 2023
1. Interest and Contingent Interest.
(a) The Convertible Subordinated Notes will bear cash interest on the
Original Principal Amount at the rate of 3.75% per year from the Issue Date, or
from the most recent date to which interest has been paid or provided for, until
August 1, 2010. During such period, the Company will pay cash interest
semiannually in arrears on each Interest Payment Date to holders of record at
the close of business on each Regular Record Date immediately preceding such
Interest Payment Date. Each payment of cash interest on the Convertible
Subordinated Notes will include interest (including Contingent Interest, if any)
and Liquidated Damages, if any, accrued through the day immediately preceding
the most recent Interest Payment Date (or the Repurchase Date, Redemption Date,
the Designated Event Payment Date or, in certain circumstances, the Conversion
Date, as the case may be). Any payment required to be made on any day that is
not a business day will be made on the next succeeding business day.
(b) Until August 1, 2010, the accreted principal amount (the "Accreted
Principal Amount") of a Convertible Subordinated Note will be equal to the
Original Principal Amount of $1,000. Beginning August 1, 2010, the Convertible
Subordinated Note shall not bear interest, except as specified in this paragraph
or in Section 4.10 of the Indenture. From such date, the Original Principal
Amount shall commence increasing daily by the annual rate of 3.75% to produce
the Accreted Principal Amount. The Accreted Principal Amount will compound
semiannually, not daily. On the Maturity Date, the holder of this Convertible
Subordinated Note will receive $1,620.91 for each $1,000 Original Principal
Amount of Convertible Subordinated Notes, which is the fully Accreted Principal
Amount of this Convertible Subordinated Note on such date, unless the
Convertible Subordinated Note has been earlier redeemed, repurchased or
converted, which for each $1,000 Original Principal Amount will be equal to such
Original Principal Amount of $1,000 per Convertible Subordinated Note increased
daily by 3.75% per year as provided in the Indenture. The yield will be
calculated using a 360-day year composed of twelve 30-day months. If the
Accreted Principal Amount hereof or any portion of such Accreted Principal
Amount is not paid when due (whether upon acceleration pursuant to Section 6.02
of the Indenture, upon the date set for payment of the Redemption Price pursuant
to paragraph 6 hereof, upon the date set for payment of the Repurchase Price or
Designated Event Payment pursuant to paragraph 7 hereof or upon the Maturity
Date of this Convertible Subordinated Note) or if installments of cash interest
due hereon are not paid when due in accordance with this paragraph, then in each
such case the overdue amount shall, to the extent permitted by law, bear
interest at 3.75% per year, as the case may be, in effect following the date
such overdue amount was due, compounded semiannually, which interest shall
accrue from the date such overdue amount was originally due to the date payment
of such amount, including interest thereon, has been made or duly provided for.
All such interest shall be payable on demand. The accrual of such interest on
overdue amounts shall be in lieu of, and not in addition to, any subsequent
increase in the Accreted Principal Amount.
A-6
(c) The Company will pay contingent interest ("Contingent Interest") to
the holders of the Convertible Subordinated Notes in respect of any six-month
interest period from August 1 to January 31 or from February 1 to July 31,
commencing on or after August 1, 2008 for which the average Trading Price of a
Convertible Subordinated Notes for the applicable five trading day reference
period equals or exceeds 120% or more of the sum of the Accreted Principal
Amount and accrued interest, if any, for a Convertible Subordinated Note as of
the day immediately preceding the first day of the applicable six-month interest
period. The "five trading day reference period" means the five trading days
ending on the third trading day immediately preceding the relevant six-month
interest period. For any six-month interest period in respect of which
Contingent Interest is payable, the Contingent Interest payable on each $1,000
principal amount of Notes shall equal 0.5% of the Original Principal Amount. No
Contingent Interest shall be payable on Convertible Subordinated Notes redeemed
pursuant to this paragraph 6 on August 7, 2008 (or, if August 7, 2008 is not a
business day, on the next following business day).
Upon determination that holders will be entitled to receive Contingent
Interest in respect of a six-month period which may become payable, the Company
shall notify the holders. In connection with providing such notice, the Company
will issue a press release containing information regarding the Contingent
Interest determination or publish such information on the Company's then
existing website or through such other public medium as the Company may use at
that time.
(d) Interest, including Contingent Interest, if any, on any Convertible
Subordinated Note that is payable, and is punctually paid or duly provided for,
on any Interest Payment Date shall be paid to the person in whose name that
Convertible Subordinated Note is registered at the close of business on the
Regular Record Date for such interest or Contingent Interest, if any, at the
office or agency of the Company maintained for such purpose. Each installment of
interest or Contingent Interest, if any, on any Convertible Subordinated Note
shall be paid in same-day funds by transfer to an account maintained by the
payee located inside the United States.
(e) The amount of interest, including Contingent Interest, if any, payable
for any period shall be computed on the basis of a 360-day year of twelve 30-day
months. The amount of interest, including Contingent Interest, if any, payable
for any partial period shall be computed on the basis of a 360-day year of
twelve 30-day months and the days elapsed in any partial month. In the event
that any date on which interest is payable on a Convertible Subordinated Note is
not a business day, then a payment of the interest, including Contingent
Interest, if any, payable on such date will be made on the next succeeding day
which is a business day (and without any interest or other payment in respect of
any such delay) with the same force and effect as if made on the date the
payment was originally payable.
2. Method of Payment.
Subject to the terms and conditions of the Indenture, the Company will make
payments in respect of Accreted Principal Amount, Redemption Prices, Repurchase
Prices, Designated Event Payment and on the Maturity Date to holders who
surrender Convertible Subordinated Notes to a Paying Agent to collect such
payments in respect of the Convertible Subordinated Notes. In addition, the
Company will pay cash interest beginning February 1, 2004 until August 1, 2010,
A-7
as more fully described in paragraph 1 hereof. The Company will pay any cash
amounts in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may make
such cash payments by check payable in such money.
3. Paying Agent, Conversion Agent and Registrar.
Initially, BNY Midwest Trust Company (the "Trustee") will act as Paying
Agent, Conversion Agent and Registrar. The Company may appoint and change any
Paying Agent, Conversion Agent and Registrar or co-registrar without notice,
other than notice to the Trustee except that the Company will maintain at least
one Paying Agent in the State of New York, City of New York, Borough of
Manhattan, which shall initially be an office or agency of the Trustee. The
Company or any of its Subsidiaries or any of their Affiliates may act as Paying
Agent, Conversion Agent, Registrar or co-registrar.
4. Indenture.
The Company issued the Convertible Subordinated Notes pursuant to an
Indenture dated as of July 18, 2003 (the "Indenture"), between the Company and
the Trustee. The terms of the Convertible Subordinated Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Convertible Subordinated Notes themselves and the Trust Indenture Act of 1939,
as in effect from time to time (the "TIA"). Capitalized terms used herein and
not defined herein have the meanings ascribed thereto in the Indenture. The
Convertible Subordinated Notes are subject to all such terms, and Convertible
Subordinated Note holders are referred to the Indenture and the TIA for a
statement of those terms. In the event of any inconsistency between the terms
hereof and the terms of the Indenture, the terms of the Indenture shall prevail.
The Convertible Subordinated Notes are unsecured and subordinated
obligations of the Company limited to $110,000,000 aggregate Original Principal
Amount (plus up to $25,000,000 aggregate Original Principal Amount that may be
sold by the Company to the Initial Purchasers pursuant to the over-allotment
option granted to the Initial Purchasers pursuant to the Purchase Agreement)
(subject to Section 2.07 of the Indenture). The Indenture does not limit other
indebtedness of the Company, secured or unsecured.
5. [Reserved].
6. Redemption at the Option of the Company.
No sinking fund is provided for the Convertible Subordinated Notes. The
Convertible Subordinated Notes are redeemable as a whole, or from time to time
in part, at any time at the option of the Company in accordance with the
Indenture at the Redemption Prices set forth below, provided that the
Convertible Subordinated Notes are not redeemable prior to August 7, 2008.
If redeemed at the option of the Company, the Convertible Subordinated
Notes will be redeemed at a Redemption Prices equal to the following, plus
accrued and unpaid interest (including Contingent Interest, if any) and
Liquidated Damages, if any:
A-8
(a) Beginning on August 7, 2008 through July 31, 2009: 101.071% of the
Original Principal Amount;
(b) Beginning on August 1, 2009 through August 1, 2010: 100.536% of the
Original Principal Amount; and
(c) On or after August 1, 2010, 100% of the Accreted Principal Amount.
No Contingent Interest shall be payable on Convertible Subordinated Notes
redeemed pursuant to this paragraph 6 on August 7, 2008 (or, if August 7, 2008
is not a business day, on the following business day).
The table below shows the Redemption Price of a Convertible Subordinated
Note on August 1, 2010 and each August 1 thereafter prior to the Maturity Date
and at the Maturity Date (assuming there is no accrued and unpaid interest or
Contingent Interest). In addition, the Redemption Price of a Convertible
Subordinated Note that is redeemed between the dates listed below would include
an additional amount reflecting the Accreted Principal Amount since the
immediately preceding date in the table below.
(2) (3)
(1) Accreted Redemption
Redemption Date Note Issue Principal Price
August 1: Price Amount (1)+(2)
----------------------------- ------------ ------------ ------------
2010 ........................ $ 1,000.00 $ 0.00 $ 1,000.00
2011 ........................ $ 1,000.00 $ 37.85 $ 1,037.85
2012 ........................ $ 1,000.00 $ 77.14 $ 1,077.14
2013 ........................ $ 1,000.00 $ 117.91 $ 1,117.91
2014 ........................ $ 1,000.00 $ 160.22 $ 1,160.22
2015 ........................ $ 1,000.00 $ 204.14 $ 1,204.14
2016 ........................ $ 1,000.00 $ 249.72 $ 1,249.72
2017 ........................ $ 1,000.00 $ 297.02 $ 1,297.02
2018 ........................ $ 1,000.00 $ 346.11 $ 1,346.11
2019 ........................ $ 1,000.00 $ 397.07 $ 1,397.07
2020 ........................ $ 1,000.00 $ 449.95 $ 1,449.95
2021 ........................ $ 1,000.00 $ 504.83 $ 1,504.83
2022 ........................ $ 1,000.00 $ 561.79 $ 1,561.79
At stated maturity .......... $ 1,000.00 $ 620.91 $ 1,620.91
If this Convertible Subordinated Note has been converted to a semiannual
coupon note following the occurrence of a Tax Event, the Redemption Price will
be equal to the Restated Principal Amount plus accrued and unpaid interest
(including Contingent Interest, if any) and Liquidated Damages, if any, from the
date of such conversion to but not including the Redemption Date; but in no
event will this Convertible Subordinated Note be redeemable before August 7,
2008.
A-9
7. Purchase by the Company at the Option of the Holder.
Subject to the terms and conditions of the Indenture, the Company shall
become obligated to purchase, at the option of the holder, the Convertible
Subordinated Notes held by such holder on August 1 of 2010, 2013 and 2018 at a
Repurchase Price equal to 100% of the Accreted Principal Amount of such
Convertible Subordinated Notes on the applicable Repurchase Date plus accrued
and unpaid interest (including Contingent Interest, if any) and Liquidated
Damages, if any, to but not including the Repurchase Date, upon delivery of a
Repurchase Notice containing the information set forth in the Indenture, at any
time from the opening of business on the date that is 20 business days prior to
such Repurchase Date until the close of business on the third business day prior
to such Repurchase Date and upon delivery of the Convertible Subordinated Notes
to the Paying Agent by the holder as set forth in the Indenture.
If prior to a Repurchase Date this Convertible Subordinated Note has been
converted to a semiannual coupon note following the occurrence of a Tax Event,
the Repurchase Price will be equal to the Restated Principal Amount plus accrued
and unpaid cash interest (including Contingent Interest, if any) and Liquidated
Damages, if any, from the date of conversion to the Repurchase Date but not
including the Repurchase Date as provided in the Indenture.
At the option of the holder and subject to the terms and conditions of the
Indenture, the Company shall become obligated to purchase in cash all or a
portion of the Convertible Subordinated Notes in integral multiples of $1,000
Original Principal Amount held by such holder no later than 60 business days
after the occurrence of a Designated Event of the Company for a Designated Event
Payment equal to 100% of the Accreted Principal Amount of such Convertible
Subordinated Notes plus accrued and unpaid interest (including Contingent
Interest, if any) and Liquidated Damages, if any, to but not including the
Designated Event Payment Date, which Designated Event Payment shall be paid in
cash.
Holders have the right to withdraw any Repurchase Notice or Designated
Event notice, as the case may be, by delivering to the Paying Agent a written
notice of withdrawal in accordance with the provisions of the Indenture.
Payment of the Repurchase Price for a Convertible Subordinated Note for
which a Repurchase Notice has been delivered and not withdrawn is conditioned
upon book-entry transfer or delivery of such Convertible Subordinated Note,
together with any necessary endorsements, to the Paying Agent at its office in
the Borough of Manhattan, The City of New York, or any other office or the
Paying Agent, at any time after delivery of the Repurchase Notice.
If cash sufficient to pay the Repurchase Price or Designated Event Payment,
as the case may be, of all Convertible Subordinated Notes or portions thereof to
be purchased as of the Repurchase Date or the Designated Event Payment Date, as
the case may be, is deposited with the Paying Agent on the business day
immediately following to the Repurchase Date or on the Designated Event Payment
Date, as the case may be, such Convertible Subordinated Notes (or portions
thereof) will cease to be outstanding, the Accreted Principal Amount shall cease
to increase, and cash interest (including Contingent Interest, if any) and
Liquidated Damages, if
A-10
any, shall cease to accrue on such Convertible Subordinated Notes (or portions
thereof) on such Repurchase Date or Designated Event Payment Date, as the case
may be, and the holder thereof shall have no other rights as such (other than
the right to receive the Repurchase Price or Designated Event Payment, as the
case may be, if any, upon surrender of such Convertible Subordinated Notes).
This will be the case whether or not book-entry transfer of the Convertible
Subordinated Note has been made or the Convertible Subordinated Note has been
delivered to the Paying Agent.
8. [Reserved].
9. Conversion.
Conversion Based on Common Stock Price. Subject to the provisions of this
paragraph 9 and notwithstanding the fact that any other condition to conversion
described below has not been satisfied, holders may convert the Convertible
Subordinated Notes into Common Stock on a Conversion Date at any time starting
with the first day of any calendar quarter commencing after September 30, 2003
if the Closing Sale Price of the Common Stock for at least 20 trading days in a
period of 30 consecutive trading days ending on the last trading day of such
preceding calendar quarter is greater than the conversion trigger price per
share. The "conversion trigger price" for any calendar quarter shall be 120% of
the accreted conversion price per share (as defined below) of Common Stock on
the last trading day of such preceding calendar quarter. If the foregoing
condition is satisfied, then the Convertible Subordinated Notes will be
convertible at any time of the option of the holder, through their maturity.
The "accreted conversion price" per share of Common Stock as of any day
equals the quotient of:
.. the Accreted Principal Amount on that day, divided by
.. the number of shares of Common Stock issuable upon conversion of $1,000
Original Principal Amount of Convertible Subordinated Notes on that day,
subject to any adjustments to the Conversion Rate through that day.
For example, the accreted conversion price of a Convertible Subordinated
Note at the Issue Date will be $40.00 per share ($1,000 / 25); and the accreted
conversion price of a Convertible Subordinated Note that has an accreted
principal amount of $1,100 will be $44.00 per share ($1,100 / 25).
Until August 1, 2010, the accreted principal amount of a Convertible
Subordinated Note will be equal to the original principal amount of $1,000.
During this period the conversion trigger price per share of Common Stock will
be $48.00. This conversion trigger price reflects the accreted conversion price
per share of Common Stock multiplied by 120% and assumes that no events have
occurred that would require an adjustment to the Conversion Rate.
Beginning August 1, 2010, the accreted principal amount of a Convertible
Subordinated Note will be equal to the original principal amount of $1,000
increased daily by the rate of 3.75% per year. The following table sets forth
the accreted conversion price and conversion
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trigger prices for each quarterly period until August 1, 2023, the Maturity Date
of the Convertible Subordinated Notes, and assumes that no events have occurred
that would require an adjustment to the Conversion Rate. The accreted conversion
price and the conversion trigger price for each of the calendar quarters
indicated in the following table are calculated as of the last day of the
preceding quarter, and would determine whether the notes are convertible in each
such calendar quarter and thereafter.
Accreted Conversion Prices and Conversion Trigger Prices
Accreted
Conversion Conversion
Quarter Price Trigger Price
------------------------------------------ ------------ -------------
Through Third Quarter 2010 ............ $ 40.00 $ 48.00
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ................... $ 40.24 $ 48.29
2011
First Quarter ......................... $ 40.62 $ 48.74
Second Quarter ........................ $ 41.00 $ 49.20
Third Quarter ......................... $ 41.38 $ 49.66
Fourth Quarter ........................ $ 41.77 $ 50.12
2012
First Quarter ......................... $ 42.16 $ 50.59
Second Quarter ........................ $ 42.55 $ 51.06
Third Quarter ......................... $ 42.95 $ 51.54
Fourth Quarter ........................ $ 43.35 $ 52.02
2013
First Quarter ......................... $ 43.75 $ 52.50
Second Quarter ........................ $ 44.16 $ 52.99
Third Quarter ......................... $ 44.57 $ 53.48
Fourth Quarter ........................ $ 44.99 $ 53.99
2014
First Quarter ......................... $ 45.41 $ 54.49
Second Quarter ........................ $ 45.83 $ 55.00
Third Quarter ......................... $ 46.26 $ 55.51
Fourth Quarter $ 46.69 $ 56.03
2015
First Quarter ......................... $ 47.13 $ 56.56
Second Quarter ........................ $ 47.57 $ 57.08
Third Quarter ......................... $ 48.01 $ 57.61
Fourth Quarter ........................ $ 48.46 $ 58.15
2016
First Quarter ......................... $ 48.91 $ 58.69
Second Quarter ........................ $ 49.37 $ 59.24
Third Quarter ......................... $ 49.83 $ 59.80
Fourth Quarter ........................ $ 50.29 $ 60.35
2017
First Quarter ......................... $ 50.76 $ 60.91
Second Quarter ........................ $ 51.24 $ 61.49
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Accreted
Conversion Conversion
Quarter Price Trigger Price
------------------------------------------ ------------ -------------
Third Quarter ......................... $ 51.72 $ 62.06
Fourth Quarter ........................ $ 52.20 $ 62.64
2018
First Quarter ......................... $ 52.68 $ 63.22
Second Quarter ........................ $ 53.18 $ 63.82
Third Quarter ......................... $ 53.67 $ 64.40
Fourth Quarter ........................ $ 54.17 $ 65.00
2019
First Quarter ......................... $ 54.68 $ 65.62
Second Quarter ........................ $ 55.19 $ 66.23
Third Quarter ......................... $ 55.70 $ 66.84
Fourth Quarter ........................ $ 56.22 $ 67.46
2020
First Quarter ......................... $ 56.75 $ 68.10
Second Quarter ........................ $ 57.28 $ 68.74
Third Quarter ......................... $ 57.81 $ 69.37
Fourth Quarter ........................ $ 58.35 $ 70.02
2021
First Quarter ......................... $ 58.90 $ 70.68
Second Quarter ........................ $ 59.45 $ 71.34
Third Quarter ......................... $ 60.00 $ 72.00
Fourth Quarter ........................ $ 60.56 $ 72.67
2022
First Quarter ......................... $ 61.13 $ 73.36
Second Quarter ........................ $ 61.70 $ 74.04
Third Quarter ......................... $ 62.27 $ 74.72
Fourth Quarter ........................ $ 62.85 $ 75.42
2023
First Quarter ........................... $ 63.44 $ 76.13
Second Quarter .......................... $ 64.03 $ 76.84
Third Quarter ........................... $ 64.63 $ 77.56
Conversion Based on Trading Price of Convertible Subordinated Notes.
Subject to the provisions of this paragraph 9 and notwithstanding the fact that
any other condition to conversion described below has not been satisfied,
Holders may convert the Convertible Subordinated Notes into Common Stock during
each of the five business day periods after any ten consecutive trading day
period in which the Trading Price per $1,000 Original Principal Amount of the
Convertible Subordinated Notes for each day of such ten day period was less than
98% of the product of the Closing Sale Price on the applicable date and the
number of shares of Common Stock issuable upon conversion of $1,000 Original
Principal Amount of the Convertible Subordinated Notes. Upon conversion, the
Company has the right to deliver cash or a combination of cash and Common Stock.
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The "Trading Price" means, on any date, the average of the secondary market
bid quotations for the Convertible Subordinated Notes obtained by the Trustee
for $10,000,000 Original Principal Amount of Convertible Subordinated Notes at
approximately 3:30 p.m., New York City time, on such date from three independent
nationally recognized securities dealers selected by the Company; provided that
if at least three such bids cannot reasonably be obtained by the Trustee, but
two bids are obtained, then the average of the two bids shall be used, and if
only one such bid can reasonably be obtained by the Trustee, one bid shall be
used; and provided further that if the Trustee cannot reasonably obtain at least
one bid for $10,000,000 Original Principal Amount of Convertible Subordinated
Notes from a nationally recognized securities dealer or in the Company's
reasonable judgment, the bid quotations are not indicative of the secondary
market value of the Convertible Subordinated Notes, then the Trading Price per
$1,000 Original Principal Amount of Convertible Subordinated Notes shall be
deemed to be less than 98% of the product of (a) the number of shares of Common
Stock issuable upon conversion of $1,000 Original Principal Amount of
Convertible Subordinated Notes and (b) the Closing Sale Price on such date.
The Trustee (or other conversion agent appointed by the Company) shall have
no obligation to determine the Trading Price unless the Company has requested
such a determination; and the Company shall have no obligation to make such
request unless a holder provides it with reasonable evidence that the Trading
Price per $1,000 Original Principal Amount of Convertible Subordinated Notes
would be less than 98% of the product of the Closing Sale Price of Common Stock
and the number of shares of Common Stock issuable upon conversion of $1,000
Original Principal Amount of Convertible Subordinated Notes. If such evidence is
provided, the Company shall instruct the Trustee (or other conversion agent) to
determine the Trading Price of the Convertible Subordinated Notes beginning on
the next trading day and on each successive trading day until the Trading Price
per $1,000 Original Principal Amount of Convertible Subordinated Notes is
greater than 98% of the product of the Closing Sale Price and the number of
shares issuable upon conversion of $1,000 Original Principal Amount of the
Convertible Subordinated Notes.
Conversion upon Redemption. Subject to the provisions of this paragraph 9
and notwithstanding the fact that any other condition described herein to
conversion has not been satisfied, a holder may convert into Common Stock a
Convertible Subordinated Note or portion of a Convertible Subordinated Note
which has been called for redemption pursuant to paragraph 6 hereof, provided
such Convertible Subordinated Notes are surrendered for conversion prior to the
close of business on the business day immediately preceding the Redemption Date.
Conversion Upon Occurrence of Certain Corporate Transactions. (a) Subject
to the provisions of this paragraph 9 and notwithstanding the fact that any
other condition described herein to conversion has not been satisfied, in the
event the Company is a party to a consolidation, merger or binding share
exchange or a transfer of all or substantially all of the Company's assets
pursuant to which the Common Stock would be converted into cash, securities or
other property as set forth in Section 12.14 of the Indenture, the Convertible
Subordinated Notes may be surrendered for conversion at any time from and after
the date which is 15 days prior to the date announced by the Company as the
anticipated effective time until 15 days after the actual effective date of such
transaction, and at the effective time of such transaction the right to convert
a Convertible Subordinated Note into Common Stock will be deemed to have changed
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into a right to convert it into the kind and amount of cash, securities or other
assets of the Company or another person which the holder would have received if
the holder had converted its Convertible Subordinated Note into Common Stock
immediately prior to the transaction. If such transaction also constitutes a
Designated Event, a holder will be able to require the Company to purchase all
or a portion of such holder's Convertible Subordinated Notes pursuant to
Paragraph 7 and Section 3.10 of the Indenture.
(b) Subject to the provisions of this paragraph 9 and notwithstanding the
fact that any other condition to conversion has not been satisfied, in the event
that the Company declares a dividend or distribution described in Section
12.06(b) of the Indenture, or a dividend or a distribution described in Section
12.06(c) of the Indenture where, the fair market value, per share, of such
dividend or distribution per share of Common Stock, as determined in the
Indenture, exceeds 10% of the Closing Sale Price of the Common Stock on the
business day immediately preceding the date of declaration for such dividend or
distribution or a Designated Event occurs other than pursuant to a transaction
described in clause (a) hereof, the Convertible Subordinated Notes may be
surrendered for conversion beginning on the date the Company gives notice to the
holders of such right, which shall not be less than 20 days prior to the
Ex-Dividend Date for such dividend or distribution or which shall be within 20
days of the occurrence of such Designated Event, as the case may be, and
Convertible Subordinated Notes may be surrendered for conversion at any time
thereafter until the earlier of the close of business on the business day prior
to the Ex-Dividend Date or until the Company announces that such dividend or
distribution will not take place, with respect to a dividend or distribution, or
within 30 days of such Designated Event notice, in the case of such a Designated
Event. No adjustment to the Conversion Rate or the ability of the holders to
convert this Convertible Subordinated Note will be made if the Company provides,
as permitted in the Indenture, for holders to participate in the transaction
without conversion or in other cases specified in the Indenture.
A Convertible Subordinated Note in respect of which a holder has delivered
a Repurchase Notice or notice of a Designated Event exercising the option of
such holder to require the Company to purchase such Convertible Subordinated
Note may be converted only if such notice of exercise is withdrawn in accordance
with the terms of the Indenture.
The initial Conversion Rate is 25 shares of Common Stock per $1,000
Original Principal Amount of each Convertible Subordinated Note, subject to
adjustment for certain events described in the Indenture. The Company will
deliver cash or a check in lieu of any fractional share of Common Stock. The
ability to surrender Convertible Subordinated Notes for conversion will expire
at the close of business on July 31, 2023.
In the event the Company exercises its option pursuant to Section 4.10 of
the Indenture to have, in lieu of having the Accreted Principal Amount increase,
interest accrue on the Convertible Subordinated Note following a Tax Event, the
holder will be entitled on conversion to receive the same number of shares of
Common Stock such holder would have received if the Company had not exercised
such option.
Increases in the Accreted Principal Amount and cash interest (including
Contingent Interest, if any, and interest payable upon the occurrence of a Tax
Event, if any) will not be paid on Convertible Subordinated Notes that are
converted, except accrued cash interest will be
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payable upon conversion of Convertible Subordinated Notes made concurrently with
or after acceleration of Convertible Subordinated Notes following an Event of
Default. Convertible Subordinated Notes surrendered for conversion during the
period from the close of business on any Regular Record Date next preceding any
Interest Payment Date to the opening of business on such Interest Payment Date
shall be entitled to receive such interest payable on such Convertible
Subordinated Notes on the corresponding Interest Payment Date and, except
Convertible Subordinated Notes to be redeemed within this period, Convertible
Subordinated Notes surrendered for conversion during such periods must be
accompanied by payment of an amount equal to the interest, including Contingent
Interest, with respect thereto that the registered holder is to receive.
To exercise its conversion right, a holder must (1) complete and manually
sign the conversion notice (or complete and manually sign a facsimile of such
notice) and deliver such notice to the Conversion Agent, (2) surrender the
Convertible Subordinated Note to the Conversion Agent, (3) furnish appropriate
endorsements and transfer documents if required by the Conversion Agent, the
Company or the Trustee and (4) pay any transfer or similar taxes, if required.
A holder may convert a portion of a Convertible Subordinated Note if the
Original Principal Amount of such portion is $1,000 or an integral multiple of
$1,000. No payment or adjustment will be made for dividends on the Common Stock
except as provided in the Indenture. On conversion of a Convertible Subordinated
Note, increases in the Accreted Principal Amount or cash interest (or interest
if the Company has exercised its option provided for in paragraph 11 hereof)
attributable to the period from the Issue Date (or, if the Company has exercised
the option referred to in paragraph 11 hereof, the later of (x) the date of such
exercise and (y) the date on which interest was last paid) through the
Conversion Date shall not be cancelled, extinguished or forfeited, but rather
shall be deemed to be paid in full to the holder thereof through the delivery of
the Common Stock (together with the cash payment, if any, in lieu of fractional
shares) in exchange for the Convertible Subordinated Note being converted
pursuant to the terms hereof; and the fair market value of such shares of Common
Stock (together with any such cash payment in lieu of fractional shares) shall
be treated as issued, to the extent thereof, first in exchange for increases in
the Accreted Principal Amount or cash interest (or interest, if the Company has
exercised its option provided for in paragraph 11 hereof) accrued through the
Conversion Date, and the balance, if any, of such fair market value of such
Common Stock (and any such cash payment) shall be treated as issued in exchange
for the Issue Price of the Convertible Subordinated Note being converted
pursuant to the provisions hereof.
The Conversion Rate will be adjusted for dividends or distributions on
Common Stock payable in Common Stock or other Capital Stock of the Company;
subdivisions, combinations or certain reclassifications of Common Stock;
distributions to all holders of Common Stock of certain rights to purchase
Common Stock for a period expiring within 60 days of the record date for such
distribution at less than the current market price of the Common Stock at the
time of the announcement of the distribution, distributions to such holders of
assets or debt securities of the Company or certain rights to purchase
securities of the Company (including cash dividends or distributions) and
payments in respect of a tender offer or exchange offer for Common Stock to the
extent that the cash and value of any other consideration included in the
payment per share of Common Stock exceed the current market price per share of
Common Stock on the trading day
A-16
next succeeding the last date on which tenders or exchanges may be made pursuant
to such tender or exchange offer. However, no adjustment need be made if
Convertible Subordinated Note holders may participate in the transaction or in
certain other cases. The Company from time to time may voluntarily increase the
Conversion Rate.
If the Company is a party to a consolidation, merger or binding share
exchange or a transfer of all or substantially all of its assets, or upon
certain distributions described in the Indenture, the right to convert a
Convertible Subordinated Note into Common Stock may be changed into a right to
convert it into securities, cash or other assets of the Company or another
person.
The Conversion Rate will not be adjusted for increases in the Accreted
Principal Amount or accrued cash interest, Contingent Interest or Liquidated
Damages, if any.
If a holder elects to convert all or a portion of a Convertible
Subordinated Note into shares of Common Stock as set forth above, the Company
may choose to satisfy all or any portion of its Conversion Obligation in cash as
set forth in Section 12.20 of the Indenture.
10. Conversion Arrangement on Call for Redemption.
Any Convertible Subordinated Notes called for redemption, unless
surrendered for conversion before the close of business on the Redemption Date,
may be deemed to be purchased from the holders of such Convertible Subordinated
Notes at an amount not less than the Redemption Price, by one or more investment
bankers or other purchasers who may agree with the Company to purchase such
Convertible Subordinated Notes from the holders, to convert them into Common
Stock of the Company and to make payment for such Convertible Subordinated Notes
to the Trustee in trust for such holders.
11. Tax Event.
From and after the date (the "Tax Event Date") of the occurrence of a Tax
Event after July 31, 2010, the Company shall have the option to elect, in lieu
of having Accreted Principal Amount increase, to have interest accrue and be
paid in cash at the rate of 3.75% per annum, on a Restated Principal Amount, per
$1,000 Original Principal Amount (the "Restated Principal Amount") equal to the
accrued Accreted Principal Amount through the Tax Event Date or the date the
Company exercises the option provided for in this paragraph 11, whichever is
later (the "Option Exercise Date"). Such interest shall be payable semiannually
on February 1 and August 1 of each year to Holders of record at the close of
business on January 15 and July 15 immediately preceding such interest payment
date. Interest will accrue from the most recent date on which interest has been
paid or, if no interest has been paid, from the Option Exercise Date.
The Trustee shall notify holders of Convertible Subordinated Notes within
15 days after the Option Exercise Date that the Company has exercised the option
provided for in this paragraph 11.
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12. Defaulted Interest.
Except as otherwise specified with respect to the Convertible Subordinated
Notes, any defaulted interest on any Convertible Subordinated Note shall
forthwith cease to be payable to the registered holder thereof on the relevant
Regular Record Date or accrual date, as the case may be, by virtue of having
been such holder, and such defaulted interest may be paid by the Company as
provided for in Section 2.12 of the Indenture.
13. Denominations; Transfer; Exchange.
The Convertible Subordinated Notes are in fully registered form, without
coupons, in denominations of $1,000 of Original Principal Amount and integral
multiples of $1,000. A holder may transfer or exchange Convertible Subordinated
Notes in accordance with 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 transfer or exchange any Convertible Subordinated Notes
selected for redemption (except, in the case of a Convertible Subordinated Note
to be redeemed in part, the portion of the Convertible Subordinated Note not to
be redeemed) or any Convertible Subordinated Notes in respect of which a
Repurchase Notice or Designated Event notice has been given and not withdrawn
(except, in the case of a Convertible Subordinated Note to be purchased in part,
the portion of the Convertible Subordinated Note not to be purchased) or any
Convertible Subordinated Notes for a period of 15 days before the mailing of a
notice of redemption of Convertible Subordinated Notes to be redeemed.
14. Persons Deemed Owners.
The registered holder of this Convertible Subordinated Note may be treated
as the owner of this Convertible Subordinated Note for all purposes.
15. Unclaimed Money or Securities.
The Trustee and the Paying Agent shall return to the Company, upon written
request any money or securities held by them for the payment of any amount with
respect to the Convertible Subordinated Notes that remains unclaimed for two
years, subject to applicable unclaimed property laws. After return to the
Company holders entitled to the money or securities must look to the Company for
payment as general creditors unless an applicable abandoned property law
designates another person.
16. Amendment; Waiver.
Subject to certain exceptions, the Indenture or the Convertible
Subordinated Notes may be amended or supplemented with the consent of the
holders of at least a majority in principal amount of the then outstanding
Convertible Subordinated Notes, and any existing default may be waived with the
consent of the holders of a majority in aggregate Accreted Principal Amount of
the then outstanding Convertible Subordinated Notes.
Without the consent of any holder, the Indenture or the Convertible
Subordinated Notes may be amended to: (a) cure any ambiguity or correct or
supplement any defective or
A-18
inconsistent provision contained in the Indenture, or make any other changes in
the provisions of the Indenture which the Company and the Trustee may deem
necessary or desirable provided such amendment does not materially and adversely
affect the legal rights under the Indenture of the holders of Convertible
Subordinated Notes; (b) provide for uncertificated Convertible Subordinated
Notes in addition to or in place of certificated Convertible Subordinated Notes;
(c) evidence the succession of another person to the Company and providing for
the assumption by such successor of the covenants and obligations of the Company
thereunder and in the Convertible Subordinated Notes as permitted by Section
5.01 of the Indenture; (d) provide for conversion rights and/or repurchase
rights of holders of Convertible Subordinated Notes in the event of
consolidation, merger, share exchange or sale of all or substantially all of the
assets of the Company as required to comply with Sections 5.01 and/or 12.14 of
the Indenture; (e) increase the Conversion Rate; (f) evidence and provide for
the acceptance of the appointment under the Indenture of a successor Trustee;
(g) make any change that would provide any additional rights or benefits to the
holders of Convertible Subordinated Notes or that does not adversely affect the
legal rights under the Indenture of any such holder; or (h) comply with the
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the TIA.
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Convertible Subordinated Notes held by a non-consenting
holder): (a) reduce the principal amount of Convertible Subordinated Notes whose
holders must consent to an amendment, supplement or waiver; (b) reduce the
principal of, or premium on, or change the fixed maturity of any Convertible
Subordinated Note or, except as permitted pursuant to clause (a), (d), (g) or
(h) of the immediately preceding paragraph, alter the provisions with respect to
the redemption or repurchase of the Convertible Subordinated Notes; (c) reduce
the rate of or change the time for payment of interest, including contingent
interest, defaulted interest, or Liquidated Damages on any Convertible
Subordinated Notes; (d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest (including Contingent Interest, if
any) or Liquidated Damages, if any, on the Convertible Subordinated Notes
(except a rescission of acceleration of the Convertible Subordinated Notes by
the holders of at least a majority in aggregate Accreted Principal Amount of the
Convertible Subordinated Notes and a waiver of the payment default that resulted
from such acceleration); (e) make the principal of, or premium, if any, or
interest (including Contingent Interest, if any) or Liquidated Damages, if any,
on, any Convertible Subordinated Note payable in money other than as provided
for in the Indenture and in the Convertible Subordinated Notes; (f) make any
change in the provisions of the Indenture relating to waivers of past Defaults
or the rights of holders of Convertible Subordinated Notes to receive payments
of principal of, premium, if any, or interest (including Contingent Interest, if
any) or Liquidated Damages, if any, on the Convertible Subordinated Notes; (g)
waive a redemption or repurchase payment with respect to any Convertible
Subordinated Note; (h) except as permitted by the Indenture (including Section
9.01(a)), decrease the Conversion Rate or modify the provisions of the Indenture
relating to conversion of the Convertible Subordinated Notes in a manner adverse
to the holders thereof or (i) make any change to the ability of holder of
Convertible Subordinated Notes to enforce their rights under the Indenture or
the provisions of clauses (a) through (i) of Section 9.02 of the Indenture. In
addition, any amendment to the provisions of Article 11 of the Indenture (which
relate to subordination) will require the consent of the holders of at least 75%
in aggregate Accreted Principal Amount of the
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Convertible Subordinated Notes then outstanding if such amendment would
adversely affect the rights of holders of Convertible Subordinated Notes.
17. Defaults and Remedies.
An Event of Default is: (a) default in payment of the principal of, or
premium, if any, on the Convertible Subordinated Notes, when due at maturity,
upon repurchase, upon acceleration or otherwise, whether or not such payment is
prohibited by the subordination provisions of the Indenture; (b) default for 30
days or more in payment of any installment of interest (including contingent
interest, if any) or Liquidated Damages, if any, on the Convertible Subordinated
Notes, whether or not such payment is prohibited by the subordination provisions
of the Indenture; (c) default by the Company for 60 days or more after notice as
provided in the Indenture in the observance or performance of any other
covenants in the Indenture; (d) default in the payment of the Designated Event
Payment in respect of the Convertible Subordinated Notes on the date therefor,
whether or not such payment is prohibited by the subordination provisions of the
Indenture; (e) failure to provide timely notice of a Designated Event; (f)
default under any credit agreement, mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Material
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Material Subsidiaries), whether such Indebtedness or guarantee exists on the
date of the Indenture or is created thereafter, which default (i) is caused by a
failure to pay when due any 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 (without such
acceleration being rescinded or annulled) and, in each case, the principal
amount of 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 $15,000,000 or more and such Payment
Default is not cured or such acceleration is not annulled within 30 days after
notice; or (g) failure by the Company or any Material Subsidiary of the Company
to pay final, non-appealable judgments (other than any judgment as to which a
reputable insurance company has accepted full liability) aggregating in excess
of $15,000,000, which judgments are not stayed, bonded or discharged within 60
days after their entry; or (h) certain events involving bankruptcy, insolvency
or reorganization of the Company or any Material Subsidiary. If an Event of
Default occurs and is continuing, the Trustee or the holders of at least 25% in
aggregate Accreted Principal Amount of the then outstanding Convertible
Subordinated Notes may declare the unpaid principal of, premium, if any, and
accrued and unpaid interest (including Contingent Interest, if any) and
Liquidated Damages, if any, on all Convertible Subordinated Notes then
outstanding to be due and payable immediately, except that in the case of an
Event of Default arising from certain events of bankruptcy, insolvency, or
reorganization with respect to the Company or any of its Material Subsidiaries,
all outstanding Convertible Subordinated Notes become due and payable without
further action or notice. Holders of Convertible Subordinated Notes may not
enforce the Indenture or the Convertible Subordinated Notes except as provided
in the Indenture. The Trustee may require an indemnity satisfactory to it before
it enforces the Indenture or the Convertible Subordinated Notes. Subject to
certain limitations, holders of a majority in principal amount of the then
outstanding Convertible Subordinated Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from holders notice of
any continuing default (except a default in payment
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of principal, premium, if any, or interest (including Contingent Interest, if
any) or Liquidated Damages, if applicable) if it determines that withholding
notice is in their interests. The Company must furnish annual compliance
certificates to the Trustee.
18. Registration Rights Agreement.
The holder of this Convertible Subordinated Note is entitled to the
benefits of a Registration Rights Agreement, dated July 18, 2003, between the
Company and the Initial Purchasers (the "Registration Rights Agreement").
Pursuant to the Registration Rights Agreement the Company has agreed for the
benefit of the holders of the Convertible Subordinated Notes and the Common
Stock issued and issuable upon conversion of the Convertible Subordinated Notes,
that (i) it will, at its cost, within 90 days after the Issue Date, file a shelf
registration statement (the "Shelf Registration Statement") with the Securities
and Exchange Commission (the "Commission") with respect to resales of the
Convertible Subordinated Notes and the Common Stock issuable upon conversion
thereof, (ii) the Company will use its reasonable best efforts to cause such
Shelf Registration Statement to be declared effective by the Commission under
the Securities Act within 180 days after the Issue Date and (iii) the Company
will use its reasonable best efforts to keep such Shelf Registration Statement
continuously effective under the Securities Act until the earliest of (a) the
second anniversary of the Issue Date or, if later, the second anniversary of the
last date on which any Convertible Subordinated Notes are issued upon exercise
of the Initial Purchasers' over-allotment option, (b) the date on which the
Convertible Subordinated Notes or the Common Stock issuable upon conversion
thereof may be sold to persons who are not "affiliates" (as defined in Rule 144)
of the Company pursuant to paragraph (k) of Rule 144 (or any successor
provision) promulgated by the Commission under the Securities Act, (c) the date
as of which the Convertible Subordinated Notes or the Common Stock issuable upon
conversion thereof have been transferred pursuant to Rule 144 under the
Securities Act (or any similar provision then in force) and (d) the date as of
which all the Convertible Subordinated Notes or the Common Stock issuable upon
conversion thereof have been sold pursuant to such Shelf Registration Statement.
If the Shelf Registration Statement (i) is not filed with the Commission on
or prior to 90 days, or has not been declared effective by the Commission within
180 days, after the Issue Date or (ii) is filed and declared effective but shall
thereafter cease to be effective (without being succeeded immediately by a
replacement shelf registration statement filed and declared effective) or cease
to be usable (including, without limitation, as a result of a Suspension Period
as defined below) for the offer and sale of Transfer Restricted Securities (as
defined below) for a period of time (including any Suspension Period) which
shall exceed 60 days in the aggregate in any 12-month period during the period
beginning on the Issue Date and ending on the second anniversary of the Issue
Date or, if later, the second anniversary of the last date on which any
Convertible Subordinated Notes are issued upon exercise of the Initial
Purchasers' over-allotment option (each such event referred to in clauses (i)
and (ii) being referred to herein as a "Registration Default"), the Company will
pay liquidated damages ("Liquidated Damages") to each holder of Transfer
Restricted Securities which has complied with its obligations under the
Registration Rights Agreement. The amount of Liquidated Damages payable during
any period in which a Registration Default shall have occurred and be continuing
is that amount which is equal to one-quarter of one percent (25 basis points)
per annum per $1,000 principal amount of Securities and $2.50 per annum per 25
shares of Common Stock (subject to adjustment from
A-21
time to time in the event of a stock split, stock recombination, stock dividend
and the like) constituting Transfer Restricted Securities for the first 90 days
during which a Registration Default has occurred and is continuing and one-half
of one percent (50 basis points) per annum per $1,000 principal amount of
Securities and $5.00 per annum per 25 shares of Common Stock (subject to
adjustment as set forth above) constituting Transfer Restricted Securities for
any additional days during which such Registration Default has occurred and is
continuing. The Company will pay all accrued Liquidated Damages by wire transfer
of immediately available funds or by federal funds check on each Damages Payment
Date (as defined in the Registration Rights Agreement), and Liquidated Damages
will be calculated on the basis of a 360-day year consisting of twelve 30-day
months. Following the cure of a Registration Default, Liquidated Damages will
cease to accrue with respect to such Registration Default.
"Transfer Restricted Securities" means each Convertible Subordinated Note
and each share of Common Stock issued on conversion thereof until the date on
which such Convertible Subordinated Note or share, as the case may be, (i) has
been transferred pursuant to the Shelf Registration Statement or another
registration statement covering such Convertible Subordinated Note or share
which has been filed with the Commission pursuant to the Securities Act, in
either case after such registration statement has become and while such
registration statement is effective under the Securities Act, (ii) has been
transferred pursuant to Rule 144 under the Securities Act (or any similar
provision then in force), or (iii) may be sold or transferred pursuant to Rule
144(k) under the Securities Act (or any similar provision then in force).
Pursuant to the Registration Rights Agreement, the Company may suspend the
use of the prospectus which is a part of the Shelf Registration Statement for a
period not to exceed 30 days in any three-month period or for three periods not
to exceed an aggregate of 60 days in any twelve-month period under certain
circumstances (each, a "Suspension Period"); provided that the existence of a
Suspension Period will not prevent the occurrence of a Registration Default or
otherwise limit the obligation of the Company to pay Liquidated Damages.
The above description of certain provisions of the Registration Rights
Agreement is qualified by reference to, and is subject in its entirety to, the
more complete description thereof contained in the Registration Rights
Agreement.
19. Trustee Dealings with the Company.
Subject to certain limitations imposed by the TIA, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Convertible Subordinated Notes and may otherwise deal with and
collect obligations owed to it by the Company or its Affiliates and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not Trustee.
20. No Recourse Against Others.
A director, officer, employee, agent, representative, stockholder or equity
holder, as such, of the Company shall not have any liability for any obligations
of the Company under the Convertible Subordinated Notes or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Convertible Subordinated Note, each
A-22
Convertible Subordinated Note holder shall waive and release all such liability.
The waiver and release shall be part of the consideration for the issue of the
Convertible Subordinated Notes.
21. Authentication.
This Convertible Subordinated Note shall not be valid until an authorized
signatory of the Trustee manually signs the Trustee's Certificate of
Authentication on the other side of this Convertible Subordinated Note.
22. Abbreviations.
Customary abbreviations may be used in the name of a Convertible
Subordinated Note 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 Gift to Minors Act).
23. GOVERNING LAW.
THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THIS
CONVERTIBLE SUBORDINATED NOTE.
----------
A-23
The Company will furnish to any Convertible Subordinated Note holder upon
written request and without charge a copy of the Indenture that has in it the
text of this Convertible Subordinated Note in larger type. Requests may be made
to:
School Specialty, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
A-24
ASSIGNMENT FORM CONVERSION NOTICE
To assign this Convertible Subordinated To convert this Convertible
Note, fill in the form below: Subordinated Note into Common Stock
of the Company, check the box: [ ]
I or we assign and transfer this
Convertible Subordinated Note to:
_______________________________________ To convert only part of this
Convertible Subordinated Note, state
_______________________________________ the Original Principal Amount to be
converted (which must be $1,000 or an
(Insert assignee's soc. sec. or tax integral multiple of $1,000):
ID no.)
_______________________________________ $____________________________________
_______________________________________ If you want the stock certificate
made out in another person's name,
_______________________________________ fill in the form below:
(Print or type assignee's name, address _____________________________________
and zip code) _____________________________________
(Insert other person's soc. sec. or
tax ID no.)
and irrevocably appoint
_______________________________agent to _____________________________________
transfer this Convertible Subordinated
Note on the books of the Company. The _____________________________________
agent may substitute another to act for
him.
_____________________________________
_____________________________________
(Print or type other person's name,
address and zip code)
_____________________________________
_______________________________________
Date: Your Signature:
---------------------------------- ----------------------
--------------------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Convertible
Subordinated Note)
A-25
OPTION OF HOLDER TO ELECT REPURCHASE
If you wish to have this Convertible Subordinated Note repurchased by the
Company pursuant to Section 3.09 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Convertible Subordinated Note
purchased by the Company pursuant to Section 3.09 of the Indenture, state the
amount (in multiples of $1,000): $_____.
Date: Your Signature:
----------------------- --------------------------------
(Sign exactly as your name appears on the
other side of this Convertible
Subordinated Note)
Medallion Signature Guarantee:
--------------------------------------------------
A-26
EXHIBIT B
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
OF RESTRICTED COMMON STOCK
(Transfers pursuant to Section 12.19(c) of the Indenture)
[NAME AND ADDRESS OF COMMON STOCK TRANSFER AGENT]
Re: School Specialty, Inc. 3.75% Convertible Subordinated Notes
due 2023 (the "Convertible Subordinated Notes")
Reference is hereby made to the Indenture dated as of July 18, 2003 (the
"Indenture") between School Specialty, Inc. and BNY Midwest Trust Company, as
Trustee. Capitalized terms used but not defined herein shall have the meanings
given them in the Indenture.
This letter relates to _________ shares of Common Stock represented by the
accompanying certificate(s) that were issued upon conversion of Convertible
Subordinated Notes and which are held in the name of [name of transferor] (the
"Transferor") to effect the transfer of such Common Stock.
In connection with the transfer of such shares of Common Stock, the
undersigned confirms that such shares of Common Stock are being transferred:
CHECK ONE BOX BELOW
(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) [ ] pursuant to an exemption from registration under the Securities
Act of 1933 provided by Rule 144 thereunder.
B-1
Unless one of the boxes is checked, the transfer agent will refuse to
register any of the Common Stock evidenced by this certificate in the name of
any person other than the registered holder thereof; provided, however, that if
box (3) or (4) is checked, the transfer agent may require, prior to registering
any such transfer of the Common Stock such certifications and other information,
and if box (4) is checked such legal opinions, as the Company has reasonably
requested in writing, by delivery to the transfer agent of a standing letter of
instruction, 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.
[Name of Transferor],
By
-------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Dated:
B-2
EXHIBIT C
PROJECTED PAYMENT SCHEDULE
--------------------------------------------------------------------------------
Projected
Date Payments
--------------------------------------------------------------------------------
July 1, 2003 --
--------------------------------------------------------------------------------
February 1, 2004 $ 20.10
--------------------------------------------------------------------------------
July 1, 2004 $ 18.75
--------------------------------------------------------------------------------
February 1, 2005 $ 18.75
--------------------------------------------------------------------------------
July 1, 2005 $ 18.75
--------------------------------------------------------------------------------
February 1, 2006 $ 18.75
--------------------------------------------------------------------------------
July 1, 2006 $ 18.75
--------------------------------------------------------------------------------
February 1, 2007 $ 18.75
--------------------------------------------------------------------------------
July 1, 2007 $ 18.75
--------------------------------------------------------------------------------
February 1, 2008 $ 18.75
--------------------------------------------------------------------------------
July 1, 2008 $ 18.75
--------------------------------------------------------------------------------
February 1, 2009 $ 18.75
--------------------------------------------------------------------------------
July 1, 2009 $ 18.75
--------------------------------------------------------------------------------
February 1, 2010 $ 18.75
--------------------------------------------------------------------------------
July 1, 2010 $ 23.75
--------------------------------------------------------------------------------
February 1, 2011 $ 5.00
--------------------------------------------------------------------------------
July 1, 2011 $ 5.00
--------------------------------------------------------------------------------
February 1, 2012 $ 5.00
--------------------------------------------------------------------------------
July 1, 2012 $ 5.00
--------------------------------------------------------------------------------
February 1, 2013 $ 5.00
--------------------------------------------------------------------------------
July 1, 2013 $ 5.00
--------------------------------------------------------------------------------
February 1, 2014 $ 5.00
--------------------------------------------------------------------------------
July 1, 2014 $ 5.00
--------------------------------------------------------------------------------
February 1, 2015 $ 5.00
--------------------------------------------------------------------------------
July 1, 2015 $ 5.00
--------------------------------------------------------------------------------
February 1, 2016 $ 5.00
--------------------------------------------------------------------------------
July 1, 2016 $ 5.00
--------------------------------------------------------------------------------
February 1, 2017 $ 5.00
--------------------------------------------------------------------------------
July 1, 2017 $ 5.00
--------------------------------------------------------------------------------
February 1, 2018 $ 5.00
--------------------------------------------------------------------------------
July 1, 2018 $ 5.00
--------------------------------------------------------------------------------
February 1, 2019 $ 5.00
--------------------------------------------------------------------------------
July 1, 2019 $ 5.00
--------------------------------------------------------------------------------
February 1, 2020 $ 5.00
--------------------------------------------------------------------------------
July 1, 2020 $ 5.00
--------------------------------------------------------------------------------
February 1, 2021 $ 5.00
--------------------------------------------------------------------------------
July 1, 2021 $ 5.00
--------------------------------------------------------------------------------
February 1, 2022 $ 5.00
--------------------------------------------------------------------------------
July 1, 2022 $ 5.00
--------------------------------------------------------------------------------
February 1, 2023 $ 5.00
--------------------------------------------------------------------------------
July 1, 2023 $ 3,627.08
--------------------------------------------------------------------------------
C-1