<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 28, 1999
REGISTRATION NO. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------------
AMERITRADE HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 47-0642657
(State of incorporation) (I.R.S. Employer Identification No.)
YVONNE M. KISIEL
4211 SOUTH 102ND STREET AMERITRADE HOLDING CORPORATION
OMAHA, NEBRASKA 68127 4211 SOUTH 102ND STREET
(402) 331-7856 OMAHA, NEBRASKA 68127
(Address, including zip code, and telephone (402) 331-7856
number, including area code, of (Name, address, including zip code, and telephone
registrant's principal executive offices) number, including area code, of agent for service)
</TABLE>
Copies to:
CAROL S. RIVERS, ESQ.
MAYER, BROWN & PLATT
190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60603
(312) 782-0600
----------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: From
time to time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===========================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNTS OFFERING AGGREGATE AMOUNT OF
TO BE PRICE PER OFFERING REGISTRATION
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED UNIT PRICE FEE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5.75% Convertible Subordinated Notes due August 1,
2004........................................... $200,000,000 100% $200,000,000 $55,600
Class A common stock, par value $.01 per share... 6,142,470(1) (2) (2) (2)
===========================================================================================================
</TABLE>
(1) This number represents the number of shares of Class A common stock that are
initially issuable upon conversion of the 5.75% Convertible Subordinated
Notes due August 1, 2004 registered hereby. Pursuant to Rule 416 under the
Securities Act of 1933, as amended, the amount to be registered also
includes an indeterminate number of shares of Class A common stock issuable
as a result of stock splits, stock dividends and antidilution provisions.
(2) No additional consideration will be received for the Class A common stock,
and, therefore, no registration fee is required pursuant to Rule 457(i).
----------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
===============================================================================
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject to Completion. Dated September 28, 1999.
$200,000,000
AMERITRADE HOLDING CORPORATION
[AMERITRADE HOLDING CORPORATION LOGO]
5.75% Convertible Subordinated Notes due August 1, 2004
6,142,470 Shares of Class A Common Stock issuable
upon conversion of the Notes
----------------------
Holders of our 5.75% Convertible Subordinated Notes due August 1, 2004 may
offer for sale the notes and the shares of our Class A common stock into which
the notes are convertible at any time at market prices prevailing at the time of
sale or at privately negotiated prices. The selling holders may sell the notes
or the Class A common stock directly to purchasers or through underwriters,
broker-dealers or agents, who may receive compensation in the form of discounts,
concessions or commissions. We will not receive any of the proceeds from the
sale of the notes or shares by the selling holders.
The holders of the notes may convert the notes into shares of Class A
common stock at any time prior to the close of business on the maturity date of
the notes, unless previously redeemed or repurchased, at a conversion rate of
30.7137 shares per $1,000 principal amount of notes (equivalent to an
approximate conversion price of $32.56 per share), subject to adjustment in
certain events. See "Description of Notes -- Conversion Rights".
Interest on the notes is payable on February 1 and August 1 of each year,
commencing on February 1, 2000. The notes will not be subject to redemption
prior to August 6, 2002, and we may, at our option, redeem the notes on or after
such date, in whole or in part, upon not less than 30 days nor more than 60 days
notice to each holder, at the redemption prices set forth herein, plus accrued
interest, if any, to the redemption date. See "Description of Notes -- Optional
Redemption". The notes are not entitled to any sinking fund. The notes will
mature on August 1, 2004.
In the event of a Change in Control (as defined herein), each holder of
notes may require us to repurchase its notes, in whole or in part, for cash or,
at our option, Class A common stock (valued at 95% of the average closing bid
prices for the five trading days immediately preceding and including the third
trading day prior to the repurchase date) at a repurchase price of 100% of the
principal amount of notes to be repurchased plus accrued interest to the
repurchase date. See "Description of Notes -- Repurchase at Option of Holders
Upon a Change in Control".
The notes are our unsecured obligations, subordinated in right of payment
to all of our existing and future Senior Indebtedness (as defined herein) and
effectively subordinated in right of payment to all indebtedness and other
liabilities of our subsidiaries. See "Description of Notes -- Subordination".
The Class A common stock is quoted on The Nasdaq National Market under the
symbol "AMTD". The last reported bid price of the Class A common stock on
September , 1999 was $ per share.
The notes are currently eligible for trading on the PORTAL Market of the
Nasdaq Stock Market.
Our Class B common stock, which is not being offered, is entitled to elect
a majority of our board of directors. The Class A common stock is entitled to
elect the remaining directors. See "Description of Capital Stock".
See "RISK FACTORS" beginning on page 8 to read about factors you should
consider before buying the notes or shares of the Class A common stock.
----------------------
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the accuracy
or adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
----------------------
Prospectus dated September , 1999.
<PAGE> 3
SUMMARY
The following summary highlights selected information from this prospectus
and the documents incorporated by reference in this prospectus. It does not
contain all of the information that is important to you. You should carefully
read this entire prospectus and the documents incorporated by reference in this
prospectus before making an investment in the 5.75% Convertible Subordinated
Notes due August 1, 2004 (the "Notes") or the Class A common stock. The terms
"we", "us" and "our" as used in this prospectus refer to Ameritrade Holding
Corporation ("Holding") and its operating subsidiaries Ameritrade (Inc.)
("Ameritrade"), Accutrade, Inc. ("Accutrade"), Advanced Clearing, Inc.
("Advanced Clearing"), AmeriVest, Inc. ("AmeriVest") and OnMoney Financial
Services Corporation ("OnMoney"), collectively. Our fiscal year ends on the last
Friday of each September. Unless otherwise indicated, dollar amounts have been
rounded to the nearest one hundred thousand.
OUR COMPANY
We are a leading provider of online discount brokerage services. We provide
technology-based brokerage services to retail investors through a variety of
mediums, primarily through the Internet. Our services appeal to a broad market
of self-directed retail investors who are value conscious. We use our low-cost
platform to offer brokerage services to investors at prices that are
significantly lower than prices offered by our major competitors. Our goal is to
provide the best execution using the best information at the best value.
We are an innovator in electronic brokerage services. We were the first
brokerage firm to offer touch-tone trading in 1988 and the first to offer
trading over the Internet in 1994. In 1997, we embarked upon an aggressive
marketing campaign to build awareness of the Ameritrade brand and to attract
investors to online trading. At the same time, we introduced our "8 bucks a
trade" program and set a price standard among major online discount brokerage
firms that remains in place today.
BUSINESS OPERATIONS
Following is a summary of our operating subsidiaries:
- AMERITRADE, our principal operating subsidiary, provides retail brokerage
services targeted at value conscious investors who trade primarily
through the Internet. Ameritrade offers a full range of trading services
and focuses on providing a compelling price point and value to retail
customers. In addition to the Internet, Ameritrade provides access to its
services through automated touch-tone telephone systems, personal digital
assistants and registered representatives. Ameritrade customers can
invest in common and preferred stocks, mutual funds, options, corporate
and municipal bonds, treasury obligations and other securities.
Ameritrade also offers a wide range of informational services and
educational tools to its customers.
- ACCUTRADE also offers retail brokerage services, targeting investors who
desire a higher degree of personalized customer service.
- ADVANCED CLEARING provides clearing and execution services to Ameritrade
and Accutrade, as well as to independent broker-dealers and other
correspondents.
- AMERIVEST provides wholesale discount brokerage services to depository
institutions, including banks, savings and loans and credit unions.
In addition, we are developing an Internet-based personal financial
management system for individual investors through our OnMoney subsidiary.
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BUSINESS STRATEGY
Our business strategy is to capitalize on the growth of the online
brokerage industry. The key elements of our business strategy are as follows:
- Establish Ameritrade as the dominant brand in online trading;
- Focus on online discount brokerage services;
- Expand our capacity and infrastructure to meet expected increases in
trading volume;
- Continue to offer innovative technologies and service enhancements to our
customers;
- Be the lowest cost provider of quality brokerage services; and
- Expand our access to international customers.
Our principal executive offices are located at 4211 South 102nd Street,
Omaha, Nebraska 68127, and our telephone number is (402) 331-7856.
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SUMMARY OF THE SECURITIES
THE NOTES
Interest................................ Interest on the Notes is payable
semi-annually on February 1 and
August 1 of each year, commencing
on February 1, 2000.
Conversion.............................. The Notes are convertible at the
option of the holder into shares of
Class A common stock at a
conversion rate of 30.7137 shares
of Class A common stock per $1,000
principal amount of Notes
(equivalent to an approximate
conversion price of $32.56 per
share), subject to adjustment in
certain events.
The Notes are convertible at any
time prior to the close of business
on the maturity date, unless
previously redeemed or repurchased,
at the conversion rate set forth
above. Holders of Notes called for
redemption or repurchase will be
entitled to convert the Notes up to
and including, but not after, the
business day immediately before the
date fixed for redemption or
repurchase, as the case may be. See
"Description of Notes -- Conversion
Rights".
Subordination........................... The Notes are subordinated to
present and future Senior
Indebtedness (as defined herein) of
Holding. The Notes are also
effectively subordinated in right
of payment to all indebtedness and
other liabilities of our
subsidiaries. The Indenture (as
defined herein) does not restrict
the incurrence of Senior
Indebtedness by Holding or
indebtedness or other liabilities
by any of our subsidiaries. See
"Description of Notes --
Subordination".
Global Note; Book-Entry System.......... The Notes were issued only in fully
registered form without coupons and
in minimum denominations of $1,000.
The Notes are evidenced by a global
note in fully registered form and
without coupons, deposited with the
Trustee (as defined herein) as
custodian for the Depository Trust
Corporation ("DTC"). Beneficial
interests in the global note will
be shown on, and transfers thereof
will be effected only through,
records maintained by DTC and its
participants and indirect
participants. See
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"Description of Notes -- Global
Note; Book-Entry System".
Optional Redemption..................... The Notes will not be subject to
redemption at the option of Holding
prior to August 6, 2002 and will be
redeemable on and after such date
at the option of Holding, in whole
or in part, upon not less than 30
nor more than 60 days notice to
each holder of Notes at the prices
set forth herein plus accrued and
unpaid interest, if any, to the
redemption date. See "Description
of Notes -- Optional Redemption".
Repurchase at Option of Holders Upon a
Change in Control....................... Upon a Change in Control, each
holder of Notes will have the
right, subject to certain
conditions and restrictions, to
require Holding to repurchase the
Notes, in whole or in part, at 100%
of the principal amount thereof,
plus accrued interest to the
repurchase date. The repurchase
price is payable in cash or, at the
option of Holding but subject to
the satisfaction of certain
conditions on the part of Holding,
in shares of Class A common stock
(valued at 95% of the average
closing bid prices of the Class A
common stock for the five trading
days immediately preceding and
including the third trading day
prior to the repurchase date). See
"Description of Notes -- Repurchase
at Option of Holders Upon a Change
in Control".
Events of Default....................... Events of default include: (1)
failure to pay principal of or
premium, if any, on any Note when
due, whether or not such payment is
prohibited by the subordination
provisions of the Notes and the
Indenture; (2) failure to pay any
interest on any Note when due,
continuing for 30 days, whether or
not such payment is prohibited by
the subordination provisions of the
Notes and the Indenture; (3)
default in Holding's obligation to
provide notice of a Change in
Control, whether or not prohibited
by the subordination provisions of
the Notes and the Indenture; (4)
failure to perform any other
covenant of Holding in the
Indenture, continuing for 60 days
after written notice as provided in
the Indenture; (5) any event of
default, as defined in any
agreement, indenture or instrument
of Holding or any significant
subsidiary evidencing indebtedness
in
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excess of $25.0 million, shall have
occurred and the indebtedness
thereunder, if not already matured
at its final maturity in accordance
with its terms, shall have been
accelerated; and (6) certain events
of bankruptcy, insolvency or
reorganization with respect to
Holding or any significant
subsidiary. See "Description of
Notes -- Events of Default".
PORTAL Trading of Notes................. The Notes are currently eligible
for trading on the Private
Offerings, Resales and Trading
through Automated Linkages
("PORTAL") System of the National
Association of Securities Dealers,
Inc. ("NASD").
Use of Proceeds......................... We will not receive any of the
proceeds from the sale of the Notes
by the selling holders. See "Use of
Proceeds".
Federal Income Tax Consequences......... The registration of the Notes and
the Class A common stock will not
result in any income, gain or loss
to the holders of the Notes or to
Holding.
THE CLASS A COMMON STOCK
Voting Rights........................... Except as otherwise required by law
and with respect to the election of
directors, the holders of Class A
common stock and the holders of
Class B common stock have one vote
per share and vote as a single
class with respect to all matters
submitted to a vote of the holders
of common stock. The Class B common
stock is not being offered hereby.
The Class B common stock is
entitled to elect a majority of our
directors. The Class A common stock
is entitled to elect the remainder
of our directors. Except with
respect to the ability to elect
directors and the conversion rights
discussed below, the Class A common
stock and the Class B common stock
are identical in all respects. If
all shares of Class B common stock
are converted into Class A common
stock or if no shares of Class B
common stock are otherwise
outstanding, the holders of Class A
common stock will be entitled to
elect all of our directors, subject
to any rights of the holders of
preferred stock. See "Description
of Capital Stock -- Common
Stock -- Voting Rights".
Conversion of Class B Common Stock...... Each share of Class B common stock
is convertible into one share of
Class A common stock at any time at
the election of the
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holder of the share of Class B
common stock. Each share of Class B
common stock automatically converts
into one share of Class A common
stock in the event of a transfer of
the share of Class B common stock
to any person other than J. Joe
Ricketts, Marlene M. Ricketts, the
lineal descendants of J. Joe
Ricketts and Marlene M. Ricketts
and their spouses or any trust or
other person or entity that holds
common stock for the benefit of any
of those members of the Ricketts
family (the "Control Group"). In
addition, each share of Class B
common stock automatically converts
into one share of Class A common
stock if the number of shares of
outstanding common stock held by
the Control Group falls below 20%
of the number of shares of
outstanding common stock. See
"Description of Capital
Stock -- Conversion Rights".
Dividends............................... We have never declared or paid any
cash dividends on our capital stock
and do not anticipate paying any
cash dividends to our stockholders
in the foreseeable future.
Listing................................. The Class A common stock is quoted
on The Nasdaq National Market.
Nasdaq National Market Symbol........... AMTD
Use of Proceeds......................... We will not receive any of the
proceeds from the sale of the Class
A common stock by the selling
holders. See "Use of Proceeds".
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SUMMARY CONSOLIDATED FINANCIAL DATA
The information in the following table is based on historical financial
information contained in this prospectus and incorporated by reference herein.
The following summary financial information should be read in conjunction with
this historical financial information, including the notes that accompany such
financial information. Per share amounts have been adjusted to reflect a
three-for-one stock split effective on July 2, 1999.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------
SEPT. 30, SEPT. 29, SEPT. 27, SEPT. 26, SEPT. 25,
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenues:
Commissions and clearing fees........................... $ 20,386 $ 23,977 $ 36,470 $ 51,937 $ 85,644
Interest revenue........................................ 9,856 16,297 22,518 36,623 66,716
Investment income and other............................. 1,119 2,608 6,391 7,107 11,834
-------- -------- -------- -------- --------
Total revenues.................................... 31,361 42,882 65,379 95,667 164,194
Interest expense........................................ 3,912 7,862 11,040 18,429 29,279
-------- -------- -------- -------- --------
Net revenues...................................... 27,449 35,020 54,339 77,238 134,915
Pre-advertising operating expense......................... 14,012 19,348 28,385 41,842 90,770
Advertising expense....................................... 5,987 4,842 7,537 13,971 43,614
-------- -------- -------- -------- --------
Total expenses excluding interest................. 19,999 24,190 35,922 55,813 134,384
Income before provision for income taxes.................. 7,450 10,830 18,417 21,425 531
Provision for income taxes................................ 2,619 3,799 7,259 7,603 321
-------- -------- -------- -------- --------
Net income........................................ $ 4,831 $ 7,031 $ 11,158 $ 13,822 $ 210
======== ======== ======== ======== ========
Basic earnings per share.................................. $ 0.03 $ 0.05 $ 0.07 $ 0.08 $ 0.00
Diluted earnings per share................................ $ 0.03 $ 0.05 $ 0.07 $ 0.08 $ 0.00
Weighted average shares outstanding -- basic.............. 154,271 153,766 153,766 165,227 174,188
Weighted average shares outstanding -- diluted............ 154,271 153,766 153,766 165,233 174,465
</TABLE>
<TABLE>
<CAPTION>
SEPT. 30, SEPT. 29, SEPT. 27, SEPT. 26, SEPT. 25,
1994 1995 1996 1997 1998
--------- --------- --------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and segregated investments.......................... $101,352 $125,456 $191,436 $373,286 $ 527,982
Receivable from customers and correspondents, net........ 99,627 130,187 166,075 325,407 647,122
Total assets............................................. 216,991 287,105 401,679 757,357 1,290,402
Payable to customers and correspondents.................. 198,539 251,862 356,943 666,279 1,136,082
Total long-term debt..................................... -- 7,097 4,853 -- 11,000
Stockholders' equity..................................... 12,473 19,504 30,662 66,989 84,572
</TABLE>
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RISK FACTORS
You should carefully consider the risks described below before making an
investment in the Notes or the Class A common stock.
OUR BUSINESS COULD BE HARMED BY MARKET FLUCTUATIONS AND OTHER SECURITIES
INDUSTRY RISKS
Substantially all of our revenues are derived from discount securities
brokerage and clearing and execution services. Like other brokerage businesses,
we are directly affected by economic and political conditions, broad trends in
business and finance and changes in volume and price levels of securities
transactions. We are particularly affected by volatility in technology and
Internet-related stocks because a significant portion of our customers invest in
these types of stocks. In recent months, the U.S. securities markets have
fluctuated considerably. Severe market fluctuations in the future could have a
material adverse effect on our business, financial condition and operating
results. Reduced trading volumes and prices have historically resulted in
reduced transaction revenues. In addition, when trading volume is low, our
profitability may be adversely affected because our overhead is substantially
fixed.
THE MARKET PRICE OF THE CLASS A COMMON STOCK WILL FLUCTUATE AND COULD FLUCTUATE
SIGNIFICANTLY
The Class A common stock has experienced significant price fluctuations in
recent months. The stock market in general also has experienced substantial
price and volume fluctuations. The market prices of securities of
Internet-related companies, in particular, have been especially volatile. The
price of the Class A common stock could decrease substantially from its current
level. In addition, because the market price of our Class A common stock tends
to fluctuate significantly, we may become the object of securities class action
litigation. Securities class action litigation may result in substantial costs
and a diversion of management's attention and resources.
SYSTEMS FAILURES AND DELAYS COULD HARM OUR BUSINESS
We receive and process trade orders through a variety of electronic
mediums, including the Internet, personal digital assistants and automated
touch-tone telephone systems. These methods of trading are heavily dependent on
the integrity of the electronic systems supporting them. Our systems and
operations are vulnerable to damage or interruption from human error, natural
disasters, power loss, computer viruses, intentional acts of vandalism and
similar events. Extraordinary trading volumes could cause our computer systems
to operate at an unacceptably low speed or even fail. We have experienced
periods of extremely high trading volume that has caused individual system
components or processes to fail, resulting in the temporary unavailability of
our Web site for online trading and delays in our telephone systems. On some
other occasions, high trading volume has caused significant delays in executing
trading orders, resulting in some customers' orders being executed at prices
they did not anticipate. In September 1998, we became subject to a putative
class action lawsuit resulting from systems failures and delays. In addition,
from time to time, we reimburse our customers for losses incurred in connection
with systems failures and delays. During the quarter ended December 31, 1998, we
paid $3.1 million to customers for execution price adjustments as a result of
systems failures and delays. Systems failures and delays may occur again in the
future and could cause:
- unanticipated disruptions in service;
- slower response times;
- decreased customer service and customer satisfaction; and
- harm to our reputation;
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which could result in:
- loss of customers;
- increased operating expenses;
- financial losses;
- additional litigation or other customer claims; and
- regulatory sanctions.
CAPACITY CONSTRAINTS OF OUR SYSTEMS COULD HARM OUR BUSINESS
As our business grows, we will need to expand and upgrade our transaction
processing systems, network infrastructure and other aspects of our technology.
Many of our systems are designed to accommodate additional growth without
redesign or replacement; however, we will need to make significant investments
in additional hardware and software to accommodate growth. We may not be able to
project accurately the rate or timing of growth in our business, or the cost to
expand and upgrade our systems and infrastructure to accommodate any growth in a
timely manner. Failure to make necessary expansions and upgrades to our systems
and infrastructure could lead to failures and delays, which could have a
material adverse effect on our business, financial condition and results of
operations.
SUBSTANTIAL COMPETITION COULD REDUCE OUR MARKET SHARE AND HARM OUR FINANCIAL
PERFORMANCE
The market for discount brokerage services, particularly electronic
brokerage services, is new, rapidly evolving and competitive. We expect the
competitive environment to continue in the future. We may not be able to compete
effectively with current or future competitors, which could have a material
adverse effect on our business, financial condition and results of operations.
We face direct competition from numerous discount brokerage firms, many of which
provide online services. We also encounter competition from the broker-dealer
affiliates of established full-commission brokerage firms as well as from
financial institutions, mutual fund sponsors and other organizations, some of
which provide or have announced that they intend to provide online discount
brokerage services. Some of our competitors have greater financial, technical,
marketing and other resources than we do. Some of our competitors offer a wider
range of services and financial products than we do and have greater name
recognition and a more extensive customer base than we do. We believe that the
general financial success of companies within the online securities industry
will continue to attract new competitors to the industry, such as banks,
software development companies, insurance companies, providers of online
financial information and others. These companies may provide a more
comprehensive suite of services than we do. In addition, our clearing operations
compete with numerous firms that provide clearing and execution services to the
securities industry.
WE MAY BE UNABLE TO MANAGE OUR RAPID GROWTH EFFECTIVELY
We have rapidly and significantly expanded our operations and anticipate
that continued expansion will be required to realize our growth strategy. Our
rapid growth has placed significant demands on our management and other
resources and these demands are likely to continue. If we are unable to
effectively manage our future growth, we may not be able to achieve the rate of
growth that we have experienced in the past. To manage our future growth, we
will need to attract, hire and retain highly skilled and motivated officers and
employees. In particular, we currently need to hire a significant number of
technical personnel and customer service representatives. Most of our
competitors face similar staffing shortages, which makes the competition for
qualified employees particularly intense. We also will need to improve existing
systems and/or implement new systems for operational and financial management
and training, integrating and managing our growing employee base.
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OUR FUTURE OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY
We may experience significant variation in our future quarterly results of
operations. These fluctuations may result from:
- the timing and size of advertising campaigns;
- introductions of or enhancements to online investing services by us or
our competitors;
- changes in trading volume in securities markets;
- changes in pricing policies by us or our competitors;
- disruptions or problems in our services to customers;
- changes in our business strategy;
- changes in the level of operating expenses needed to support projected
growth;
- actions taken by us that negatively affect short-term results but may
benefit long-term results; and
- general economic conditions.
Due to these factors, quarterly revenues and operating results are difficult to
forecast. We believe that period-to-period comparisons of our operating results
will not necessarily be meaningful, and you should not rely on them as an
indication of our future performance. In addition, our future quarterly
operating results may not consistently meet the expectations of securities
analysts or investors, which could have a material adverse effect on the market
price of the Class A common stock.
REGULATORY AND LEGAL UNCERTAINTIES COULD HARM OUR BUSINESS
The securities industry in the United States is subject to extensive
regulation under both federal and state laws. Broker-dealers are subject to
regulations covering all aspects of the securities business. Our operations and
profitability may be directly affected by:
- additional legislation;
- changes in rules promulgated by the Securities and Exchange Commission
(the "SEC"), the NASD, the Board of Governors of the Federal Reserve
System, the various stock exchanges and other self-regulatory
organizations; or
- changes in the interpretation or enforcement of existing laws and rules.
The SEC, the NASD and other self-regulatory organizations and state
securities commissions can censure, fine, issue cease-and-desist orders to,
suspend or expel a broker-dealer or any of its officers or employees. Our
ability to comply with applicable laws and rules is largely dependent on our
internal system to ensure compliance, as well as our ability to attract and
retain qualified compliance personnel. We could be subject to disciplinary or
other actions in the future due to claimed noncompliance, which could have a
material adverse effect on our business, financial condition and results of
operations.
Recently, various regulatory and enforcement agencies have been reviewing
systems capacity, customer access, best execution practices, other service
issues and advertising claims as they relate to the discount and online
brokerage industry. These reviews could result in enforcement actions or new
regulations, either of which could have a material adverse effect on our
business, financial condition and results of operations.
Securities industry regulators are currently reviewing the extent to which
clearing firms, such as Advanced Clearing, will be held accountable for the
improper activities of introducing brokers
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<PAGE> 13
for which they provide clearing services. Our procedures may not be sufficient
to protect us from liability for the acts of introducing brokers under current
or future laws and regulations.
In addition, we use the Internet as a major distribution channel to provide
services to our customers. Due to the increasing popularity of the Internet, it
is possible that new laws and regulations may be adopted dealing with issues
such as user privacy and the pricing, content and quality of products and
services. These laws and regulations might increase our cost of using, or limit
our ability to use, the Internet as a distribution channel. As a result, the
adoption of these laws and regulations could have a material adverse effect on
our business, financial condition and results of operations.
We intend to expand our business in U.S. securities to other countries. We
will need to comply with the relevant regulations of each country in which we
conduct business. Our international expansion may be limited by the compliance
requirements of these jurisdictions.
THE SUCCESS OF OUR BUSINESS WILL DEPEND ON CONTINUED GROWTH OF INTERNET COMMERCE
The market for online discount brokerage services is at an early stage of
development and is rapidly evolving. Consequently, demand and market acceptance
for recently introduced services and products are subject to a high level of
uncertainty. A significant portion of our growth is related to acceptance of the
Internet as a method of commerce. The failure of commerce on the Internet to
grow at projected rates could have a material adverse effect on our business,
financial condition and results of operations.
THE SUCCESS OF OUR BUSINESS WILL DEPEND ON CONTINUED DEVELOPMENT AND MAINTENANCE
OF THE INTERNET INFRASTRUCTURE
The Internet has experienced, and is expected to continue to experience,
significant growth in the number of users and amount of traffic. Our success
will depend upon the development and maintenance of the Internet's
infrastructure to cope with this increased traffic. The failure to develop and
maintain the Internet's infrastructure could have a material adverse effect on
our business, financial condition and results of operations. The Internet has
experienced a variety of outages and other delays as a result of damage to
portions of its infrastructure and could face similar outages and delays in the
future. Outages and delays are likely to affect the level of Internet usage and
the processing of transactions on our Web site. In addition, the Internet could
lose its viability due to delays in the development or adoption of new standards
to handle increased levels of activity.
WE ARE HIGHLY DEPENDENT ON OUR KEY PERSONNEL
We are highly dependent on a small number of key executive officers. We
have entered into employment agreements with our key executive officers but do
not maintain "key person" life insurance policies on any of our officers. Our
success has been, and will be, dependent to a large degree on our ability to
retain the services of our existing key executive officers and to attract and
retain additional qualified personnel in the future. Competition for these
personnel is intense. The loss of the services of any of our key executive
officers or the inability to identify, hire and retain other highly qualified
technical and managerial personnel in the future could have a material adverse
effect on our business, financial condition and results of operations.
THE RICKETTS FAMILY CONTROLS ALL FUNDAMENTAL MATTERS AFFECTING US
J. Joe Ricketts, our Chairman and Co-Chief Executive Officer, his family
members and trusts held for their benefit (collectively, the "Ricketts Family")
own approximately 58.3% of the Class A common stock and all of the Class B
common stock, which constitute approximately
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<PAGE> 14
62.2% of the common stock. As a result, the Ricketts Family has the ability to
control all fundamental matters affecting us, including:
- the election of the majority of our directors;
- the sale of substantially all of our assets;
- the merger of Holding with another entity;
- an amendment to our certificate of incorporation;
- the future issuance of common stock or other securities; and
- the declaration of any dividend payable on the common stock.
In addition, the Ricketts Family could convert a portion of its Class B common
stock into Class A common stock and subsequently dispose of such shares, thereby
substantially reducing its economic interest in Holding while retaining the
ability to elect the majority of our directors.
WE WILL NEED TO INTRODUCE NEW PRODUCTS AND SERVICES TO REMAIN COMPETITIVE
Our future success depends in part on our ability to develop and enhance
our products and services. There are significant technical and financial risks
in the development of new or enhanced products and services, including the risk
that we will be unable to:
- effectively use new technologies;
- adapt our products and services to emerging industry standards; or
- develop, introduce and market new or enhanced products and services.
If we are unable to develop and introduce enhanced or new products and services
quickly enough to respond to market or customer requirements, or if our products
and services fail to achieve market acceptance, our business, financial
condition and results of operations could be materially adversely affected.
WE MAY NOT BE ABLE TO KEEP UP WITH RAPID TECHNOLOGICAL AND OTHER CHANGES
The markets in which we compete are characterized by rapidly changing
technology, evolving industry standards, frequent new product and service
announcements, introductions and enhancements and changing consumer demands. We
may not be able to keep up with these rapid changes. In addition, the widespread
adoption of new Internet, networking or telecommunications technologies or other
technological changes could require us to incur substantial expenditures to
modify or adapt our services or infrastructure.
CHANGES IN PAYMENTS FOR ROUTING OUR CUSTOMERS' ORDERS COULD ADVERSELY AFFECT OUR
BUSINESS
We have arrangements with several execution agents to receive cash payments
in exchange for routing trade orders to these firms for execution. We expect
these payments to continue to decrease on a per trade basis, which could have a
material adverse effect on our business, financial condition and results of
operations. Receiving payments for routing customers' orders may not continue to
be permitted by the SEC, the NASD or other governmental and regulatory agencies
and courts. Furthermore, competition between execution agents and the
implementation by the SEC of order handling rules in January 1997 has made it
less profitable for execution agents to offer order flow payments to
broker-dealers.
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OUR NETWORKS MAY BE VULNERABLE TO SECURITY RISKS
The secure transmission of confidential information over public networks is
a critical element of our operations. We have not in the past experienced
network security problems. However, our networks may be vulnerable to
unauthorized access, computer viruses and other security problems. Persons who
circumvent security measures could wrongfully use our confidential information
or our customers' confidential information or cause interruptions or
malfunctions in our operations. We may be required to expend significant
additional resources to protect against the threat of security breaches or to
alleviate problems caused by any breaches. We may not be able to implement
security measures that will protect against all security risks.
YEAR 2000 RISKS MAY HARM OUR BUSINESS
Many computer systems were not designed to handle dates beyond the year
1999. These systems, if not modified or replaced, could fail or create erroneous
results by or at the Year 2000. We have implemented a plan to address Year 2000
problems with our own systems. However, if we are unable to make our systems
Year 2000 compliant on a timely basis or if the costs associated with addressing
Year 2000 issues are greater than planned, our business, financial condition and
results of operations could be materially adversely affected. In addition, our
operations rely heavily on the integrity of computer systems of third parties,
such as broker-dealers, clearinghouses, stock exchanges and online and Internet
service providers. A systems failure affecting any of these parties due to Year
2000 issues would interfere with the trading process and, as a result, could
have a material adverse effect on our business, financial condition and results
of operations.
WE MUST COMPLY WITH NET CAPITAL REQUIREMENTS
The SEC, the NASD and various other regulatory agencies have stringent
rules with respect to the maintenance of specific levels of net capital by
securities broker-dealers. Net capital is an SEC-defined measure of a
broker-dealer's readily available liquid assets, reduced by its total
liabilities other than approved subordinated debt. All of our broker-dealer
subsidiaries are required to comply with the net capital requirements. If we
fail to maintain the required net capital, the SEC could suspend or revoke our
registration, or the NASD could expel us from membership, which could ultimately
lead to our liquidation. If the net capital rules are changed or expanded, or if
there is an unusually large charge against net capital, operations that require
the intensive use of capital would be limited. A large operating loss or charge
against net capital could adversely affect our ability to expand or even
maintain our present levels of business, which could have a material adverse
effect on our business, financial condition and results of operations.
OUR CLEARING OPERATIONS EXPOSE US TO LIABILITY FOR ERRORS IN CLEARING FUNCTIONS
Advanced Clearing provides clearing and execution services to each of our
discount brokerage businesses, as well as to independent broker-dealers,
depository institutions, registered investment advisors and financial planners.
Clearing services include the confirmation, receipt, settlement and delivery
functions involved in securities transactions. As a clearing broker, Advanced
Clearing also assumes direct responsibility for the possession and control of
customer securities and other assets and the clearance of customer securities
transactions. Self-clearing securities firms are subject to substantially more
regulatory control and examination than brokers that rely on others to perform
those functions, such as many of our competitors. Errors in performing clearing
functions, including clerical and other errors related to the handling of funds
and securities held by us on behalf of customers and introducing brokers, could
lead to civil penalties imposed by applicable authorities as well as losses and
liability in related lawsuits brought by customers and others.
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<PAGE> 16
WE ARE EXPOSED TO CREDIT RISK
We make margin loans to customers collateralized by customer securities and
periodically borrow securities to cover trades. By permitting customers to
purchase securities on margin, we are subject to risks inherent in extending
credit, especially during periods of rapidly declining markets in which the
value of the collateral held by us could fall below the amount of a customer's
indebtedness. The inability of customers to repay their margin loans could
result in material losses to us. A significant portion of our net revenues is
derived from interest on margin loans. To the extent that these margin loans
exceed customer cash balances maintained with us, we generally must obtain
financing from third parties. We may not be able to obtain such financing on
favorable terms or in sufficient amounts.
WE MUST PROTECT OUR INTELLECTUAL PROPERTY
Our success and ability to compete are dependent to a significant degree on
fully protecting our intellectual property, which includes our proprietary
technology, trade identity and customer base. We rely on all modes of
intellectual property protection to protect our intellectual property, including
copyright, trade secret, trademark, domain name, patent and contract law.
Notwithstanding the precautions taken by us to protect our intellectual
property, it is possible that third parties may misappropriate, obtain, copy or
use without authorization, or otherwise infringe upon, our intellectual
property. It is also possible that third parties may independently develop
intellectual property similar to ours. Policing unauthorized use of our
intellectual property may be difficult because of difficulties in controlling
the ultimate destination or security of information transmitted over the
Internet. In addition, the laws of foreign countries may afford different, and
possibly inadequate, protection of our intellectual property.
ACQUISITIONS AND STRATEGIC RELATIONSHIPS INVOLVE RISKS
We intend to pursue strategic acquisitions of businesses and technologies.
Acquisitions may entail numerous risks, including:
- difficulties in assessing values for acquired businesses and
technologies;
- difficulties in the assimilation of acquired operations and products;
- diversion of management's attention from other business concerns;
- assumption of unknown material liabilities of acquired companies;
- amortization of acquired intangible assets, which could reduce future
reported earnings; and
- potential loss of customers or key employees of acquired companies.
We may not be able to integrate successfully any operations, personnel, services
or products that we acquire in the future. In addition, we have established a
number of strategic relationships with online service providers and information
service providers. These relationships and others we may enter into in the
future are and will be important to our business and growth prospects. We may
not be able to maintain these relationships or develop new strategic alliances.
WE MAY NOT SUCCEED IN INTERNATIONAL MARKETS
We have limited experience in providing brokerage services internationally.
We may not succeed in marketing our services in international markets. In
addition, there are risks inherent in doing business in some international
markets that may include:
- less developed technological infrastructures;
- lower customer acceptance of, or access to, electronic channels;
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<PAGE> 17
- regulatory requirements, tariffs and other trade barriers;
- reduced protection for intellectual property rights;
- difficulties in staffing and managing foreign operations;
- less developed automation in exchanges, depositories and clearing
systems;
- fluctuations in currency exchange rates; and
- potentially adverse tax consequences.
Any of the factors described above could have a material adverse effect on our
future international operations.
CERTAIN PROVISIONS OF OUR ORGANIZATIONAL DOCUMENTS AND DELAWARE LAW COULD MAKE A
TAKEOVER MORE DIFFICULT
Our certificate of incorporation, bylaws and Delaware corporate law contain
provisions that might make it more difficult for someone to acquire control of
us in a transaction not approved by our board of directors. These provisions
could also discourage proxy contests and make it more difficult for you and
other stockholders to elect directors other than the candidates nominated by our
board of directors. The existence of these provisions could adversely affect the
market price of the Class A common stock. In addition, these provisions could
have the effect of depriving stockholders of an opportunity to sell their shares
at a premium over prevailing market prices. For a description of these
provisions, see "Description of Capital Stock".
THE NOTES ARE SUBORDINATED TO OTHER DEBT
The Notes are unsecured and subordinated in right of payment to all of our
existing and future Senior Indebtedness. As a result, in the event of
bankruptcy, liquidation or reorganization or upon acceleration of the Notes due
to an Event of Default and in specific other events, our assets will be
available to pay obligations on the Notes only after all Senior Indebtedness has
been paid in full in cash or other payment satisfactory to the holders of Senior
Indebtedness has been made. There may not be sufficient assets remaining to pay
amounts due on any or all of the Notes then outstanding. The Notes are also
effectively subordinated to the liabilities, including trade payables, of our
subsidiaries. The Indenture does not prohibit or limit the incurrence of Senior
Indebtedness or the incurrence of other indebtedness and other liabilities by us
or our subsidiaries. The incurrence of additional indebtedness and other
liabilities by us or our subsidiaries could adversely affect our ability to pay
obligations on the Notes. As of June 25, 1999, we had approximately $58 million
of indebtedness outstanding that would have constituted Senior Indebtedness. As
of June 25, 1999, our subsidiaries had approximately $2.1 billion of
indebtedness and other liabilities. We anticipate that from time to time we will
incur additional indebtedness, including Senior Indebtedness. See "Description
of Notes -- Subordination".
LIMITATIONS ON REDEMPTION OF THE NOTES UPON CHANGE IN CONTROL
Upon a Change in Control, each holder of the Notes has the right, at the
holder's option, to require us to redeem all or a portion of the holder's Notes.
If a Change in Control were to occur, we may not have sufficient funds to pay
the redemption price for all Notes tendered by holders. Our revolving credit
agreement and other agreements relating to other indebtedness, including other
Senior Indebtedness, to which we are or may become a party may contain
restrictions on the payment of the redemption price while the indebtedness is
outstanding. In the event a Change in Control occurs at a time when we are
prohibited from purchasing or redeeming the Notes, we could seek the consent of
the holders of the indebtedness to purchase or redeem the Notes or could attempt
to refinance the borrowings that contain this prohibition. If we do not obtain a
consent or repay these borrowings in full, we would remain prohibited from
purchasing
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<PAGE> 18
or redeeming the Notes. Our failure to redeem the tendered Notes would
constitute an Event of Default, which might constitute a default under the terms
of other indebtedness that we may enter into from time to time. In these
circumstances, the subordination provisions in the Indenture would likely
restrict payments to the holders of Notes. The term "Change in Control" is
limited to specified transactions and may not include other events that might
adversely affect our financial condition. In addition, the requirement that we
offer to repurchase the Notes upon a Change in Control does not necessarily
afford holders of the Notes protection in the event of a highly leveraged
transaction, reorganization, merger or similar transaction involving us. See
"Description of Notes -- Repurchase at Option of Holders Upon a Change in
Control".
OUR DEBT SERVICE OBLIGATIONS MAY ADVERSELY AFFECT OUR BUSINESS OPERATIONS
We are required to generate cash sufficient to pay all amounts due on the
Notes and to conduct our business operations. We may not be able to generate
sufficient cash flow, which would have a material adverse effect on our ability
to make payments on the Notes and on our business, financial condition and
results of operations.
ABSENCE OF PUBLIC MARKET FOR THE NOTES AND RESTRICTIONS ON RESALE
There is no public trading market for the Notes. Although the initial
purchaser of the Notes has advised us that it currently intends to make a market
in the Notes, it is not obligated to do so and may discontinue its market making
at any time without notice. In addition, its market making activity will be
subject to the limits imposed by the Securities Act of 1933 (the "Securities
Act") and the Securities Exchange Act of 1934 (the "Exchange Act"). Accordingly,
there can be no assurance that any market for the Notes will develop or, if one
does develop, that it will be maintained. If an active market for the Notes
fails to develop or be sustained, the trading price of the Notes could be
materially adversely affected.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the information incorporated by reference in it include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. We intend that the forward-looking
statements be covered by the safe harbor provisions for forward-looking
statements in these sections. In some cases, you can identify these statements
by our use of forward-looking words such as "may", "will", "should",
"anticipate", "estimate", "expect", "plan", "believe", "predict", "potential" or
"intend". You should be aware that these statements only reflect our
expectations. Actual events or results may differ materially from our
expectations. Important factors that could cause our actual results to be
materially different from our expectations include those discussed in this
prospectus under the caption "Risk Factors". We undertake no obligation to
update or revise publicly any forward-looking statements, whether as a result of
new information, future events or otherwise.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------------------------- -------------------
SEPT. 30, SEPT. 29, SEPT. 27, SEPT. 26, SEPT. 25, JUNE 26, JUNE 25,
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges......................... 2.78 2.33 2.60 2.10 1.02 -- 1.94
======= ======= ======= ======= ======= ======= =======
Deficiency of Earnings Available
to Cover Fixed Charges.......... -- -- -- -- -- $(8,553) --
======= ======= ======= ======= ======= ======= =======
</TABLE>
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the Notes or Class
A common stock by the selling holders.
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<PAGE> 20
SELLING HOLDERS
The Notes were originally issued by Holding and sold by Goldman, Sachs &
Co. as the initial purchaser in transactions exempt from the registration
requirements of the Securities Act to persons reasonably believed by the initial
purchaser to be qualified institutional buyers. Selling holders, including their
transferees, pledgees or donees or their successors, may from time to time offer
and sell pursuant to this prospectus any or all of the Notes and the Class A
common stock into which the Notes are convertible.
The following table sets forth information, as of October , 1999, with
respect to the selling holders and the principal amounts of Notes and amounts of
Class A common stock beneficially owned by each selling holder that may be
offered under this prospectus. The information is based on information provided
by or on behalf of the selling holders. The selling holders may offer all, some
or none of the Notes or Class A common stock into which the Notes are
convertible. Because the selling holders may offer all or some portion of the
Notes or the Class A common stock, no estimate can be given as to the amount of
the Notes or the Class A common stock that will be held by the selling holders
upon termination of any sales. In addition, the selling holders identified below
may have sold, transferred or otherwise disposed of all or a portion of their
Notes or Class A common stock since the date on which they provided the
information regarding their Notes or Class A common stock in transactions exempt
from the registration requirements of the Securities Act. No selling holder
named in the table below beneficially owns one percent or more of our Class A
common stock assuming conversion of a selling holder's Notes.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT CLASS A
OF NOTES COMMON STOCK CLASS A
BENEFICIALLY OWNED PRIOR TO COMMON STOCK
ACCOUNT NAME OWNED AND OFFERED THE OFFERING OFFERED
- ------------ ----------------- -------------- ------------
<S> <C> <C> <C>
</TABLE>
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<PAGE> 21
DESCRIPTION OF NOTES
The Notes were issued under an Indenture, as supplemented by a supplemental
indenture, each dated as of August 4, 1999 (together, the "Indenture"), between
Holding and The Bank of New York, as Trustee (the "Trustee"). You may request a
copy of the Indenture from the Trustee at the Corporate Trust office of the
Trustee in the Borough of Manhattan. This section summarizes the provisions of
the Notes and the Indenture and the related registration rights agreement. You
should refer to these documents for more detailed information.
GENERAL
Holding issued $200,000,000 aggregate principal amount of Notes. The Notes
are unsecured subordinated obligations of Holding. The Notes mature on August 1,
2004 and will be payable at a price of 100% of the principal amount thereof. The
Notes bear interest at the rate of 5.75% per annum from August 4, 1999, payable
semiannually on February 1 and August 1 of each year, commencing on February 1,
2000. Interest payable per $1,000 principal amount of Notes for the partial
period from August 4, 1999 to February 1, 2000 will be $28.27. Interest payable
per $1,000 principal amount of Notes for subsequent periods ending on February 1
or August 1 will be $28.75.
The Notes are currently convertible into Class A common stock initially at
the conversion rate of 30.7137 shares per $1,000 principal amount of Notes,
subject to adjustment upon the occurrence of certain events described under
"-- Conversion Rights", at any time prior to the close of business on the
maturity date, unless previously redeemed or repurchased.
The Notes were offered and sold by the initial purchaser to qualified
institutional buyers as defined in Rule 144A under the Securities Act.
GLOBAL NOTE; BOOK-ENTRY SYSTEM
The Notes are evidenced by one or more global notes in definitive, fully
registered form without interest coupons, and were deposited with the Trustee as
custodian for DTC and registered in the name of Cede & Co. ("Cede"), as nominee
of DTC. Except as set forth below, record ownership of the global note may be
transferred, in whole or in part, only to another nominee of DTC or to a
successor of DTC or its nominee.
Holders who are participants in DTC may hold interests in the global note
directly through DTC or indirectly through organizations that are participants.
Holders who are not participants in DTC may beneficially own interests in the
global note held by DTC only through participants in DTC or various banks,
brokers, dealers, trust companies and other parties that clear through or
maintain a custodial relationship with a participant. Transfers between
participants will be effected in the ordinary way in accordance with DTC's rules
and will be settled in same-day funds. The laws of some states require that
certain persons take physical delivery of securities in definitive form.
Consequently, the ability to transfer beneficial interests in the global note to
such persons may be limited.
Holding will pay interest on and principal of and the redemption or
repurchase price of the global note, as well as any payment of liquidated
damages, as described below, to Cede, the nominee for DTC, as the registered
owner of the global note, by wire transfer of immediately available funds on
each relevant payment date. Neither we nor the Trustee has any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the global note, including for any delay by
DTC or any participant or indirect participant in identifying the beneficial
ownership interests, and Holding and the Trustee may conclusively rely on, and
shall be protected in relying on, instructions from DTC as the registered holder
of the global note for all purposes.
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DTC has informed us that its practice is to credit participants' accounts
on the payment date with payments in amounts proportionate to their respective
beneficial interests in the global note, unless DTC has reason to believe that
it will not receive payment. Only the participants are responsible for payments
to owners of beneficial interests held through them.
Redemption notices shall be sent to Cede. If less than all the Notes are
being redeemed, DTC's practice is to determine by lot the amount of the holdings
of each participant in such issue to be redeemed.
Neither DTC nor Cede will consent or vote with respect to the Notes. Under
its usual procedures, DTC mails an omnibus proxy to the issuer as soon as
possible after the record date. The omnibus proxy assigns Cede's consenting or
voting rights to those participants to whose accounts the Notes are credited on
the record date identified in a listing attached to the omnibus proxy.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants, a person or entity having a beneficial interest
in the global note may be unable to pledge its interest to persons or entities
that do not participate in the DTC book-entry system, and other actions related
to their interest may be affected, due to the lack of a physical certificate
evidencing their interest.
DTC has advised us that it will take any action permitted to be taken by a
holder of Notes only at the direction of one or more participants to whose
accounts with DTC interests in the global note are credited. DTC will only take
action in respect of the portion of the principal amount of the Notes
represented by the global note as to which the participant or participants has
or have given direction.
DTC has advised us that it is a limited purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve System,
a "clearing corporation" within the meaning of the New York Uniform Commercial
Code, as amended, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may include
certain other organizations. Various participants or their representatives,
together with other entities, own DTC. Indirect access to the DTC system is
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of beneficial ownership interests in the global note among
participants, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be reliable, but we take no
responsibility for the accuracy of this information. Neither we, the Trustee nor
any of our or their respective agents are responsible for the performance by DTC
or its participants or indirect participants of their obligations under the
rules and procedures governing their operations, including maintaining,
supervising or reviewing the records relating to, or payments made on account
of, beneficial ownership interests in the global note.
So long as DTC, or its nominee, is the registered owner of the global note,
DTC or its nominee, as the case may be, will be considered the sole legal owner
or holder of the Notes represented by the global note. Except as set forth
below, owners of beneficial interests in a global note will not be entitled to
have Notes represented by the global note registered in their names, will not
receive or be entitled to receive physical delivery of Notes in definitive form
and
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<PAGE> 23
will not be considered the legal owners or holder of the Notes under the
Indenture. Accordingly, each person owning a beneficial interest in the global
note must rely on the procedures of DTC and, if such person is not a
participant, those of the participant through which that person owns its
interests, in order to exercise any rights of a holder under the Indenture or
the holder's Note.
A global note is exchangeable for definitive Notes in registered
certificated form if:
- DTC notifies Holding that it is unwilling or unable to continue as
depositary for Holding's global note or has ceased to be a clearing agency
registered under the Exchange Act;
- Holding notifies the Trustee in writing that it elects to cause the
issuance of the Notes in certificated form; or
- there shall have occurred and be continuing a default or an event of
default with respect to the Notes.
In all cases, certificated Notes delivered in exchange for any global note
will be registered in the names, and issued in any approved denominations,
required by or on behalf of the depositary.
CONVERSION RIGHTS
You may convert any portion of the principal amount of any Note that is an
integral multiple of $1,000 into shares of Class A common stock at any time
prior to the close of business on the maturity date, unless previously redeemed
or repurchased, at a conversion rate of 30.7137 shares of Class A common stock
per $1,000 principal amount of Notes. This is equivalent to an approximate
conversion price of $32.56 per share of Class A common stock, subject to
adjustment in certain events as described below. The right to convert a Note
called for redemption or delivered for repurchase will terminate at the close of
business on the business day immediately preceding the redemption date or the
repurchase date, as the case may be.
You may convert a Note by delivering the Note at the Corporate Trust Office
of the Trustee in the Borough of Manhattan, The City of New York, accompanied by
a duly signed and completed notice of conversion. A form of such notice of
conversion can be obtained at the office of the Trustee at its Corporate Trust
Office in New York City. The conversion date will be the date on which the Note
and the duly signed and completed notice of conversion are delivered.
As promptly as practicable on or after the conversion date, Holding will
issue and deliver to the Trustee a certificate or certificates for the number of
full shares of Class A common stock issuable upon conversion, together with
payment in lieu of any fraction of a share. The shares of Class A common stock
issuable upon conversion of the Notes will be fully paid and nonassessable and
will rank equal to the other shares of Class A common stock outstanding.
If you surrender a Note for conversion on or after a record date for
interest payments, but before the next interest payment date, the Note generally
must be accompanied by payment equal to the interest payable on the next
interest payment date. In such case, you will be paid interest on the next
interest payment date notwithstanding the conversion. If you surrender a Note
for conversion on a date that is before a record date for interest payments and
on or after the prior interest payment date, you generally will not receive any
interest for the period from the prior interest payment date to the date of
conversion or for any later period. In addition, holders of Class A common stock
issued upon conversion will not be entitled to receive any dividends payable to
holders of Class A common stock as of any record time or date before the close
of business on the conversion date.
A holder delivering a Note for conversion will not be required to pay any
taxes or duties in respect of the issue or delivery of Class A common stock on
conversion. However, if the Class A common stock will be issued or delivered in
a name other than that of the holder of the Note, the holder will be required to
pay any tax or duty which may be payable in respect of the transfer.
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<PAGE> 24
Certificates representing shares of Class A common stock will not be issued or
delivered unless all taxes and duties, if any, payable by the Holder have been
paid.
The conversion rate is subject to adjustment in certain events, including:
- dividends and other distributions payable in Class A common stock on
shares of Class A common stock;
- the issuance to all holders of Class A common stock of rights, options or
warrants entitling them to subscribe for or purchase Class A common stock at
less than the then current market price;
- subdivisions, combinations and reclassifications of Class A common stock;
- distributions to all holders of Class A common stock of evidences of
indebtedness of Holding, shares of capital stock, cash or assets, including
securities, but excluding: those dividends, rights, and distributions referred
to above, dividends and distributions paid exclusively in cash and distributions
upon mergers or consolidations resulting in a reclassification, conversion,
exchange or cancellation of Class A common stock;
- distributions consisting exclusively of cash (excluding any cash portion
of distributions referred to in the bullet point immediately above, or cash
distributed upon a merger or consolidation as described in the bullet point
immediately above) to all holders of Class A common stock in an aggregate amount
that, combined together with (A) other such all-cash distributions made within
the preceding 12 months in respect of which no adjustment has been made and (B)
any cash and the fair market value of other consideration payable in respect of
any tender offer by Holding or any of its subsidiaries for Class A common stock
concluded within the preceding 12 months in respect of which no adjustment has
been made, exceeds 10% of Holding's market capitalization and
- the successful completion of a tender offer by Holding or any of its
subsidiaries for Class A common stock which involves an aggregate consideration
that, together with (A) cash and other consideration payable in a tender offer
by Holding or any of its subsidiaries for Class A common stock expiring within
the 12 months preceding the expiration of such tender offer in respect of which
no adjustment has been made and (B) the amount of any all-cash distributions
referred to in the bullet point immediately above to all holders of Class A
common stock within the 12 months preceding the expiration of that tender offer
for which no adjustment was made, exceeds 10% of Holding's market capitalization
on the expiration of the tender offer.
Holding reserves the right to make increases in the conversion rate in
addition to those required as it considers to be advisable in order that any
event treated for United States federal income tax purposes as a dividend of
stock or stock rights will not be taxable to the recipients. No adjustment of
the conversion rate will be required to be made until the cumulative adjustments
amount to 1.0% or more of the conversion rate. Holding will compute any
adjustments to the conversion rate and will give notice by mail to Holders of
the Notes of any adjustments.
If Holding is consolidated or merged with another entity that results in
the reclassification, conversion, exchange or cancellation of its Class A common
stock, or if Holding sells or transfers all or substantially all of its assets,
each Note will automatically become convertible only into the consideration
receivable upon such consolidation, merger, sale or transfer by the holders of
the Class A common stock.
If Holding makes a distribution of property to its stockholders that would
be taxable to them as a dividend for United States federal income tax purposes
and the number of shares into which Notes are convertible is increased, the
increase may be deemed for federal income tax purposes to be the payment of a
taxable dividend to holders of Notes.
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<PAGE> 25
SUBORDINATION
All payments on the Notes are subordinated to the prior payment in full of
all Senior Indebtedness of Holding. As of June 25, 1999, Holding had
approximately $58 million of outstanding Senior Indebtedness. In addition, the
Notes will be structurally subordinated to all indebtedness and other
liabilities (including trade payables and lease obligations) of Holding's
subsidiaries. As of June 25, 1999, Holding's subsidiaries had approximately $2.1
billion of liabilities and other obligations (excluding liabilities that would
not appear on a consolidating balance sheet of any such subsidiary and
intercompany liabilities).
The Indenture does not limit Holding's or its subsidiaries' ability to
incur Senior Indebtedness or any other indebtedness.
"Senior Indebtedness" is defined in the Indenture to mean: the principal of
(and premium, if any) and interest (including all interest accruing subsequent
to the commencement of any bankruptcy or similar proceeding, whether or not a
claim for post-petition interest is allowable as a claim in any such
proceeding), rent and end-of-term payments payable on, and all fees and other
amounts payable in connection with, the following, whether secured or unsecured,
absolute or contingent, due or to become due, outstanding on the date of the
Indenture or thereafter created, incurred or assumed: (1) indebtedness of
Holding evidenced by a credit or loan agreement, note, bond, debenture or other
written obligation, (2) all obligations of Holding for money borrowed, (3) all
obligations of Holding evidenced by a note or similar instrument given in
connection with the acquisition of any businesses, properties or assets of any
kind, (4) obligations of Holding (A) as lessee under leases required to be
capitalized on the balance sheet of the lessee under generally accepted
accounting principles or (B) as lessee under other leases for facilities,
capital equipment or related assets, whether or not capitalized, entered into or
leased for financing purposes, (5) all obligations of Holding under interest
rate and currency swaps, caps, floors, collars, hedge agreements, forward
contracts or similar agreements or arrangements, (6) all obligations of Holding
with respect to letters of credit, bankers' acceptances and similar facilities
(including reimbursement obligations with respect to the foregoing), (7) all
obligations of Holding issued or assumed as the deferred purchase price of
property or services (but excluding trade accounts payable and accrued
liabilities arising in the ordinary course of business), (8) all obligations of
the type referred to in clauses (1) through (7) above of another person and all
dividends of another person, the payment of which, in either case, Holding has
assumed or guaranteed, or for which Holding is responsible or liable, directly
or indirectly, jointly or severally, as obligor, guarantor or otherwise, or
which is secured by a lien on the property of Holding and (9) renewals,
extensions, modifications, replacements, restatements and refundings of, or any
indebtedness or obligation issued in exchange for, any such indebtedness or
obligation described in clauses (1) through (8) of this paragraph; provided,
however, that Senior Indebtedness shall not include the Notes or any such
indebtedness or obligation if the terms of such indebtedness or obligation (or
the terms of the instrument under which, or pursuant to which it is issued)
expressly provide that such indebtedness or obligation is not superior in right
of payment to the Notes.
In addition, the subordination provisions of the Indenture prevent Holding
from making any payments on the Notes if:
- Holding fails to pay any amounts due on any Designated Senior Debt, as
defined below, beyond the applicable grace period; or
- any other event of default occurs and is continuing under any Designated
Senior Debt that permits its holders to accelerate the maturity of that debt,
and the Trustee receives a payment blockage notice of the default from Holding,
a holder of the Designated Senior Debt or other persons permitted to give notice
under the Indenture.
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<PAGE> 26
Holding may resume making payments on the Notes once a payment default on
the Designated Senior Debt is cured or waived.
Holding may also resume making payments on the Notes following a nonpayment
default on the Designated Senior Debt on the earlier of the date on which the
default is cured or waived or 179 days after the date on which the payment
blockage notice is received. No new payment blockage period may be commenced
unless:
- 365 days have passed since the Trustee's receipt of the prior payment
blockage notice; and
- all scheduled payments of principal, premium, if any, and interest on the
Notes that have come due have been paid in full in cash.
Any nonpayment default that exists or is continuing on the date of delivery
of any payment blockage notice to the Trustee shall not be, or be made, the
basis for any subsequent payment blockage notice.
"Designated Senior Debt" means Holding's obligations in respect of (1)
Holding's revolving credit agreement or (2) any Senior Indebtedness in which the
instrument creating or evidencing the same or the assumption or guarantee
thereof (or related agreements or documents to which Holding 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
Indebtedness to exercise the rights of Designated Senior Debt).
In addition, upon any acceleration of the principal due on the Notes as a
result of an event of default or payment or distribution of assets of Holding to
creditors upon any dissolution, winding up, liquidation or reorganization,
whether voluntary or involuntary, marshalling of assets, assignment for the
benefit of creditors, or in bankruptcy, insolvency, receivership or other
similar proceedings of Holding, all amounts due on all Senior Indebtedness must
be paid in full before the Holders of the Notes are entitled to receive any
payment. As a result, in the event of insolvency, creditors of Holding who are
holders of Senior Indebtedness may recover more, ratably, than the Holders of
the Notes, which may result in a reduction or elimination of payments to the
Holders of the Notes.
OPTIONAL REDEMPTION
Holding may not redeem the Notes prior to August 6, 2002. Holding may
redeem the Notes on and after August 6, 2002, in whole or in part, upon not less
than 30 nor more than 60 days notice to each holder, at the prices set forth
below.
The redemption price (expressed as a percentage of principal amount) is as
follows for the 12-month periods beginning on August 6 of the years indicated
below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2002........................................................ 102.30%
2003........................................................ 101.15%
</TABLE>
and thereafter is equal to 100% of the principal amount, in each case together
with accrued interest to the date of redemption.
No sinking fund is provided for the Notes.
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<PAGE> 27
PAYMENT AND CONVERSION
The principal of the Notes will be payable in U.S. dollars when the Notes
are surrendered at the Corporate Trust Office of the Trustee in the Borough of
Manhattan, The City of New York. Payment will be made by check drawn on a bank
in New York City, or, if requested by holders with more than $2,000,000 of
Notes, by transfer to a dollar account maintained by the holder with a bank in
New York City. Interest payments on each Note will be made to the person in
whose name the Note is registered at the close of business on the January 15 or
the July 15 immediately preceding the relevant interest payment date. Interest
payments are payable in U.S. dollars and made by a dollar check drawn on a bank
in New York City mailed to the holder at the holder's registered address. In
addition, if requested by a holder with more than $2,000,000 of Notes, interest
payments may be made by transfer to an account maintained by the holder with a
bank in New York City. No transfer to a dollar account will be made unless the
Trustee has received written wire instructions not less than 15 days prior to
the relevant payment date.
Payments on any global note registered in the name of DTC or its nominee
will be payable by the Trustee to DTC or its nominee. Under the terms of the
Indenture, Holding and the Trustee will treat the persons in whose names the
Notes, including the global note, are registered as the owners of the Notes or
the global note, as the case may be, for the purpose of receiving such payments
and for any and all other purposes whatsoever. Consequently, neither Holding,
the Trustee nor any agent of Holding or the Trustee has or will have any
responsibility or liability for any aspect of DTC's records or any participant's
or indirect participant's records relating to or payments made on account of
beneficial ownership interests in the global note, or for maintaining,
supervising or reviewing any of DTC's records or any participant's or indirect
participant's records relating to the beneficial ownership interests in the
global note.
Any payment on the Notes due on any day which is not a business day need
not be made on such day, but may be made on the next succeeding business day.
Notes may be surrendered for conversion at the Corporate Trust Office in
the Borough of Manhattan, The City of New York. Notes surrendered for conversion
must be accompanied by appropriate notices and any payments in respect of
interest or taxes, as applicable, as described above under " -- Conversion
Rights".
Holding has initially appointed the Trustee as paying agent and conversion
agent. Holding may at any time terminate the appointment of any paying agent or
conversion agent and appoint additional or other paying agents and conversion
agents, provided that until the Notes have been delivered to the Trustee for
cancellation, or moneys sufficient to pay the principal of, premium, if any, and
interest on the Notes have been made available for payment and either paid or
returned to Holding as provided in the Indenture, it will maintain an office or
agency in the Borough of Manhattan, The City of New York for surrender of Notes
for conversion. Notice of any such termination or appointment and of any change
in the office through which any paying agent or conversion agent will act will
be given in accordance with "-- Notices" below.
All moneys deposited with the Trustee or any paying agent, or then held by
Holding, in trust for the payment of principal of, premium, if any, or interest
on any Notes which remain unclaimed at the end of two years after the payment
has become due and payable will be repaid to Holding and the holder of the Note
will then look only to Holding for payment.
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE IN CONTROL
If a Change in Control occurs, then each holder of Notes shall have the
right to require that Holding purchase the holder's Notes, in whole or in part,
in integral multiples of $1,000, at a repurchase price in cash, in an amount
equal to 100% of the principal amount of such Notes or portion thereof, plus
accrued and unpaid interest, if any, to the date of purchase. Within 30 days
following the Change in Control, Holding will mail an offer to purchase to each
holder describing
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<PAGE> 28
the transaction or transactions that constitute the Change in Control and
offering to purchase Notes on the date specified in the offer to purchase.
Holding may, at its option, in lieu of paying the repurchase price in cash,
pay the repurchase price in Class A common stock valued at 95% of the average of
the closing bid prices of the Class A common stock for the five trading days
immediately preceding and including the third day prior to the repurchase date;
provided, that payment may not be made in Class A common stock unless Holding
satisfies certain conditions with respect to such payment prior to the
repurchase date as provided in the Indenture.
Except as otherwise provided below, a "Change in Control" means:
- the acquisition by any person (including any syndicate or group
deemed to be a "person" under Section 13(d)(3) of the Exchange Act) other
than the Ricketts Family of beneficial ownership, directly or indirectly,
through a purchase, merger or other acquisition transaction or series of
transactions, of shares of capital stock of Holding entitling such Person
to elect a majority of the board of directors of Holding, other than any
such acquisition by Holding, any subsidiary of Holding or any employee
benefit plan of Holding; or
- any consolidation or merger of Holding with or into any other
person, any merger of another person into Holding or any conveyance, sale,
transfer or lease of all or substantially all of the assets of Holding to
another person other than:
- any such transaction which does not result in any
reclassification, conversion, exchange or cancellation of outstanding
shares of capital stock of Holding and pursuant to which the holders of
the Class A common stock and Class B common stock of Holding immediately
prior to such transaction are entitled to exercise, directly or
indirectly, 50% or more of the total voting power of all shares of
capital stock entitled to vote generally in the election of directors of
the continuing or surviving corporation immediately after such
transaction and
- any merger which is effected solely to change the jurisdiction of
incorporation of Holding and results in a reclassification, conversion
or exchange of outstanding shares of Class A common stock solely into
shares of common stock.
A Change in Control will not be deemed to have occurred if:
- the closing bid price per share of the Class A common stock for any five
trading days within the period of 10 consecutive trading days ending immediately
after the later of the Change in Control or the public announcement of the
Change in Control (in the case of a Change in Control under the first bullet
point above) or the period of 10 consecutive trading days ending immediately
before the Change in Control (in the case of a Change in Control under the
second bullet point above) equals or exceeds 105% of the conversion price of the
Notes in effect on each such trading day; or
- all of the consideration (excluding cash payments for fractional shares
and cash payments made pursuant to dissenters' appraisal rights) in a merger or
consolidation constituting the Change in Control consists of shares of common
stock traded on a national securities exchange or on The Nasdaq National Market
(or will be so traded or quoted immediately following the Change in Control).
"Beneficial ownership" shall be determined in accordance with Rule 13d-3
promulgated by the Commission under the Exchange Act, as in effect on the date
of execution of the Indenture.
Rule 13e-4 under the Exchange Act requires the dissemination of certain
information to security holders in the event of an issuer tender offer and may
apply in the event that the repurchase option becomes available to Holders of
the Notes. Holding will comply with this rule to the extent applicable at that
time.
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<PAGE> 29
Holding may, to the extent permitted by applicable law, at any time
purchase Notes in the open market or by tender at any price or by private
agreement. Any Note so purchased by Holding may, to the extent permitted by
applicable law and subject to restrictions contained in the Purchase Agreement,
be re-issued or resold or may, at Holding's option, be surrendered to the
Trustee for cancellation. Any Notes surrendered as aforesaid may not be
re-issued or resold and will be canceled promptly.
Holding will not be required to make an offer to purchase upon a Change in
Control if a third party makes the Offer to Purchase in the manner, at the times
and otherwise in compliance with the requirements set forth in the Indenture
applicable to the offer to purchase made by Holding and purchases all Notes
validly tendered and not withdrawn under such offer to purchase.
The foregoing provisions would not necessarily afford Holders of the Notes
protection in the event of highly leveraged or other transactions involving
Holding that may adversely affect Holders.
Holding's ability to repurchase Notes upon the occurrence of a Change in
Control is subject to limitations. There can be no assurance that Holding would
have the financial resources, or would be able to arrange financing, to pay the
repurchase price for all the Notes that might be delivered by Holders of Notes
seeking to exercise the repurchase right. Moreover, although under the Indenture
Holding may elect, subject to satisfaction of certain conditions, to pay the
repurchase price for the Notes using shares of Class A common stock, Holding's
ability to repurchase Notes may be limited or prohibited by the terms of
borrowing arrangements, including Holding's revolving credit agreement and other
Senior Indebtedness existing at the time of a Change in Control. Holding's
ability to repurchase Notes with cash may also be limited by the terms of its
subsidiaries' borrowing arrangements due to dividend restrictions. Any failure
by Holding to repurchase the Notes when required following a Change in Control
would result in an Event of Default under the Indenture whether or not such
repurchase is permitted by the subordination provisions of the Indenture. Any
such default may, in turn, cause a default under Senior Indebtedness of Holding.
Moreover, the occurrence of a Change in Control could result in an event of
default under the terms of Holding's revolving credit agreement or under the
terms of other Senior Indebtedness of Holding. As a result, in each case, any
repurchase of the Notes would, absent a waiver, be prohibited under the
subordination provisions of the Indenture until the Senior Indebtedness is paid
in full. In addition, Holding's repurchase of Notes as a result of the
occurrence of a Change in Control may be prohibited or limited by, or create an
event of default under, the terms of agreements related to borrowings which
Holding may enter into from time to time, including agreements relating to
Senior Indebtedness. See "-- Subordination".
MERGERS AND SALES OF ASSETS BY HOLDING
Holding may not consolidate with or merge into any other person or convey,
transfer, sell or lease its properties and assets substantially as an entirety
to any person unless:
- the person formed by such consolidation or into or with which Holding is
merged or the person to which the properties and assets of Holding are so
conveyed, transferred, sold or leased shall be a corporation, limited liability
company, partnership or trust organized and existing under the laws of the
United States, any State thereof or the District of Columbia and, if other than
Holding, shall expressly assume the payment of the principal of, premium, if
any, and interest on the Notes and the performance of the other covenants of
Holding under the Indenture and
- immediately after giving effect to that transaction, no event of default,
and no event that, after notice or lapse of time or both, would become an event
of default, shall have occurred and be continuing.
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<PAGE> 30
EVENTS OF DEFAULT
The following will be events of default under the Indenture:
- failure to pay principal of or premium, if any, on any Note when due,
whether or not such payment is prohibited by the subordination provisions of the
Notes and the Indenture;
- failure to pay any interest on any Note when due, continuing for 30 days,
whether or not such payment is prohibited by the subordination provisions of the
Notes and the Indenture;
- failure to provide an offer to purchase in the event of a Change in
Control whether or not such Offer to Purchase is prohibited by the subordination
provisions of the Notes and the Indenture;
- failure to perform any other covenant of Holding in the Indenture
continuing for 60 days after written notice as provided in the Indenture;
- any default by Holding or any significant subsidiary in the payment of
the principal, premium, if any, or interest has occurred with respect to amounts
in excess of $25 million under any agreement, indenture or instrument evidencing
indebtedness when the same shall become due and payable in full and such default
shall have continued after any applicable grace period and shall not have been
cured or waived and, if not already matured at its final maturity in accordance
with its terms, the holder of such indebtedness shall have the right to
accelerate such indebtedness;
- any event of default as defined in any agreement, indenture or instrument
of Holding or any significant subsidiary evidencing indebtedness in excess of
$25 million shall have occurred and the indebtedness thereunder, if not already
matured at its final maturity in accordance with its terms, shall have been
accelerated; and
- certain events of bankruptcy, insolvency or reorganization with respect
to Holding or any significant subsidiary.
If an event of default (other than with respect to the bankruptcy,
insolvency or reorganization of Holding) shall occur and be continuing, either
the Trustee or the Holders of at least 25% in principal amount of the
outstanding Notes may accelerate the maturity of all Notes. However, after
acceleration, but before a judgment or decree based on acceleration, the holders
of a majority in aggregate principal amount of outstanding Notes may rescind and
annul the acceleration if all events of default, other than the non-payment of
principal of the Notes which have become due solely by such declaration of
acceleration, have been cured or waived as provided in the Indenture. If an
event of default with respect to the bankruptcy, insolvency or reorganization of
Holding occurs and is continuing, then the principal of, and accrued interest
on, all the Notes shall automatically become immediately due and payable without
any declaration or other act on the part of the holders of the Notes or the
Trustee. For information as to waiver of defaults, see "-- Meetings,
Modification and Waiver".
The holders of a majority in aggregate principal amount of the outstanding
Notes will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. No holder of any Note will have any right to
institute any proceeding with respect to the Indenture or for any remedy
thereunder unless:
- the holder shall have previously given to the Trustee written notice of a
continuing event of default; and
- the holders of at least 25% in aggregate principal amount of the
outstanding Notes shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as trustee, and the
Trustee shall not have received from the Holders of a majority in
28
<PAGE> 31
aggregate principal amount of the outstanding Notes a direction inconsistent
with the request and shall have failed to institute the proceeding within 60
days.
However, these limitations do not apply to a suit instituted by a holder of a
Note for the enforcement of payment of the principal of, premium, if any, or
interest on such Note on or after the respective due dates expressed in such
Note or of the right to convert such Note in accordance with the Indenture.
Holding will be required to furnish to the Trustee annually a statement as
to the performance by Holding of certain of its obligations under the Indenture
and as to any default in such performance.
MEETINGS, MODIFICATION AND WAIVER
The Indenture contains provisions for convening meetings of the Holders of
Notes to consider matters affecting their interests.
Limited modifications of the Indenture may be made without the necessity of
obtaining the consent of the holders of Notes. Other modifications and
amendments of the Indenture may be made, and certain past defaults by Holding
may be waived, either:
- with the written consent of the holders of not less than a majority in
aggregate principal amount of the Notes at the time outstanding or
- by the adoption of a resolution, at a meeting of holders of the Notes at
which a quorum is present, by the holders of at least 66 2/3% in aggregate
principal amount of the Notes represented at such meeting.
However, the consent of the holder of each outstanding Note affected is
required to approve modifications or amendments of the Notes that would:
- change the stated maturity of the principal of, or any installment of
interest on, any Note,
- reduce the principal amount of, or the premium, if any, or interest on,
any Note,
- reduce the amount payable upon a redemption or mandatory repurchase,
- modify the provisions with respect to the repurchase right of the holder
in a manner adverse to the Holders,
- change the currency of payment of principal of, premium, if any, or
interest on, any Note,
- except as otherwise permitted or contemplated by provisions concerning
consolidation, merger, conveyance, transfer, sale or lease of all or
substantially all of the property and assets of Holding, adversely affect the
right of holders to convert any of the Notes or to require Holding to repurchase
any Note other than as provided in the Indenture,
- modify the subordination provisions in a manner adverse to the holders of
the Notes,
- reduce the above stated percentage of outstanding Notes necessary to
modify or amend the Indenture,
- reduce the percentage of aggregate principal amount of outstanding Notes
necessary for waiver of compliance with certain provisions of the Indenture or
for waiver of certain defaults,
- reduce the percentage in aggregate principal amount of outstanding Notes
required for the adoption of a resolution or the quorum required at any meeting
of holders of Notes at which a resolution is adopted or
- modify the obligation of Holding to deliver information required under
Rule 144A to permit resales of Notes and Class A common stock issuable upon
conversion thereof in the event
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<PAGE> 32
Holding ceases to be subject to certain reporting requirements under the United
States securities laws.
The quorum at any meeting called to adopt a resolution will be persons
holding or representing a majority in aggregate principal amount of the Notes at
the time outstanding and, at any reconvened meeting adjourned for lack of a
quorum, 25% of the aggregate principal amount.
The holders of a majority in aggregate principal amount of the outstanding
Notes may waive compliance by Holding with certain restrictive provisions of the
Indenture by written consent or by the adoption of a resolution at a meeting.
The holders of a majority in aggregate principal amount of the outstanding Notes
also may waive any past default under the Indenture, except a default in the
payment of principal, premium, if any, or interest, by written consent.
REGISTRATION RIGHTS
Holding has entered into a registration rights agreement with the initial
purchaser of the Notes pursuant to which Holding has agreed to, at its expense,
for the benefit of the holders of the Notes and the shares of Class A common
stock issuable upon conversion thereof (together, the "Registrable Securities"),
(1) file with the SEC, within 90 days after the date of original issuance of the
Notes, a registration statement (the "Shelf Registration Statement") covering
resales of the Registrable Securities, (2) use all reasonable efforts to cause
the Shelf Registration Statement to be declared effective under the Securities
Act within 180 days after the date of original issuance of the Notes and (3) use
all reasonable efforts to keep effective the Shelf Registration Statement until
two years after the date it is declared effective or, if earlier, until there
are no outstanding registrable securities (the "Effectiveness Period"). The
Registration Statement of which this prospectus is a part has been filed to
satisfy these obligations and any reference to Shelf Registration Statement
shall mean such Registration Statement, as amended or supplemented. Any
reference to the prospectus that is part of the Shelf Registration Statement
shall mean this prospectus, as amended or supplemented.
Holding will be permitted to suspend the use of the prospectus which is
part of the Shelf Registration Statement in connection with sales of Registrable
Securities during certain periods of time (not to exceed an aggregate of 45 days
in any 90 day period, or an aggregate of 90 days in any 365 day period) under
certain circumstances relating to pending corporate financings, acquisitions and
other events. Holding will provide to each holder of Registrable Securities
copies of the prospectus that is a part of the Shelf Registration Statement,
notify each holder when the Shelf Registration Statement has become effective
and take certain other actions as are required to permit public resales of the
Registrable Securities.
Holding may, upon written notice to all the holders, postpone having the
Shelf Registration Statement declared effective as required by the registration
rights agreement for a reasonable period not to exceed 90 days if Holding
determines that it should disclose in the Shelf Registration Statement a
financing, acquisition or other corporate transaction and Holding determines in
good faith that such disclosure is not in the best interests of Holding and its
stockholders. Notwithstanding any such postponement, if (1) on or prior to 90
days following the date of original issuance of the Notes, a Shelf Registration
Statement has not been filed with the SEC or (2) on or prior to 180 days
following the date of original issuance of the Notes, the Shelf Registration
Statement is not declared effective (each, a "Registration Default"), additional
interest ("Liquidated Damages") will accrue on the Notes, from and including the
day following the Registration Default to but excluding the day on which the
Registration Default has been cured. Liquidated Damages will be paid
semi-annually in arrears, with the first semi-annual payment due on the first
interest payment date as applicable, following the date on which the Liquidated
Damages begin to accrue, and will accrue at a rate per annum equal to an
additional one-quarter of one percent (.25%) of the principal amount, to and
including the 90th day
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following the Registration Default and one-half of one percent (.5%) thereof
from and after the 91st day following the Registration Default. In the event
that the Shelf Registration Statement ceases to be effective (or the holders of
Registrable Securities are otherwise prevented or restricted by Holding from
effecting sales pursuant thereto) (an "Effective Failure") during the
Effectiveness Period for more than 45 days, whether or not consecutive, during
any 90 day period, or for more than 90 days, whether or not consecutive, during
any 12-month period then, in either case, the interest rate borne by the Notes
will increase by an additional one-half of one percent (.5%) per annum from the
46th day of the applicable 90 day period or the 91st day of the applicable
12-month period, as the case may be, until such time as the Effective Failure is
cured.
A holder who elects to sell any Registrable Securities pursuant to the
Shelf Registration Statement will be required to be named as a selling security
holder in the related prospectus, may be required to deliver a prospectus to
purchasers, may be subject to certain civil liability provisions under the
Securities Act in connection with such sales and will be bound by the provisions
of the registration rights agreement that are applicable to a holder making such
election, including certain indemnification provisions.
Holding has mailed a Notice and Questionnaire to the holders of Registrable
Securities. No holder of Registrable Securities shall be entitled to be named as
a selling securityholder in the Shelf Registration Statement as of the effective
date of the Shelf Registration Statement, and no holder of Registrable
Securities shall be entitled to use the prospectus forming a part thereof for
offers and resales of Registrable Securities at any time, unless such holder has
returned a completed and signed Notice and Questionnaire to Holding by the
deadline for response set forth in the notice; provided, that holders of
Registrable Securities shall have at least 28 calendar days from the date on
which the Notice and Questionnaire is first mailed to such holders to return a
completed and signed Notice and Questionnaire to Holding.
After the effective date of the Shelf Registration Statement, Holding
shall, upon the request of any holder of Registrable Securities that is not then
named in the related prospectus, as promptly as reasonably practicable, send a
Notice and Questionnaire to such holder. Holding shall not be required to take
any action to name such holder as a selling holder in the Shelf Registration
Statement until the holder has returned a completed and signed Notice and
Questionnaire to Holding. Following its receipt of a Notice and Questionnaire,
Holding will as promptly as practicable include the Registrable Securities
covered by that Notice and Questionnaire in the Shelf Registration Statement, if
not previously included.
Holding has agreed in the registration rights agreement to use all
reasonable efforts to cause the shares of Class A common stock issuable upon
conversion of the Notes to be quoted on The Nasdaq National Market upon
effectiveness of the Shelf Registration Statement.
TITLE
Holding, the Trustee, any paying agent and any conversion agent may treat
the registered owner (as reflected in the security register) of any Note as the
absolute owner of that Note for the purpose of making payment and for all other
purposes.
NOTICES
Notice to holders of the Notes will be given by mail to the addresses of
the holders as they appear in the security register. The notices will be deemed
to have been given on the date of mailing.
Notice of a redemption of Notes will be given at least once not less than
30 and not more than 60 days prior to the redemption date (which notice may be
revoked) and will specify the redemption date.
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REPLACEMENT OF NOTES
Notes that become mutilated, destroyed, stolen or lost will be replaced by
Holding at the expense of the holder upon delivery to the Trustee of the
mutilated Notes or evidence of the loss, theft or destruction thereof
satisfactory to Holding and the Trustee, in the case of a lost, stolen or
destroyed Note, indemnity satisfactory to the Trustee and Holding may be
required at the expense of the holder of the Note before a replacement Note will
be issued.
PAYMENT OF STAMP AND OTHER TAXES
Holding will pay all stamp and other duties, if any, which may be imposed
by the United States or any political subdivision thereof or taxing authority
thereof or therein with respect to the issuance of the Notes. Holding is not be
required to make any payment with respect to any other tax, assessment or
governmental charge imposed by any government or any political subdivision
thereof or taxing authority.
GOVERNING LAW
The Indenture and the Notes are governed by and to be construed in
accordance with the laws of the State of New York, United States of America.
THE TRUSTEE
In case an event of default shall occur and shall not be cured, the Trustee
will be required to use the degree of care of a prudent person in the conduct of
his own affairs in the exercise of its powers. The Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any of the holders of Notes, unless they shall have offered to the
Trustee reasonable security or indemnity satisfactory to the Trustee.
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DESCRIPTION OF CAPITAL STOCK
The following summary description of our capital stock is based on the
provisions of our certificate of incorporation and bylaws and the applicable
provisions of the Delaware General Corporation Law. For information on how to
obtain copies of our certificate of incorporation and bylaws, see "Where You Can
Find More Information".
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
We currently have authority to issue 291,000,000 shares of capital stock,
consisting of 270,000,000 shares of Class A common stock, $.01 par value,
18,000,000 shares of Class B common stock, $.01 par value, and 3,000,000 shares
of preferred stock, $1.00 par value. As of September 1, 1999, 158,103,480 shares
of our Class A common stock, 16,372,800 shares of our Class B common stock and
no shares of our preferred stock were issued and outstanding.
The authorized and unissued shares of common stock and preferred stock may
be utilized for a variety of corporate purposes, including future public
offerings and corporate acquisitions, and could be utilized, under certain
circumstances, to delay, prevent or make more difficult a takeover or change in
control of Holding.
The rights of the holders of our Class A common stock and our Class B
common stock discussed below are subject to such rights as our board of
directors may from time to time confer on holders of our preferred stock that
may be issued in the future. Such rights may adversely affect the rights of
holders of our Class A common stock or our Class B common stock, or both.
COMMON STOCK
VOTING RIGHTS. Except for the election of directors and as otherwise
required by the law, the holders of our Class A common stock and our Class B
common stock have one vote per share and vote as a single class on any matter
submitted to a stockholder vote. Under the Delaware General Corporation Law, the
holders of Class A common stock must vote separately as a class to approve any
proposal to amend the certificate of incorporation to change the rights,
preferences and limitations of Class A common stock. Our board of directors
determines by resolution the number of directors we will have but, in any case,
by our bylaws, we may not have less than three. We currently have nine
directors.
The holders of our Class B common stock are entitled to elect a majority
(five) of our board of directors. The holders of Class A common stock are
entitled to elect the remaining (four) directors. Only the holders of the class
of common stock that have elected a director or that have filled the vacancy of
a director previously may remove or fill the vacancy of that director. If all of
the shares of Class B common stock are converted into Class A common stock or
are no longer outstanding, the holders of Class A common stock will be entitled
to elect all of the directors, subject to any rights of the holders of preferred
stock. The shares of Class A common stock and Class B common stock do not have
cumulative voting rights.
In general, the holders of our Class B common stock will be able to defeat
any attempt to acquire control of us even if more than a majority of the holders
of the outstanding shares of common stock favor a change of control. This could
preclude holders of shares of our common stock from receiving any premium above
market price for their shares that may be offered in an attempt to acquire
control of us. By their ability to control the board of directors, the holders
of our Class B common stock also will generally have the power to prevent
certain fundamental corporate changes, like a sale of substantially all of our
assets, a merger of our company or an amendment to our certificate of
incorporation.
DIVIDEND RIGHTS. Dividends may be paid on our Class A common stock and our
Class B common stock when and as declared by our board of directors. Any
dividend declared and
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payable in cash, capital stock (other than our Class A common stock or our Class
B common stock) or other property must be paid equally on a share-for-share
basis on Class A common stock and Class B common stock. Dividends and
distributions payable in shares of Class A common stock may be paid only on
shares of Class A common stock, and dividends and distributions payable in
shares of Class B common stock may be paid only on shares of Class B common
stock. If a dividend or distribution payable in Class A common stock is made on
Class A common stock, the same dividend or distribution in Class B common stock
has to be made on Class B common stock. Similarly, if a dividend or distribution
payable in Class B common stock is made on Class B common stock, the same
dividend or distribution in Class A common stock must be made on Class A common
stock.
LIQUIDATION RIGHTS. If there is a liquidation, distribution or winding up
of Holding, the holders of our Class A common stock and the holders of our Class
B common stock will be entitled to participate equally on a share-for-share
basis in all distributions to the holders of common stock.
CONVERSION RIGHTS. Our Class A common stock is not convertible. Each share
of Class B common stock is convertible into one share of Class A common stock at
any time at the option of and without any cost to the holder of the share. Each
share of Class B common stock automatically converts into one share of Class A
common stock if that share of Class B common stock is sold or transferred to any
person other than a member of the Control Group. In addition, each share of
Class B common stock automatically converts into one share of Class A common
stock if the number of shares of outstanding common stock held by the Control
Group falls below 20 percent of the total number of shares of outstanding common
stock.
PREEMPTIVE RIGHTS. Neither the holders of Class A common stock nor the
holders of Class B common stock have preemptive rights to purchase shares of
Class A or Class B common stock or shares of stock of any other class that we
may issue.
PREFERRED STOCK
Our board of directors are authorized to issue, by resolution and without
any action by stockholders, up to 3,000,000 shares of our preferred stock and
may establish the designations, dividend rights, dividend rate, conversion
rights, voting rights, terms of redemption, liquidation preference, sinking fund
terms and all other preferences and rights of any series of preferred stock,
including rights that could adversely affect the voting power of the holders of
Class A common stock. We have no present intention to issue any shares of
preferred stock.
DIRECTOR NOMINATIONS AND STOCKHOLDER PROPOSALS.
Our bylaws establish procedures for the nomination of candidates for
election as directors and stockholder proposals. In order to nominate directors
or bring other business before an annual meeting of stockholders, a stockholder
must give notice to the secretary not less than 120 days and not more than 150
days prior to the date of our proxy statement for the preceding year's annual
meeting. To make nominations or bring other business before a special meeting of
stockholders, a stockholder must give notice to the secretary not less than 60
days and not more than 90 days prior to the date of the special meeting. Only
the chief executive officer, the president, the majority of the board of
directors or the holders of not less than 25% of our outstanding voting stock
may call a special meeting of the stockholders. A stockholder may nominate a
person to be a director only if that stockholder would be entitled to vote for
that person in the election for that director. Also, the stockholder's notice
for nominating a director must provide all information relating to the person
being nominated that is required by Regulation 14A of the Exchange Act.
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CERTAIN STATUTORY PROVISIONS.
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. In general, this statute prohibits a publicly held Delaware
corporation like us from engaging in a business combination with an interested
stockholder for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless
- - prior to that date, the corporation's board of directors approved either the
business combination or the transaction that resulted in the stockholder
becoming an interested stockholder,
- - upon consummation of the transaction that resulted in such person becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding, for purposes of determining the number of shares
outstanding, shares owned by directors who are also officers and by certain
employee stock plans, or
- - on or after the date the stockholder became an interested stockholder, the
business combination is approved by the corporation's board of directors and
authorized by the affirmative vote, and not by written consent, of at least
two-thirds of the outstanding voting stock of the corporation excluding the
stock owned by the interested stockholder.
A "business combination" includes a merger or consolidation, asset sale or
other transaction resulting, directly or indirectly, in a financial benefit to
the interested stockholder. An "interested stockholder" is a person, other than
the corporation and any direct or indirect majority owned subsidiary of the
corporation, who (1) is the owner of 15% or more of the corporation's
outstanding voting stock or (2) is an affiliate or associate of the corporation
and was the owner of 15% or more of the corporation's outstanding voting stock
at any time within the three-year period immediately prior to the date on which
it is sought to be determined whether a person is an interested stockholder,
including the affiliates or associates of that person.
Section 203 expressly exempts from the requirements described above any
business combination by a corporation with an interested stockholder who became
an interested stockholder at a time when the section did not apply to the
corporation.
LIMITATION OF LIABILITY AND INDEMNIFICATION
LIMITATIONS OF DIRECTOR LIABILITY. Section 102(b)(7) of the Delaware
General Corporation Law authorizes corporations to limit or eliminate the
personal liability of directors to corporations and their stockholders for
monetary damages for breach of directors' fiduciary duty of care. Our
certificate of incorporation limits the liability of our directors to us or our
stockholders to the full extent permitted by the law. Specifically, our
directors are not personally liable for monetary damages to us or our
stockholders for breach of the director's fiduciary duty as a director, except
for liability for:
- - any breach of the director's duty of loyalty to us or our stockholders;
- - acts or omissions not in good faith or that involve intentional misconduct or
a knowing violation of law;
- - unlawful payments of dividends or unlawful stock repurchases or redemptions as
provided in Section 174 of the Delaware General Corporation Law; and
- - any transaction from which the director derived an improper personal benefit.
These provisions in our certificate of incorporation do not eliminate a
director's duty of care and do not affect the availability of equitable remedies
such as an action to enjoin or rescind a
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transaction involving a breach of fiduciary duty. Moreover, these provisions
probably would not bar claims against a director for violation of the federal
securities laws.
INDEMNIFICATION. Our bylaws require us to indemnify our directors and
officers to the maximum extent permitted by law against any expense, liability
or loss to which they may become subject, or which they may incur as a result of
being or having been a director or officer of our company. In addition, we must
advance or reimburse directors and officers for expenses incurred by them
relating to indemnifiable claims. We also maintain directors' and officers'
liability insurance, which covers liabilities under the federal securities laws.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our Class A common stock is The Bank
of New York.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following describes the material United States federal income tax
consequences to a United States holder, as defined below, of the ownership and
disposition of the Notes and the Class A common stock into which the Notes may
be converted. It deals only with Notes and shares of Class A common stock that
are held as capital assets by investors who purchase the Notes in the offering
at the offering price. It does not address special classes of holders including:
- dealers in securities or currencies,
- traders in securities that elect to mark to market,
- banks,
- insurance companies,
- persons that hold Notes or the Class A common stock as a hedge, or
hedged against, currency or interest rate risks or that are part of a
straddle or conversion transaction, or
- persons whose functional currency is not the U.S. dollar.
If you purchase the Notes at a price other than the offering price,
amortizable bond premium or market discount rules may also apply. You should
consult your tax advisor regarding this possibility. This discussion is based on
the tax laws of the United States, including the Internal Revenue Code of 1986,
as amended (the "Code"), existing and proposed regulations thereunder, and
administrative and judicial interpretations thereof, as currently in effect.
These laws are subject to change, possibly on a retroactive basis.
Before purchasing these Notes, please consult your own tax advisor
concerning the consequences of owning these Notes in your particular
circumstances under the Code and the laws of any other jurisdiction.
FEDERAL INCOME TAX CONSEQUENCES OF THE REGISTRATION
The registration of the Notes and the Class A common stock will not result
in any income, gain or loss to the holders of the Notes or to Holding.
UNITED STATES HOLDER
You are a "United States holder" if you are a beneficial owner and you are:
- a citizen or resident of the United States,
- a domestic corporation,
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- an estate whose income is subject to United States federal income tax
regardless of its source, or
- a trust if a United States court can exercise primary supervision over
the trust's administration and one or more United States persons are
authorized to control all substantial decisions of the trust.
PAYMENT OF INTEREST
Interest on your Note is taxable as ordinary income that you will recognize
when you receive the interest or when the interest accrues, depending on your
method of accounting for tax purposes. We intend to take the position that the
likelihood of a repurchase upon a Change in Control, as described under
"Description of Notes -- Repurchase at Option of Holders Upon a Change in
Control", is remote under the applicable Treasury regulations, and therefore,
will not affect the yield to maturity of a Note. Accordingly, the Notes will not
have any original issue discount.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
Upon the sale, exchange or redemption of a Note, you generally will
recognize capital gain or loss equal to the difference between the amount
realized (with the exception of any amount attributable to accrued but unpaid
interest that is generally treated as ordinary income) and your tax basis in the
Note. Your tax basis in your Note generally will be its cost. Your capital gain
will be long-term capital gain that is taxed at a maximum rate of 20% if you are
a non-corporate holder and have held the Note for longer than one year.
CONVERSION OF THE NOTES
You generally will not recognize any income, gain or loss upon the
conversion of a Note into a Class A common stock, except with respect to cash
received in lieu of a fractional share of Class A common stock or attributable
to accrued interest on your converted Note. Your tax basis in the Class A common
stock you receive on conversion of a Note will be the same as your basis in the
Note at the time of the conversion, reduced by any basis allocable to a
fractional share interest, and your holding period for the Class A common stock
you receive on conversion will generally include the holding period of the Note
converted, except with respect to any Class A common stock received in respect
of accrued but unpaid interest.
Cash you receive in lieu of a fractional share of Class A common stock upon
conversion generally will be treated as a payment in exchange for the fractional
share of Class A common stock. Accordingly, the receipt of cash in lieu of a
fractional share of Class A common stock will result in capital gain or loss,
measured by the difference between the cash you received for the fractional
share and your adjusted tax basis in the fractional share.
DIVIDENDS ON THE CLASS A COMMON STOCK
The amount of any distribution you receive from us in respect of Class A
common stock will be equal to the amount of cash and the fair market value, on
the date of distribution, of any property distributed. Generally, distributions
will be treated as a dividend, subject to tax as ordinary income, to the extent
of our current or accumulated earnings and profits, then as a tax-free return of
capital to the extent of your basis in the shares of Class A common stock and
thereafter as gain from the sale or exchange of the stock.
In general, if you are a corporate United States holder any dividend you
receive will qualify for the 70% dividends-received deduction if you own less
than 20% of the voting power or value of our stock, other than non-voting,
non-convertible, non-participating preferred stock. If you are a corporate
United States holder and own 20% or more of the voting power and value of our
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stock, other than non-voting, non-convertible, non-participating preferred
stock, you generally will qualify for an 80% dividends-received deduction. The
dividends-received deduction is subject, however, to certain holding period,
taxable income and other limitations. In addition, corporate holders should
consider the rules under section 1059 of the Code that may reduce their basis in
the Class A common stock.
If at any time we make a distribution of cash or property to our
stockholders or purchase Class A common stock and the distribution or purchase
would be taxable to the stockholders as a dividend for United States federal
income tax purposes, e.g. distributions of evidences of indebtedness or assets,
but generally not stock dividends or rights to subscribe for Class A common
stock, and in connection with such distribution the Conversion Rate of the Notes
is increased, the increase in the Conversion Rate of the Notes may be deemed to
be the payment of a taxable dividend to holders of the Notes, pursuant to
section 305 of the Code, to the extent of our current or accumulated earnings
and profits. Consequently, you could have taxable income as a result of an event
pursuant to which you did not receive any cash or property.
SALE OF CLASS A COMMON STOCK
Upon your sale or exchange of Class A common stock, you generally will
recognize capital gain or loss equal to the difference between the amount you
received upon the sale or exchange and your tax basis in the Class A common
stock. The capital gain or loss will be long-term if your holding period in the
Class A common stock is more than one year at the time of the sale or exchange.
Long-term capital gain of a non-corporate United States holder is generally
subject to a maximum rate of 20%.
BACKUP WITHHOLDING AND INFORMATION REPORTING
PAYMENTS OF PRINCIPAL, INTEREST AND DIVIDENDS
If you are a non-corporate United States holder, information reporting
requirements generally will apply to payments within the United States of
principal and interest on a Note or dividend payments on the Class A common
stock.
Additionally, backup withholding at a rate of 31% will apply to such
payments if you:
- fail to provide an accurate taxpayer identification number or
- are notified by the Internal Revenue Service that you have failed to
report all interest and dividends required to be shown on your federal
income tax returns.
PROCEEDS FROM THE SALE OF A NOTE OR CLASS A COMMON STOCK
Payment of the proceeds from the sale of a Note to or through the United
States office of a broker may be subject to information reporting and backup
withholding. Payment of the proceeds from the sale of a Note made to or through
a foreign office of a broker generally will not be subject to information
reporting or backup withholding. Information reporting, but not backup
withholding, may apply to such payments, however, if the broker is:
- a United States person,
- a controlled foreign corporation for United States tax purposes,
- a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified
three-year period, or
- with respect to payments made after December 31, 2000, a foreign
partnership, if at any time during its tax year
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-- one or more of its partners are United States persons, as defined in
U.S. Treasury regulations, who in the aggregate hold more than 50% of
the income or capital interest in the partnership or
-- the foreign partnership is engaged in a United States trade or
business, unless the broker has documentary evidence in its records
that the holder is a non-United States person and does not have actual
knowledge that the holder is a United States person or otherwise
establishes an exemption.
The preceding discussion of certain United States federal income and estate
tax consequences is for general information only and is not tax advice.
Accordingly, each investor should consult its own tax advisor as to particular
tax consequences to it of purchasing, holding and disposing of the Notes and the
Class A common stock, including the applicability and effect of any state, local
or foreign tax laws, and of any proposed changes in applicable laws.
PLAN OF DISTRIBUTION
The selling holders and their successors, including their transferees,
pledgees or donees or their successors, may sell the Notes and the Class A
common stock into which the Notes are convertible directly to purchasers or
through underwriters, broker-dealers or agents, who may receive compensation in
the form of discounts, concessions or commissions from the selling holders or
the purchasers. These discounts, concessions or commissions as to any particular
underwriter, broker-dealer or agent may be in excess of those customary in the
types of transactions involved.
The Notes and the Class A common stock into which the Notes are convertible
may be sold in one or more transactions at fixed prices, at prevailing market
prices at the time of sale, at prices related to the prevailing market prices,
at varying prices determined at the time of sale, or at negotiated prices. These
sales may be effected in transactions, which may involve crosses or block
transactions:
- on any national securities exchange or U.S. inter-dealer system of a
registered national securities association on which the Notes or the
Class A common stock may be listed or quoted at the time of sale;
- in the over-the-counter market;
- in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
- through the writing of options, whether the options are listed on an
options exchange or otherwise; or
- through the settlement of short sales.
In connection with the sale of the Notes and the Class A common stock into
which the Notes are convertible or otherwise, the selling holders may enter into
hedging transactions with broker-dealers or other financial institutions, which
may in turn engage in short sales of the Notes or the Class A common stock into
which the Notes are convertible in the course of hedging the positions they
assume. The selling holders may also sell the Notes or the Class A common stock
into which the Notes are convertible short and deliver these securities to close
out their short positions, or loan or pledge the Notes or the Class A common
stock into which the Notes are convertible to broker-dealers that in turn may
sell these securities.
The aggregate proceeds to the selling holders from the sale of the Notes or
Class A common stock into which the Notes are convertible offered by them will
be the purchase price of the Notes or Class A common stock less discounts and
commissions, if any. Each of the selling holders reserves the right to accept
and, together with their agents from time to time, to reject, in
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whole or in part, any proposed purchase of Notes or Class A common stock to be
made directly or through agents. Holding will not receive any of the proceeds
from this offering.
The Class A common stock is listed for trading on The Nasdaq National
Market. The Notes are currently eligible for trading on the PORTAL System of the
NASD.
In order to comply with the securities laws of some states, if applicable,
the Notes and Class A common stock into which the Notes are convertible may be
sold in these jurisdictions only through registered or licensed brokers or
dealers. In addition, in some states the Notes and Class A common stock into
which the Notes are convertible may not be sold unless they have been registered
or qualified for sale or an exemption from registration or qualification
requirements is available and is complied with.
The selling holders and any underwriters, broker-dealers or agents that
participate in the sale of the Notes and Class A common stock into which the
Notes are convertible may be "underwriters" within the meaning of Section 2(11)
of the Securities Act. Any discounts, commissions, concessions or profit they
earn on any resale of the shares may be underwriting discounts and commissions
under the Securities Act. Selling holders who are "underwriters" within the
meaning of Section 2(11) of the Securities Act will be subject to the prospectus
delivery requirements of the Securities Act. The selling holders have
acknowledged that they understand their obligations to comply with the
provisions of the Exchange Act and the rules thereunder relating to stock
manipulation, particularly Regulation M.
In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus. A selling holder
may not sell any Notes or Class A common stock described in this prospectus and
may transfer, devise or gift these securities by other means not described in
this prospectus.
To the extent required, the specific Notes or Class A common stock to be
sold, the names of the selling holders, the respective purchase prices and
public offering prices, the names of any agent, dealer or underwriter, and any
applicable commissions or discounts with respect to a particular offer will be
set forth in an accompanying prospectus supplement or, if appropriate, a
post-effective amendment to the registration statement of which this prospectus
is a part.
Holding entered into a registration rights agreement for the benefit of
holders of the Notes to register their Notes and Class A common stock under
applicable federal and state securities laws under specific circumstances and at
specific times. The registration rights agreement provides for
cross-indemnification of the selling holders and Holding and their respective
directors, officers and controlling persons against specific liabilities in
connection with the offer and sale of the Notes and the Class A common stock,
including liabilities under the Securities Act. Holding will pay substantially
all of the expenses incurred by the selling holders of Holding incident to the
offering and sale of the Notes and the Class A common stock.
VALIDITY OF SECURITIES
The validity of the Notes and the Class A common stock issuable upon
conversion thereof is being passed upon for us by Mayer, Brown & Platt, Chicago,
Illinois.
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EXPERTS
The consolidated financial statements of Holding as of September 25, 1998
and September 26, 1997 and for each of the years in the three year period ended
September 25, 1998, included in this prospectus and the related financial
statement schedule incorporated by reference in this prospectus from our Annual
Report on Form 10-K/A for the year ended September 25, 1998 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports, which
are included and incorporated by reference herein, and have been so included and
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement that we filed with the
SEC. The registration statement, including the attached exhibits, contain
additional relevant information about us and our Class A common stock. The rules
and regulations of the SEC allow us to omit some of the information included in
the registration statement from this prospectus. In addition, we file reports,
proxy statements and other information with the SEC under the Exchange Act. You
may read and copy any of this information at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
You may obtain information on the operation of the SEC's Public Reference
Room by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet Web site that contains reports, proxy
statements and other information regarding issuers, like us, that file
electronically with the SEC. The address of that site is http://www.sec.gov. The
SEC file number for our documents filed under the Exchange Act is 0-22163.
The SEC allows us to "incorporate by reference" information into this
prospectus. This means we can disclose important information to you by referring
you to another document filed separately with the SEC. This prospectus
incorporates by reference important business and financial information about us.
The information incorporated by reference is considered to be a part of this
prospectus, except for any such information that is superseded by information
included directly in this document, and later information that we file with the
SEC will automatically update and supersede all of such information.
This prospectus incorporates by reference the documents listed below that
we have previously filed or will file with the SEC:
- - Our Annual Report on Form 10-K for our fiscal year ended September 25, 1998,
filed on December 21, 1998, as amended by Form 10-K/A filed on January 20,
1999 (except for Item 8, "Financial Statements and Supplementary Data", which
has been updated and included elsewhere in this prospectus);
- - Our Quarterly Report on Form 10-Q for the quarterly period ended December 31,
1998, filed on February 12, 1999;
- - Our Quarterly Report on Form 10-Q for the quarterly period ended March 26,
1999, filed on May 10, 1999;
41
<PAGE> 44
- - Our Quarterly Report on Form 10-Q for the quarterly period ended June 25,
1999, filed on August 9, 1999;
- - Our Current Report on Form 8-K, filed on July 29, 1999; and
- - All documents filed with the SEC by us under Sections 13(a), 13(c) 14, and
15(d) of the Exchange Act after the date of this prospectus and before the
offering is terminated, are considered to be part of this prospectus,
effective as of the date these documents are filed.
You can obtain any of the documents listed above from the SEC, through the
SEC's Web site at the address described above, or directly from us, by
requesting them in writing or by telephone at the following address:
Ameritrade Holding Corporation
4211 South 102nd St.
Omaha, Nebraska 68127
Attn: J. Peter Ricketts, Secretary
(402) 331-7856
We will provide a copy of any of these documents without charge, excluding
any exhibits unless the exhibit is specifically listed as an exhibit to the
registration statement of which this prospectus is a part.
42
<PAGE> 45
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................. F-2
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Income......................... F-4
Consolidated Statements of Stockholders' Equity........... F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>
F-1
<PAGE> 46
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Ameritrade Holding Corporation and Subsidiaries
Omaha, Nebraska
We have audited the accompanying consolidated balance sheets of Ameritrade
Holding Corporation and its subsidiaries (collectively, the "Company") as of
September 25, 1998 and September 26, 1997, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended September 25, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Ameritrade Holding Corporation
and its subsidiaries as of September 25, 1998 and September 26, 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended September 25, 1998, in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Omaha, Nebraska
October 27, 1998 (August 4, 1999 as to Note 11)
F-2
<PAGE> 47
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 26, 1997 AND SEPTEMBER 25, 1998
ASSETS
<TABLE>
<CAPTION>
1997 1998
------------ --------------
<S> <C> <C>
Cash and cash equivalents................................... $ 53,522,447 $ 24,526,935
Cash and investments segregated in compliance with federal
regulations............................................... 319,763,921 503,455,354
Receivable from brokers, dealers, and clearing
organizations............................................. 17,823,640 25,732,164
Receivable from customers and correspondents -- net of
allowance for doubtful accounts: 1997 -- $249,949; 1998 --
$1,039,788................................................ 325,407,147 647,121,854
Furniture, equipment and leasehold improvements -- net of
accumulated depreciation and amortization: 1997 --
$3,732,790; 1998 -- $6,728,212............................ 8,709,923 26,116,333
Goodwill -- net of accumulated amortization................. 6,346,763 5,983,761
Investments................................................. 12,597,972 30,760,729
Deferred income taxes....................................... 39,314 --
Other assets................................................ 13,145,616 26,704,546
------------ --------------
Total assets...................................... $757,356,743 $1,290,401,676
============ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Payable to brokers, dealers and clearing organizations.... $ 1,404,999 $ 11,765,785
Payable to customers and correspondents................... 666,279,440 1,136,082,337
Accounts payable and accrued liabilities.................. 19,252,931 30,716,987
Notes payable............................................. -- 11,000,000
Income taxes payable...................................... 3,430,279 1,331,170
Deferred income taxes..................................... -- 14,933,313
------------ --------------
Total liabilities................................. 690,367,649 1,205,829,592
------------ --------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par value; authorized 3,000,000
shares, none issued.................................... -- --
Common stock, $0.01 par value:
Class A -- 270,000,000 shares authorized; 157,841,076
shares issued........................................ 1,578,411 1,578,411
Class B -- 18,000,000 shares authorized; 16,372,800
shares issued and outstanding........................ 163,728 163,728
------------ --------------
Total common stock................................ 1,742,139 1,742,139
Additional paid in capital.................................. 21,700,545 21,683,870
Retained earnings........................................... 43,546,410 43,756,848
Treasury stock -- Class A shares at cost (56,652 shares at
September 25, 1998)....................................... -- (133,388)
Net unrealized investment gain.............................. -- 17,522,615
------------ --------------
Total stockholders' equity........................ 66,989,094 84,572,084
------------ --------------
Total liabilities and stockholders' equity........ $757,356,743 $1,290,401,676
============ ==============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 48
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 26, 1997 AND SEPTEMBER 25,
1998
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Commissions and clearing fees.............. $ 36,469,561 $ 51,936,902 $ 85,644,433
Interest revenue........................... 22,517,655 36,622,800 66,716,234
Equity income from investments............. 3,358,871 3,443,807 5,083,172
Gain from sale of investment............... -- -- 794,634
Other...................................... 3,032,443 3,663,685 5,955,534
------------ ------------ ------------
Total revenues..................... 65,378,530 95,667,194 164,194,007
Interest expense........................... 11,039,777 18,428,854 29,278,536
------------ ------------ ------------
Net revenues....................... 54,338,753 77,238,340 134,915,471
Expenses excluding interest:
Employee compensation and benefits......... 14,049,642 19,290,808 36,082,707
Commissions and clearance.................. 2,530,642 3,320,262 5,762,336
Communications............................. 3,685,535 5,623,468 12,926,154
Occupancy and equipment costs.............. 2,889,654 5,422,839 10,621,551
Advertising................................ 7,537,265 13,970,834 43,613,779
Other...................................... 5,228,422 8,185,016 25,377,918
------------ ------------ ------------
Total expenses excluding
interest......................... 35,921,160 55,813,227 134,384,445
------------ ------------ ------------
Income before provision for income taxes..... 18,417,593 21,425,113 531,026
Provision for income taxes................... 7,259,248 7,602,964 320,588
------------ ------------ ------------
Net income................................... $ 11,158,345 $ 13,822,149 $ 210,438
============ ============ ============
Basic earnings per share..................... $ 0.07 $ 0.08 $ 0.00
Diluted earnings per share................... $ 0.07 $ 0.08 $ 0.00
Weighted average shares outstanding --
basic...................................... 153,765,876 165,226,668 174,187,962
Weighted average shares outstanding --
diluted.................................... 153,765,876 165,233,442 174,464,730
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 49
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 26, 1997 AND SEPTEMBER 25,
1998
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------------------ PAID-IN RETAINED TREASURY
TOTAL CLASS A CLASS B TOTAL CAPITAL EARNINGS STOCK
----------- ---------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 29, 1995.... $19,503,719 $1,595,811 $ 299,376 $ 1,895,187 $ (793,519) $19,839,450 $(1,437,399)
Net Income................... 11,158,345 -- -- -- -- 11,158,345 --
Retirement of treasury
stock...................... -- (221,880) (135,648) (357,528) 193,663 (1,273,534) 1,437,399
----------- ---------- --------- ----------- ----------- ----------- -----------
Balance, September 27, 1996.... 30,662,064 1,373,931 163,728 1,537,659 (599,856) 29,724,261 --
Net Income................... 13,822,149 -- -- -- -- 13,822,149 --
Issuance of 48,000 shares
from compensation plans.... 33,750 480 -- 480 33,270 -- --
Issuance of 20,400,000 shares
from initial public
offering................... 22,471,131 204,000 -- 204,000 22,267,131 -- --
----------- ---------- --------- ----------- ----------- ----------- -----------
Balance, September 26, 1997.... 66,989,094 1,578,411 163,728 1,742,139 21,700,545 43,546,410 --
Net Income................... 210,438 -- -- -- -- 210,438 --
Purchase of treasury stock... (286,375) -- -- -- -- -- (286,375)
Reissuance of treasury
stock...................... 136,312 -- -- -- (16,675) -- 152,987
Net unrealized investment
gain....................... 17,522,615 -- -- -- -- -- --
----------- ---------- --------- ----------- ----------- ----------- -----------
Balance, September 25, 1998.... $84,572,084 $1,578,411 $ 163,728 $ 1,742,139 $21,683,870 $43,756,848 $ (133,388)
=========== ========== ========= =========== =========== =========== ===========
<CAPTION>
NET
UNREALIZED
INVESTMENT
GAIN
-----------
<S> <C>
Balance, September 29, 1995.... $ --
Net Income................... --
Retirement of treasury
stock...................... --
-----------
Balance, September 27, 1996.... --
Net Income................... --
Issuance of 48,000 shares
from compensation plans.... --
Issuance of 20,400,000 shares
from initial public
offering................... --
-----------
Balance, September 26, 1997.... --
Net Income................... --
Purchase of treasury stock... --
Reissuance of treasury
stock...................... --
Net unrealized investment
gain....................... 17,522,615
-----------
Balance, September 25, 1998.... $17,522,615
===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 50
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 26, 1997 AND SEPTEMBER 25,
1998
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 11,158,345 $ 13,822,149 $ 210,438
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization........................... 1,048,692 1,693,487 2,999,017
Provision for losses.................................... 148,014 59,000 815,000
Deferred income taxes................................... (358,139) 405,064 3,769,643
Equity income from investments.......................... (3,358,871) (3,443,807) (5,083,172)
Gain from sale of investment............................ -- -- (794,634)
Amortization of goodwill................................ 363,002 363,002 363,002
Changes in operating assets and liabilities:
Cash and investments segregated in compliance with
Federal regulations................................. (51,977,699) (144,095,424) (183,691,433)
Receivable from brokers, dealers and clearing
organizations....................................... (5,080,870) (2,726,778) (7,908,524)
Receivable from customers and correspondents.......... (36,035,750) (159,391,092) (322,529,707)
Other assets.......................................... (658,027) (7,132,072) (13,558,930)
Payable to brokers, dealers and clearing
organizations....................................... (1,664,200) 211,520 10,360,786
Payable to customers and correspondents............... 105,080,587 309,336,470 469,802,897
Accounts payable and accrued liabilities.............. 1,999,534 12,031,923 11,464,056
Income taxes payable.................................. 244,342 2,623,568 (2,099,109)
------------ ------------- -------------
Net cash provided by (used in) operating
activities....................................... 20,908,960 23,757,010 (35,880,670)
------------ ------------- -------------
Cash flows from investing activities:
Acquisition of subsidiary............................... (188,953) -- --
Purchase of furniture, equipment and leasehold
improvements.......................................... (1,104,124) (6,657,232) (20,405,427)
Purchase of investments................................. (6,272,361) (659,613) (1,652,740)
Distributions received from investments................. 2,902,005 3,663,231 12,264,993
Proceeds from sale of investments....................... -- -- 5,828,395
------------ ------------- -------------
Net cash used in investing activities............... (4,663,433) (3,653,614) (3,964,779)
------------ ------------- -------------
Cash flows from financing activities:
Issuance of Class A common stock........................ -- 33,750 --
Proceeds from initial public offering, net of offering
costs................................................. -- 22,471,131 --
Proceeds from notes payable............................. -- -- 22,500,000
Principal payments on notes payable..................... (2,244,000) (4,853,000) (11,500,000)
Purchase of treasury stock.............................. -- -- (286,375)
Reissuance of treasury stock............................ -- -- 136,312
------------ ------------- -------------
Net cash provided by (used in) financing
activities....................................... (2,244,000) 17,651,881 10,849,937
------------ ------------- -------------
Net increase (decrease) in cash and cash equivalents...... 14,001,527 37,755,277 (28,995,512)
Cash and cash equivalents at beginning of year............ 1,765,643 15,767,170 53,522,447
------------ ------------- -------------
Cash and cash equivalents at end of year.................. $ 15,767,170 $ 53,522,447 $ 24,526,935
============ ============= =============
Supplemental cash flow information:
Interest paid........................................... $ 11,025,779 $ 17,623,539 $ 28,258,819
Income taxes paid (refunds received).................... $ 7,342,359 $ 4,525,078 $ (1,418,800)
Supplemental investing activities:
Unrealized investment gain net of deferred taxes of
$11,202,984........................................... $ -- $ -- $ 17,522,615
Noncash financing activities:
Retirement of treasury stock............................ $ 1,437,399 $ -- $ --
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 51
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 26, 1997
AND SEPTEMBER 25, 1998
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation -- The consolidated financial statements include the
accounts of Ameritrade Holding Corporation and its wholly-owned subsidiaries
(collectively, the "Company"), Advanced Clearing, Inc. ("Advanced Clearing"),
formerly known as AmeriTrade Clearing, Inc., Accutrade, Inc. ("Accutrade"),
Ameritrade (Inc.), formerly known as Ceres Securities, Inc., AmeriVest, Inc.
("AmeriVest"), formerly known as All American Brokers, Inc., K. Aufhauser &
Company ("Aufhauser"), and OnMoney Financial Services Corporation ("OnMoney").
All significant intercompany balances and transactions have been eliminated.
On September 27, 1996, the Company's Board of Directors approved a
resolution to reincorporate in the State of Delaware and change its name from
TransTerra Co. to Ameritrade Holding Corporation. The reincorporation was
accomplished by exchanging each share of Class A and Class B common stock of
TransTerra Co. for thirty shares of Class A and Class B common stock of the
Company. On January 23, 1997, the Company effected an eight-for-five stock split
in the form of a stock dividend. During 1998, the Company's Board of Directors
declared a two-for-one common stock split, distributed August 1998, and effected
in the form of a stock dividend. All share data and per share amounts have been
restated to reflect these exchanges.
The Company reports on a fifty-two/fifty-three week year. The fiscal years
ended 1998, 1997, and 1996 were each fifty-two week years.
Nature of Operations -- The Company provides discount securities brokerage
services through its Ameritrade (Inc.), Accutrade, Aufhauser, and AmeriVest
subsidiaries. The Company also provides trading execution and clearing services
for its own broker-dealer operations and for unaffiliated broker-dealers through
Advanced Clearing. OnMoney is a development-stage entity involved in on-line
financial services. The Company's broker-dealer subsidiaries are subject to
regulation by the Securities and Exchange Commission, the National Association
of Securities Dealers, and the Chicago Stock Exchange, Inc.
Capital Stock -- The authorized capital stock of the Company consists of
Class A common stock, Class B common stock and preferred stock. Each share of
Class A and Class B common stock is entitled to one vote on all matters, except
that the Class B common stock is entitled to elect a majority of the directors
of the Company and the Class A common stock is entitled to elect the remainder
of the directors. Each class of common stock is equally entitled to dividends
if, as and when declared by the Board of Directors. Shares of Class A common
stock are not convertible, while each share of Class B common stock is
convertible into one share of Class A common stock at the option of the Class B
holder or upon the occurrence of certain events. Class A and Class B common
stock have equal participation rights in the event of a liquidation of the
Company.
Voting, dividend, conversion and liquidation rights of the preferred stock
would be established by the Board of Directors upon issuance of such preferred
stock.
Use of Estimates -- The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
F-7
<PAGE> 52
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 26, 1997
AND SEPTEMBER 25, 1998
Securities Transactions -- Securities transactions are recorded on a
settlement date basis with such transactions generally settling three business
days after trade date. Revenues and expenses related to securities transactions,
including revenues from execution agents, are also recorded on settlement date,
which is not materially different than trade date.
Depreciation and Amortization -- Depreciation is provided on a
straight-line basis using estimated useful service lives of three to seven
years. Leasehold improvements are amortized over the lesser of the economic
useful life of the improvement or the term of the lease.
Goodwill is amortized on a straight-line basis generally over a twenty year
period. Accumulated amortization at September 25, 1998 and September 26, 1997
was $1,243,026 and $880,024, respectively. The Company reviews its intangible
assets for impairment at least annually or whenever events or change in
circumstances indicate that the carrying amount of such asset may not be
recoverable.
Income Taxes -- The Company files a consolidated income tax return with its
subsidiaries on a calendar year basis. Deferred income taxes are provided for
temporary differences between financial statement and taxable income. The
principal temporary differences arise from depreciation, bad debts, prepaid
expenses, and certain accrued liabilities. Deferred tax liabilities and assets
are determined based on the differences between the financial statement carrying
amounts and tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse.
Cash and Cash Equivalents -- The Company considers temporary, highly liquid
investments with an original maturity of three months or less to be cash
equivalents.
Segregated Cash and Investments -- Cash and investments consisting
primarily of U.S. Treasury Bills and repurchase agreements at Advanced Clearing
of $503,455,354 and $319,763,921 as of September 25, 1998 and September 26,
1997, respectively, have been segregated in a special reserve bank account for
the benefit of customers under Rule 15c3-3 of the Securities and Exchange
Commission.
Estimated Fair Value of Financial Instruments -- The Company considers the
amounts presented for financial instruments on the consolidated balance sheets
to be reasonable estimates of fair value. The estimated fair value amounts have
been determined by the Company using available market information and
appropriate valuation methodologies.
Investments -- The Company's investments in companies and partnerships are
accounted for under the equity method when the Company has the ability to
exercise significant influence over the investee's operating and financial
policies. The cost method is used for investments that do not meet equity method
requirements. The Company's investments in marketable equity securities are
carried at fair market value and designated as available for sale. Unrealized
gains and losses, net of deferred income taxes, are reflected as a separate
component of stockholders' equity. Realized gains and losses are determined on
the specific identification method and reflected in operations.
Advertising -- The Company generally expenses advertising costs as they are
incurred.
Earnings Per Share -- The Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share ("SFAS 128")
and accordingly, restated all prior period earnings per share ("EPS") to conform
with SFAS 128. This statement requires dual presentation of basic and diluted
earnings per share on the face of the Statement
F-8
<PAGE> 53
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 26, 1997
AND SEPTEMBER 25, 1998
of Income. Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of all classes
common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or securities converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity. The
adoption of SFAS 128 did not have a material effect on previously reported EPS.
Stock Based Compensation -- As permitted by SFAS No. 123, Accounting for
Stock Based Compensation, the Company accounts for its stock-based compensation
on the intrinsic-value method in accordance with Accounting Principles Board
("APB") Opinion No. 25.
Reclassifications -- Certain items in prior years' consolidated financial
statements have been reclassified to conform to the current year presentation.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
SFAS No. 130 -- In June 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income ("SFAS No. 130"). This statement establishes standards for
reporting and display of comprehensive income and its components in a full set
of financial statements. This statement is effective for fiscal years beginning
after December 15, 1997. Companies are also required to report comparative
totals for comprehensive income in interim reports. The Company will report
comprehensive income commencing in fiscal 1999.
SFAS No. 131 -- In June 1997, the FASB issued Statement of Financial
Accounting Standards No. 131, Disclosures About Segments of an Enterprise and
Related Information ("SFAS No. 131"). This statement requires disclosures for
each segment that are similar to those required under current standards with the
addition of quarterly disclosure requirements and more specific and detailed
geographic disclosures especially by countries as opposed to broad geographic
regions. The provisions of SFAS No. 131 are effective for fiscal years beginning
after December 15, 1997. This statement will have no impact on the Company as
the Company currently does not have reportable operating segments.
SFAS No. 133 -- In June 1998, the FASB issued Statement of Financial
Accounting Standards No. 133, Accounting for Derivatives and Similar Financial
Instruments and for Hedging Activities. This statement revises the accounting
for the recognition and measurement of derivatives and hedging transactions and
is effective for fiscal years beginning after June 15, 2000. The Company has not
determined the impact this statement will have on the consolidated financial
statements.
F-9
<PAGE> 54
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 26, 1997
AND SEPTEMBER 25, 1998
2. RECEIVABLE FROM AND PAYABLE TO BROKERS, DEALERS AND CLEARING ORGANIZATIONS
Amounts receivable from and payable to brokers, dealers and clearing
organizations are comprised of the following:
<TABLE>
<CAPTION>
SEPTEMBER 26, SEPTEMBER 25,
1997 1998
------------- -------------
<S> <C> <C>
Receivable:
Securities borrowed............................. $15,072,400 $21,638,669
Securities failed to deliver.................... 2,751,240 4,069,740
Clearing organizations.......................... -- 23,755
----------- -----------
Total........................................ $17,823,640 $25,732,164
=========== ===========
Payable:
Securities loaned............................... $ -- $ 5,519,000
Securities failed to receive.................... 1,005,984 2,227,342
Clearing organizations.......................... 399,015 4,019,443
----------- -----------
Total........................................ $ 1,404,999 $11,765,785
=========== ===========
</TABLE>
3. INVESTMENTS
Knight/Trimark Group, Inc. -- Prior to July 8, 1998, the Company owned a
9.2 percent interest in Roundtable Partners L.L.C. ("Roundtable"), a company
formed to hold equity interests in securities trading and market making
companies. The Company had accounted for its investment in Roundtable under the
equity method since its inception. On July 8, 1998, Roundtable was reorganized
into a corporation known as Knight/Trimark Group, Inc. ("Knight/ Trimark")
coincident with an initial public offering of Knight/Trimark common stock. As a
result of this reorganization, all of the Company's ownership interest in
Roundtable was converted to common stock of Knight/Trimark, which represents 7.7
percent of the issued and outstanding shares of common stock of Knight/Trimark.
As of September 25, 1998, the Company also received a cash distribution of
$7,817,329 in connection with the reorganization. The cash distribution was a
return of capital, therefore there was no gain or loss associated with the
distribution. As a result of the reorganization of Knight/Trimark and subsequent
initial public offering in 1998, the Company accounts for its investment in
Knight/Trimark as a marketable equity security held available-for-sale. The
Company's investment in Knight/Trimark is subject to a 180-day sale restriction
agreement from the initial public offering date with the underwriters of the
initial public offering and potential registration costs. On September 25, 1998,
the Company valued its investment in Knight/Trimark at $29,454,879. The
Company's cost basis on September 25, 1998 was $729,280, therefore the gross
unrealized gain is $28,725,599. The Company executes a portion of its securities
transactions through subsidiaries of Knight/Trimark. Revenues related to such
transactions totaled $9,435,696, $6,843,502, and $7,758,836 in 1998, 1997, and
1996, respectively. These amounts are included in Commissions and Clearing Fees.
Comprehensive Software Systems, Ltd.("CSS") -- As of September 25, 1998,
the Company owned 7.2 percent of CSS, a partnership formed for the purpose of
developing software for securities broker-dealers, banks and other financial
institutions. On June 3, 1998, the Company earned $794,634 on the sale of a
portion of its limited partnership interest in CSS. As a result of this
transaction, the Company's ownership interest in CSS decreased from 14.3 percent
to 7.2 percent. Accordingly, the Company began accounting for its investment in
CSS under the
F-10
<PAGE> 55
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 26, 1997
AND SEPTEMBER 25, 1998
cost method as of that date, and will, therefore, no longer recognize income or
loss based on the operations of CSS.
Adirondack Trading Partners, L.L.C. ("Adirondack") -- As of September 25,
1998, the Company owned a minority interest in Adirondack, a development-stage
company formed to trade listed equity and index options. The Company accounts
for its ownership in Adirondack under the cost method.
Telescan, Inc. ("Telescan") -- As of September 26, 1997, the Company owned
769,794 shares of common stock of Telescan, a publicly traded software/online
services company. During fiscal 1998, in a series of transactions, the Company
sold its interest in Telescan.
4. NOTES PAYABLE
The Company entered into a revolving credit agreement with a bank group on
January 16, 1998. The revolving credit agreement permits borrowings up to $50
million through June 30, 1999, with permissible borrowings decreasing $2.5
million quarterly to $35 million maturity at December 31, 2000. The revolving
credit agreement is collateralized by the common stock of the Company's
subsidiaries, as well as all assets of the Company. Borrowings under the
revolving credit agreement bear interest at prime rate less 0.75 percent (7.75
percent at September 25, 1998). The Company had outstanding indebtedness under
the revolving credit agreement of $11 million at September 25, 1998. The Company
pays a maintenance fee of 0.25 percent per annum of the unused credit available
under the revolving credit agreement. The revolving credit agreement contains
certain restrictions, including restrictions on the payment of cash dividends
and additional borrowings.
5. INCOME TAXES
Provision for income tax is comprised of the following for fiscal years
ended:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Current expense (benefit):
Federal............................................ $7,132,387 $7,150,775 $(3,051,000)
State.............................................. 485,000 47,125 (398,055)
---------- ---------- -----------
7,617,387 7,197,900 (3,449,055)
Deferred expense (benefit):
Federal............................................ (306,777) 344,066 3,383,013
State.............................................. (51,362) 60,998 386,630
---------- ---------- -----------
(358,139) 405,064 3,769,643
---------- ---------- -----------
Provision for income taxes........................... $7,259,248 $7,602,964 $ 320,588
========== ========== ===========
</TABLE>
F-11
<PAGE> 56
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 26, 1997
AND SEPTEMBER 25, 1998
A reconciliation of the federal statutory tax rate to the effective tax
rate applicable to income before provision for income taxes follows:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate...................................... 35.00% 35.00% 35.00%
State taxes, net of federal tax effect...................... 4.29 3.57 2.78
Amortization of goodwill.................................... 0.75 0.59 23.93
State credits............................................... (2.87) (3.72) 0.00
Other....................................................... 2.24 0.05 (1.34)
----- ----- -----
Effective tax rate.......................................... 39.41% 35.49% 60.37%
===== ===== =====
</TABLE>
Deferred tax assets (liabilities) are comprised of the following:
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Unrealized investment gain.................................. $ -- $(11,202,984)
Depreciation and amortization, net.......................... (181,323) (575,425)
Prepaid expenses............................................ (1,107,460) (4,279,343)
----------- ------------
(1,288,783) (16,057,752)
Accrued liabilities......................................... 1,328,097 1,124,439
----------- ------------
Net deferred tax assets (liabilities)....................... $ 39,314 $(14,933,313)
=========== ============
</TABLE>
6. NET CAPITAL
The Company's subsidiaries are subject to the Securities and Exchange
Commission Uniform Net Capital Rule (SEC rule 15c3-1), which requires the
maintenance of minimum net capital, as defined. Net capital and the related net
capital requirement may fluctuate on a daily basis.
The Company's broker-dealer subsidiaries had net capital, in the aggregate,
of $40,062,733 and $26,121,959 as of September 25, 1998 and September 26, 1997,
respectively, which exceeded aggregate minimum net capital requirements by
$25,247,775 and $18,058,972, respectively. Subsidiary net capital in the amount
of $14,814,958 and $8,062,987 as of September 25, 1998 and September 26, 1997,
respectively, is not available for transfer to the Company due to net capital
regulations.
7. STOCK OPTION AND INCENTIVE PLANS
The Company has two stock option plans, the Ameritrade Holding Corporation
Long-Term Incentive Plan (the "Long-Term Incentive Plan") and the Ameritrade
Holding Corporation Directors Incentive Plan (the "Directors Plan"), both
initiated in fiscal 1997.
The Long-Term Incentive Plan authorizes the award of options to purchase
Class A Common Stock, Class A Common Stock appreciation rights, shares of Class
A Common Stock and performance units. The Long-Term Incentive Plan reserves
9,600,000 shares of the Company's Class A Common Stock for issuance to eligible
employees. The Directors Plan authorizes the award of options to purchase Class
A Common Stock. The Directors Plan reserves 960,000 shares of the Company's
Class A Common Stock for issuance to non-employee directors. Options are
generally granted at not less than the fair market value at grant date, vest
over a one to three year period, and expire ten years after the grant date.
F-12
<PAGE> 57
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 26, 1997
AND SEPTEMBER 25, 1998
A summary of the status of the Company's outstanding stock options as of
September 26, 1997 and September 25, 1998 is presented below:
<TABLE>
<CAPTION>
1997 1998
----------------------------- -----------------------------
NUMBER WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE
OF OPTIONS EXERCISE PRICE OF OPTIONS EXERCISE PRICE
---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year... -- -- 96,000 $1.25
Granted.......................... 96,000 $1.25 1,681,200 $2.14
Exercised........................ -- -- -- --
Canceled......................... -- -- -- --
---------- ----- --------- -----
Outstanding at end of year......... 96,000 $1.25 1,777,200 $2.09
Exercisable at end of year......... -- -- 96,000 $1.25
Available for future grant at end
of year.......................... 10,464,000 8,782,800
Weighted-average fair value of
options granted during the
year............................. $1.12 $1.23
</TABLE>
The following table summarizes information about the stock options
outstanding at September 25, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------ -----------------------------
WEIGHTED-AVERAGE
REMAINING
NUMBER CONTRACTUAL WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE
RANGE OF EXERCISE PRICES OF OPTIONS LIFE(IN YEARS) EXERCISE PRICE OF OPTIONS EXERCISE PRICE
- ------------------------ ---------- ---------------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
$0.83-$1.66........... 96,000 6.44 $1.25 96,000 $1.25
$1.67-$2.50........... 1,653,600 7.14 $2.13 -- --
$2.51-$3.33........... 27,600 7.81 $2.86 -- --
--------- ---- ----- ------ -----
$0.83-$3.33........... 1,777,200 7.11 $2.09 96,000 $1.25
</TABLE>
There are no Stock Appreciation Rights or performance units outstanding as
of September 25, 1998.
As discussed in Note 1, the Company has elected to follow APB 25 and
related Interpretations in accounting for stock-based awards to employees. Under
APB 25, the Company generally recognizes no compensation expense with respect to
such awards.
Pro forma information regarding the net income and earnings per share is
required by SFAS 123. This information is required as if the Company had
accounted for its stock-based awards to employees under the fair value method.
The fair value of options was estimated at the date of the grant using the
Black-Scholes option pricing model with the following weighted average
assumptions for fiscal 1998 and 1997, respectively: risk-free interest rate of
5.95 percent and 6.37 percent; dividend yield of zero for both years; expected
volatility of 49.8 percent for both years; and an expected option life of eight
years for both years. The weighted average fair value
F-13
<PAGE> 58
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 26, 1997
AND SEPTEMBER 25, 1998
of options granted in fiscal 1997 and 1998 was $1.12 and $1.23, respectively.
Pro forma net income and earnings per share are as follows:
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C> <C>
Net Income:.......................... As reported $13,822,149 $ 210,438
Pro forma 13,787,640 (301,983)
Basic earnings per share:............ As reported $ 0.08 $ 0.00
Pro forma 0.08 (0.00)
Diluted earnings per share:.......... As reported 0.08 0.00
Pro forma 0.08 (0.00)
</TABLE>
8. EMPLOYEE BENEFIT PLANS
The Company has a profit-sharing plan under which the annual contribution
is determined at the discretion of the Board of Directors. Profit sharing
expense was $779,657, $595,222 and $388,800 for the fiscal years ended 1998,
1997 and 1996, respectively.
The Company has a 401(k) plan covering all eligible employees. The plan
provides for matching contributions at the discretion of the Board of Directors.
Contribution expense under this plan was $-0-, $-0- and $9,093 for the fiscal
years ended 1998, 1997 and 1996, respectively.
The Company has an executive bonus plan that was designed to allow
designated executive participants the opportunity to earn bonus awards with
current and deferred components. The value of each component is based on the
annual increase (if any) in the book value per share of the common stock.
Executive bonus plan expense was $960,000, $2,170,000 and $1,710,000 for the
fiscal years ended 1998, 1997 and 1996, respectively.
9. EARNINGS PER SHARE
Reconciliation between the weighted average shares outstanding used in the
basic and diluted earnings per share ("EPS") computation is presented below.
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Net Income...................................... $ 11,158,345 $ 13,822,149 $ 210,438
------------ ------------ ------------
Weighted average shares outstanding -- basic.... 153,765,876 165,226,668 174,187,962
Effect of dilutive securities:
Assumed exercise of stock options............. -- 6,774 276,768
Weighted average shares outstanding --
diluted....................................... 153,765,876 165,233,442 174,464,730
Earnings per share -- basic..................... $ 0.07 $ 0.08 $ 0.00
Earnings per share -- diluted................... $ 0.07 $ 0.08 $ 0.00
</TABLE>
F-14
<PAGE> 59
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 26, 1997
AND SEPTEMBER 25, 1998
10. COMMITMENTS AND CONTINGENCIES
Lease Commitments -- The Company and its subsidiaries have various
non-cancelable operating leases on facilities and certain computer and office
equipment requiring annual payments as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING AMOUNT
- ------------------ ------
<S> <C>
1999........................................................ $ 6,970,754
2000........................................................ 6,028,228
2001........................................................ 3,075,012
2002........................................................ 1,776,036
2003........................................................ 1,790,677
Thereafter (to December 31, 2017)........................... 20,904,751
-----------
Total....................................................... $40,545,458
===========
</TABLE>
The Company and certain of its subsidiaries lease one of their office
facilities from the Chief Executive Officer of the Company. The lease expires on
December 31, 2017, and provides for annual rentals of $1,288,000. Additionally,
the Company and its subsidiaries lease certain computer equipment, office
equipment, and office facilities under various operating leases. Rental expense
was $6,225,232, $3,155,550 and $1,581,171 for fiscal years ended 1998, 1997 and
1996, respectively.
Advertising Commitment -- The Company has entered into a two-year agreement
with America Online, Inc. ("AOL") that will feature Ameritrade (Inc.) as one of
four brokerages on AOL's Personal Finance Channel. The pact calls for the
Company to pay AOL $12.5 million annually over a two-year term.
Letter of Credit -- A letter of credit in the amount of $44 million as of
September 25, 1998, has been issued by a financial institution on behalf of
Advanced Clearing, a wholly-owned subsidiary of the Company which acts as a
securities clearing firm. The letter of credit has been issued to support margin
requirements. Advanced Clearing pays a maintenance fee of 0.5 percent of the
committed amount for the letter of credit. As of September 25, 1998 and
September 26, 1997, no amounts were outstanding under the credit facility. In
addition, the same financial institution may make loans to Advanced Clearing if
requested under a note. Advanced Clearing has pledged customer securities, the
amount of which fluctuates from time to time, to secure its obligations under
the letter of credit and the note.
Legal -- On September 16, 1998, a putative class action complaint was filed
in the District Court, Douglas County, Nebraska, seeking injunctive and
equitable relief due to the Company's alleged breach of contract, violation of
the Consumer Protection Act, fraudulent inducement, negligent misrepresentation,
negligence, and unjust enrichment regarding the Company's alleged inability to
handle the volume of subscribers to its Internet brokerage services. The
complaint seeks injunctive relief enjoining alleged deceptive, fraudulent, and
misleading practices and unspecified compensatory damages. The Company believes
that it has viable defenses to the allegations raised in the complaint. However,
because this proceeding is at a preliminary phase and the amount of damages
sought has not been quantified, the Company is not presently able to predict the
ultimate outcome of this matter.
F-15
<PAGE> 60
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 26, 1997
AND SEPTEMBER 25, 1998
The Company and its subsidiaries are parties to a number of other legal
matters arising in the ordinary course of business. In management's opinion, the
Company has adequate legal defenses respecting each of these actions and does
not believe that they will materially affect the Company's results of operations
or its financial position.
General Contingencies -- In the general course of business, there are
various contingencies which are not reflected in the consolidated financial
statements. These include Advanced Clearing's customer activities involving the
execution, settlement and financing of various customer securities transactions.
These activities may expose the Company to off-balance-sheet credit risk in the
event the customers are unable to fulfill their contracted obligations.
Advanced Clearing's customer securities activities are transacted on either
a cash or margin basis. In margin transactions, Advanced Clearing extends credit
to the customer, subject to various regulatory and internal margin requirements,
collateralized by cash and securities in the customer's account. In connection
with these activities, Advanced Clearing executes and clears customer
transactions involving the sale of securities not yet purchased (short sales),
substantially all of which are transacted on a margin basis subject to
individual exchange regulations. Such transactions may expose the Company to
off-balance-sheet risk in the event margin requirements are not sufficient to
fully cover losses which customers may incur. In the event the customer fails to
satisfy its obligations, Advanced Clearing may be required to purchase or sell
financial instruments at prevailing market prices in order to fulfill the
customer's obligations.
Advanced Clearing seeks to control the risks associated with its customer
activities by requiring customers to maintain margin collateral in compliance
with various regulatory and internal guidelines. Advanced Clearing monitors
required margin levels daily and, pursuant to such guidelines, requires
customers to deposit additional collateral, or to reduce positions, when
necessary.
Advanced Clearing borrows securities both to cover short sales and to
complete customer transactions in the event that a customer fails to deliver
securities by the required date. Such borrowings are collateralized by
depositing cash or pledging securities with lending institutions and are "marked
to market" on a daily basis. Failure to maintain levels of cash deposits or
pledged securities at all times at least equal to the value of the related
securities can subject Advanced Clearing to risk of loss. Advanced Clearing
seeks to control the risk of loss by monitoring the market value of securities
pledged and requiring adjustments of collateral levels where necessary.
NOTE 11 -- SUBSEQUENT EVENTS
Subsequent to September 25, 1998, the Company announced a two-for-one and a
three-for-one stock split. Stockholders of record as of the close of business on
February 5, 1999 received, in the form of a stock dividend, one additional share
for each share held by them. This two-for-one split was distributed on or about
February 22, 1999 and the stock began trading at post-split value on February
23, 1999. Stockholders of record as of the close of business on June 11, 1999
received, in the form of a stock dividend, two additional shares for each share
held by them. This three-for-one split was distributed on July 2, 1999 and the
stock began trading at post-split value on July 6, 1999. On July 1, 1999, the
stockholders approved a restated certificate of incorporation increasing the
number of shares of Class A common stock to 270,000,000 and
F-16
<PAGE> 61
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 26, 1997
AND SEPTEMBER 25, 1998
Class B common stock to 18,000,000. All share data and per share amounts have
been restated to reflect the two-for-one and three-for-one stock splits.
On August 4, 1999, the Company sold $200,000,000 principal amount of 5.75
percent Convertible Subordinated Notes due August 1, 2004 (the "Notes") to
qualified institutional investors in a private placement pursuant to Rule 144A
of the Securities Act of 1933. The Notes are convertible into a total of
6,142,470 shares of the Class A common stock of the Company at approximately
$32.56 per share. On August 4, 1999, the Company used a portion of the proceeds
of the Notes to repay all outstanding indebtedness under its revolving credit
agreement. After the sale of the Notes, the Company will not be able to make
additional borrowings under the revolving credit agreement until new
arrangements have been made with the bank group.
F-17
<PAGE> 62
QUARTERLY FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AND STOCK PRICE DATA)
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED SEPTEMBER 25, 1998
---------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues........................................ $ 31,365 $ 36,762 $ 47,926 $ 48,141
Interest expense................................ 5,689 6,684 8,320 8,586
-------- -------- -------- --------
Net revenues.......................... 25,676 30,078 39,606 39,555
Total expenses excluding interest............... 43,171 30,394 30,346 30,473
-------- -------- -------- --------
Income (loss) before provision for income
taxes......................................... (17,495) (316) 9,260 9,082
Net income (loss)............................... $(11,249) $ (271) $ 5,940 $ 5,790
-------- -------- -------- --------
Basic earnings (loss) per share................. $ (0.06) $ (0.00) $ 0.03 $ 0.03
Diluted earnings (loss) per share............... $ (0.06) $ (0.00) $ 0.03 $ 0.03
Stock price data ($)
High.......................................... 3.25 2.59 2.74 4.47
Low........................................... 1.50 1.86 1.91 2.16
</TABLE>
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED SEPTEMBER 26, 1997
---------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues........................................ $ 19,042 $ 22,641 $ 24,904 $ 29,080
Interest expense................................ 3,690 4,197 4,959 5,583
-------- -------- -------- --------
Net revenues.......................... 15,352 18,444 19,945 23,497
Total expenses excluding interest............... 15,416 13,036 12,805 14,556
-------- -------- -------- --------
Income (loss) before provision for income
taxes......................................... (64) 5,408 7,140 8,941
Net income (loss)............................... $ (75) $ 3,469 $ 4,587 $ 5,841
-------- -------- -------- --------
Basic earnings (loss) per share................. $ 0.00 $ 0.02 $ 0.03 $ 0.03
Diluted earnings (loss) per share............... $ 0.00 $ 0.02 $ 0.03 $ 0.03
Stock price data ($)
High.......................................... N/A 1.88* 1.53 2.24
Low........................................... N/A 1.35* 0.98 1.22
</TABLE>
- ---------------
* Commencing March 4, 1997
All information is adjusted for the two-for-one stock splits effective on
August 18, 1998 and February 22, 1999 and the three-for-one stock split
effective on July 2, 1999. The stock prices listed above do not include retail
markups, markdowns, or commissions, and may not represent actual transactions.
F-18
<PAGE> 63
- ------------------------------------------------------
- ------------------------------------------------------
No person is authorized to give any information or to represent anything not
contained in this prospectus. You must not rely on any unauthorized information
or representations. This prospectus is an offer to sell only the securities
offered hereby, but only under circumstances and in jurisdictions where it is
lawful to do so. The information contained in this prospectus is current only as
of its date.
----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary............................ 1
Risk Factors....................... 8
Cautionary Note Regarding
Forward-Looking Statements....... 17
Ratio of Earnings to Fixed
Charges.......................... 17
Use of Proceeds.................... 17
Selling Holders.................... 18
Description of Notes............... 19
Description of Capital Stock....... 33
Material United States Federal
Income Tax Considerations........ 36
Plan of Distribution............... 39
Validity of Securities............. 40
Experts............................ 41
Where You Can Find More
Information...................... 41
Index to Consolidated Financial
Statements....................... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$200,000,000
AMERITRADE HOLDING
CORPORATION
5.75% Convertible
Subordinated Notes due
August 1, 2004
6,142,470 Shares of
Class A Common Stock
issuable upon conversion
of the Notes
---------------------------------
Ameritrade Holding Corporation Logo
---------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 64
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a statement of the expenses payable by us in connection
with the issuance and distribution of the securities being registered hereby.
All amounts shown are estimates, except the SEC registration fee and Nasdaq
National Market listing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ 55,600
Nasdaq National Market listing fee.......................... 17,500
Printing expenses........................................... 75,000
Legal fees and expenses..................................... 35,000
Accounting fees and expenses................................ 10,000
Miscellaneous............................................... 6,900
--------
Total............................................. $200,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to the provisions of the Delaware General Corporation Law, we have
adopted provisions in our certificate of incorporation and bylaws, which (1)
require us to indemnify our directors and officers to the fullest extent
permitted by law and (2) eliminate the personal liability of our directors to us
and our stockholders for monetary damages for breach of their duty of due care,
except (a) for any breach of the duty of loyalty; (b) for acts or omissions not
in good faith or which involve intentional misconduct or knowing violations of
law; (c) for liability under Section 174 of the Delaware General Corporation Law
(relating to certain unlawful dividends, stock repurchases or stock
redemptions); or (d) for any transaction from which the director derived any
improper personal benefit.
We also maintain insurance on our directors and officers, which covers
liabilities under the federal securities laws.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
The following documents are filed with this registration statement.
<TABLE>
<CAPTION>
EXHIBIT
-------
<C> <S>
4.1 Form of Stock Certificate (incorporated herein by reference
to our Registration Statement on Form S-1, File No.
333-17495)
4.2 Form of Note for Registrant's 5.75% Convertible Subordinated
Note, due August 1, 2004 (included in Exhibit 4.4)
4.3 Indenture, dated as of August 4, 1999, between Registrant
and the Bank of New York, as trustee
4.4 First Supplemental Indenture, dated as of August 4, 1999,
between Registrant and the Bank of New York, as trustee
4.5 Registration Rights Agreement, dated August 4, 1999, between
Registrant and Goldman, Sachs & Co.
5.1 Opinion of Mayer, Brown & Platt as to validity of securities
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Mayer, Brown & Platt (included in Exhibit 5.1)
24.1 Powers of Attorney (included on the signature page)
25.1 Statement of Eligibility of Trustee
</TABLE>
II-1
<PAGE> 65
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933; (ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement; and (iii) to include any material
information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement; provided, however, that (i) and
(ii) do not apply if the information required to be included in a
post-effective amendment thereby is contained in periodic reports filed
with or furnished to the Commission by the Registrant pursuant to Section
13 or Section 15(d) of the Exchange Act that are incorporated by reference
in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes, that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE> 66
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Omaha, State of Nebraska on the 28th day of
September, 1999.
AMERITRADE HOLDING CORPORATION
By: /s/ ROBERT T. SLEZAK
----------------------------------
Robert T. Slezak
Vice President, Chief
Financial Officer and Treasurer
POWERS OF ATTORNEY
Each person whose signature appears below constitutes and appoints J. Joe
Ricketts and Robert T. Slezak, or either of them, such person's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, to sign any and all amendments (including post-effective
amendments) to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this amendment to
registration statement has been signed by the following persons in the
capacities indicated and on the 28th day of September, 1999.
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<C> <S>
/s/ J. JOE RICKETTS Director, Chairman and Co-Chief Executive
- -------------------------------------------- Officer (Principal Executive Officer)
J. Joe Ricketts
/s/ THOMAS K. LEWIS, JR. Co-Chief Executive Officer
- -------------------------------------------- (Principal Executive Officer)
Thomas K. Lewis, Jr.
/s/ ROBERT T. SLEZAK Director, Vice President, Chief Financial
- -------------------------------------------- Officer and Treasurer (Principal Financial
Robert T. Slezak and Accounting Officer)
/s/ JOSEPH A. KONEN Director
- --------------------------------------------
Joseph A. Konen
/s/ GENE L. FINN Director
- --------------------------------------------
Gene L. Finn
</TABLE>
II-3
<PAGE> 67
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<C> <S>
/s/ DAVID W. GARRISON Director
- --------------------------------------------
David W. Garrison
/s/ THOMAS Y. HARTLEY Director
- --------------------------------------------
Thomas Y. Hartley
/s/ CHARLES L. MARINACCIO Director
- --------------------------------------------
Charles L. Marinaccio
/s/ MARK L. MITCHELL Director
- --------------------------------------------
Mark L. Mitchell
/s/ JOHN W. WARD Director
- --------------------------------------------
John W. Ward
</TABLE>
II-4
<PAGE> 68
INDEX TO EXHIBITS
<TABLE>
<C> <S>
4.1 Form of Stock Certificate (incorporated herein by reference
to our Registration Statement on Form S-1, File No.
333-17495)
4.2 Form of Note for Registrant's 5.75% Convertible Subordinated
Note, due August 1, 2004 (included in Exhibit 4.4)
4.3 Indenture, dated as of August 4, 1999, between Registrant
and the Bank of New York, as trustee
4.4 First Supplemental Indenture, dated as of August 4, 1999,
between Registrant and the Bank of New York, as trustee
4.5 Registration Rights Agreement, dated August 4, 1999, between
Registrant and Goldman, Sachs & Co.
5.1 Opinion of Mayer, Brown & Platt as to validity of securities
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Mayer, Brown & Platt (included in Exhibit 5.1)
24.1 Powers of Attorney (included on the signature page)
25.1 Statement of Eligibility of Trustee
</TABLE>
<PAGE> 1
EXHIBIT 4.3
EXECUTION COPY
AMERITRADE HOLDING CORPORATION
and
THE BANK OF NEW YORK, as Trustee
-------------
INDENTURE
Dated as of August 4, 1999
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA SECTION INDENTURE SECTION
- ----------- -----------------
<S> <C>
310(a)(1) 7.10
(a)(2) 7.10
(a)(3) N/A
(a)(4) N/A
(a)(5) 7.10
(b) 7.8; 7.10; 10.2
(b)(1) 7.10
(b)(9) 7.10
(c) N/A
311(a) 7.11
(b) 7.11
(c) N/A
312(a) 2.6
(b) 10.3
(c) 10.3
313(a) 7.6
(b)(1) 7.6
(b)(2) 7.6
(c) 7.6; 10.2
(d) 7.6
314(a) 4.2; 4.4; 10.2
(b) N/A
(c)(1) 10.4; 10.5
(c)(2) 10.4; 10.5
(c)(3) N/A
(d) N/A
(e) 10.5
(f) N/A
315(a) 7.1, 7.2
(b) 7.5; 10.2
(c) 7.1
(d) 6.5; 7.1; 7.2
(e) 6.11
316(a)(last sentence) 2.10
(a)(1)(A) 6.5
(a)(1)(B) 6.4
(a)(2) 8.2
(b) 6.7
(c) 8.4
317(a)(1) 6.8
(a)(2) 6.9
(b) 2.5; 7.12
318(a) 10.1
</TABLE>
- ----------------------
N/A means not applicable
Note: This Cross-Reference Table shall not, for any purpose, be deeded to be
a part of the Indenture.
i
<PAGE> 3
INDENTURE, dated as of August 4, 1999, between AMERITRADE HOLDING
CORPORATION, a Delaware corporation, as Issuer (the "Company") and THE BANK OF
NEW YORK, a New York banking corporation, as Trustee (the "Trustee").
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its debentures, notes
or other evidences of indebtedness to be issued in one or more series (the
"Securities"), as herein provided, up to such principal amount as may from time
to time be authorized pursuant to one or more supplemental indentures.
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Securities issued under this
Indenture:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
1.1 Definitions.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with") as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise; provided
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be "control".
"Agent" means any Registrar, Paying Agent, co-registrar, authenticating
agent or agent for service of notices and demands.
"Board of Directors" means the Board of Directors of the Company or any
committee duly authorized to act therefor.
"Board Resolution" means a copy of a resolution certified pursuant to
an Officers' Certificate to have been duly adopted by the Board of Directors of
the Company and to be in full force and effect, and delivered to the Trustee.
"Capital Stock" means, with respect to any Person, any and all shares
or other equivalents (however designated) of capital stock, partnership
interests or any other participation, right or
<PAGE> 4
other interest in the nature of an equity interest in such Person or any option,
warrant or other security convertible into any of the foregoing.
"Company" means the party named as such in the first paragraph of this
Indenture until a successor Person replaces such party pursuant to Article 5 of
this Indenture and, thereafter, "Company" shall mean such successor Person and
any other primary obligor on the Securities. The foregoing sentence shall
likewise apply to any subsequent successor or successors.
"Company Order" means a written order signed in the name of the Company
by two Officers, one of whom must be either of its Co-Chief Executive Officers
or its Chief Financial Officer.
"Corporate Trust Office" or other similar term, shall mean the
principal office of the Trustee at which at any particular time its corporate
trust business shall be principally administered, which office is, at the date
as of which this Indenture is dated, located at 101 Barclay Street, Floor 21
West, New York, New York 10286, Attention: Corporate Trust Administration.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Depositary" means, with respect to the Securities of any Series
issuable or issued in whole or in part in the form of one or more Global
Securities, the Person designated as Depositary for such Series by the Company,
which Depositary shall be a clearing agency registered under the Exchange Act,
until a successor Depositary shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter "Depositary" shall mean each Person
who is then a Depositary hereunder, and if at any time there is more than one
such Person, such Persons.
"Dollars" means the currency of the United States of America.
"Euro" means the European Currency Unit as determined by the Commission
of the European Union.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Foreign Currency" means any currency or currency unit issued by a
government other than the government of the United States of America.
2
<PAGE> 5
"Foreign Government Obligations" means with respect to Securities of
any Series that are denominated in a Foreign Currency, (i) direct obligations of
the government that issued or caused to be issued such currency for the payment
of which obligations its full faith and credit is pledged or (ii) obligations of
a person controlled or supervised by or acting as an agency or instrumentality
of such government the timely payment of which is unconditionally guaranteed as
a full faith and credit obligation by such government, which, in either case
under clauses (i) or (ii), are not callable or redeemable at the option of the
issuer thereof.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, as in effect from time to time.
"Global Security" or "Global Securities" means a Security or
Securities, as the case may be, in the form established pursuant to Section 2.2,
evidencing all or part of a Series of Securities issued to the Depositary for
such Series or its nominee, registered in the name of such Depositary or nominee
and bearing the legend set forth in Section 2.15(c) (or such legend as may be
specified as contemplated by Section 2.2 for such Securities).
"Holder" or "Securityholder" means a Person in whose name a Security is
registered on the Registrar's books.
"Indebtedness" means (without duplication), with respect to any Person,
any indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding any balances that constitute accounts payable or trade
payables, and other accrued liabilities arising in the ordinary course of
business regardless of whether such balances and liabilities are evidenced by
bonds, notes, debenture or similar instruments) if and to the extent any of the
foregoing indebtedness would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP.
"Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof, including, for all purposes of this
instrument and any such supplemental indenture, the provisions of the TIA that
are deemed to be a part of and govern this instrument and any such supplemental
indenture, respectively.
"Interest Payment Date" means the stated maturity date of an
installment of interest on Securities of any Series.
3
<PAGE> 6
"Lien" means, with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, security interest, lien,
charge, encumbrance, or other security agreement of any kind or nature
whatsoever on or with respect to such property or assets (including, without
limitation, any capitalized lease obligation, conditional sales, or other title
retention agreement having substantially the same economic effect as any of the
foregoing), any agreement to give a security interest in and any filing of or
agreement to give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
"Maturity Date" when used with respect to any Security or installment
of principal thereof, means the date on which the principal of such Security or
such installment of principal becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption, notice of option to elect payment or otherwise.
"Officer" means either Co-Chief Executive Officer, the President, any
Vice President, the Chief Financial Officer, the Treasurer or the Secretary of
the Company or any other officer designated by the Board of Directors.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chief Executive Officer (or any Co-Chief Executive
Officer), the President or any Vice President, and the Chief Financial Officer
or the Treasurer, any Assistant Treasurer or the Controller of such Person that
shall comply with applicable provisions of this Indenture.
"Opinion of Counsel" means a written opinion from legal counsel, which
may include an employee or an executive officer of the Company.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Redemption Date," when used with respect to any Security of a Series
to be redeemed, means the date fixed for such redemption pursuant to this
Indenture.
"Responsible Officer" when used with respect to the Trustee, means any
officer within the corporate trust department of the Trustee (or any successor
group of the Trustee) or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject and who shall have direct responsibility
for the administration of this Indenture.
4
<PAGE> 7
"SEC" means the United States Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this instrument such commission is not existing and
performing the duties now assigned to it under the TIA, then the body performing
such duties at such time.
"Securities" means the securities that are issued under this Indenture,
as amended or supplemented from time to time pursuant to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Series" or "Series of Securities" means each series of debentures,
notes or other debt instruments of the Company created pursuant to Sections 2.1
and 2.2 hereof.
"Significant Subsidiary" means any direct or indirect Subsidiary of the
Company that would be a "significant subsidiary" as defined in Article 1, Rule
1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such
regulation is in effect on the date hereof. On the date hereof, the Significant
Subsidiaries of the Company are Ameritrade (Inc.) and Advanced Clearing, Inc.
"Stated Maturity" means, when used with respect to a Security of any
Series or any installment of interest thereon, the date specified in such
Security as the last date on which the principal of such Security or such
installment of interest is due and payable, and when used with respect to any
other Indebtedness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such Indebtedness, or
any installment of interest thereon, is due and payable.
"Subsidiary" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which more than 50% of the total voting power of the Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors thereof is held, directly or indirectly by such Person or any of its
Subsidiaries; or (ii) in the case of a partnership, joint venture, association
or other business entity, with respect to which such Person or any of its
Subsidiaries has the power to direct or cause the direction of the management
and policies of such entity by contract or otherwise or if in accordance with
GAAP such entity is consolidated with such Person for financial statement
purposes.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Section
77aaa-77bbbb) as in effect on the date of this Indenture (except as provided in
Section 8.3 hereof).
5
<PAGE> 8
"Trustee" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor, and if at any time there is more than one such Person, "Trustee" as
used with respect to the Securities of any Series shall mean the Trustee with
respect to Securities of that Series.
"U.S. Government Obligations" means direct non-callable obligations of,
or non-callable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
1.2 Other Definitions.
The definitions of the following terms may be found in the sections
indicated as follows:
<TABLE>
<CAPTION>
Defined
Term in Section
---- ----------
<S> <C>
"Bankruptcy Law" 6.1
"Business Day" 10.7
"Covenant Defeasance" 9.3
"Custodian" 6.1
"Event of Default" 6.1
"Journal" 10.15
"Judgment Currency" 10.16
"Legal Defeasance" 9.2
"Legal Holiday" 10.7
"Market Exchange Rate" 10.15
"New York Banking Day" 10.16
"Paying Agent" 2.4
"Place of Payment" 10.7
"Registrar" 2.4
"Required Currency" 10.16
"Service Agent" 2.4
</TABLE>
1.3 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the portion
of such provision required to be incorporated herein in order for this Indenture
to be qualified under the TIA is incorporated by reference in and made a part of
this Indenture. The following TIA terms used in this Indenture have the
following meanings:
6
<PAGE> 9
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder or Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor on the indenture securities" means the Company.
All other terms used in this Indenture that are defined by the TIA,
defined in the TIA by reference to another statute or defined by SEC rule have
the meanings therein assigned to them.
1.4 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein,
whether defined expressly or by reference;
(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;
(5) words used herein implying any gender shall apply
to each gender;
(6) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Indenture as a
whole and not to any particular Article, Section or other
subdivision.
7
<PAGE> 10
ARTICLE 2
THE SECURITIES
2.1 Issuable in Series.
The aggregate principal amount of Securities that may be authenticated
and delivered under this Indenture is unlimited. The Securities may be issued in
one or more Series. All Securities of a Series shall be identical except as may
be set forth in a supplemental indenture detailing the adoption of the terms
thereof. In the case of Securities of a Series to be issued from time to time,
the supplemental indenture may provide for the method by which specified terms
(such as interest rate, maturity date, record date or date from which interest
shall accrue) are to be determined. Securities may differ between Series in
respect of any matters, provided that all Series of Securities shall be equally
and ratably entitled to the benefits of the Indenture.
2.2 Establishment of Terms of Series of Securities.
At or prior to the issuance of any Securities within a Series, the
following shall be established (as to the Series generally, in the case of
Subsection 2.2(1), and either as to such Securities within the Series or as to
the Series generally, in the case of Subsections 2.2(2) through 2.2(25)) by a
supplemental indenture:
(1) the title of the Series (which shall distinguish
the Securities of that particular Series from the Securities
of any other Series);
(2) the price or prices (expressed as a percentage of
the principal amount thereof) at which the Securities of the
Series will be issued;
(3) any limit upon the aggregate principal amount of
the Securities of the Series which may be authenticated and
delivered under this Indenture (except for Securities
authenticated and delivered upon registration of transfer of,
or in exchange for, or in lieu of, other Securities of the
Series pursuant to Section 2.7, 2.8, 2.11, 3.6 or 8.5);
(4) the date or dates on which the principal of the
Securities of the Series is payable;
(5) the rate or rates (which may be fixed or
variable) per annum or, if applicable, the method used to
determine such rate or rates (including, but not limited to,
any commodity, commodity index, stock exchange index or
financial index) at which the Securities of the Series shall
bear interest, if any, the date or
8
<PAGE> 11
dates from which such interest, if any, shall accrue, the date
or dates on which such interest, if any, shall commence and be
payable and any regular record date for the interest payable
on any Interest Payment Date;
(6) the place or places where the principal of and
interest and premium, if any, on the Securities of the Series
shall be payable, or the method of such payment, if by wire
transfer, mail or other means;
(7) if applicable, the period or periods within
which, the price or prices at which and the terms and
conditions upon which the Securities of the Series may be
redeemed, in whole or in part, at the option of the Company;
(8) the obligation, if any, of the Company to redeem
or purchase the Securities of the Series pursuant to any
sinking fund or analogous provisions or at the option of a
Holder thereof and the period or periods within which, the
price or prices at which and the terms and conditions upon
which Securities of the Series shall be redeemed or purchased,
in whole or in part, pursuant to such obligation;
(9) the dates, if any, on which and the price or
prices at which the Securities of the Series will be
repurchased by the Company at the option of the Holders
thereof and other detailed terms and provisions of such
repurchase obligations;
(10) if other than denominations of $1,000 and any
integral multiple thereof, the denominations in which the
Securities of the Series shall be issuable;
(11) the forms of the Securities of the Series in
bearer or fully registered form (and, if in fully registered
form, whether the Securities will be issuable as Global
Securities);
(12) if other than the principal amount thereof, the
portion of the principal amount of the Securities of the
Series that shall be payable upon declaration of acceleration
of the maturity thereof pursuant to Section 6.2;
(13) the currency of denomination of the Securities
of the Series, which may be Dollars or any Foreign Currency,
including, but not limited to, the Euro, and if such currency
of denomination is a composite currency other than the Euro,
the agency or organization, if any, responsible for overseeing
such composite currency;
9
<PAGE> 12
(14) the designation of the currency, currencies or
currency units in which payment of the principal of and
interest and premium, if any, on the Securities of the Series
will be made;
(15) if payments of principal of or interest and
premium, if any, on the Securities of the Series are to be
made in one or more currencies or currency units other than
that or those in which such Securities are denominated, the
manner in which the exchange rate with respect to such
payments will be determined;
(16) the manner in which the amounts of payment of
principal of and interest and premium, if any, on the
Securities of the Series will be determined, if such amounts
may be determined by reference to an index based on a currency
or currencies or by reference to a commodity, commodity index,
stock exchange index or financial index;
(17) the provisions, if any, relating to any
collateral security provided for the Securities of the Series;
(18) any addition to or change in the Events of
Default which applies to any Securities of the Series and any
change in the right of the Trustee or the requisite Holders of
such Securities to declare the principal amount thereof due
and payable pursuant to Section 6.2;
(19) any addition to or change in the covenants set
forth in this Indenture which applies to Securities of the
Series;
(20) any depositories, interest rate calculation
agents, exchange rate calculation agents or other agents with
respect to Securities of such Series if other than those
appointed herein;
(21) the terms and conditions, if any, upon which the
Securities and any guarantees thereof shall be subordinated in
right of payment to other indebtedness of the Company or any
guarantor;
(22) the form and terms of any guarantee of the
Securities;
(23) if applicable, that the Securities of the
Series, in whole or any specified part, shall be defeasible
pursuant to Article 9;
(24) if applicable, CUSIP numbers for the Securities
of the Series; and
10
<PAGE> 13
(25) any other terms of the Securities of the Series
(which terms shall not be inconsistent with the provisions of
this Indenture, except as permitted by Section 8.1, but which
may modify or delete any provision of this Indenture insofar
as it applies to such Series).
All Securities of any one Series need not be issued at the same time and may be
issued from time to time, consistent with the terms of this Indenture, if so
provided by or pursuant to the supplemental indenture referred to above, and the
authorized principal amount of any Series may not be increased to provide for
issuances of additional Securities of such Series, unless otherwise provided in
such supplemental indenture.
2.3 Execution and Authentication.
The Securities shall be executed on behalf of the Company by two
Officers of the Company. Each signature may be either manual or facsimile. The
Company's seal need not be impressed, affixed, imprinted or reproduced on the
Securities.
If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid. A Security shall not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent. The signature shall
be conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall at any time, and from time to time, authenticate
Securities for original issue in the principal amount provided in the
supplemental indenture hereto, upon receipt by the Trustee of a Company Order.
Such Company Order may authorize authentication and delivery pursuant to oral or
electronic instructions from the Company or its duly authorized agent or agents,
which oral instructions shall be promptly confirmed in writing. Each Security
shall be dated the date of its authentication unless otherwise provided by a
supplemental indenture.
The aggregate principal amount of Securities of any Series outstanding
at any time may not exceed any limit upon the maximum principal amount for such
Series set forth in the supplemental indenture delivered pursuant to Section
2.2, except as provided in Section 2.8.
Prior to the issuance of Securities of any Series, the Trustee shall
have received and (subject to Section 7.2) shall be fully protected in relying
on: (a) the supplemental indenture establishing the form of the Securities of
that Series or of Securities within that Series and the terms of the Securities
of that Series or of Securities within that Series, (b) an Officers' Certificate
complying with Section 10.4, and (c) an Opinion of Counsel complying with
Section 10.4.
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The Trustee shall have the right to decline to authenticate and deliver
any Securities of such Series: (a) if the Trustee, being advised in writing by
outside counsel, determines that such action may not lawfully be taken; or (b)
if the Trustee in good faith by its board of directors or trustees, executive
committee or a trust committee of directors and/or vice-presidents shall
determine, based on written advice of outside counsel, that such action would
expose the Trustee to personal liability to Holders of any then outstanding
Series of Securities.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate Securities. An authenticating agent may
authenticate Securities whenever the Trustee may do so. Any appointment shall be
evidenced by instrument signed by an authorized officer of the Trustee, a
certified copy of which shall be furnished to the Company. Each reference in
this Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal with the
Company or an Affiliate of the Company.
2.4 Registrar and Paying Agent.
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange ("Registrar"), an office
or agency located in the Borough of Manhattan, City of New York, State of New
York where Securities may be presented for payment ("Paying Agent") and an
office or agency where notices and demands to or upon the Company in respect of
the Securities and this Indenture may be served ("Service Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more co-registrars and one or more additional paying
agents. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or to furnish
the Trustee with the address thereof, such presentations, surrenders, notices
and demands may be made or served at the address of the Trustee as set forth in
Section 10.2. Neither the Company nor any Affiliate of the Company may act as
Paying Agent. The Company may change any Paying Agent, Registrar or co-registrar
without notice to any Securityholder.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in each
place of payment for Securities of any series for such purposes. The Company
shall give prompt written notice to the Trustee of such designation or
rescission and of any change in the location of any such other office or agency.
The Company shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture. The agreement shall
implement the provisions of this
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Indenture that relate to such Agent. The Company shall notify the Trustee of the
name and address of any such Agent. If the Company fails to maintain a Registrar
or Paying Agent, or agent for service of notices and demands, or fails to give
the foregoing notice, the Trustee shall act as such. The Company hereby appoints
the Trustee as the initial Registrar, Paying Agent and Service Agent for each
Series unless another Registrar, Paying Agent or Service Agent, as the case may
be, is appointed prior to the time Securities of that Series are first issued.
The Company hereby initially designates the Corporate Trust Office of the
Trustee as such office of the Company.
2.5 Paying Agent To Hold Assets in Trust.
The Trustee as Paying Agent shall, and the Company shall require each
Paying Agent other than the Trustee to agree in writing that each Paying Agent
shall, hold in trust for the benefit of the Holders of any Series of Securities
or the Trustee all assets held by the Paying Agent for the payment of principal
of, or interest and premium, if any, on, such Series of Securities (whether such
assets have been distributed to it by the Company or any other obligor on such
Series of Securities), and the Company and the Paying Agent shall notify the
Trustee in writing of any Default by the Company (or any other obligor on such
Series of Securities) in making any such payment. The Company at any time may
require a Paying Agent to distribute all assets held by it to the Trustee and
account for any assets disbursed and the Trustee may at any time during the
continuance of any payment default with respect to any Series of Securities,
upon written request to a Paying Agent, require such Paying Agent to distribute
all assets held by it to the Trustee and to account for any assets distributed.
Upon distribution to the Trustee of all assets that shall have been delivered by
the Company to the Paying Agent, the Paying Agent shall have no further
liability for such assets.
2.6 Securityholder 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
Securityholders of each Series of Securities. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee as of each regular interest
payment record date and on or before each related Interest Payment Date, and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
of Securityholders of each Series of Securities.
2.7 Transfer and Exchange.
When Securities of a Series are presented to the Registrar with a
request to register the transfer thereof, the Registrar shall register the
transfer as requested if the requirements of applicable law are met and, when
such Securities of a Series are presented to the Registrar with a
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request to exchange them for an equal principal amount of other authorized
denominations of Securities of the same Series, the Registrar shall make the
exchange as requested. To permit transfers and exchanges, upon surrender of any
Security for registration of transfer at the office or agency maintained
pursuant to Section 2.4 hereof, subject to the provisions of this Section 2.7,
the Company shall execute and the Trustee shall authenticate Securities at the
Registrar's request.
In the event that the Securities are issued as Global Securities, the
provisions of Section 2.15 shall apply.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration or transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Registrar or a
co-registrar) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Registrar or a
co-registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing.
Any exchange or transfer shall be without charge, except that the
Company may require payment by the Holder of a sum sufficient to cover any tax
or other governmental charge that may be imposed in relation to a transfer or
exchange, but this provision shall not apply to any exchange pursuant to
Sections 2.11, 3.6 or 8.5 hereof. The Trustee shall not be required to register
transfers of Securities of any Series or to exchange Securities of any Series
for a period of 15 days before selection for redemption of such Securities. The
Trustee shall not be required to exchange or register transfers of Securities of
any Series called or being called for redemption in whole or in part, except the
unredeemed portion of such Security being redeemed in part.
2.8 Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security presents evidence to the satisfaction of the Company and the
Trustee that the Security has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Security of
the same Series and of like tenor and principal amount and bearing a number not
contemporaneously outstanding, if the Company's and the Trustee's requirements
are met. An indemnity bond may be required by the Company or the Trustee that is
sufficient in the judgment of the Company or the Trustee, as the case may be, to
protect the Company, the Trustee or any Agent from any loss which any of them
may suffer if a Security is replaced. The Company and the Trustee may charge
such Holder for their reasonable, out-of-pocket expenses in replacing a
Security, including reasonable fees and expenses of counsel. Every replacement
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Security shall constitute an original additional obligation of the Company,
whether or not the destroyed, lost or stolen Security shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Securities of that
Series duly issued hereunder.
2.9 Outstanding Securities.
Securities outstanding at any time are all Securities authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, and those described in this Section 2.9 as not outstanding.
If a Security is replaced pursuant to Section 2.8 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
until the Company and the Trustee receive proof satisfactory to each of them
that the replaced Security is held by a bona fide purchaser in which case the
replacement Security ceases to be outstanding. A mutilated Security ceases to be
outstanding upon surrender of such Security and replacement thereof pursuant to
Section 2.8.
If a Paying Agent holds on a Redemption Date or Maturity Date money
sufficient to pay the principal of, premium, if any, and accrued interest on
Securities payable on that date and is not prohibited from paying such money to
the Holders thereof pursuant to the terms of this Indenture (provided that, if
such Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made), then on and after that date such Securities cease to be
outstanding and interest on them ceases to accrue.
Subject to Section 2.10, a Security does not cease to be outstanding
solely because the Company or an Affiliate holds the Security.
2.10 When Treasury Securities are Disregarded; Determination of
Holders' Action.
In determining whether the Holders of the required aggregate principal
amount of the Securities of any Series have concurred in any direction, waiver
or consent, the Securities of any Series owned by the Company or any other
obligor on such Securities or by any Affiliate of any of them shall be
disregarded, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities of such Series which a Responsible Officer of the Trustee actually
knows are so owned shall be so disregarded. Securities of such Series so owned
which have been pledged in good faith shall not be disregarded if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to the Securities of such Series and that the pledgee is not the
Company or any other obligor upon the Securities of such Series or any Affiliate
of any of them.
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2.11 Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form, and shall carry all rights, of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities in
exchange for temporary Securities presented to it, without charge to the Holder.
2.12 Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
for cancellation. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and may deliver to
the Trustee (or to any other Person for delivery to the Trustee) for
cancellation any Securities previously authenticated hereunder which the Company
has not issued and sold. The Registrar and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for transfer, exchange or payment.
The Trustee, or at the direction of the Trustee, the Registrar or the Paying
Agent, and no one else, shall cancel and, at the written request of the Company,
shall dispose of all Securities surrendered for transfer, exchange, payment or
cancellation. If the Company shall acquire any of the Securities, such
acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Securities unless and until the same are
surrendered to the Trustee for cancellation pursuant to this Section 2.12. No
Securities shall be authenticated in lieu of or in exchange for any Securities
cancelled as provided in this Section 2.12, except as expressly permitted by
this Indenture.
2.13 Payment of Interest; Defaulted Interest; Computation of
Interest.
Except as otherwise provided as contemplated by Section 2.2 with
respect to any Series of Securities, interest on any Security which is payable,
and is punctually paid or duly provided for, on any Interest Payment Date shall
be paid to the Person in whose name that Security is registered at the close of
business on the regular record date for such interest. If the Company defaults
in a payment of interest on the Securities, it shall pay the defaulted amounts,
plus, to the extent lawful, any interest payable on defaulted amounts pursuant
to Section 4.1 hereof, to the persons who are Securityholders on a subsequent
special record date, which date shall be the fifteenth day next preceding the
date fixed by the Company for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day. At least 10 days
before the special record date, the Company shall mail or cause to be mailed to
each Securityholder,
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with a copy to the Trustee, a notice that states the special record date, the
payment date, and the amount of defaulted interest, and interest payable on such
defaulted interest, if any, to be paid.
Except as otherwise specified as contemplated by Section 2.2 for
Securities of any Series, interest on the Securities of each Series shall be
computed on the basis of a 360-day year of twelve 30-day months.
2.14 CUSIP Number.
The Company in issuing the Securities may use one or more "CUSIP"
numbers, and if so, the Trustee shall use the CUSIP number(s) in notices of
redemption or exchange as a convenience to Holders, provided that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number(s) printed in the notice or on the Securities, and
that reliance may be placed only on the other identification numbers printed on
the Securities. The Company shall promptly notify the Trustee of any change in
the CUSIP numbers.
2.15 Provisions for Global Securities.
(a) A supplemental indenture hereto shall establish whether
the Securities of a Series shall be issued in whole or in part in the form of
one or more Global Securities and the Depositary for such Global Security.
(b) Notwithstanding any provisions to the contrary contained
in Section 2.7 of the Indenture and in addition thereto, if (A) the Depositary
(i) at any time is unwilling or unable to continue as Depositary for such Global
Security or ceases to be a clearing agency registered under the Exchange Act and
(ii) a successor Depositary is not appointed by the Company within 90 days of
the date the Company is so informed in writing or becomes aware of the same, or
(B) a Default or an Event of Default has occurred and is continuing with respect
to the Securities represented by such Global Security, the Company promptly will
execute and deliver to the Trustee definitive Securities, and the Trustee, upon
receipt of a Company Order for the authentication and delivery of such
definitive Securities which shall set forth the reasons for such authentication
and delivery (which the Company will promptly execute and deliver to the
Trustee), will authenticate and deliver definitive Securities, without charge,
registered in such names and in such authorized denominations as the Depositary
shall direct in writing (pursuant to instructions from its direct and indirect
participants or otherwise) in an aggregate principal amount equal to the
principal amount of the Global Security with like tenor and terms. Upon the
exchange of a Global Security for definitive Securities, such Global Security
shall be canceled by the Trustee.
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Except as provided in this Section 2.15(b), unless and until it is
exchanged in whole or in part for definite Securities, a Global Security may not
be transferred except as a whole by the Depositary with respect to such Global
Security to a nominee of such Depositary, by a nominee of such Depositary to
such Depositary or another nominee of such Depositary or by the Depositary or
any such nominee to a successor Depositary or a nominee of such a successor
Depositary.
(c) Any Global Security issued hereunder shall bear a legend
in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF
THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITARY OR A NOMINEE OF THE DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR
SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS
NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND MAY
NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY, 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 A SUCCESSOR DEPOSITARY.
(d) The Depositary, as a Holder, may appoint agents and
otherwise authorize participants to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action which a Holder
is entitled to give or take under the Indenture.
(e) Notwithstanding the other provisions of this Indenture,
unless otherwise specified as contemplated by Section 2.2, payment of the
principal of and interest and premium, if any, on any Global Security shall be
made to the Depositary or its nominee in its capacity as the Holder thereof.
(f) Except as provided in Section 2.15(e), the Company, the
Trustee and any Agent shall treat a person as the Holder of such principal
amount of outstanding Securities of such Series represented by a Global Security
as shall be specified in a written statement of the Depositary delivered to the
Company, the Trustee or such Agent, as the case may be, with respect to such
Global Security, for purposes of obtaining any consents, declarations, waivers
or directions required to be given by the Holders pursuant to this Indenture,
until a written statement to the contrary has been delivered to the Company, the
Trustee or such Agent, as the case may be.
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ARTICLE 3
REDEMPTION
3.1 Notices to Trustee.
The Company may, with respect to any Series of Securities, reserve the
right to redeem and pay the Series of Securities or may covenant to redeem and
pay the Series of Securities or any part thereof prior to the Stated Maturity
thereof at such time and on such terms as provided for in such Securities. If a
Series of Securities is redeemable and the Company elects to redeem such
Securities of a Series, it shall notify the Trustee of the Redemption Date and
the principal amount of Securities to be redeemed at least 40 days (unless the
Series is being redeemed in full or a shorter notice shall be satisfactory to
the Trustee) but not more than 60 days before the Redemption Date. Any such
notice may be canceled at any time prior to notice of such redemption being
mailed to any Holder and shall thereby be void and of no effect.
3.2 Selection by Trustee of Securities To Be Redeemed.
Unless otherwise indicated for a particular Series of Securities by a
supplemental indenture, if fewer than all of the Securities of a Series are to
be redeemed, the Trustee shall select the Securities of a Series to be redeemed
pro rata, by lot or by any other method that the Trustee considers fair and
appropriate and, if such Securities are listed on any securities exchange, by a
method that complies with the requirements of such exchange.
The Trustee shall make the selection from Securities of a Series
outstanding and not previously called for redemption and shall promptly notify
the Company in writing of the Securities selected for redemption and, in the
case of any Security selected for partial redemption, the principal amount
thereof to be redeemed. Unless otherwise indicated for a particular Series of
Securities by a supplemental indenture, securities of a Series in denominations
of $1,000 may be redeemed only in whole. Unless otherwise indicated for a
particular Series of Securities by a supplemental indenture, the Trustee may
select for redemption portions of the principal of Securities of a Series that
have denominations larger than or equal to $1,000. Provisions of this Indenture
that apply to Securities called for redemption also apply to portions of
Securities called for redemption.
3.3 Notice of Redemption.
Unless otherwise indicated for a particular Series by a supplemental
indenture hereto, at least 30 days, and no more than 60 days, before a
Redemption Date, the Company shall mail, or cause to be mailed, a notice of
redemption by first-class mail to each Holder of Securities to be
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redeemed at his or her last address as the same appears on the registry books
maintained by the Registrar.
The notice shall identify the Securities to be redeemed (including the
CUSIP number(s) thereof, if any) and shall state:
(1) the Redemption Date;
(2) the redemption price, and that such redemption
price shall become due and payable on the Redemption Date;
(3) if any Security of a Series is being redeemed in
part, the portion of the principal amount of such Security of
a Series to be redeemed and that, after the Redemption Date
and upon surrender of such Security of a Series, a new
Security or Securities in principal amount equal to the
unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Securities of a Series called for redemption
must be surrendered to the Paying Agent to collect the
redemption price, and the place or places where each such
security is to be surrendered for such payment;
(6) that, unless the Company defaults in making the
redemption payment, interest on the Securities of a Series
called for redemption ceases to accrue on and after the
Redemption Date, and the only remaining right of the Holders
of such Securities is to receive payment of the redemption
price upon surrender to the Paying Agent of the Securities
redeemed; and
(7) if fewer than all the Securities of a Series are
to be redeemed, the identification of the particular
Securities of a Series (or portion thereof) to be redeemed, as
well as the aggregate principal amount of Securities of a
Series to be redeemed and the aggregate principal amount of
Securities of a Series to be outstanding after such partial
redemption.
At the Company's written request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's sole reasonable expense,
and such notice may be revoked by the Company at any time at least five Business
Days prior to the Redemption Date, at the Company's sole reasonable expense.
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3.4 Effect of Notice of Redemption.
Once the notice of redemption described in Section 3.3 is mailed,
Securities of a Series called for redemption become due and payable on the
Redemption Date and at the redemption price, plus interest, if any, accrued to
the Redemption Date. Upon surrender to the Trustee or Paying Agent, such
Securities of a Series shall be paid at the redemption price, plus accrued
interest, if any, to the Redemption Date, provided that if the Redemption Date
is after a regular interest payment record date and on or prior to the next
Interest Payment Date, the accrued interest shall be payable to the Holder of
the redeemed Securities registered on the relevant record date.
3.5 Deposit of Redemption Price.
On or prior to the Redemption Date, the Company shall deposit with the
Paying Agent money sufficient to pay the redemption price of and accrued
interest, if any, on all Securities to be redeemed on that date other than
Securities or portions thereof called for redemption on that date which have
been delivered by the Company to the Trustee for cancellation.
On and after any Redemption Date, if money sufficient to pay the
redemption price of and accrued interest on Securities called for redemption
shall have been made available in accordance with the preceding paragraph and
the Company and the Paying Agent are not prohibited from paying such moneys to
Holders generally, the Securities called for redemption will cease to accrue
interest and the only right of the Holders of such Securities will be to receive
payment of the redemption price of and, subject to the proviso in Section 3.4,
accrued and unpaid interest on such Securities to the Redemption Date. If any
Security called for redemption shall not be so paid, interest will be paid, from
the Redemption Date until such redemption payment is made, on the unpaid
principal of the Security and any interest or premium, if any, not paid on such
unpaid principal, in each case, at the rate and in the manner provided in the
Securities.
3.6 Securities Redeemed in Part.
Upon surrender of a Security of a Series that is redeemed in part, the
Company shall execute and Trustee shall authenticate and deliver to the Holder a
new Security in an authorized denomination of the same Series equal in principal
amount to the unredeemed portion of the Security surrendered.
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ARTICLE 4
COVENANTS
4.1 Payment of Securities.
The Company shall duly and punctually pay the principal of and interest
and premium, if any, on each Series of Securities on the dates and in the manner
provided in such Securities and this Indenture.
An installment of principal or interest shall be considered paid on the
date it is due if the Trustee or Paying Agent holds on that date money
designated for and sufficient to pay such installment and is not prohibited from
paying such money to the Holders generally pursuant to the terms of this
Indenture or otherwise.
The Company shall pay interest on overdue principal, and overdue
interest, to the extent lawful, at the rate specified in the Series of
Securities.
4.2 SEC Reports.
The Company will deliver to the Trustee and Holders of Securities
within 15 days after the filing of the same with the SEC, copies of the
quarterly and annual report and of the information documents and other reports,
if any, which the Company is required to file with the SEC or provide to
securityholders pursuant to Section 13 or 15(d) of the Exchange Act.
Notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company will file
with the SEC, to the extent permitted, and provide the Trustee and Holders of
each Series of Securities with such quarterly and annual reports and such
information, documents and other reports specified in Section 13 and 15(d) of
the Exchange Act. The Company will also comply with the other provisions of TIA
Section 314(a).
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
4.3 Waiver of Stay, Extension, Usury or Other Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead (as a defense or otherwise) or in
any manner whatsoever claim or take
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the benefit or advantage of, any stay, extension, usury or other law which would
prohibit or forgive the Company from paying all or any portion of the principal
of, premium, if any, and/or interest on the Securities as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that they may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
4.4 Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year of the Company, an Officers' Certificate which
complies with TIA Section 314(a)(4) stating that a review of the activities of
the Company and its Subsidiaries during such fiscal year has been made under the
supervision of the signing Officers with a view to determining whether each has
kept, observed, performed and fulfilled 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 each has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and is not in
default in the performance or observance of any of the terms, provisions and
conditions hereof (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he or she may have
knowledge and what action each is taking or proposes to take with respect
thereto) 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, if any, on the Securities is prohibited or if such event has
occurred, a description of the event and what action each is taking or proposes
to take with respect thereto.
(b) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder notifies the Company that it seeks to exercise
any remedy hereunder with respect to a claimed Default under this Indenture or
the Securities, the Company shall deliver to the Trustee an Officers'
Certificate specifying such event, notice or other action within five Business
Days of its becoming aware of such occurrence or notice and what action the
Company is taking or proposes to take with respect thereto.
4.5 Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon it or any of its Significant
Subsidiaries or properties of it or any of its Significant Subsidiaries and (ii)
all lawful claims for labor, materials and supplies that, if unpaid, might by
law become a Lien
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upon the property of it or any of its Significant Subsidiaries; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim if the amount,
applicability or validity thereof is being contested in good faith by
appropriate proceedings and, in the case of material taxes, assessments and
governmental charges in clause (i) above, an adequate reserve has been
established therefor to the extent required by GAAP.
4.6 Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things reasonably necessary to preserve and keep in full force and effect
its corporate existence, and the corporate, partnership or other existence of
each Significant Subsidiary, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company and of
each Significant Subsidiary, and the material rights (charter and statutory),
licenses and franchises of the Company and its Significant Subsidiaries;
provided, however, that the Company shall not be required to preserve any such
right, license or franchise, or the corporate, partnership or other existence of
any of its Significant Subsidiaries, if the Board of Directors shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and its Significant Subsidiaries, taken as a whole, and
that the loss thereof is not adverse in any material respect to the Holders.
4.7 Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where Securities of a Series may be presented or
surrendered for payment, where Securities of such Series may be surrendered for
registration of transfer, exchange, purchase, redemption or conversion and where
notices and demands to or upon the Company in respect of the Securities of such
Series and this Indenture may be served. The office or agency of The Bank of New
York located at 101 Barclay Street, Floor 21 West, New York, New York 10286
(Attention: Corporate Trust Administration) shall be such office or agency for
all of the aforesaid purposes unless the Company shall maintain some other
office or agency for such purposes and shall give prompt written notice to the
Trustee of the location, and any change in the location, of such other office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office.
The Company may also from time to time designate one or more other
offices or agencies where the Securities of a Series may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or
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rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in the Borough of Manhattan, The City of New York, for such
purposes.
4.8 Further Instruments and Acts.
The Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary to carry out more effectively
the purposes of this Indenture.
ARTICLE 5
SUCCESSOR ENTITY
5.1 Limitation on Consolidation, Merger and Sale of Assets.
(a) The Company will not, in any transaction or series of
transactions, consolidate with or merge into any other Person or Persons, or
convey, transfer, sell or lease its properties and assets substantially as an
entirety to any Person or Persons and the Company will not permit any of its
Significant Subsidiaries to enter into any such transaction or series of
transactions if such transaction or series of transactions, in the aggregate,
would result in a conveyance, transfer, sale or lease of the properties and
assets of the Company or the Company and its Significant Subsidiaries
substantially as an entirety, to any Person or Persons, unless at the time of
and after giving effect thereto (i) either (A) if the transaction or series of
transactions is a merger or consolidation, the Company shall be the surviving
Person of such merger or consolidation, or (B) the Person formed by such
consolidation or into which the Company or such Significant Subsidiary is merged
or to which the properties and assets of the Company or such Significant
Subsidiary, as the case may be, are transferred (any such surviving person or
transferee Person being the "Surviving Entity") shall be a corporation, limited
liability company, partnership or trust organized and existing under the laws of
the United States of America, any state thereof or the District of Columbia and
shall expressly assume by a supplemental indenture executed and delivered to the
Trustee, in form reasonably satisfactory to the Trustee, all the obligations of
the Company (including, without limitation, the obligation to pay the principal
of, premium, if any, and interest on the Securities and the performance of the
other covenants) under the Securities of a Series and this Indenture, and in
each case, this Indenture shall remain in full force and effect; and (ii)
immediately before and immediately after giving effect to such transaction or
series of transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), no Default or Event of
Default shall have occurred and be continuing.
(b) In connection with any consolidation, merger or transfer
of assets contemplated by this Section 5.1, the Company shall deliver, or cause
to be delivered, to the
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Trustee, in form and substance reasonably satisfactory to the Trustee, an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this Section 5.1 and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.
5.2 Successor Person Substituted.
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company or any Significant Subsidiary in
accordance with Section 5.1 above, the successor entity formed by such
consolidation or into which the Company is merged or to which such transfer is
made shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor entity had been named as the Company herein, and thereafter (except
with respect to any such transfer which is a lease) the predecessor entity shall
be relieved of all obligations and covenants under this Indenture and the
Securities.
ARTICLE 6
DEFAULTS AND REMEDIES
6.1 Events of Default.
"Events of Default," wherever used herein with respect to Securities of
any Series, means any one of the following events, unless in the establishing
supplemental indenture it is provided that such Series shall not have the
benefit of said Event of Default:
(1) there is a default in the payment of any
principal of, or premium, if any, on the Securities when the
same becomes due and payable at maturity, upon acceleration,
redemption or otherwise;
(2) there is a default in the payment of any interest
on any Security of a Series when the same becomes due and
payable and the default continues for a period of 30 days;
(3) the Company defaults in the observance or
performance of any other covenant in the Securities of a
Series or this Indenture for 60 days after written notice from
the Trustee or the Holders of not less than 25% in the
aggregate principal amount of the Securities of such Series
then outstanding;
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(4) there is a default or are defaults under one or
more agreements, instruments, mortgages, bonds, debentures or
other evidences of Indebtedness under which the Company or any
Significant Subsidiary of the Company then has outstanding
Indebtedness in excess of $25 million, individually or in the
aggregate, and either (a) such Indebtedness is already due and
payable in full or (b) such default or defaults have resulted
in the acceleration of the maturity of such Indebtedness;
(5) a court of competent jurisdiction enters a final
judgment or judgments which can no longer be appealed for the
payment of money in excess of $25 million (not covered by
insurance) against the Company or any Significant Subsidiary
and such judgment remains undischarged for a period of 60
consecutive days during which a stay of enforcement of such
judgment shall not be in effect;
(6) the Company or any Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for
relief against it in an involuntary case,
(C) consents to the appointment of a
Custodian of it or for all or substantially all of
its property,
(D) makes a general assignment for the
benefit of its creditors, or
(E) generally is not paying its debts as
they become due;
(7) a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Significant Subsidiary in an involuntary case,
(B) appoints a Custodian of the Company or
any Significant Subsidiary or for all or
substantially all of the property of the Company or
any Significant Subsidiary, or
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(C) orders the liquidation of the Company or
any Significant Subsidiary,
and the order or decree remains unstayed and in effect for 90
days; or
(8) any other Event of Default provided with respect
to Securities of that Series, which is specified in a
supplemental indenture hereto, in accordance with Section
2.2(18).
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.
The Trustee may withhold notice of any Default (except in payment of
principal or premium, if any, or interest on the Securities) to the Holders of
the Securities of any Series in accordance with Section 7.5.
6.2 Acceleration.
If an Event of Default with respect to Securities of any Series at the
time outstanding (other than an Event of Default arising under Section 6.1(6) or
(7)) occurs and is continuing, the Trustee by written notice to the Company, or
the Holders of not less than 25% in aggregate principal amount of the Securities
of that Series then outstanding may by written notice to the Company and the
Trustee declare that the entire principal amount of all the Securities of that
Series then outstanding plus accrued and unpaid interest to the date of
acceleration are immediately due and payable, in which case such amounts shall
become immediately due and payable; provided, however, that after such
acceleration but before a judgment or decree based on such acceleration is
obtained by the Trustee, the Holders of a majority in aggregate principal amount
of the outstanding Securities of that Series may rescind and annul such
acceleration and its consequences if (i) all existing Events of Default, other
than the nonpayment of accelerated principal, premium, if any, or interest that
has become due solely because of the acceleration, have been cured or waived,
(ii) to the extent the payment of such interest is lawful, interest on overdue
installments of interest and overdue principal, which has become due otherwise
than by such declaration of acceleration, has been paid and (iii) if the
rescission would not conflict with any judgment or decree. No such rescission
shall affect any subsequent Default or impair any right consequent thereto. In
case an Event of Default specified in Section 6.1(6) or (7) with respect to the
Company occurs, such principal, premium, if any, and interest amount with
respect to all of the Securities of that Series shall be due and payable
immediately without any declaration or other act on the part of the Trustee or
the Holders of the Securities of that Series.
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6.3 Other Remedies.
If an Event of Default with respect to Securities of any Series at the
time outstanding occurs and is continuing, the Trustee may pursue any available
remedy by proceeding at law or in equity to collect the payment of principal of,
or premium, if any, and interest on the Securities of that Series or to enforce
the performance of any provision of the Securities of that Series or this
Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities of that Series or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Securityholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative to the extent permitted by law.
6.4 Waiver of Past Defaults and Events of Default.
Subject to Sections 6.2, 6.7 and 8.2 hereof, the Holders of a majority
in principal amount of the Securities of any Series then outstanding have the
right to waive any existing Default or Event of Default with respect to such
Series or compliance with any provision of this Indenture or the Securities of
such Series. Upon any such waiver, such Default with respect to such Series
shall cease to exist, and any Event of Default with respect to such Series
arising therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
Event of Default or impair any right consequent thereto.
6.5 Control by Majority.
The Holders of a majority in principal amount of the Securities of any
Series then outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee by this Indenture with respect to such Series.
The Trustee, however, may refuse to follow any direction that conflicts with law
or this Indenture or that the Trustee determines may be unduly prejudicial to
the rights of another Securityholder or that may involve the Trustee in personal
liability; provided that the Trustee may take any other action deemed necessary
by the Trustee which is not inconsistent with such direction.
6.6 Limitation on Suits.
Subject to Section 6.7 below, a Securityholder may not institute any
proceeding or pursue any remedy with respect to this Indenture or the Securities
of a Series unless:
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(1) the Holder gives to the Trustee written notice of
a continuing Event of Default with respect to the Securities
of that Series;
(2) the Holders of at least 25% in aggregate
principal amount of the Securities of such Series then
outstanding make a written request to the Trustee to pursue
the remedy;
(3) such Holder or Holders offer to the Trustee
indemnity satisfactory to the Trustee against any loss,
liability or expense to be incurred in compliance with such
request;
(4) the Trustee does not comply with the request
within 60 days after receipt of the request and the offer of
indemnity; and
(5) no direction inconsistent with such written
request has been given to the Trustee during such 60-day
period by the Holders of a majority in aggregate principal
amount of the Securities of such Series then outstanding.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
6.7 Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security of a Series to receive payment of principal of, or premium,
if any, and interest of the Security of such Series on or after the respective
due dates expressed in the Security of such Series, or to bring suit for the
enforcement of any such payment on or after such respective dates, is absolute
and unconditional and shall not be impaired or affected without the consent of
the Holder.
6.8 Collection Suit by Trustee.
If an Event of Default in payment of principal, premium or interest
specified in Section 6.1(1) or (2) hereof with respect to Securities of any
Series at the time outstanding occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
(or any other obligor on the Securities of that Series) for the whole amount of
unpaid principal and accrued interest remaining unpaid, together with interest
on overdue principal and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate then
borne by the Securities of that Series, and such further amounts as shall be
sufficient to cover the reasonable costs and expenses of
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collection, including the compensation and reasonable expenses, disbursements
and advances of the Trustee, its agents and counsel as set forth in Section 7.7.
6.9 Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel) and the Securityholders
allowed in any judicial proceedings relative to the Company (or any other
obligor upon the Securities), any of their respective creditors or any of their
respective property and shall be entitled and empowered to collect and receive
any monies or other property payable or deliverable on any such claims and to
distribute the same after deduction of its charges and expenses to the extent
that any such charges and expenses are not paid out of the estate in any such
proceedings and any custodian in any such judicial proceeding is hereby
authorized by each Securityholder to make such payments to the Trustee, and in
the event that the Trustee shall consent to the making of such payments directly
to the Securityholders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section 7.7
hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan or reorganization, arrangement, adjustment or composition affecting the
Securities of a Series or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Securityholder in any such
proceedings.
6.10 Priorities.
If the Trustee collects any money pursuant to this Article 6, it shall
pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.7 hereof;
SECOND: to Securityholders for amounts then due and unpaid for
principal, premium, if any, and interest on the Securities in respect of which
or for the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and payable on
such Securities; and
THIRD: to the Company.
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The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 6.10. At least 15 days before such
record date, the Trustee shall mail to each Securityholder a notice that states
the record date, the payment date and amount to be paid.
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 Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees and expenses, 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 6.11 does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.7 hereof or a suit by Holders of more than 25% in
principal amount of the Securities of a Series then outstanding.
ARTICLE 7
TRUSTEE
7.1 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise or use under the same circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that
are specifically set forth in this Indenture and no covenants
or obligations shall be implied in this Indenture against the
Trustee.
(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 certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture
but, in the case of any such certificates or opinions which by
any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the
requirements of this Indenture (but need not confirm or
investigate the accuracy of any mathematical calculations or
other facts stated therein).
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(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 7.1.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless
it is proved that the Trustee was negligent in ascertaining
the pertinent facts.
(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
Sections 6.2 and 6.5 hereof.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its rights or powers if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
satisfactory to it against such risk or liability is not reasonably assured to
it.
(e) Whether or not therein expressly so provided, paragraphs
(a), (b), (c) and (d) of this Section 7.1 shall govern every provision of this
Indenture that in any way relates to the Trustee.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by the law.
(g) The Paying Agent, the Registrar, the Service Agent, any
co-registrar and any authenticating agent shall be entitled to the protections,
immunities and standard of care set forth in paragraphs (a), (b), (c) and (d) of
this Section 7.1 with respect to the Trustee.
7.2 Rights of Trustee.
(a) Subject to Section 7.1 hereof:
(1) The Trustee may conclusively rely on and shall be
fully protected in acting or refraining from acting upon any
document reasonably believed by it to be genuine and to have
been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the
document.
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(2) Before the Trustee acts or refrains from acting,
it may require an Officers' Certificate or an Opinion of
Counsel, or both, which shall conform to the provisions of
Section 10.4 hereof. The Trustee shall be protected and shall
not be liable for any action it takes or omits to take in good
faith in reliance on such certificate or opinion.
(3) The Trustee may act through agents and shall not
be responsible for the misconduct or negligence of any agent
appointed by it with due care.
(4) The Trustee shall not be liable for any action it
takes or omits to take in good faith which it reasonably
believes to be authorized or within its rights or powers.
(5) The Trustee may consult with counsel of its
selection, and the advice or opinion of such counsel as to
matters of law shall be full and complete authorization and
protection from liability in respect of any action taken,
omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
(6) The Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Indenture at the request, order or direction of any of the
Holders pursuant to the provisions of this Indenture, unless
such Holders shall have offered to the Trustee security or
indemnity satisfactory to it against the costs, expenses and
liabilities which may be incurred therein or thereby.
(7) The Trustee shall not be deemed to have knowledge
of any fact or matter unless such fact or matter is actually
known to a Responsible Officer of the Trustee.
(8) The Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper
or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as
it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the Company,
personally or by agent or attorney at the reasonable sole
reasonable cost of the Company and shall incur no liability or
additional liability of any kind by reason of such inquiry or
investigation.
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(9) The Trustee shall not be deemed to have notice of
any Default or Event of Default unless a Responsible Officer
of the Trustee has actual knowledge thereof or unless written
notice of any event which is in fact such a default is
received by the Trustee at the Corporate Trust Office of the
Trustee, and such notice references the Securities and this
Indenture.
(10) The rights, privileges, protections, immunities
and benefits given to the Trustee, including, without
limitation, its right to be indemnified, are extended to, and
shall be enforceable by the Trustee in each of its capacities
hereunder, and to each agent, custodian and other Person
employed to act hereunder.
7.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may make loans to, accept deposits from,
perform services for or otherwise deal with the Company, or any Affiliate
thereof, with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. The Trustee, however, shall be subject to
Sections 7.10 and 7.11 hereof.
7.4 Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities except that the Trustee represents that it is
duly authorized to execute and deliver this Indenture and authenticate the
Securities and perform its obligations hereunder, it shall not be accountable
for the Company's use of the proceeds from the sale of Securities or any money
paid to the Company pursuant to the terms of this Indenture and it shall not be
responsible for any statement in the Securities other than its certificates of
authentication.
7.5 Notice of Default.
If a Default or an Event of Default occurs and is continuing with
respect to the Securities of any Series and if it is actually known to a
Responsible Officer of the Trustee, the Trustee shall mail to each
Securityholder of the Securities of that Series notice of the Default or the
Event of Default, as the case may be, within 30 days (or, with respect to
Section 6.1(3), (5) and (7), 60 days) after it occurs or, if later, after a
Responsible Officer of the Trustee has knowledge of such Default or Event of
Default unless such Default or Event of Default has been cured or waived before
the issuance of such notice. Except in the case of a Default or an Event of
Default in payment of the principal of, or premium, if any, or interest on any
Security of any Series, the Trustee may withhold the notice if and so long as
the Board of Directors of the Trustee, the executive committee or any trust
committee of such board and/or its Responsible Officers in
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good faith determine(s) that withholding the notice is in the interests of the
Securityholders of that Series.
7.6 Reports by Trustee to Holders.
If and to the extent required by the TIA, within 60 days after May 15
of each year, commencing the May 15 following the date of this Indenture, the
Trustee shall mail to each Securityholder a brief report dated as of such May 15
that complies with TIA Section 313(a). The Trustee also shall comply with TIA
Sections 313(b) and 313(c).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and any stock exchange on which the Securities of
that Series are listed. The Company shall promptly notify the Trustee when the
Securities of any Series are listed on any stock exchange or delisted therefrom
and the Trustee shall comply with TIA Section 313(d).
7.7 Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation as agreed upon from time to time in writing for its services. The
Trustee's compensation shall not be limited by any provision of law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by it in connection with its duties under this Indenture,
including the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall fully indemnify the Trustee and any predecessor
Trustee for, and hold it harmless against, any and all loss, claim, damage,
expense or liability incurred by it in connection with the acceptance or
performance of its duties under this Indenture including the reasonable costs
and expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder. The
Trustee shall notify the Company promptly of any claim asserted against the
Trustee of which the Corporate Trust Office has received written notice for
which it may seek indemnity.
However, the failure by the Trustee to so notify the Company shall not
relieve the Company of its obligations. Notwithstanding the foregoing, the
Company need not reimburse the Trustee for any disbursement, expense or advance
or indemnify it against any loss or liability incurred by the Trustee through
its negligence or willful misconduct. To secure the payment obligations of the
Company in this Section 7.7, the Trustee shall have a Lien prior to the
Securities of any Series on all money or property held or collected by the
Trustee except such money or property held in trust to pay principal of and
interest and premium, if any, on particular Securities of that Series.
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When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(6) or (7) hereof occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
For purposes of this Section 7.7, the term "Trustee" shall include any
trustee appointed pursuant to Article 9.
7.8 Replacement of Trustee.
The Trustee may resign with respect to the Securities of one or more
Series by so notifying the Company in writing; provided, however, that no such
resignation shall be effective until a successor Trustee has accepted its
appointment pursuant to this Section 7.8.
The Holders of a majority in principal amount of the outstanding
Securities of any Series may remove the Trustee with respect to that Series by
notifying the removed Trustee in writing and may appoint a successor Trustee
with respect to that Series with the Company's written consent, which consent
shall not be unreasonably withheld. The Company may remove the Trustee with
respect to that Series at its election if:
(1) the Trustee fails to comply with, or ceases to be
eligible under, Section 7.10 hereof;
(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 other public officer takes charge
of the Trustee or its property; or
(4) the Trustee otherwise becomes incapable of
acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee with respect to any Series of Securities for any reason, the
Company shall promptly notify each Holder of such event and shall promptly
appoint a successor Trustee.
If a successor Trustee with respect to the Securities of one or more
Series does not take office within 30 days after the retiring Trustee resigns or
is removed, the retiring Trustee, the Company or the Holders of at least 10% in
principal amount of the outstanding Securities of the applicable Series may
petition at the reasonable expense of the Company any court of competent
jurisdiction for the appointment of a successor Trustee.
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If the Trustee with respect to the Securities of one or more Series
fails to comply with Section 7.10 hereof, any Securityholder of the applicable
Series 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. Immediately following
such delivery (i) the retiring Trustee with respect to one or more Series shall,
subject to its rights under Section 7.7 hereof, transfer all property held by it
as Trustee with respect to such Series to the successor Trustee, (ii) the
resignation or removal of the retiring Trustee shall become effective, and (iii)
the successor Trustee with respect to such Series shall have all the rights,
powers and duties of the Trustee under this Indenture. A successor Trustee with
respect to the Securities of one or more Series shall mail notice of its
succession to each Securityholder of such Series.
7.9 Successor Trustee by Consolidation, Merger or Conversion.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust assets to, another corporation,
subject to Section 7.10 hereof, the successor corporation without any further
act shall be the successor Trustee.
7.10 Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Sections 310(a)(1), (2) and (5) in every respect. The
Trustee shall have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition. The Trustee shall
comply with TIA Section 310(b), including the provision in Section 310(b)(1). If
at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 7.10, it shall resign immediately in the manner and
with the effect specified in this Article 7.
7.11 Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
7.12 Paying Agents.
The Company shall cause each Paying Agent other than the Trustee to
execute and deliver to it and the Trustee an instrument in which such agent
shall agree with the Trustee, subject to the provisions of this Section 7.12:
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(1) that it will hold all sums held by it as agent
for the payment of principal of, or premium, if any, or
interest on, the Securities (whether such sums have been paid
to it by the Company or by any obligor on the Securities) in
trust for the benefit of Holders of the Securities or the
Trustee;
(2) that it will at any time during the continuance
of any Event of Default, upon written request from the
Trustee, deliver to the Trustee all sums so held in trust by
it together with a full accounting thereof; and
(3) that it will give the Trustee written notice
within three (3) Business Days of any failure of the Company
(or by any obligor on the Securities) in the payment of any
installment of the principal of, premium, if any, or interest
on, the Securities when the same shall be due and payable.
7.13 Trustee's Application for Instructions from the Company.
Any application by the Trustee for written instructions from the
Company may, at the option of the Trustee, set forth in writing any action
proposed to be taken or omitted by the Trustee under this Indenture and the date
on and/or after which such action shall be taken or such omission shall be
effective. The Trustee shall not be liable for any action taken by, or omission
of, the Trustee in accordance with a proposal included in such application on or
after the date specified in such application (which date shall not be less than
three Business Days after the date any officer of the Company actually receives
such application, unless any such officer shall have consented in writing to any
earlier date) unless prior to taking any such action (or the effective date in
the case of an omission), the Trustee shall have received written instructions
in response to such application specifying the action to be taken or omitted.
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
8.1 Without Consent of Holders.
The Company, when authorized by a Board Resolution, and the Trustee may
amend or supplement this Indenture or the Securities of one or more Series
without notice to or consent of any Securityholder:
(1) to comply with Section 5.1 hereof;
(2) to provide for uncertificated Securities in
addition to certificated Securities;
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(3) to comply with any requirements of the SEC under
the TIA;
(4) to cure any ambiguity, defect or inconsistency,
or to make any other change that does not adversely affect the
rights of any Securityholder;
(5) to provide for the issuance of and establish the
form and terms and conditions of Securities of any Series as
permitted by this Indenture; or
(6) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect to
the Securities of one or more Series and to add to or change
any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee.
The Trustee is hereby authorized to join with the Company in the
execution of any supplemental indenture authorized or permitted by the terms of
this Indenture and to make any further appropriate agreements and stipulations
which may be therein contained, but the Trustee shall not be obligated to enter
into any such supplemental indenture which adversely affects its own rights,
duties or immunities under this Indenture. After an amendment under this Section
8.1 becomes effective, the Company shall mail to each Holder a notice briefly
describing the amendment.
8.2 With Consent of Holders.
(a) The Company, when authorized by a Board Resolution, and
the Trustee may amend or supplement this Indenture or the Securities of one or
more Series (i) with the written consent of the Holders of not less than a
majority in aggregate principal amount of the outstanding Securities of such
Series affected by such amendment or supplement without notice to any
Securityholder, or (ii) by the adoption of a resolution, at a meeting of
Securityholders of such Series at which a quorum is present, by the Holders of
at least 66 2/3% in aggregate principal amount of Securities of such Series
represented at such meeting. The Holders of not less than a majority in
aggregate principal amount of the outstanding Securities of each such Series
affected by such amendment or supplement may waive compliance in a particular
instance by the Company with any provision of this Indenture or the Securities
of such Series without notice to any Securityholder. Subject to Section 8.4,
without the consent of each Securityholder affected, however, an amendment,
supplement or waiver, including a waiver pursuant to Section 6.4, may not:
(1) reduce the amount of Securities whose Holders
must consent to an amendment, supplement or waiver to this
Indenture or the Securities;
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(2) reduce the rate of or change the time for payment
of interest on any Security;
(3) reduce the principal or change the Stated
Maturity of any Security or reduce the amount of, or postpone
the date fixed for, the payment of any sinking fund or
analogous obligation;
(4) make any Security payable in money other than
that stated in the Security;
(5) change the amount or time of any payment required
by the Securities or reduce the premium payable upon any
redemption of the Securities, or change the time before which
no such redemption may be made;
(6) waive a Default or Event of Default in the
payment of the principal of or interest or premium, if any, on
any Security (except a rescission of acceleration of the
Securities of any Series by the Holders of at least a majority
in principal amount of the outstanding Securities of such
Series and a waiver of the payment default that resulted from
such acceleration);
(7) waive a redemption payment with respect to any
Security or change any of the provisions with respect to the
redemption of any Securities;
(8) make any changes in Sections 6.4 or 6.7 hereof or
this sentence of Section 8.2, except to increase any
percentage of Securities the holders of which must consent to
any matter;
(9) change the currency of payment of principal of,
premium, if any, or interest on, Securities of any Series; or
(10) take any other action otherwise prohibited by
this Indenture to be taken without the consent of each holder
affected thereby.
The quorum at any meeting called to adopt a resolution will be Holders
representing a majority in aggregate principal amount of Securities of a Series
at the time outstanding and, at any reconvened meeting adjourned for lack of a
quorum, 25% of such aggregate principal amount.
(b) Upon the request of the Company, accompanied by a Board
Resolution authorizing the execution of any such supplemental indenture, and
upon the receipt by the Trustee of evidence reasonably satisfactory to the
Trustee of the consent of the Securityholders
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as aforesaid and upon receipt by the Trustee of the documents described in
Section 8.6 hereof, the Trustee shall join with the Company in the execution of
such supplemental indenture unless such supplemental indenture affects the
Trustee's own rights, duties or immunities under this Indenture, in which case
the Trustee may, but shall not be obligated to, enter into such supplemental
indenture.
(c) It shall not be necessary for the consent of the Holders
under this section to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
(d) After an amendment under this Section 8.1 becomes
effective, the Company shall mail to each Holder a notice briefly describing the
amendment.
8.3 Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
8.4 Revocation and Effect of Consents.
Until an amendment, supplement, waiver or other action becomes
effective, a consent to it by a Holder of a Security is a continuing consent
conclusive and binding upon such Holder and every subsequent Holder of the same
Security or portion thereof, and of any Security issued upon the transfer
thereof or in exchange therefor or in place thereof, even if notation of the
consent is not made on any such Security. Any such Holder or subsequent Holder,
however, may revoke the consent as to his Security or portion of a Security, if
the Trustee receives the notice of revocation before the date the amendment,
supplement, waiver or other action becomes effective.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement, or waiver which record date shall be at least 30 days prior to the
first solicitation of such consent. If a record date is fixed, then,
notwithstanding the preceding paragraph, those Persons who were Holders at such
record date (or their duly designated proxies), and only such Persons, shall be
entitled to consent to such amendment, supplement, or waiver or to revoke any
consent previously given, whether or not such Persons continue to be Holders
after such record date. No such consent shall be valid or effective for more
than 90 days after such record date without the applicable amendment,
supplement, waiver or record date becoming effective.
After an amendment, supplement, waiver or other action becomes
effective, it shall bind every Securityholder, unless it makes a change
described in any of clauses (1) through (9) of Section 8.2 hereof. In that case
the amendment, supplement, waiver or other action shall bind
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each Holder of a Security who has consented to it and every subsequent Holder of
a Security or portion of a Security that evidences the same debt as the
consenting Holder's Security.
8.5 Notation on or Exchange of Securities.
If an amendment, supplement, or waiver changes the terms of a Security
of any Series, the Trustee may request the Holder of such Security to deliver it
to the Trustee. In such case, the Trustee shall place an appropriate notation on
such Security about the changed terms and return it to the Holder.
Alternatively, if the Company or the Trustee so determines, the Company in
exchange for such Security shall issue and the Trustee shall authenticate a new
security that reflects the changed terms. Failure to make the appropriate
notation or issue a new Security shall not affect the validity and effect of
such amendment, supplement or waiver.
8.6 Trustee to Sign Amendments, Etc.
The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article 8 if the amendment, supplement or waiver does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may, but need not, sign it. In signing or refusing to
sign such amendment, supplement or waiver the Trustee shall be entitled to
receive and, subject to Section 7.1 hereof, shall be fully protected in relying
upon an Officers' Certificate and/or an Opinion of Counsel stating that such
amendment, supplement or waiver is authorized or permitted by this Indenture.
The Company may not sign an amendment or supplement until the Board of Directors
of the Company approves it.
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
9.1 Discharge of Indenture.
The Company may terminate its obligations under the Securities of any
Series and this Indenture with respect to such Series, except the obligations
referred to in the last paragraph of this Section 9.1, if there shall have been
canceled by the Trustee or delivered to the Trustee for cancellation all
Securities of such Series theretofore authenticated and delivered (other than
any Securities of such Series that are asserted to have been destroyed, lost or
stolen and that shall have been replaced as provided in Section 2.8 hereof) and
the Company has paid all sums payable by it hereunder or deposited all required
sums with the Trustee.
After such delivery the Trustee upon request shall acknowledge in
writing the discharge of the Company's obligations under the Securities of such
Series and this Indenture except for those surviving obligations specified
below.
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Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company in Sections 7.7, 9.5 and 9.6 hereof shall survive
such satisfaction and discharge.
9.2 Legal Defeasance.
The Company may at its option, by Board Resolution, be discharged from
its obligations with respect to the Securities of any Series on the date the
conditions set forth in Section 9.4 below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, such Legal Defeasance means that the Company
shall be deemed to have paid and discharged the entire indebtedness represented
by the Securities of such Series and to have satisfied all its other obligations
under such Securities and this Indenture insofar as such Securities are
concerned (and the Trustee, at the expense of the Company, shall, subject to
Section 9.6 hereof, execute proper instruments acknowledging the same), except
for the following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of outstanding Securities of such Series to
receive solely from the trust funds described in Section 9.4 hereof and as more
fully set forth in such section, payments in respect of the principal of,
premium, if any, and interest on the Securities of such Series when such
payments are due, (B) the Company's obligations with respect to the Securities
of such Series under Sections 2.4, 2.5, 2.6, 2.7, 2.8 and 2.9 hereof, (C) the
rights, powers, trusts, duties, and immunities of the Trustee hereunder
(including claims of, or payments to, the Trustee under or pursuant to Section
7.7 hereof) and (D) this Article 9. Subject to compliance with this Article 9,
the Company may exercise its option under this Section 9.2 with respect to the
Securities of any Series notwithstanding the prior exercise of its option under
Section 9.3 below with respect to the Securities of such Series.
9.3 Covenant Defeasance.
At the option of the Company, pursuant to a Board Resolution, the
Company shall be released from its obligations under Sections 4.2 through 4.6
hereof, inclusive, and Section 5.1 hereof with respect to the outstanding
Securities of any Series on and after the date the conditions set forth in
Section 9.4 hereof are satisfied (hereinafter, "Covenant Defeasance"). For this
purpose, such Covenant Defeasance means that the Company may omit to comply with
and shall have no liability in respect of any term, condition or limitation set
forth in any such specified section or portion thereof, whether directly or
indirectly by reason of any reference elsewhere herein to any such specified
Section or portion thereof or by reason of any reference in any such specified
section or portion thereof to any other provision herein or in any other
document, but the remainder of this Indenture and the Securities of any Series
shall be unaffected thereby.
9.4 Conditions to Legal Defeasance or Covenant Defeasance.
The following shall be the conditions to application of Section 9.2 or
Section 9.3 hereof to the outstanding Securities of a Series:
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(1) the Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee
satisfying the requirements of Section 7.10 hereof who shall
agree to comply with the provisions of this Article 9
applicable to it) as funds in trust for the purpose of making
the following payments, specifically pledged as security for,
and dedicated solely to, the benefit of the Holders of the
Securities, (A) money in an amount, or (B) U.S. Government
Obligations or Foreign Government Obligations which through
the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not later
than the due date of any payment, money in an amount, or (C) a
combination thereof, sufficient, in the opinion of a
nationally-recognized firm of independent public accountants
expressed in a written certification thereof delivered to the
Trustee, to pay and discharge, and which shall be applied by
the Trustee (or other qualifying trustee) to pay and
discharge, the principal of, premium, if any, and accrued
interest on the outstanding Securities of such Series at the
maturity date of such principal, premium, if any, or interest,
or on dates for payment and redemption of such principal,
premium, if any, and interest selected in accordance with the
terms of this Indenture and of the Securities of such Series;
(2) after giving effect to such Legal Defeasance or
Covenant Defeasance no Event of Default or Default with
respect to the Securities of such Series shall have occurred
and be continuing on the date of such deposit, or shall have
occurred and be continuing at any time during the period
ending on the 91st day after the date of such deposit or, if
longer, ending on the day following the expiration of the
longest preference period under any Bankruptcy Law applicable
to the Company in respect of such deposit (it being understood
that this condition shall not be deemed satisfied until the
expiration of such period);
(3) such Legal Defeasance or Covenant Defeasance
shall not cause the Trustee to have a conflicting interest for
purposes of the TIA with respect to any securities of the
Company;
(4) such Legal Defeasance or Covenant Defeasance
shall not result in a breach or violation of, or constitute
default under any material agreement or instrument to which
the Company is a party or by which it is bound;
(5) the Company shall have delivered to the Trustee
an Opinion of Counsel stating that, as a result of such Legal
Defeasance or Covenant Defeasance, neither the trust nor the
Trustee will be required to register as an investment company
under the Investment Company Act of 1940, as amended;
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(6) in the case of an election under Section 9.2
above, the Company shall have delivered to the Trustee an
Opinion of Counsel stating that (i) the Company has received
from, or there has been published by, the Internal Revenue
Service a ruling to the effect that or (ii) there has been a
change in any applicable Federal income tax law with the
effect that, and such opinion shall confirm that, the Holders
of the outstanding Securities of such Series or persons in
their positions will not recognize income, gain or loss for
Federal income tax purposes solely as a result of such Legal
Defeasance and will be subject to Federal income tax on the
same amounts, in the same manner, including as a result of
prepayment, and at the same times as would have been the case
if such Legal Defeasance had not occurred;
(7) in the case of an election under Section 9.3
hereof, the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that the Holders of the
outstanding Securities of such Series will not recognize
income, gain or loss for Federal income tax purposes as a
result of such Covenant Defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(8) the Company shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent provided for relating to
either the Legal Defeasance under Section 9.2 above or the
Covenant Defeasance under Section 9.3 hereof (as the case may
be) have been complied with;
(9) the Company shall have delivered to the Trustee
an Officers' Certificate stating that the deposit under clause
(1) was not made by the Company with the intent of defeating,
hindering, delaying or defrauding any creditors of the Company
or others; and
(10) the Company shall have paid or duly provided for
payment under terms mutually satisfactory to the Company and
the Trustee all amounts then due to the Trustee pursuant to
Section 7.7 hereof and previously requested by the Trustee.
9.5 Deposited Money and U.S. and Foreign Government Obligations to
be Held in Trust; Other Miscellaneous Provisions.
All money, U.S. Government Obligations and Foreign Government
Obligations (including the proceeds thereof) deposited with the Trustee pursuant
to Section 9.4 hereof in
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respect of the outstanding Securities shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent as the
Trustee may determine, to the Holders of such Securities, of all sums due and to
become due thereon in respect of principal, premium, if any, and accrued
interest, but such money need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations and
Foreign Government Obligations deposited pursuant to Section 9.4 hereof or the
principal, premium, if any, and interest received in respect thereof other than
any such tax, fee or other charge which by law is for the account of the Holders
of the outstanding Securities.
Anything in this Article 9 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Order any
money, U.S. Government Obligations or Foreign Government Obligations held by it
as provided in Section 9.4 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be required to be deposited to effect an equivalent
Legal Defeasance or Covenant Defeasance.
9.6 Reinstatement.
If the Trustee or Paying Agent is unable to apply any money, U.S.
Government Obligations or Foreign Government Obligations in accordance with
Section 9.1, 9.2, 9.3 or 9.4 hereof by reason of any legal proceeding or 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 Securities shall be revived and
reinstated as though no deposit had occurred pursuant to this Article 9 until
such time as the Trustee or Paying Agent is permitted to apply all such money,
U.S. Government Obligations or Foreign Government Obligations, as the case may
be, in accordance with Section 9.1, 9.2, 9.3 or 9.4 hereof; provided, however,
that if the Company has made any payment of principal of, premium, if any, or
accrued interest on any Securities because of the reinstatement of their
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money, U.S. Government
Obligations or Foreign Government Obligations held by the Trustee or Paying
Agent.
9.7 Moneys Held by Paying Agent.
In connection with the satisfaction and discharge of this Indenture,
all moneys then held by any Paying Agent under the provisions of this Indenture
shall, upon demand of the Company,
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be paid to the Trustee, or if sufficient moneys have been deposited pursuant to
Section 9.1 hereof, to the Company, and thereupon such Paying Agent shall be
released from all further liability with respect to such moneys.
9.8 Moneys Held by Trustee.
Any moneys deposited with the Trustee or any Paying Agent or then held
by the Company in trust for the payment of the principal of, or premium, if any,
or interest on any Security that are not applied but remain unclaimed by the
Holder of such Security for two years after the date upon which the principal
of, or premium, if any, or interest on such Security shall have respectively
become due and payable shall be repaid to the Company upon Company Order, or if
such moneys are then held by the Company in trust, such moneys shall be released
from such trust; and the Holder of such Security entitled to receive such
payment shall thereafter, as an unsecured general creditor, look only to the
Company for the payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money shall thereupon cease; provided, however,
that the Trustee or any such Paying Agent, before being required to make any
such repayment, may, at the expense of the Company, either mail to each
Securityholder affected, at the address shown in the register of the Securities
maintained by the Registrar or cause to be published once a week for two
successive weeks, in a newspaper published in the English language, customarily
published each Business Day and of general circulation in the City of New York,
New York, a notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
mailing or publication, any unclaimed balance of such moneys then remaining will
be repaid to the Company. After payment to the Company or the release of any
money held in trust by the Company, Securityholders entitled to the money must
look only to the Company for payment as general creditors unless applicable
abandoned property law designates another person.
ARTICLE 10
MISCELLANEOUS
10.1 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this Indenture by the TIA,
the required provision shall control. If any provision of this Indenture
modifies or excludes any provision of the TIA which may be so modified or
excluded, the latter provision shall be deemed to apply to this Indenture as so
modified or to be excluded, as the case may be.
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10.2 Notices.
Any notice or communication shall be given in writing and delivered in
person, sent by facsimile, delivered by commercial courier service or mailed by
first-class mail, postage prepaid, addressed as follows:
If to the Company:
Ameritrade Holding Corporation
4211 South 102nd Street
Omaha, Nebraska 68127
Attention: J. Peter Ricketts, Secretary
Copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603-3441
Attention: Carol Rivers, Esq.
If to the Trustee:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
The Company or the Trustee by written notice to the other may designate
additional or different addresses for subsequent notices or communications. Any
notice or communication to the Company or the Trustee shall be deemed to have
been given or made as of the date so delivered if personally delivered; when
answered back, if telexed; when receipt is confirmed, if telecopied; and three
(3) Business Days after mailing if sent by registered or certified mail, postage
prepaid (except that a notice of change of address shall not be deemed to have
been given until actually received by the addressee).
Any notice or communication mailed to a Securityholder shall be mailed
to such Securityholder by first-class mail, postage prepaid, at such
Securityholder's address shown on the register kept by the Registrar. In
addition, notices or communications addressed to Securityholders shall be given
by release made to Reuters Economic Services and Bloomberg Business News.
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Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication to a Securityholder is mailed in
the manner provided above, it shall be deemed duly given, whether or not the
addressee receives it.
In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as required
by this Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.
In the case of Global Securities, notices and communications to be
addressed to Securityholders shall be addressed to the Depositary in accordance
with its applicable policies as in effect from time to time.
10.3 Communications by Holders with Other Holders.
Securityholders of any Series may communicate pursuant to TIA Section
312(b) with other Securityholders of that Series or any other Series with
respect to their rights under this Indenture or the Securities of that Series or
any other Series. The Company, the Trustee, the Registrar and anyone else shall
have the protection of TIA Section 312(c).
10.4 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate (which shall include the
statements set forth in Section 10.5 below) stating that, in
the opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed action
have been complied with; and
(2) an Opinion of Counsel (which shall include the
statements set forth in Section 10.5 below) stating that, in
the opinion of such counsel, all such conditions precedent
have been complied with.
10.5 Statement Required in Certificate and Opinion.
Each certificate and opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such
certificate or opinion has read such covenant or condition;
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(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,
it or he has made such examination or investigation as is
necessary to enable it or him to express an informed opinion
as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion
of such Person, such covenant or condition has been complied
with.
10.6 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at meetings of
Securityholders. The Registrar and Paying Agent may make reasonable rules for
their functions.
10.7 Business Days; Legal Holidays.
A "Business Day" is a day that is not a Legal Holiday. A "Legal
Holiday" is a Saturday, a Sunday, a federally-recognized holiday or a day on
which banking institutions are not authorized or required by law or executive
order to be open in the State of New York.
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. "Place of Payment"
means the place of places where the principal of and any premium and interest on
the Securities of a Series are payable as specified as contemplated by Section
2.2.
10.8 Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE SECURITIES.
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10.9 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan,
security or debt agreement of the Company or any Subsidiary thereof. No such
indenture, loan, security or debt agreement may be used to interpret this
Indenture.
10.10 No Recourse Against Others.
A director, officer, employee, stockholder, incorporator, Subsidiary or
Affiliate, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creations. Each Securityholder by accepting a Security waives and releases all
such liability. Such waiver and release are part of the consideration for the
issuance of the Securities.
10.11 Successors and Assigns.
All covenants and agreements of the Company in this Indenture and the
Securities shall bind its successors and assigns, whether so expressed or not.
All agreements of the Trustee, any additional trustee and any Paying Agents in
this Indenture shall bind its successor.
10.12 Multiple Counterparts.
The parties may sign multiple counterparts of this Indenture. Each
signed counterpart shall be deemed an original, but all of them together
represent one and the same agreement.
10.13 Table of Contents, Headings, Etc.
The table of contents, cross-reference sheet 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.
10.14 Separability.
Each provision of this Indenture shall be considered separable and if
for any reason any provision which is not essential to the effectuation of the
basic purpose of this Indenture or the Securities 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.
52
<PAGE> 55
10.15 Securities in a Foreign Currency or in Euros.
Unless otherwise specified in a supplemental indenture hereto pursuant
to Section 2.2 of this Indenture with respect to a particular Series of
Securities, whenever for purposes of this Indenture any action may be taken by
the Holders of a specified percentage in aggregate principal amount of
Securities of all Series or all Series affected by a particular action at the
time outstanding and, at such time, there are outstanding Securities of any
Series which are denominated in a coin or currency other than Dollars (including
Euros), then the principal amount of Securities of such Series which shall be
deemed to be outstanding for the purpose of taking such action shall be that
amount of Dollars that could be obtained for such amount at the Market Exchange
Rate at such time. For purposes of this Section 10.16, "Market Exchange Rate"
shall mean the noon Dollar buying rate in New York City for cable transfers of
that currency as published by the Federal Reserve Bank of New York; provided,
however, in the case of Euros, Market Exchange Rate shall mean the rate of
exchange determined by the Commission of the European Union (or any successor
thereto) as published in the Official Journal of the European Union (such
publication or any successor publication, the "Journal"). If such Market
Exchange Rate is not available for any reason with respect to such currency, the
Trustee shall use, in its sole discretion and without liability on its part,
such quotation of the Federal Reserve Bank of New York or, in the case of Euros,
the rate of exchange as published in the Journal, as of the most recent
available date, or quotations or, in the case of Euros, rates of exchange from
one or more major banks in The City of New York or in the country of issue of
the currency in question or, in the case of Euros, in Luxembourg or such other
quotations or, in the case of Euros, rates of exchange as the Trustee, upon
consultation with the Company, shall deem appropriate. The provisions of this
paragraph shall apply in determining the equivalent principal amount in respect
of Securities of a Series denominated in currency other than Dollars in
connection with any action taken by Holders of Securities pursuant to the terms
of this Indenture.
All decisions and determinations of the Trustee regarding the Market
Exchange Rate or any alternative determination provided for in the preceding
paragraph shall be in its sole discretion and shall, in the absence of manifest
error, be conclusive to the extent permitted by law for all purposes and
irrevocably binding upon the Company and all Holders.
10.16 Judgment Currency.
The Company agrees, to the fullest extent that it may effectively do so
under applicable law, that (a) if for the purpose of obtaining judgment in any
court it is necessary to convert the sum due in respect of the principal of or
interest or other amount on the Securities of any Series (the "Required
Currency") into a currency in which a judgment will be rendered (the "Judgment
Currency"), the rate of exchange used shall be the rate at which in accordance
with normal banking procedures the Trustee could purchase in The City of New
York the Required Currency with the Judgment Currency on the day on which final
unappealable judgment is entered, unless
53
<PAGE> 56
such day is not a New York Banking Day, then, the rate of exchange used shall be
the rate at which in accordance with normal banking procedures the Trustee could
purchase in The City of New York the Required Currency with the Judgment
Currency on the New York Banking Day preceding the day on which final
unappealable judgment is entered and (b) its obligations under this Indenture to
make payments in the Required Currency (i) shall not be discharged or satisfied
by any tender, any recovery pursuant to any judgment (whether or not entered in
accordance with subsection (a)), in any currency other than the Required
Currency, except to the extent that such tender or recovery shall result in the
actual receipt, by the payee, of the full amount of the Required Currency
expressed to be payable in respect of such payments, (ii) shall be enforceable
as an alternative or additional cause of action for the purpose of recovering in
the Required Currency the amount, if any, by which such actual receipt shall
fall short of the full amount of the Required Currency so expressed to be
payable, and (iii) shall not be affected by judgment being obtained for any
other sum due under this Indenture. For purposes of the foregoing, "New York
Banking Day" means any day except a Saturday, Sunday or a legal holiday in The
City of New York on which banking institutions are authorized or required by
law, regulation or executive order to close.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
AMERITRADE HOLDING CORPORATION
By:
--------------------------------
Name:
Title:
THE BANK OF NEW YORK
By:
--------------------------------
Name:
Title:
54
<PAGE> 1
EXHIBIT 4.4
EXECUTION COPY
===============================================================================
AMERITRADE HOLDING CORPORATION
and
THE BANK OF NEW YORK
as Trustee
---------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of August 4, 1999
---------------------------
Supplement to Indenture dated as of August 4, 1999
$250,000,000
5.75% Convertible Subordinated Notes due August 1, 2004
===============================================================================
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE, dated as of August 4, 1999 by and
between AMERITRADE HOLDING CORPORATION, a Delaware corporation (the "Company"),
and THE BANK OF NEW YORK, a New York banking corporation, as Trustee under the
Indenture (as hereinafter defined) (the "Trustee").
RECITALS
WHEREAS, the Company and the Trustee have as of August 4, 1999 entered
into an Indenture (the "Indenture", all capitalized terms used and not
otherwise defined herein shall have the meanings set forth in the Indenture)
providing for the issuance by the Company from time to time of its Securities
to be issued in one or more Series as may from time to time be authorized by
supplemental indenture.
WHEREAS, no Securities have been issued under the Indenture and there
do not currently exist any Holders;
WHEREAS, the Company desires to issue one Series of convertible
subordinated debt securities under the Indenture, and has duly authorized the
creation and issuance of such debt securities and the execution and delivery of
this First Supplemental Indenture to modify the Indenture and provide certain
additional provisions as hereinafter described;
WHEREAS, the Company and the Trustee deem it advisable to enter into
this First Supplemental Indenture for the purposes of establishing the terms of
such debt securities;
WHEREAS, the execution and delivery of this First Supplemental
Indenture has been authorized by a Board Resolution;
WHEREAS, concurrent with the execution hereof, the Company has
delivered an Officers' Certificate and has caused its counsel to deliver to the
Trustee an Opinion of Counsel; and
WHEREAS, all things necessary to make this First Supplemental
Indenture a valid agreement of the Company in accordance with its terms have
been done, and the execution and delivery thereof have been in all respects
duly authorized by the parties hereto.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually agreed, for the equal and proportionate
benefit of all Holders of the Notes, as follows:
<PAGE> 3
ARTICLE 1
CREATION OF THE NOTES
1.1 Designation of Series.
Pursuant to the terms hereof and Sections 2.1 and 2.2 of the
Indenture, the Company hereby creates a Series of Securities designated as the
"5.75% Convertible Subordinated Notes due August 1, 2004" (the "Notes"), which
Notes shall be deemed "Securities" for all purposes under the Indenture.
1.2 Form of Notes.
The definitive form of the Notes shall be substantially in the form
set forth in Exhibit A attached hereto, which is incorporated herein and made
part hereof. The Stated Maturity of the Notes shall be August 1, 2004.
1.3 Limit on Amount of Series.
The Notes shall not exceed U.S.$250,000,000 in aggregate principal
amount, and may, upon the execution and delivery of this First Supplemental
Indenture or from time to time thereafter, be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Notes upon a Company Order.
1.4 Interest.
The Notes shall bear interest at a rate of 5.75% per annum, payable
semi-annually. The Interest Payment Dates for the Notes shall be February 1 and
August 1 of each year, commencing February 1, 2000, with interest payable in
Dollars to Holders in whose names the Notes are registered at the close of
business on the immediately preceding January 15 or July 15 of each year,
respectively (each, a "Regular Record Date"), or, if such Regular Record Date
is not a Business Day, at the close of business of the immediately succeeding
Business Day. Interest payable per $1,000 principal amount of Notes for the
partial period from August 4, 1999 to February 1, 2000 will be $28.27. Interest
payable per $1,000 principal amount of Notes for subsequent periods ending on
February 1 or August 1 will be $28.75.
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<PAGE> 4
1.5 Certificate of Authentication.
The Trustee's certificate of authentication to be borne on the Notes
shall be substantially as provided in the Form of Note attached hereto as
Exhibit A.
1.6 No Sinking Fund.
No sinking fund will be provided with respect to the Notes.
1.7 Issuance in Global Form.
Pursuant to Section 2.15(a) of the Indenture, the Notes shall be
issued as one or more global notes in definitive, fully registered form without
interest coupons (the "Global Notes"), representing the aggregate principal
amount of the Notes, and shall be deposited with the Trustee as custodian for
The Depositary Trust Company, New York, New York ("DTC"), as Depositary. The
Global Notes shall be registered in the name of Cede & Co., or another nominee
of DTC.
1.8 Discharge of Indenture; Defeasance.
The Notes shall not be subject to the provisions of Article 9 of the
Indenture.
1.9 Changes, etc. Applicable Only to the Notes.
The changes, modifications and supplements to the Indenture effected
by this First Supplemental Indenture shall be applicable only with respect to,
and govern the terms of, the Notes, and shall not apply to any other Series of
Securities which may be issued under the Indenture unless a supplemental
indenture with respect to such other Series specifically incorporates such
changes, modifications and supplements.
ARTICLE 2
CONVERSION OF NOTES
2.1 Conversion Privilege.
Subject to and upon compliance with the provisions of this Article, at
the option of the Holder thereof, any portion of the principal amount of any
Note that is an integral multiple of $1,000, and which has not previously been
redeemed pursuant to Article 6 hereof or repurchased pursuant to Article 8
hereof, may be converted at the principal amount thereof, or of such portion
thereof, into fully paid and nonassessable shares (calculated as to each
conversion to the nearest
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<PAGE> 5
1/100 of a share) of Class A common stock of the Company, $0.01 par value
per share (the "Class A Common Stock"), at the Conversion Rate, determined as
hereinafter provided, in effect at the time of conversion. Such conversion
right shall commence on the date of issuance of the Notes, and expire at the
close of business on the Stated Maturity. In case a Note or portion thereof is
called for redemption at the election of the Company or the Holder thereof
exercises his right to require the Company to repurchase the Note, such
conversion right in respect of the Note, or portion thereof so called, shall
expire at the close of business on the Business Day immediately preceding the
Redemption Date or the Change of Control Purchase Date, as the case may be,
unless the Company defaults in making the payment due upon redemption or
repurchase, as the case may be.
2.2 Conversion Rate.
The rate at which shares of Class A Common Stock shall be delivered
upon conversion (the "Conversion Rate") shall be initially 30.7137 shares of
Class A Common Stock for each $1,000 principal amount of Notes. The Conversion
Rate shall be adjusted in certain instances as provided in Section 2.5.
2.3 Exercise of Conversion Privilege.
In order to exercise the conversion privilege, the Holder of any Note
to be converted shall surrender such Note, duly endorsed or assigned to the
Company or in blank and, in case such surrender shall be made during the period
from the close of business on any Regular Record Date immediately preceding any
Interest Payment Date to the opening of business on such Interest Payment Date
(except if this Note or portion thereof has been called for redemption on a
Redemption Date or is repurchasable on a Change of Control Purchase Date
occurring, in either case, during such period and is surrendered for conversion
during such period), also accompanied by payment in New York Clearing House or
other funds acceptable to the Company of an amount equal to the interest
payable on such Interest Payment Date on the principal amount of such Note or
portion thereof then being converted, and also the conversion notice hereon
duly executed, to the Company at the Corporate Trust Office of the Trustee, or
at such other office or agency of the Company, subject to any laws or
regulations applicable thereto and subject to the right of the Company to
terminate the appointment of any Conversion Agent (as defined below) as may be
designated by it for such purpose in the Borough of Manhattan, The City of New
York, or at such other offices or agencies as the Company may designate (each a
"Conversion Agent"), provided, however, that the interest so payable on such
Interest Payment Date in respect of any Note or portion thereof which has not
been called for redemption on a Redemption Date or repurchase on a Change in
Control Purchase Date occurring during the period from the close of business on
any Regular Record Date to the opening of business on the next succeeding
Interest Payment Date, which Note or portion thereof is surrendered for
conversion during such period, shall be paid to the Holder of such Note or
portion thereof as of such Regular Record
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<PAGE> 6
Date; and provided further that the interest payable on such Interest Payment
Date with respect to any Note or portion thereof which has been called for
redemption on a Redemption Date or repurchase on a Change in Control Purchase
Date occurring during the period from the close of business on any Regular
Record Date to the opening of business on the next succeeding Interest Payment
Date, which Note or portion thereof is surrendered for conversion during such
period, shall be paid to the holder of such Note or portion thereof being
converted in an amount equal to the interest that would have been payable on
such Note or portion thereof if such Note or portion thereof had been converted
as of the close of business on such Interest Payment Date; and provided further
that Interest payable in respect of any Note or portion thereof surrendered for
conversion on or after an Interest Payment Date shall be paid to the Holder of
such Note or portion thereof as of the Regular Record Date preceding such
Interest Payment Date, notwithstanding the exercise of the right of conversion.
Except as otherwise expressly provided in this paragraph, in the case of any
Note which is converted, interest whose Stated Maturity is after the date of
conversion of such Note shall not be payable. Except as provided in this
paragraph, no cash payment or adjustment shall be made upon any conversion on
account of any interest accrued from the Interest Payment Date next preceding
the conversion date, in respect of any Note (or part thereof, as the case may
be) surrendered for conversion, or on account of any dividends on the Class A
Common Stock issued upon conversion. The Company's delivery to the Holder of
the number of shares of Class A Common Stock (and cash in lieu of fractions
thereof, as provided in this Indenture) into which a Note is convertible will
be deemed to satisfy the Company's obligation to pay the principal amount of
the Note.
Notes shall be deemed to have been converted immediately
prior to the close of business on the day of surrender of such Notes for
conversion in accordance with the foregoing provisions, and at such time the
rights of the Holders of such Notes as Holders shall cease, and the Person or
Persons entitled to receive the Class A Common Stock issuable upon conversion
shall be treated for all purposes as the record holder or holders of such Class
A Common Stock at such time. As promptly as practicable on or after the
conversion date, the Company shall issue and deliver to the Trustee, for
delivery to the Holder, a certificate or certificates for the number of full
shares of Class A Common Stock issuable upon conversion, together with payment
in lieu of any fraction of a share, as provided in Section 2.4.
2.4 Fractions of Class A Common Stock Shares.
No fractional shares of Class A Common Stock shall be issued upon
conversion of the Notes. If more than one Note shall be surrendered for
conversion at one time by the same Holder, the number of full shares which
shall be issuable upon conversion thereof shall be computed on the basis of the
principal amount of the Notes so surrendered. Instead of any fractional share
of Class A Common Stock which would otherwise be issuable upon conversion of
any Note or Notes, the Company shall pay a cash adjustment in respect of such
fraction in an amount equal to the same fraction of the Market Price per share
of Class A Common Stock.
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<PAGE> 7
For purposes of this Section 2.4, "Market Price" means the Sale Price
(as defined below) of the Class A Common Stock on the date of conversion of the
Notes or, if such date is not a Trading Day (as defined below), then on the
last Trading Day prior to such date. The "Sale Price" of the Class A Common
Stock on any date means the closing per share sale price (or if no closing sale
price is reported, the average of the closing bid and ask prices or, if more
than one in either case, the average of the average closing bid and average
closing ask prices) on such date as reported in the composite transactions for
the principal United States securities exchange on which the Class A Common
Stock is traded or, if the Class A Common Stock is not listed on a United
States national or regional stock exchange, as reported by the Nasdaq National
Market. "Trading Day" means, in respect of any securities exchange or
securities market, each Monday, Tuesday, Wednesday, Thursday and Friday, other
than any day on which securities are not traded on the applicable securities
exchange or in the applicable securities market.
2.5 Adjustment of Conversion Rate.
(1) In case at any time after the date of the
issuance of the Notes, the Company shall pay or make a
dividend or other distribution on shares of Class A Common
Stock of the Company payable in shares of its Class A Common
Stock, the Conversion Rate in effect at the opening of
business on the day following the date fixed for the
determination of stockholders entitled to receive such
dividend or other distribution shall be increased by dividing
such Conversion Rate by a fraction of which the numerator
shall be the number of shares of Class A Common Stock
outstanding at the close of business on the date fixed for
such determination and the denominator shall be the sum of
such number of shares and the total number of shares
constituting such dividend or other distribution, such
increase to become effective immediately after the opening of
business on the day following the date fixed for such
determination. For the purposes of this paragraph (1), the
number of shares of Class A Common Stock at any time
outstanding shall not include shares held in the treasury of
the Company but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of shares of
Class A Common Stock. The Company will not pay any dividend
or make any distribution on shares of Class A Common Stock
held in the treasury of the Company.
(2) Subject to paragraph 9 of this Section, in case
at any time after the date of the issuance of the Notes, the
Company shall issue rights, options or warrants to all
holders of its Class A Common Stock (other than any rights,
options or warrants that by their terms will also be issued
to any Holder upon conversion of a Note into Class A Common
Stock without any action required by the Company or any other
Person) entitling them to subscribe for or purchase shares of
Class A Common Stock at a price per share less than the then
current
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<PAGE> 8
market price per share (determined as provided in paragraph
(9) of this Section) of the Class A Common Stock on the date
fixed for the determination of stockholders entitled to
receive such rights, options or warrants (other than pursuant
to a dividend reinvestment plan), the Conversion Rate in
effect at the opening of business on the day following the
date fixed for such determination shall be increased by
dividing such Conversion Rate by a fraction of which the
numerator shall be the number of shares of Class A Common
Stock outstanding at the close of business on the date fixed
for such determination plus the number of shares of Class A
Common Stock which the aggregate of the offering price of the
total number of shares of Class A Common Stock so offered for
subscription or purchase would purchase at such current
market price and the denominator shall be the number of
shares of Class A Common Stock outstanding at the close of
business on the date fixed for such determination plus the
number of shares of Class A Common Stock so offered for
subscription or purchase, such increase to become effective
immediately after the opening of business on the day
following the date fixed for such determination. For the
purposes of this paragraph (2), the number of shares of Class
A Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall include
shares issuable in respect of scrip certificates issued in
lieu of fractions of shares of Class A Common Stock. The
Company will not issue any rights, options or warrants in
respect of shares of Class A Common Stock held in the
treasury of the Company.
(3) In case at any time after the date of the
issuance of the Notes, outstanding shares of Class A Common
Stock shall be subdivided into a greater number of shares of
Class A Common Stock, the Conversion Rate in effect at the
opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately
increased, and, conversely, in case outstanding shares of
Class A Common Stock shall be combined into a smaller number
of shares of Class A Common Stock, the Conversion Rate in
effect at the opening of business on the day following the
day upon which such combination becomes effective shall be
proportionately reduced, such reduction or increase, as the
case may be, to become effective immediately after the
opening of business on the day following the day upon which
such subdivision or combination becomes effective.
(4) In case at any time after the date of the
issuance of the Notes, the Company shall, by dividend or
otherwise, distribute to all holders of its Class A Common
Stock, shares of any class of its capital stock, evidences of
its indebtedness, cash or other assets (including securities,
but excluding any rights, options or warrants referred to in
paragraph (2) of this Section, any dividend or
-7-
<PAGE> 9
distribution paid exclusively in cash, any dividend or
distribution referred to in paragraph (1) of this Section and
distributions upon merger or consolidation to which Section
2.12 applies), the Conversion Rate shall be adjusted so that
the same shall equal the price determined by dividing the
Conversion Rate in effect immediately prior to the close of
business on the date fixed for the determination of
stockholders entitled to receive such distribution by a
fraction of which the numerator shall be the current market
price per share (determined as provided in paragraph (9) of
this Section) of the Class A Common Stock on the date fixed
for such determination less the then fair market value (as
determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution filed
with the Trustee) of the portion of the assets, shares of
capital stock or evidences of indebtedness so distributed
applicable to one share of Class A Common Stock and the
denominator shall be such current market price per share of
the Class A Common Stock, such adjustment to become effective
immediately prior to the opening of business on the day
following the date fixed for the determination of
stockholders entitled to receive such distribution. If the
Board of Directors determines the fair market value of any
distribution for purposes of this paragraph (4) by reference
to the actual or when issued trading market for any
securities comprising such distribution, it must in doing so
consider the prices in such market over the same period used
in computing the current market price per share pursuant to
paragraph (9) of this Section 2.5.
(5) In case at any time after the date of the
issuance of the Notes, the Company shall, by dividend or
otherwise, distribute to all holders of its Class A Common
Stock cash (excluding any cash that is distributed upon a
merger or consolidation to which Section 2.12 applies or as
part of a distribution referred to in paragraph (4) of this
Section) in an aggregate amount that, combined together with:
(A) the aggregate amount of any other
distributions to all holders of its Class A
Common Stock made exclusively in cash
within the 12 months preceding the date of
payment of such distribution and in respect
of which no adjustment pursuant to this
paragraph (5) has been made, and
(B) the aggregate of any cash plus the fair
market value (as determined by the Board of
Directors, whose determination shall be
conclusive and described in a Board
Resolution filed with the Trustee) of
consideration payable in respect of any
tender offer by the Company or any of its
subsidiaries for all or any portion of the
Class A Common Stock concluded within the
12 months preceding
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<PAGE> 10
the date of payment of such distribution
and in respect of which no adjustment
pursuant to paragraph (6) of this Section
has been made,
(the amount of such cash distribution together with the
amounts described in clauses (A) and (B) above being referred
to herein as the "Aggregate Cash Distribution Amount")
exceeds 10% of the product of (I) the current market price
per share (determined as provided in paragraph (9) of this
Section) of the Class A Common Stock on the date for the
determination of holders of shares of Class A Common Stock
entitled to receive such distribution, times (II) the number
of shares of Class A Common Stock and Class B Common Stock,
par value $0.01 per share, of the Company outstanding on such
date (the amount by which the Aggregate Cash Distribution
Amount exceeds 10% of the product of the amounts described in
clauses (I) and (II) above being referred to herein as the
"Excess Amount"), then, and in each such case, immediately
after the close of business on such date for determination,
the Conversion Rate shall be increased in accordance with the
following formula:
AC = CR / M - (EA/O)
M
Where:
AC = the adjusted Conversion Rate.
CR = the Conversion Rate in effect immediately prior to the
close of business on the date fixed for determination of the
stockholders entitled to receive the distribution.
M = the current market price per share (determined as
provided in paragraph (9) of this Section) of the Class A
Common Stock on the date fixed for determination of the
stockholders entitled to receive the distribution.
EA = the Excess Amount.
O = the number of shares of Common Stock outstanding on the
date fixed for determination of the stockholders entitled to
receive the distribution.
(6) In case at any time after the date of the
issuance of the Notes, a tender offer made by the Company or
any Subsidiary for all or any portion of the
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<PAGE> 11
Class A Common Stock shall expire and such tender offer (as
amended upon the expiration thereof) shall require the
payment to stockholders (based on the acceptance (up to any
maximum specified in the terms of the tender offer) of
Purchased Shares (as defined below)) of an aggregate
consideration having a fair market value (as determined by
the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution filed with the
Trustee) that combined together with:
(A) the aggregate of the cash plus the fair
market value (as determined by the Board of
Directors, whose determination shall be
conclusive and described in a Board
Resolution filed with the Trustee), as of
the expiration of such tender offer, of
consideration payable in respect of any
other tender offer, by the Company or any
Subsidiary for all or any portion of the
Class A Common Stock expiring within the 12
months preceding the expiration of such
tender offer and in respect of which no
adjustment pursuant to this paragraph (6)
has been made, and
(B) the aggregate amount of any distributions
to all holders of the Company's Class A
Common Stock made exclusively in cash
within 12 months preceding the expiration
of such tender offer and in respect of
which no adjustment pursuant to paragraph
(5) of this Section has been made,
exceeds 10% of the product of (I) the current market price
per share of the Class A Common Stock (determined as provided
in paragraph (9) of this Section) as of the last time (the
"Expiration Time") tenders could have been made pursuant to
such tender offer (as it may be amended), times (II) the
number of shares of Class A Common Stock outstanding
(including any tendered shares) on the Expiration Time, then,
and in each such case, immediately prior to the opening of
business on the day after the date of the Expiration Time,
the Conversion Rate shall be reduced in accordance with the
following formula:
AC = CR / (M x O) - C
M x (O - TS)
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<PAGE> 12
Where:
AC = the adjusted Conversion Rate.
CR = the Conversion Rate immediately prior to close of
business on the date of the Expiration Time.
M = the current market price per share of the Common Stock
(determined as provided in paragraph (9) of this Section) on
the date of the Expiration Time.
O = the number of shares of Common Stock outstanding
(including any tendered shares) on the Expiration Time.
C = the amount of cash plus the fair market value (as
determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution filed
with the Trustee) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum
specified in the terms of the tender offer) of Purchased
Shares (as defined below).
TS = the number of all shares validly tendered and not
withdrawn as of the Expiration Time (the shares deemed so
accepted up to any such maximum, being referred to as the
"Purchased Shares").
(7) The reclassification of Class A Common Stock
into securities other than Class A Common Stock (other than
any reclassification upon a consolidation or merger to which
Section 2.12 applies) shall be deemed to involve (a) a
distribution of such securities other than Class A Common
Stock to all holders of Class A Common Stock (and the
effective date of such reclassification shall be deemed to be
"the date fixed for the determination of stockholders
entitled to receive such distribution" and "the date fixed
for such determination" within the meaning of paragraph (4)
of this Section), and (b) a subdivision or combination, as
the case may be, of the number of shares of Class A Common
Stock outstanding immediately prior to such reclassification
into the number of shares of Class A Common Stock outstanding
immediately thereafter (and the effective date of such
reclassification shall be deemed to be "the day upon which
such subdivision becomes effective" or "the day upon which
such combination becomes effective", as the case may be, and
"the day upon which such subdivision or combination becomes
effective" within the meaning of paragraph (3) of this
Section).
(8) In case at any time after the date of the
issuance of the Notes, the Company shall issue rights,
options or warrants to all holders of the Class A
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Common Stock entitling the holders thereof to subscribe for
or purchase shares of Class A Common Stock (either initially
or under certain circumstances), which rights, options or
warrants (i) are deemed to be transferred with such shares of
Class A Common Stock, (ii) are not exercisable and (iii) are
also issued in respect of future issuances of Class A Common
Stock, in each case in clauses (i) through (iii) until the
occurrence of a specified event or events ("Trigger Event"),
shall for purposes of this Section 2.5 not be deemed issued
or distributed until the occurrence of the earliest Trigger
Event, whereupon such rights, options and warrants shall be
deemed to have been distributed and an appropriate adjustment
(if any is required) to the Conversion Rate shall be made
under this Section 2.5. If any such rights, options or
warrants, including any such existing rights, options or
warrants distributed prior to the date of this Indenture are
subject to subsequent events, upon the occurrence of each of
which such rights, options or warrants shall become
exercisable to purchase different securities, evidences of
indebtedness or other assets, then the occurrence of each
such event shall be deemed to be such date of issuance and
record date with respect to new rights, options or warrants
(and a termination or expiration of the existing rights,
options or warrants without exercise by the holder thereof).
In addition, in the event of any distribution (or deemed
distribution) of rights, options or warrants, or any Trigger
Event with respect thereto, that was counted for purposes of
calculating a distribution amount for which an adjustment to
the Conversion Rate under this Section 2.5 was made, (1) in
the case of any such rights, options or warrants which shall
all have been redeemed or repurchased without exercise by any
holders thereof, the Conversion Rate shall be readjusted upon
such final redemption or repurchase to give effect to such
distribution or Trigger Event, as the case may be, as though
it were a cash distribution, equal to the per share
redemption or repurchase price received by a holder or
holders of Class A Common Stock with respect to such rights,
options or warrants (assuming such holder had retained such
rights, options or warrants), made to all holders of Class A
Common Stock as of the date of such redemption or repurchase,
and (2) in the case of such rights, options or warrants which
shall have expired or been terminated without exercise by any
holders thereof, the Conversion Rate shall be readjusted as
if such rights, options and warrants had not been issued.
(9) For the purpose of any computation under
paragraphs (2), (4), (5) or (6) of this Section 2.5, the
current market price per share of Class A Common Stock on any
date shall be deemed to be the average of the daily Sale
Prices of the Class A Common Stock for the five consecutive
Trading Days selected by the Company commencing not more than
ten Trading Days before, and ending not later than the
earlier of, the day in question and the day before the "ex"
date with respect to the issuance or distribution requiring
such computation. For purposes of
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this paragraph, the term "ex" date, when used with respect to
any issuance or distribution, means the first date on which
the Class A Common Stock trades regular way in the applicable
securities market or on the applicable securities exchange
without the right to receive such issuance or distribution.
(10) No adjustment in the Conversion Rate shall be
required unless such adjustment (plus any adjustments not
previously made by reason of this paragraph (10)) would
require an increase or decrease of at least 1.0% in such
rate; provided, however, that any adjustments which by reason
of this paragraph (10) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment. All calculations under this paragraph (10) shall
be made to the nearest whole cent.
(11) The Company may make such increases in the
Conversion Rate, in addition to those required by this
Section, as it considers to be advisable in order to avoid or
diminish any income tax to any holders of shares of Class A
Common Stock resulting from any dividend or distribution of
stock or issuance of rights, options or warrants to purchase
or subscribe for stock or from any event treated as such for
income tax purposes or for any other reasons. The Company
shall have the power to resolve any ambiguity or correct any
error in this paragraph (11) and its actions in so doing
shall be final and conclusive.
(12) To the extent permitted by applicable law, the
Company from time to time may increase the Conversion Rate by
any amount for any period of time if the period is at least
20 days, the increase is irrevocable during such period, and
the Board of Directors shall have made a determination that
such increase would be in the best interests of the Company,
which determination shall be conclusive; provided that no
such increase shall be taken into account when determining
any closing bid price per share of Class A Common Stock for
purposes of determining whether a Change of Control has
occurred. Whenever the Conversion Rate is increased pursuant
to the preceding sentence, the Company shall give notice of
the increase to the Holders of the Notes in the manner
provided for in the Indenture at least 15 days prior to the
date the increased Conversion Rate takes effect, and such
notice shall state the increased Conversion Rate and the
period during which it will be in effect.
For the purposes of this Section 2.5, the term Conversion Price shall
equal $1,000 divided by the Conversion Rate (rounded to the nearest cent).
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2.6 Notice of Adjustments of Conversion Rate.
Whenever the Conversion Rate is adjusted as herein provided: (a) the
Company shall compute the adjusted Conversion Rate in accordance with Section
2.5 and shall prepare an Officers' Certificate, one of the signatories of which
shall be the Treasurer or Chief Financial Officer of the Company, setting forth
the adjusted Conversion Rate and showing in reasonable detail the facts upon
which such adjustment is based, and such certificate shall forthwith be filed
at each office or agency maintained for the purpose of conversion of Securities
pursuant to Section 2.4; and (b) a notice stating that the Conversion Rate has
been adjusted and setting forth the adjusted Conversion Rate shall forthwith be
required, and as soon as practicable after it is required, such notice shall be
given by the Company to all Holders of the Notes in the manner provided in the
Indenture.
2.7 Notice of Certain Corporate Action.
In case: (a) the Company shall declare a dividend (or any other
distribution) on its Class A Common Stock payable otherwise than (I)
exclusively in cash or (ii) exclusively in cash in an amount that would require
any adjustment pursuant to Section 2.5; or (b) the Company shall authorize the
granting to the holders of its Class A Common Stock of rights or warrants to
subscribe for or purchase any shares of capital stock of any class or of any
other rights; or (C) of any reclassification of the Class A Common Stock of the
Company (other than a subdivision or combination of its outstanding shares of
Class A Common Stock), or of any consolidation or merger to which the Company
is a party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company; or (d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; then the Company shall cause to be filed at each
office or agency maintained for the purpose of conversion of Notes pursuant to
Section 2.4, and shall cause to be mailed to all Holders of the Notes at their
last addresses as they shall appear in the Security Register, at least 20 days
(or 10 days in any case specified in clause (a) or (b) above) prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, rights or warrants, or, if a record is not to be taken, the date
as of which the holders of Class A Common Stock of record to be entitled to
such dividend, distribution, rights or warrants are to be determined, or (y)
the date on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Class A Common Stock of record
shall be entitled to exchange their shares of Class A Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up.
Neither the failure to give such notice nor any defect therein shall affect the
legality or validity of the proceedings described in clauses (a) through (d) of
this Section 2.7. If at the time the Trustee shall not be the Conversion Agent,
a copy of such notice shall also forthwith be filed by the Company with the
Trustee. The Company
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<PAGE> 16
shall cause to be filed at the Corporate Trust Office and each office or agency
maintained for the purpose of conversion of Notes pursuant to Section 2.4 of
the Indenture, and shall cause to be provided to all Holders of Notes in
accordance with Section 2.2, notice of any tender offer by the Company or any
Subsidiary for all or any portion of the Class A Common Stock at or about the
time that such notice of tender offer is provided to the public generally.
2.8 Company to Reserve Class A Common Stock.
The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Class A Common Stock, for
the purpose of effecting the conversion of Notes, the full number of shares of
Class A Common Stock then issuable upon the conversion of all outstanding
Notes.
2.9 Taxes on Conversions.
The Company will pay any and all taxes and duties that may be payable
in respect of the issue or delivery of shares of Class A Common Stock on
conversion of Notes pursuant hereto. The Company shall not, however, be
required to pay any tax or duty which may be payable in respect of any transfer
involved in the issue or delivery of shares of Class A Common Stock in a name
other than that of the Holder of the Note or Notes to be converted, and no such
issue or delivery shall be made unless and until the Person requesting such
issue has paid to the Company the amount of any such tax or duty, or has
established to the satisfaction of the Company that such tax or duty has been
paid.
2.10 Covenant as to Class A Common Stock.
The Company covenants that all shares of Class A Common Stock which
may be issued upon conversion of Notes will upon issue be fully paid and
nonassessable and, except as provided in Section 2.9, the Company will pay all
taxes with respect to the issue thereof.
2.11 Cancellation of Converted Securities.
All Notes delivered for conversion shall be delivered to the Trustee
to be canceled by or at the direction of the Trustee, which shall dispose of
the same as provided in Section 2.12 of the Indenture.
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2.12 Provisions in Case of Consolidation, Merger or Sale of Assets.
In case of any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another Person into the Company
(other than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Class A Common Stock of the
Company) or any sale or transfer of all or substantially all of the assets of
the Company, the Person formed by such consolidation or resulting from such
merger or which acquires such assets, as the case may be, shall execute and
deliver to the Trustee a supplemental indenture providing that the Holder of
each Note then outstanding shall have the right thereafter, during the period
such Note shall be convertible as specified in Section 2.2, to convert such
Note only into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer by a holder of the
number of shares of Class A Common Stock of the Company into which such Note
might have been converted immediately prior to such consolidation, merger, sale
or transfer, assuming such holder of Class A Common Stock of the Company (i) is
not a Person with which the Company consolidated or into which the Company
merged or which merged into the Company or to which such sale or transfer was
made, as the case may be ("Constituent Person"), or an Affiliate of a
Constituent Person and (ii) failed to exercise his rights of election, if any,
as to the kind or amount of securities, cash and other property receivable upon
such consolidation, merger, sale or transfer (provided that if the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer is not the same for each share of Class
A Common Stock of the Company held immediately prior to such consolidation,
merger, sale or transfer by other than a Constituent Person or an Affiliate
thereof and in respect of which such rights of election shall not have been
exercised ("Non-Electing Share"), then for the purpose of this Section 2.12 the
kind and amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by each Non-Electing Share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
Non-Electing Shares), and assuming, if such consolidation, merger, sale or
transfer is prior to the date upon which the Notes first become convertible,
that the Notes were convertible at the time of such consolidation, merger, sale
or transfer at the initial Conversion Rate specified in Section 2.2 as adjusted
from the date of the issuance of the applicable Notes to such time pursuant to
Section 2.5. Such supplemental indenture shall provide for adjustments which,
for events subsequent to the effective date of such supplemental indenture,
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article 2. The above provisions of this Section shall similarly
apply to successive consolidations, mergers, sales or transfers.
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ARTICLE 3
RESTRICTIONS ON TRANSFERS
3.1 Restrictions on Transfer of the Notes.
Every Note that bears or is required under this Section 3.1 to bear
the legend set forth in this Section 3.1 (together with any Class A Common
Stock issued upon conversion, redemption or repurchase of the Notes and
required to bear the legend required under Section 3.2, collectively, the
"Restricted Securities") shall be subject to the restrictions on transfer set
forth in this Section 3.1 (including those set forth in the legend set forth
below) unless such restrictions on transfer shall be waived by written consent
of the Company, and the holder of each such Restricted Security, by such
Securityholder's acceptance thereof, agrees to be bound by all such
restrictions on transfer. As used in Sections 3.1 and 3.2, the term "transfer"
encompasses any sale, pledge, transfer or other disposition whatsoever of any
Restricted Security.
Any certificate evidencing such Notes (and all securities issued in
exchange therefor or substitution thereof, other than Class A Common Stock, if
any, issued upon conversion, redemption or repurchase thereof, which shall bear
the legend required under Section 3.2, if applicable) shall bear a legend in
substantially the following form, unless such Notes have been sold pursuant to
a registration statement that has been declared effective under the Securities
Act (and which continues to be effective at the time of such transfer), or
unless otherwise agreed by the Company in writing, with written notice thereof
to the Trustee:
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT")
AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144A, AND IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES.
Notes as to which such restrictions on transfer shall have expired in
accordance with their terms or as to which the conditions for removal of the
foregoing legend set forth herein have been satisfied may, upon surrender of
such Notes for exchange to the Registrar in accordance
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<PAGE> 19
with the provisions of this Section 3.2, be exchanged for a new Note or Notes,
of like tenor and aggregate principal amount, which shall not bear the
restrictive legend required by this Section 3.2.
3.2 Restrictions on Transfer of Class A Common Stock.
Any stock certificates representing Class A Common Stock issued upon
conversion, redemption or repurchase of the Notes shall bear legends in
substantially the same form as set forth in Section 3.1, unless such Class A
Common Stock has been sold pursuant to a registration statement that has been
declared effective under the Securities Act (and which continues to be
effective at the time of such transfer), such Class A Common Stock has been
issued upon conversion, redemption or repurchase of Notes that have been
transferred pursuant to a registration statement that has been declared
effective under the Securities Act, or unless otherwise agreed by the Company
in writing with written notice thereof to the transfer agent for the Class A
Common Stock.
Any such Class A Common Stock as to which such restrictions on
transfer shall have expired in accordance with their terms or as to which the
conditions for removal of the foregoing legend set forth therein have been
satisfied may, upon surrender of the certificates representing such shares of
Class A Common Stock for exchange in accordance with the procedures of the
transfer agent for the Class A Common Stock, be exchanged for a new certificate
or certificates for a like number of shares of Common Stock, which shall not
bear the restrictive legend required by this Section 3.2.
ARTICLE 4
EVENTS OF DEFAULT
4.1 Additional Events of Default.
Pursuant to Section 2.2(18) of the Indenture, so long as any of the
Notes are outstanding, the following events shall be an Event of Default with
respect to the Notes, in addition to the Events of Default contained in Section
6.1 of the Indenture:
(1) Failure by the Company to pay any interest, including any
Liquidated Damages (as hereinafter defined) on any Note when due,
continuing for 30 days; and
(2) Failure by the Company to provide a Change of Control
Offer (as hereinafter defined) in the event of a Change in Control (as
hereinafter defined).
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ARTICLE 5
AMENDMENTS
5.1 With Consent of Holders.
The Company and the Trustee, (i) with the written consent of the
Holders of not less than a majority in aggregate principal amount of the Notes
at the time outstanding, or (ii) by adoption of a resolution, at a meeting of
Holders at which a quorum (as specified in Section 8.2 of the Indenture) is
present, by the Holders of at least 66 2/3% in aggregate principal amount of
Notes represented at such meeting, may amend this First Supplemental Indenture
or the Notes or the Registration Rights Agreement (as hereinafter defined).
However, without the consent of each Holder of Notes affected, an amendment or
supplement to this First Supplemental Indenture or the Notes (or, in the case
of clause (b) below, the Registration Rights Agreement) may not:
(a) make any change to the manner or rate of accrual of
Liquidated Damages, if any, or extend the time for payment of or impair or
adversely affect the right of any Holder to receive Liquidated Damages, if any;
(b) reduce or impair or adversely affect the right of any
Holder to receive the Redemption Price or Change of Control Purchase Price of
any Notes;
(c) impair or adversely affect the right of a Holder to
institute suit for the enforcement of any payment with respect to, or
conversion of, the Notes;
(d) make any change that impairs or adversely affects the
right to convert any Notes into Class A Common Stock;
(e) make any change that adversely affects the right to
require the Company to repurchase the Notes, in accordance with the terms of
this First Supplemental Indenture;
(f) modify the subordination provisions of Article 7 in a
manner adverse to the Holders of the Notes; or
(g) modify the obligation of the Company to deliver
information required under Rule 144A under the Securities Act to permit resales
of Notes and Class A Common Stock issuable upon conversion thereof in the event
the Company ceases to be subject to Section 13 and 15(d) of the Exchange Act.
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It shall not be necessary for the consent of the Holders under this
Section 5.1 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
ARTICLE 6
REDEMPTION OF NOTES
Pursuant to Section 2.2(7) of the Indenture, so long as any of the
Notes are outstanding, the following provisions shall be applicable to the
Notes:
6.1 Optional Redemption by the Company.
The Notes may be redeemed in accordance with the provisions of the
form of Note set forth in Exhibit A.
6.2 Applicability of Article.
Redemption of the Notes at the election of the Company or otherwise,
as permitted or required by any provision of the Notes or this First
Supplemental Indenture, shall be made in accordance with such provision,
Article 3 of the Indenture and this Article 6.
ARTICLE 7
SUBORDINATION OF NOTES
Pursuant to Section 2.2(21) of the Indenture, so long as the Notes are
outstanding, the following provisions shall be applicable to the Notes:
7.1 Notes Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a Note,
by his acceptance thereof, likewise covenants and agrees, that, to the extent
and in the manner hereinafter set forth in this Article 7, the indebtedness
represented by the Notes and the payment of the principal of and premium, if
any, and interest on each and all of the Notes are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of all
Senior Indebtedness. Whenever in this Article 7 there is a reference, in any
context, to the principal of any Note as of any time, such reference shall be
deemed to include reference to the Repurchase
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Price payable in cash in respect of such Note to the extent that such
Repurchase Price payable in cash is, was or would be so payable at such time,
and express mention of the Repurchase Price in any provision of this Article 7
shall not be construed as excluding the Repurchase Price payable in cash in
those provisions of this Article 7 when such express mention is not made.
7.2. Payment Over of Proceeds Upon Dissolution, Etc.
Upon any acceleration of the principal due on the Notes as a
result of an Event of Default on payment on distribution of assets of the
Company to creditors upon any dissolution, winding-up, liquidation or
reorganization, whether voluntary or involuntary, marshalling of assets,
assignment for the benefit of creditors, or in bankruptcy, insolvency,
receivership or similar proceedings of the Company, all principal, premium, if
any, interest and other amounts due on all Senior Indebtedness must be paid in
full before the Holders of the Notes are entitled to receive any payment on
account of principal of or premium, if any, or interest (including any
Liquidated Damages) on the Notes or on account of the purchase, redemption or
other acquisition of Notes, and to that end the holders of Senior Indebtedness
shall be entitled to receive, for application to the payment thereof, any
payment or distribution of any kind or character, whether in cash, property or
securities, which may be payable or deliverable in respect of the Notes in any
such dissolution, winding up, liquidation, reorganization, marshalling,
assignment or proceeding.
In the event that, notwithstanding the foregoing provisions
of this Section, the Trustee or the Holder of any Note shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, securities or other property, before all Senior Indebtedness
is paid in full, and if such fact shall, at or prior to the time of such
payment or distribution, have been made known to the Trustee or, as the case
may be, such Holder, then and in such event such payment or distribution shall
be paid over or delivered forthwith to the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee, agent or other Person making payment
or distribution of assets of the Company for application to the payment of all
Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior
Indebtedness in full, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.
For purposes of this Article only, the words "cash,
securities or other property" shall not be deemed to include shares of stock of
the Company as reorganized or readjusted, or securities of the Company or any
other corporation provided for by a plan of reorganization or readjustment
which shares of stock are subordinated in right of payment to all then
outstanding Senior Indebtedness to substantially the same extent as, or to a
greater extent than, the Notes are so subordinated as provided in this Article.
The consolidation of the Company with, or the merger of the Company into,
another Person or the liquidation or dissolution of the Company following the
conveyance or transfer of its properties and assets substantially as an
entirety to
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another Person upon the terms and conditions set forth in Article Five of the
Indenture shall not be deemed a dissolution, winding up, liquidation,
reorganization, assignment for the benefit of creditors or marshalling of
assets and liabilities of the Company for the purposes of this Section if the
Person formed by such consolidation or into which the Company is merged or
which acquires by conveyance or transfer such properties and assets
substantially as an entirety, as the case may be, shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions set
forth in Article Five of the Indenture.
7.3. No Payment When Designated Senior Debt in Default.
(a) In the event and during the continuation of any default
in the payment of principal of or premium, if any, or interest on (including a
default under any redemption or repurchase obligation with respect to) any
Designated Senior Debt beyond any applicable grace period with respect thereto
or in the event that any other event of default with respect to any Designated
Senior Debt shall have occurred and be continuing which would then permit the
holders of such Designated Senior Debt to declare such Designated Senior Debt
due and payable prior to the date on which it would otherwise have become due
and payable, and the Trustee receives a notice of such default from the
Company, a holder of such Designated Senior Debt or other Person permitted to
give such notice under this Indenture (a "Payment Blockage Notice"), then no
payment shall be made by the Company on account of principal of or premium, if
any, or interest (including Liquidated Damages) on the Notes or on account of
the purchase, redemption or other acquisition of Notes.
Payments on the Notes may and shall be resumed (a) in the case of a
payment default with respect to such Designated Senior Debt, upon the date on
which such default is cured or waived and (b) in the case of a nonpayment
default with respect to such Designated Senior Debt, the earlier of the date on
which such nonpayment default is cured or waived or 179 days after the date on
which the Payment Blockage Notice is received. No new period or payment
blockage may be commenced unless and until (i) 365 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice and (ii) all
scheduled payments of principal, premium, if any, and interest on the Notes
that have come due have been paid in full in cash. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage
Notice to the Trustee shall be, or be made, the basis of any subsequent Payment
Blockage Notice.
For purposes of this Section 7.3, the term "Designated Senior Debt"
means the Company's obligations under: (a) that certain Revolving Credit
Agreement dated as of January 16, 1998 and amended as of May 24, 1999, as now
in effect and as the same may be amended from time to time, by and between the
Company as the borrower and First National Bank of Omaha, Harris Trust and
Savings Bank, LaSalle National Bank and Mercantile Bank of St. Louis, N.A.; and
(b) any Senior Indebtedness in which the instrument creating or evidencing the
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same is 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 the purposes of this First
Supplemental Indenture; provided that such instrument, agreement or other
document may place limitations and conditions on the right of such Senior
Indebtedness to exercise the rights of Designated Senior Debt.
In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Trustee or the Holder of any Note prohibited by
the foregoing provisions of this Section, and if such fact shall, at or prior
to the time of such payment, have been made known to the Trustee or, as the
case may be, such Holder, then and in such event such payment shall be paid
over and delivered forthwith to the Company, in the case of the Trustee, or the
Trustee, in the case of such Holder.
The provisions of this Section shall not apply to any payment
with respect to which Section 7.2 would be applicable.
7.4. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this
Indenture or in any of the Notes shall prevent (a) the Company, at any time
except during the pendency of any case, proceeding, dissolution, liquidation or
other winding up, assignment for the benefit of creditors or other marshalling
of assets and liabilities of the Company referred to in Section 7.2 or under
the conditions described in Section 7.3, from making payments at any time of
principal of and premium, if any, or interest on the Notes, or (b) the
application by the Trustee of any money deposited with it hereunder to the
payment of or on account of the principal of and premium, if any, or interest
on the Notes or the retention of such payment by the Holders, if, at the time
of such application by the Trustee, it did not have knowledge that such payment
would have been prohibited by the provisions of this Article.
7.5. Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the payment in full of all Senior Indebtedness,
the Holders of the Notes shall be subrogated to the extent of the payments or
distributions made to the holders of such Senior Indebtedness pursuant to the
provisions of this Article to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of and
premium, if any, and interest on the Notes shall be paid in full. For purposes
of such subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the Holders of the
Notes or the Trustee would be entitled except for the provisions of this
Article, and no payments over pursuant to the provisions of this Article to the
holders of Senior Indebtedness by Holders of the Notes or the Trustee, shall,
as among the Company, its creditors other than
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holders of Senior Indebtedness and the Holders of the Notes, be deemed to be a
payment or distribution by the Company to or on account of the Senior
Indebtedness.
7.6. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely
for the purpose of defining the relative rights of the Holders of the Notes on
the one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Notes is
intended to or shall (a) impair, as among the Company, its creditors other than
holders of Senior Indebtedness and the Holders of the Notes, the obligation of
the Company, which is absolute and unconditional, to pay to the Holders of the
Notes the principal of and premium, if any, and interest on the Notes as and
when the same shall become due and payable in accordance with their terms; or
(b) affect the relative rights against the Company of the Holders of the Notes
and creditors of the Company other than the holders of Senior Indebtedness; or
(c) prevent the Trustee or the Holder of any Note from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture,
subject to the rights, if any, under this Article of the holders of Senior
Indebtedness to receive cash, property and securities otherwise payable or
deliverable to the Trustee or such Holder.
7.7. Trustee to Effectuate Subordination.
Each holder of a Note by his acceptance thereof authorizes
and directs the Trustee on his behalf to take such action as may be necessary
or appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
7.8. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder
of any Senior Indebtedness, or by any non-compliance by the Company with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Notes, without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article or the
obligations hereunder of the Holders of the Notes to the holders of Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the
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time of payment of, or renew or alter, Senior Indebtedness, or otherwise amend
or supplement in any manner Senior Indebtedness or any instrument evidencing the
same or any agreement under which Senior Indebtedness is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Indebtedness; (iii) release any Person liable in any
manner for the collection of Senior Indebtedness; and (iv) exercise or refrain
from exercising any rights against the Company and any other Person.
7.9. Notice to Trustee.
The Company shall give prompt written notice to the Trustee
of any fact known to the Company which would prohibit the making of any payment
to or by the Trustee in respect of the Notes. Notwithstanding the provisions of
this Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Notes, unless and
until the Trustee shall have received written notice thereof from the Company
or a holder of Senior Indebtedness or from any trustee therefor; and, prior to
the receipt of any such written notice, the Trustee, subject to the provisions
of Section 7.1 of the Indenture, shall be entitled in all respects to assume
that no such facts exist; provided, however, that if the Trustee shall not have
received the notice provided for in this Section at least two Business Days
prior to the date upon which by the terms hereof any money may become payable
for any purpose (including, without limitation, the payment of the principal of
and premium, if any, or interest on any Note), then, anything herein contained
to the contrary notwithstanding, the Trustee shall have full power and
authority to receive such money and to apply the same to the purpose for which
such money was received and shall not be affected by any notice to the contrary
which may be received by it within two Business Days prior to such date.
Subject to the provisions of Section 7.1 of the Indenture,
the Trustee shall be entitled to rely on the delivery to it of a written notice
by a Person representing himself to be a holder of Senior Indebtedness (or a
trustee therefor) to establish that such notice has been given by a holder of
Senior Indebtedness (or a trustee therefor). In the event that the Trustee
determines in good faith that further evidence is required with respect to the
right of any Person as a holder of Senior Indebtedness to participate in any
payment or distribution pursuant to this Article, the Trustee may request such
Person to furnish evidence to the reasonable satisfaction of the Trustee as to
the amount of Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
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7.10. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Company
referred to in this Article, the Trustee, subject to the provisions of Section
7.1 of the Indenture, and the Holders of the Notes shall be entitled to rely
upon any order or decree entered by any court of competent jurisdiction in
which such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other Person making
such payment or distribution, delivered to the Trustee or to the Holders of
Notes, for the purpose of ascertaining the Persons entitled to participate in
such payment or distribution, the holders of the Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article.
7.11. Trustee Not Fiduciary for Holders of Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Senior Indebtedness and shall not be liable to any such holders
if it shall in good faith mistakenly pay over or distribute to Holders of Notes
or to the Company or to any other Person cash, property or securities to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
or otherwise.
7.12. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article with respect to any Senior
Indebtedness which may at any time be held by it, to the same extent as any
other holder of Senior Indebtedness, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.
Nothing in this Article shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 7.7 of the Indenture.
7.13 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.
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7.14. Certain Conversions and Repurchases Deemed Payment.
For the purposes of this Article only, (1) the issuance and
delivery of junior securities upon conversion of Notes in accordance with
Article 2 or upon the repurchase of Securities in accordance with Article Eight
shall not be deemed to constitute a payment or distribution on account of the
principal of or premium or interest on Notes or on account of the purchase or
other acquisition of Notes, and (2) the payment, issuance or delivery of cash,
property or securities (other than junior securities) upon conversion of a Note
shall be deemed to constitute payment on account of the principal of such Note.
For the purposes of this Section, the term "junior securities" means (a) shares
of any stock of any class of the Company and any cash, property or securities
into which the Notes are convertible pursuant to Article 2 and (b) securities
of the Company which are subordinated in right of payment to all Senior
Indebtedness which may be outstanding at the time of issuance or delivery of
such securities to substantially the same extent as, or to a greater extent
than, the Notes are so subordinated as provided in this Article. Nothing
contained in this Article or elsewhere in this Indenture or in the Notes is
intended to or shall impair, as among the Company, its creditors other than
holders of Senior Indebtedness and the Holders of the Notes, the right, which
is absolute and unconditional, of the Holder of any Note to convert such Note
in accordance with Article 2 or to exchange such Note for Class A Common Stock
in accordance with Article 8 if the Company elects to satisfy the obligations
under Article 8 by the delivery of Class A Common Stock.
7.15 Certain Definitions.
For the purposes of this Article 7,
(1) the term "Senior Indebtedness" means the principal of
(and premium, if any) and interest (including all interest accruing
subsequent to the commencement of any bankruptcy or similar
proceeding, whether or not a claim for post-petition interest is
allowable as a claim in such proceeding), rent and end-of-term
payments payable on, and all fees and other amounts payable in
connection with, the following, whether secured or unsecured, absolute
or contingent, due or to become due, outstanding on the date of this
First Supplemental Indenture or thereafter created, incurred or
assumed:
(a) indebtedness of the Company evidenced by a credit
or loan agreement, note, bond, debenture or other written obligation;
(b) all obligations of the Company for money
borrowed;
(c) all obligations of the Company evidenced by a
note or similar instrument given in connection with the acquisition of
any business, properties or assets of any kind;
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(d) obligations of the Company (i) as lessee under
leases required to be capitalized on the balance sheet of the lessee
under GAAP, or (ii) as lessee under other leases for facilities,
capital equipment or related assets, whether or not capitalized,
entered into or leased for financing purposes;
(e) all obligations of the Company under interest
rate and currency swaps, caps, floors, collars, hedge agreements,
forward contracts or similar agreements or arrangements;
(f) all obligations of the Company with respect to
letters of credit, bankers' acceptances, and similar facilities
(including reimbursement obligations with respect to the foregoing);
(g) all obligations of the Company issued or assumed
as the deferred purchase price of property or services (but excluding
trade accounts payable and accrued liabilities arising in the ordinary
course of business);
(h) all obligations of the type referred to in
clauses (a) through (g) above of another Person and all dividends of
another Person, the payment of which, in either case, the Company has
assumed or guaranteed, or for which the Company is responsible or
liable, directly or indirectly, jointly or severally, as obligor,
guarantor or otherwise, or which is secured by a Lien on the property
of the Company; and
(i) renewals, extensions, modifications,
replacements, restatements and refundings of, or any indebtedness or
obligation issued in exchange for, any such indebtedness or obligation
described in clauses (a) through (h) above;
provided, however, that Senior Indebtedness shall not include the
Notes or any such indebtedness or obligation if the terms of such
indebtedness or obligation (or the terms of the instrument under
which, or pursuant to which it is issued) expressly provide that such
indebtedness or obligation is not superior in right to the payment to
the Notes.
ARTICLE 8
REPURCHASE OF NOTES AT THE OPTION
OF THE HOLDERS UPON A CHANGE OF CONTROL
Pursuant to Section 2.2(8) of the Indenture, so long as any of the
Notes are outstanding, the following provisions shall be applicable to the
Notes:
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8.1 Repurchase at Option of Holders upon Change of Control.
(a) Upon the occurrence of a Change of Control (the date of
such occurrence, the "Change of Control Date"), the Company will notify the
Holders of the Notes in writing of such occurrence and shall make an offer to
purchase (a "Change of Control Offer"), and shall purchase, on a Business Day (
a "Change of Control Purchase Date") not more than 60 nor less than 30 days
following the Change of Control Date all, but not less than all, of the then
outstanding Notes at a purchase price in cash equal to 100% of the principal
amount thereof plus accrued interest, if any, to the Change of Control Purchase
Date (the "Change of Control Purchase Price"); provided that the Company will
not be required to make a Change of Control Offer upon a Change of Control if a
third party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth herein applicable to
the Change of Control Offer made by the Company and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer. At the option of
the Company, the Change of Control Purchase Price may be paid, subject to the
fulfillment by the Company of the conditions set forth in Section 8.1(b), by
delivery of shares of Class A Common Stock having a fair market value equal to
the Change of Control Purchase Price.
(b) The Company may elect to pay the Change of Control
Purchase Price by delivery of shares of Class A Common Stock pursuant to
Section 8.1(a) if and only if the following conditions shall have been
satisfied:
(1) The shares of Class A Common Stock deliverable
in payment of the Change of Control Purchase Price shall have
a fair market value as of the Change of Control Purchase Date
of not less than the Change of Control Purchase Price. For
purposes of this Section 8.1(b), the fair market value of
shares of Class A Common Stock shall be determined by the
Company and shall be equal to 95% of the average of the
closing bid prices per share for the five consecutive Trading
Days ending on and including the third Trading Day
immediately preceding the Change of Control Purchase Date;
(2) In the event any shares of Class A Common Stock
to be issued upon repurchase of Notes hereunder require
registration under any Federal securities law before such
shares may be freely transferrable without being subject to
any transfer restrictions under the Securities Act upon such
repurchase, such registration shall have been completed and
shall have become effective prior to the Change of Control
Purchase Date; and
(3) In the event any shares of Class A Common Stock
to be issued upon repurchase of Securities hereunder require
registration with or approval of any governmental authority
under any State law or any other Federal law before
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such shares may be validly issued or delivered upon such
repurchase, such registration shall have been completed, and
shall have become effective and such approval shall have been
obtained, in each case, prior to the Change of Control
Purchase Date;
(4) The shares of Class A Common Stock deliverable
in payment of the Change of Control Purchase Price are, or
shall have been, approved for quotation on the Nasdaq
National Market or are, or shall have been, listed on a
national securities exchange, in either case, prior to the
Change of Control Purchase Date; and
(5) All shares of Class A Common Stock deliverable
in payment of the Change of Control Purchase Price shall be
issued out of the Company's authorized but unissued Class A
Common Stock and will, upon issue, be duly and validly issued
and fully paid and nonassessable and free of any preemptive
rights.
If all of the conditions set forth in this Section 8.1(b) are
not satisfied in accordance with the terms thereof, the Change of Control
Purchase Price shall be paid by the Company only in cash.
(c) Notice of a Change of Control Offer shall be sent, by
first-class mail, postage prepaid, by the Company not later than the 30th day
after the Change of Control Date to the Holders of the Notes at their last
registered addresses with a copy to the Trustee and the Paying Agent. The
Change of Control Offer shall remain open from the time of mailing for at least
20 Business Days and until 5:00 p.m., New York City time, on the Change of
Control Purchase Date. The notice, which shall govern the terms of the Change
of Control Offer, shall include such disclosures as are required by law and
shall state:
(i) that the Change of Control Offer is being made
pursuant to this Section 8.1 and that each principal amount
of Notes equal to $1,000 or an integral multiple thereof
validly tendered into the Change of Control Offer and not
withdrawn will be accepted for payment;
(ii) the cash purchase price (including the amount
of accrued interest, if any) for each Note, the Change of
Control Purchase Date and the date on which the Change of
Control Offer expires;
(iii) that any Note not tendered for payment will
continue to accrue interest in accordance with the terms
thereof;
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(iv) that, unless the Company shall default in the
payment of the purchase price, any Note accepted for payment
pursuant to the Change of Control Offer shall cease to accrue
interest after the Change of Control Purchase Date;
(v) that Holders electing to have Notes purchased
pursuant to a Change of Control Offer will be required to
surrender their Notes to the Paying Agent at the address
specified in the notice prior to 5:00 p.m., New York City
time, on the Change of Control Purchase Date and must
complete any form of letter of transmittal proposed by the
Company and reasonably acceptable to the Trustee and the
Paying Agent;
(vi) that Holders of 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 Change of
Control Purchase Date, a tested telex, facsimile transmission
or letter setting forth the name of the Holder, the principal
amount of Notes the Holder delivered for purchase, the Note
certificate number (if any) and a statement that such Holder
is withdrawing its election to have such Notes purchased;
(vii) that Holders whose Notes are purchased only in
part will be issued Notes equal in principal amount to the
unpurchased portion of the Notes surrendered;
(viii) the instructions that Holders must follow in
order to tender their Notes; and
(ix) the most recent annual and quarterly reports of
the Company filed with the SEC pursuant to the Exchange Act
(or, if the Company is not then permitted to file any such
reports with the SEC, the comparable reports prepared
pursuant to Section 4.2 of the Indenture), a description of
material developments in the Company's business, information
with respect to pro forma historical financial information
after giving effect to such Change of Control and such other
information concerning the circumstances and relevant facts
regarding such Change of Control Offer which in the Company's
reasonable discretion would be material to a Holder of Notes
in connection with the decision of such Holder as to whether
or not it should tender Notes pursuant to the Change of
Control Offer.
Prior to the Change of Control Purchase Date, the Company, the Trustee
and the Paying Agent shall agree upon reasonable procedures for provision of
notices of Notes tendered and other matters. On the Change of Control Purchase
Date, the Company shall (i) accept for payment Notes or portions thereof
validly tendered pursuant to the Change of Control Offer, (ii) deposit with the
Paying Agent money, in immediately available funds, sufficient to pay the
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purchase price of all Notes or portions thereof so tendered and accepted and
(iii) deliver to the Trustee the Notes so accepted together with an Officers'
Certificate setting forth the Notes or portions thereof tendered to and
accepted for payment by the Company. The Paying Agent shall promptly mail or
deliver to the Holders of Notes so accepted payment in an amount equal to the
purchase price for their Notes, and the Trustee shall promptly authenticate and
mail or deliver to such Holders new Notes equal in principal amount to any
unpurchased portion to the Notes surrendered; provided that each such new Note
shall be issued in an original principal amount in a denomination of $1,000 and
integral multiples thereof. Any Notes not so accepted shall be promptly mailed
or delivered by the Company to the Holder thereof. The Company will publicly
announce the results of the Change of Control Offer not later than the first
Business Day following the Change of Control Purchase Date.
(d) (i) If the Company or any subsidiary has issued any
outstanding Indebtedness that is subordinated in right of payment to the Notes,
as the case may be, or the Company or any subsidiary has issued any preferred
stock, and the Company or such subsidiary is required to make a change of
control offer or to repurchase or make a distribution with respect to such
subordinated Indebtedness or preferred stock in the event of a change of
control, the Company or such subsidiary shall not consummate any such change of
control offer, repurchase or distribution with respect to such subordinated
Indebtedness or preferred stock until such time as the Company shall have paid
the Change of Control Purchase Price in full to Holders of the Notes that have
accepted the Company's Change of Control Offer and shall otherwise have
consummated the Change of Control Offer made to Holders of the Notes and (ii)
the Company or any subsidiary will not issue Indebtedness that is subordinated
in right of payment to the Notes and the Company and its subsidiaries will not
issue preferred stock with change of control provisions requiring the payment
of such Indebtedness or preferred stock prior to the payment of the Notes in
the event of a Change of Control under this First Supplemental Indenture.
In the event that a Change of Control occurs and the holders of Notes
exercise their right to require the Company to purchase Notes, if such purchase
constitutes a "tender offer" for purposes of Rule 14e-1 under the Exchange Act
at that time, the Company will comply with the requirements of Rule 14e-1 as
then in effect with respect to such repurchase.
8.2 Certain Definitions.
For purposes of this Article 8,
(1) the term "Change of Control" means the occurrence of any
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), excluding Permitted
Holders, is or becomes the
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"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person or group shall be deemed to have
"beneficial ownership" of all securities that such person or group has
the right to acquire, whether such right is exercisable immediately or
only after the passage of time, upon the happening of an event or
otherwise), directly or indirectly, of shares of capital stock of the
Company entitling such "person" or "group" to elect a majority of the
board of directors of the Company, other than any such acquisition by
the Company, a Subsidiary of the Company or any employee benefit plan
of the Company;
(b) the Company consolidates with, or merges with or
into, another person or sells, conveys, transfers or leases all or
substantially all of its assets to any person, or any person
consolidates with, or merges with or into the Company (other than (A)
any such transaction (x) which does not result in any
reclassification, conversion, exchange or cancellation of outstanding
shares of capital stock of the Company and (y) pursuant to which the
holders of the Class A Common Stock and Class B Common Stock of the
Company immediately prior to such transaction have the entitlement to
exercise, directly or indirectly, 50% or more of the total voting
power of all shares of capital stock entitled to vote generally in the
election of directors of the continuing or surviving corporation
immediately after such transaction and (B) any merger which is
effected solely to change the jurisdiction of incorporation of the
Company and results in a reclassification, conversion or exchange of
outstanding shares of Class A Common Stock solely into shares of
common stock);
provided, that a Change of Control shall not be deemed to have
occurred if (x) the closing bid price per share of the Class A Common
Stock for any five trading days within the period of 10 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
10 consecutive Trading Days ending immediately before the Change of
Control (in the case of a Change of Control under clause (b) above)
shall equal or exceed 105% of the conversion price of the Notes in
effect on each such Trading Day or (y) all of the consideration
(excluding cash payments for fractional shares and cash payments made
pursuant to dissenters' appraisal rights) in a merger or consolidation
constituting the Change of Control consists of shares of common stock
traded on a national securities exchange or on The Nasdaq National
Market (or will be so traded or quoted immediately following the
Change of Control).
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<PAGE> 35
(2) the term "Permitted Holders" means: J. Joe
Ricketts, Marlene M. Ricketts, the lineal descendants of J.
Joe Ricketts and Marlene M. Ricketts and their spouses, and
any trust or other person or entity that holds Class A Common
Stock or Class B Common Stock of the Company for the benefit
of any of the foregoing.
ARTICLE 9
MISCELLANEOUS
9.1 Continuance in Force.
Except as specifically amended and supplemented by, or to the extent
inconsistent with, this First Supplemental Indenture, the Indenture shall
remain in full force and effect and is hereby ratified and confirmed.
9.2 Benefits of First Supplemental Indenture.
Nothing contained in this First Supplemental Indenture shall or shall
be construed to confer upon any person other than a Holder of the Notes, the
Company and the Trustee any right or interest to avail itself or himself, as
the case may be, of any benefit under any provision of the Indenture or this
First Supplemental Indenture, except for Holders of Senior Indebtedness as
provided in Article 7 hereof.
9.3 Liquidated Damages.
The Company agrees that the Holders are entitled to the
benefits of the Registration Rights Agreement and that Liquidated Damages, if
any, will be payable on the Notes and the Class A Common Stock issuable upon
conversion, redemption or repurchase thereof in accordance with, and subject
to, the terms and conditions set forth therein and herein.
The term "Registration Rights Agreement" means that certain
Registration Rights Agreement, dated as of August 4, 1999, between the Company
and Goldman, Sachs & Co. as Initial Purchaser, as the same may be amended from
time to time.
The term "Liquidated Damages" has the meaning specified in the
Registration Rights Agreement.
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<PAGE> 36
9.4 Effective Date.
This First Supplemental Indenture shall be effective as of the date
first above written and upon the execution and delivery hereof by each of the
parties hereto.
9.5 Counterparts.
This First Supplemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same
instrument.
<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed by their respective officers
hereunto duly authorized, all as of the day and year first above written.
AMERITRADE HOLDING CORPORATION
By:
-----------------------------------
Name:
Title:
THE BANK OF NEW YORK
By:
-----------------------------------
Name:
Title:
<PAGE> 38
EXHIBIT A TO FIRST SUPPLEMENTAL INDENTURE
FORM OF NOTE
[THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH GLOBAL
SECURITY:
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A
NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE COMPANY, THE TRUSTEE AND
ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS NOTE FOR ALL PURPOSES.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK LIMITED PURPOSE TRUST COMPANY
("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
DEFINITIVE REGISTERED FORM IN THE LIMITED CIRCUMSTANCES REFERRED TO IN THE
INDENTURE, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY.]
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, AND IN ACCORDANCE WITH ALL APPLICABLE SECURITIES
LAWS OF THE STATES OF THE UNITED STATES.
A-1
<PAGE> 39
AMERITRADE HOLDING CORPORATION
5.75% CONVERTIBLE SUBORDINATED NOTE
DUE AUGUST 1, 2004
No.
-------------------
U.S.$
-----------------
CUSIP NO. 03072HAA7
AMERITRADE HOLDING CORPORATION, a corporation duly organized and
existing under the laws of the State of Delaware (herein called the "Company",
which term includes any successor Person under the Indenture referred to
below), for value received, hereby promises to pay to CEDE & CO. or its
registered assigns, the principal sum of ________ United States Dollars
(U.S.$______ ) (which principal amount may from time to time be increased or
decreased to such other principal amounts (which, taken together with the
principal amounts of all other outstanding Notes, shall not exceed
U.S.$250,000,000 in the aggregate at any time) by adjustments made on the
records of the Trustee hereinafter referred to in accordance with the
Indenture) on August 1, 2004 and to pay interest thereon, from August 4, 1999,
or from the most recent Interest Payment Date (as defined below) to which
interest has been paid or duly provided for, semi-annually in arrears on
February 1 and August 1 in each year (each, an "Interest Payment Date"),
commencing February 1, 2000, at the rate of 5.75% per annum, until the
principal hereof is due, and at the rate of 5.75% per annum on any overdue
principal and premium, if any, and, to the extent permitted by law, on any
overdue interest. The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in the Indenture, be paid
to the Person in whose name this Note is registered at the close of business on
the Regular Record Date for such interest, which shall be January 15 and July
15 (or, if such Regular Record Date is not a Business Day, the immediately
succeeding Business Day), as the case may be, next preceding such Interest
Payment Date. Except as otherwise provided in the Indenture, any such interest
not so punctually paid or duly provided for will forthwith cease to be payable
to the Holder on such Regular Record Date and may either be paid to the Person
in whose name this Note is registered at the close of business on a special
record date for the payment of such Defaulted Interest to be fixed by the
Company, notice whereof shall be given to Holders of Notes not less than 10
days prior to the special record date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any automated quotation
system or securities exchange on which the Notes may be quoted or listed, and
upon such notice as may be required by such exchange, all as more fully
provided in the Indenture. Payments of principal shall be made upon the
surrender of this Note at the Corporate Trust
A-2
<PAGE> 40
Office of the Trustee, or at such other office or agency of the Company as may
be designated by the Company for such purpose in the Borough of Manhattan, The
City of New York, in such coin or currency of the United States of America as
at the time of payment shall be legal tender for the payment of public and
private debts, by United States Dollar check drawn on, or transfer to, a United
States Dollar account. Payments of interest on this Note may be made by United
States Dollar check, drawn on a United States Dollar account, mailed to the
address of the Person entitled thereto as such address shall appear in the
security register maintained by the Registrar, or, upon written application by
the Holder to the Registrar setting forth wire instructions not later than 15
days prior to the relevant Interest Payment Date, by transfer to a United
States Dollar account; provided, however, that transfers to United States
Dollar accounts will be made only to Holders of an aggregate principal amount
of Notes in excess of U.S.$2,000,000.
Except as specifically provided herein and in the Indenture, the
Company shall not be required to make any payment with respect to any tax,
assessment or other governmental charge imposed by any government or any
political subdivision or taxing authority thereof or therein.
Reference is hereby made to the further provisions of this Note set
forth below, which further provisions shall for all purposes have the same
effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to below or an authenticating agent appointed by the
Company, by the manual signature of one of their respective authorized
signatories, this Note shall not be entitled to any benefit under the Indenture
or be valid or obligatory for any purpose.
A-3
<PAGE> 41
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed and
delivered.
AMERITRADE HOLDING CORPORATION
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
(Trustee's Certificate of Authentication)
This is one of the 5.75% Convertible Subordinated Notes due August 1,
2004 referred to in the within-mentioned Indenture and First Supplemental
Indenture.
THE BANK OF NEW YORK,
as Trustee
Dated: By:
------------------ -------------------------------
Authorized Signatory
<PAGE> 42
This Note is one of a duly authorized issue of securities of the
Company designated as its "5.75% Convertible Subordinated Notes due August 1,
2004" (herein called the "Notes"), limited in aggregate principal amount to
U.S. $250,000,000, issued and to be issued under an Indenture, dated as of
August 4, 1999 (herein called the "Base Indenture"), between the Company and
The Bank of New York, as Trustee (herein called the "Trustee", which term
includes any successor trustee under the Base Indenture), and a First
Supplemental Indenture, dated as of August 4, 1999 between the Company and the
Trustee (the "First Supplemental Indenture" and, together with the Base
Indenture, the "Indenture"), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the
Trustee and the Holders of the Notes and of the terms upon which the Notes are,
and are to be, authenticated and delivered. As provided in the Indenture and
subject to certain limitations therein set forth, Notes are exchangeable for a
like aggregate principal amount of Notes of any authorized denominations as
requested by the Holder surrendering the same upon surrender of the Note or
Notes to be exchanged, at the Corporate Trust Office of the Trustee. The
Trustee upon such surrender by the Holder will issue the new Notes in the
requested denominations.
No sinking fund is provided for the Notes.
The Notes are subject to redemption at the option of the Company at
any time on or after August 6, 2002, in whole or in part, upon not less than 30
nor more than 60 days' notice to the Holders prior to the Redemption Date at
the following Redemption Prices (expressed as percentages of the principal
amount) for the twelve-month period beginning on August 6 of the following
years:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2002 102.30%
2003 101.15%
</TABLE>
and thereafter is equal to 100% of the principal amount, in each case, with
accrued and unpaid interest to the Redemption Date.
In the event of a redemption of the Notes, the Company will not be
required (a) to register the transfer or exchange of Notes for a period of 15
days immediately preceding the date notice is given identifying the serial
numbers of the Notes called for such redemption or (b) to register the transfer
or exchange of any Note, or portion thereof, called for redemption.
In any case where the due date for the payment of the principal of,
premium, if any, or interest on any Note or the last day on which a Holder of a
Note has a right to convert his Note shall be, at any place of payment or place
of conversion, as the case may be, a day on which banking institutions in the
State of New York are authorized or obligated by law, regulation or
A-5
<PAGE> 43
executive order to remain closed, then payment of principal, premium, if any,
interest or delivery for conversion of such Note need not be made on or by such
date at such place but may be made on or by the next succeeding day at such
place which is not a day on which such banking institutions are authorized or
obligated by law, regulation or executive order to remain closed, with the same
force and effect as if made on the date for such payment or the date fixed for
redemption or repurchase, or by such last day for conversion, and no interest
shall accrue on the amount so payable for the period after such date.
Subject to and upon compliance with the provisions of the Indenture,
the Holder of this Note is entitled, at his option, at any time following the
original issue date of the Notes and on or before the close of business on
August 1, 2004, or in case this Note or a portion hereof is called for
redemption or the Holder hereof has exercised his right to require the Company
to repurchase this Note or such portion hereof, then in respect of this Note
until but (unless the Company defaults in making the payment due upon
redemption or repurchase, as the case may be) not after, the close of business
on the Business Day immediately preceding the Redemption Date or the Change of
Control Purchase Date, as the case may be, to convert this Note (or any portion
of the principal amount hereof that is U.S.$1,000 or an integral multiple of
U.S.$1,000) into fully paid and nonassessable shares of Class A Common Stock of
the Company, $.01 par value per share, at an initial Conversion Rate of 30.7137
shares of Class A Common Stock for each U.S.$1,000 principal amount of Notes
(or at the current adjusted Conversion Rate if an adjustment has been made as
provided in the Indenture) by surrender of this Note, duly endorsed or assigned
to the Company or in blank and, in case such surrender shall be made during the
period from the close of business on any Regular Record Date immediately
preceding any Interest Payment Date to the opening of business on such Interest
Payment Date (except if this Note or portion thereof has been called for
redemption on a Redemption Date or is repurchasable on a Change of Control
Purchase Date occurring, in either case, during such period and is surrendered
for conversion during such period), also accompanied by payment in New York
Clearing House or other funds acceptable to the Company of an amount equal to
the interest payable on such Interest Payment Date on the principal amount of
this Note then being converted, and also the conversion notice hereon duly
executed, to the Company at the Corporate Trust Office of the Trustee, or at
such other office or agency of the Company, subject to any laws or regulations
applicable thereto and subject to the right of the Company to terminate the
appointment of any Conversion Agent (as defined below) as may be designated by
it for such purpose in the Borough of Manhattan, The City of New York, or at
such other offices or agencies as the Company may designate (each a "Conversion
Agent"), provided, however, that the interest so payable on such Interest
Payment Date in respect of any Note or portion thereof which has not been
called for redemption on a Redemption Date or repurchase on a Change of Control
Purchase Date occurring during the period from the close of business on any
Regular Record Date to the opening of business on the next succeeding Interest
Payment Date, which Note or portion thereof is surrendered for conversion
during such period, shall be paid to the Holder of such Note or portion thereof
as of such Regular Record Date; and provided further that the interest payable
on such Interest Payment Date with respect to any Note or portion thereof which
A-6
<PAGE> 44
has been called for redemption on a Redemption Date or repurchase on a Change
of Control Purchase Date occurring during the period from the close of business
on any Regular Record Date to the opening of business on the next succeeding
Interest Payment Date, which Note or portion thereof is surrendered for
conversion during such period, shall be paid to the holder of such Note or
portion thereof being converted in an amount equal to the interest that would
have been payable on such Note or portion thereof if such Note or portion
thereof had been converted as of the close of business on such Interest Payment
Date; and provided further that Interest payable in respect of any Note or
portion thereof surrendered for conversion on or after an Interest Payment Date
shall be paid to the Holder of such Note or portion thereof as of the Regular
Record Date preceding such Interest Payment Date, notwithstanding the exercise
of the right of conversion. No cash payment or adjustment is to be made on
conversion for interest accrued hereon from the Interest Payment Date
immediately preceding the day of conversion, or for dividends on the Class A
Common Stock issued on conversion hereof. The Company shall thereafter deliver
to the Holder the fixed number of shares of Class A Common Stock (together with
any cash adjustment, as provided in the Indenture) into which this Note is
convertible and such delivery will be deemed to satisfy the Company's
obligation to pay the principal amount of this Note. No fractions of shares or
scrip representing fractions of shares will be issued on conversion, but
instead of any fractional interest (calculated to the nearest 1/100th of a
share) the Company shall pay a cash adjustment as provided in the Indenture.
The Conversion Rate is subject to adjustment as provided in the Indenture. In
addition, the Indenture provides that in case of certain consolidations or
mergers to which the Company is a party (other than a consolidation or merger
that does not result in any reclassification, conversion, exchange or
cancellation of the Class A Common Stock) or the sale or transfer of all or
substantially all of the property and assets of the Company, the Indenture
shall be amended, without the consent of any Holders of Notes, so that this
Note, if then outstanding, will be convertible thereafter, during the period
this Note shall be convertible as specified above, only into the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares of
Class A Common Stock of the Company into which this Note could have been
converted immediately prior to such consolidation, merger, sale or transfer
(assuming such holder of Class A Common Stock is not a Constituent Person or an
Affiliate of a Constituent Person, failed to exercise any rights of election
and received per share the kind and amount received per share by a plurality of
Non-Electing Shares and further assuming, if such consolidation, merger, sale
or transfer occurs prior to the original issue date of the Notes, that the Note
was convertible at the time of such occurrence at the Conversion Rate specified
above as adjusted from the issue date of such Note to such time as provided in
the Indenture). No adjustment in the Conversion Rate will be made until such
adjustment would require an increase or decrease of at least one percent of
such price, provided that any adjustment that would otherwise be made will be
carried forward and taken into account in the computation of any subsequent
adjustment.
If a Change of Control occurs, the Holder of this Note, at the
Holder's option, shall have the right, in accordance with the provisions of the
Indenture, to require the Company to
A-7
<PAGE> 45
repurchase this Note (or any portion of the principal amount hereof that is at
least U.S.$1,000 or an integral multiple of U.S.$1,000 in excess thereof,
provided that the portion of the principal amount of this Note to be
Outstanding after such repurchase is at least equal to U.S.$1,000) for cash at
a Change of Control Purchase Price equal to 100% of the principal amount
thereof plus unpaid interest accrued to the Change of Control Purchase Date. At
the option of the Company, the Change of Control Purchase Price may be paid in
cash or, subject to the conditions provided in the Indenture, by delivery of
shares of Class A Common Stock having a fair market value equal to the Change
of Control Purchase Price. For purposes of this paragraph, the fair market
value of shares of Class A Common Stock shall be determined by the Company and
shall be equal to 95% of the average of the closing bid prices per share for
the five consecutive Trading Days immediately preceding and including the third
Trading Day prior to the Change of Control Purchase Date. Whenever in this Note
there is a reference, in any context, to the principal of any Note as of any
time, such reference shall be deemed to include reference to the Change of
Control Purchase Price payable in respect of such Note to the extent that such
Change of Control Purchase Price is, was or would be so payable at such time,
and express mention of the Change of Control Purchase Price in any provision of
this Note shall not be construed as excluding the Change of Control Purchase
Price so payable in those provisions of this Note when such express mention is
not made; provided, however, that, for the purposes of the second succeeding
paragraph, such reference shall be deemed to include reference to the Change of
Control Purchase Price only to the extent the Change of Control Purchase Price
is payable in cash.
[The following paragraph shall appear in each Global Security:
In the event of a deposit or withdrawal of an interest in this Note,
including an exchange, transfer, redemption, repurchase or conversion of this
Note in part only, the Trustee, as custodian of the Depositary, shall make an
adjustment on its records to reflect such deposit or withdrawal in accordance
with the rules and procedures of The Depository Trust Company applicable to,
and as in effect at the time of, such transaction.]
[The following paragraph shall appear in each Note that is not a
Global Security:
In the event of redemption, repurchase or conversion of this Note in
part only, a new Note or Notes for the unredeemed, unrepurchased or unconverted
portion hereof will be issued in the name of the Holder hereof.]
The indebtedness evidenced by this Note is, to the extent and in the
manner provided in the Indenture, subordinate and subject in right of payment
to the prior payment in full in cash of all Senior Indebtedness of the Company,
and this Note is issued subject to such provisions of the Indenture with
respect thereto. Each Holder of this Note, by accepting the same, (a) agrees to
and shall be bound by such provisions, (b) authorizes and directs the Trustee
on his behalf to take such action as may be necessary or appropriate to
effectuate the subordination so provided and (c) appoints the Trustee his
attorney-in-fact for any and all such purposes.
A-8
<PAGE> 46
If an Event of Default shall occur and be continuing, the principal of
all the Notes, together with accrued interest to the date of declaration, may
be declared due and payable in the manner and with the effect provided in the
Indenture. Upon payment (i) of the amount of principal so declared due and
payable, together with accrued interest to the date of declaration, and (ii) of
interest on any overdue principal and, to the extent permitted by applicable
law, overdue interest, all of the Company's obligations in respect of the
payment of the principal of and interest on the Notes shall terminate.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes under the Indenture at any
time by the Company and the Trustee with either (a) the written consent of the
Holders of not less than a majority in principal amount of the Notes at the
time outstanding, or (b) by the adoption of a resolution, at a meeting of
Holders of the outstanding Notes at which a quorum is present, by the Holders
of at least 66-2/3% in aggregate principal amount of the outstanding Notes
represented and entitled to vote at such meeting. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Notes at the time outstanding, on behalf of the Holders of all the
Notes, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued in exchange herefor or in lieu hereof whether or not notation of
such consent or waiver is made upon this Note or such other Note.
As provided in and subject to the provisions of the Indenture, the
Holder of this Note shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default, the Holders of not
less than 25% in principal amount of the outstanding Notes shall have made
written request to the Trustee to institute proceedings in respect of such
Event of Default as Trustee and offered the Trustee reasonable indemnity and
the Trustee shall not have received from the Holders of a majority in principal
amount of the outstanding Notes a direction inconsistent with such request, and
shall have failed to institute any such proceeding, for 60 days after receipt
of such notice, request and offer of indemnity. The foregoing shall not apply
to any suit instituted by the Holder of this Note for the enforcement of any
payment of principal hereof, premiums if any, or interest hereon on or after
the respective due dates expressed herein or for the enforcement of the right
to convert this Note as provided in the Indenture.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Note at the times, places and rate, and in the coin or
currency, herein prescribed or to convert this Note as provided in the
Indenture.
A-9
<PAGE> 47
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable on the security
register maintained by the Registrar upon surrender of this Note for
registration of transfer at the Corporate Trust Office of the Trustee or at
such other office or agency of the Company as may be designated by it for such
purpose in the Borough of Manhattan, The City of New York (which shall
initially be an office or agency of the Trustee), or at such other offices or
agencies as the Company may designate, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Registrar duly executed by, the Holder thereof or his attorney duly authorized
in writing, and thereupon one or more new Notes, of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees by the Registrar. No service charge shall be made for
any such registration of transfer or exchange, but the Company may require
payment of a sum sufficient to recover any tax or other governmental charge
payable in connection therewith.
The Holder of this Note and the Class A Common Stock issuable upon
conversion, redemption or repurchase thereof is entitled to the benefits of a
Registration Rights Agreement (subject to the provisions thereof), dated August
4, 1999, between the Company and Goldman, Sachs & Co., as Initial Purchaser.
Prior to due presentation of this Note for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name Note is registered, as the owner thereof for all
purposes, whether or not such Note be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse for the payment of the principal (and premium, if any) or
interest on this Note and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture or any indenture supplemental thereto
or in any Note, or because of the creation of any indebtedness represented
thereby, shall be had against any incorporator, stockholder, employee, agent,
officer, director, Subsidiary or Affiliate, as such, past, present or future,
of the Company or of any successor corporation, either directly or through the
Company or any successor corporation, whether by virtue of any constitution,
statute or rule of law or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part of
consideration for the issue hereof, expressly waived and released.
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA, AS
APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THIS NOTE.
All terms used in this Note which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
A-10
<PAGE> 48
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this Note, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties (Cust)
JT TEN - as joint tenants with right of survivorship and
not as tenants in common
UNIF GIFT MIN ACT - ____________ Custodian _____________
(Minor)
under Uniform Gifts to Minors Act ____________
(State)
Additional abbreviations may also be used though not in the above
list.
A-11
<PAGE> 49
ELECTION OF HOLDER TO REQUIRE REPURCHASE
(1) Pursuant to Article 8 of the First Supplemental Indenture, the
undersigned hereby elects to have this Note repurchased by the Company.
(2) The undersigned hereby directs the Trustee or the Company to pay
to the undersigned an amount in cash equal to 100% of the principal amount to
be repurchased (as set forth below), plus interest accrued to the Change of
Control Purchase Date, as provided in the Indenture.
Dated:
-----------------------------------
------------------------------------------
------------------------------------------
Signature(s)
Signature(s) must be guaranteed by an
Eligible Guarantor Institution with
membership in an approved signature
guarantee program pursuant to Rule 17Ad-15
under the Securities Exchange Act of 1934.
------------------------------------------
Signature Guaranteed
Principal amount to be repurchased (at least U.S. $1,000 or an integral multiple
thereof): _______________________________
Remaining principal amount following such repurchase (not less than U.S.
$1,000): _________________________________
NOTICE: The signature to the foregoing Election must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
A-12
<PAGE> 50
CONVERSION NOTICE
The undersigned Holder of this Note hereby irrevocably exercises the
option to convert this Note, or any portion of the principal amount hereof
(which is U.S.$1,000 or an integral multiple of U.S.$1,000) below designated,
into shares of Class A Common Stock, $.01 par value per share, of Ameritrade
Holding Corporation in accordance with the terms of the Indenture referred to
in this Note, and directs that such shares, together with a check in payment
for any fractional share and any Notes representing any unconverted principal
amount hereof, be delivered to and be registered in the name of the undersigned
unless a different name has been indicated below. If shares of Class A Common
Stock or Notes are to be registered in the name of a Person other than the
undersigned, (a) the undersigned will pay all transfer taxes payable with
respect thereto and (b) signature(s) must be guaranteed by an Eligible
Guarantor Institution with membership in an approved signature guarantee
program pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934. Any
amount required to be paid by the undersigned on account of interest
accompanies this Note.
Dated:
-------------------------- ---------------------------
---------------------------
Signature(s)
A-13
<PAGE> 51
If shares or Notes are to be registered in the name of a Person other than the
Holder, please print such Person's name and address:
- ---------------------------------------
Name
- ---------------------------------------
Address
- ---------------------------------------
Social Security or other Identification
Number, if any
- ---------------------------------------
[Signature Guaranteed]
If only a portion of the Notes is to be converted, please indicate:
1. Principal amount to be converted:
U.S. $
------------
2. Principal amount and denomination of Notes representing unconverted
principal amount to be issued:
U.S. $
------------
(U.S.$1,000 or any integral multiple of U.S.$1,000)
A-14
<PAGE> 52
FORM OF ASSIGNMENT
For value received ________________ hereby sell(s), assign(s) and
transfer(s) unto ________________ (please insert social security or other
identifying number of assignee) the within Note, and hereby irrevocably
constitutes and appoints ____________________ as attorney to transfer the said
Note on the books of the Company, with full power of substitution in the
premises.
Dated:
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
Signature(s)
Signature(s) must be
guaranteed by an Eligible
Guarantor Institution with
membership in an approved
signature guarantee
program pursuant to Rule
17Ad-15 under the
Securities Exchange Act of
1934.
A-15
<PAGE> 1
EXHIBIT 4.5
AMERITRADE HOLDING CORPORATION
5.75% CONVERTIBLE SUBORDINATED NOTES DUE AUGUST 1, 2004
(CONVERTIBLE INTO CLASS A COMMON STOCK (PAR VALUE
$.01 PER SHARE) OF AMERITRADE HOLDING CORPORATION)
REGISTRATION RIGHTS AGREEMENT
August 4, 1999
Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Ameritrade Holding Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell to the Purchaser (as defined herein) upon the terms
set forth in the Purchase Agreement (as defined herein) its 5.75% convertible
subordinated notes due August 1, 2004 convertible into Class A common stock (par
value $.01 per share of the Company) (the "Securities"). As an inducement to the
Purchaser to enter into the Purchase Agreement and in satisfaction of a
condition to the obligations of the Purchaser thereunder, the Company agrees
with the Purchaser for the benefit of holders (as defined herein) from time to
time of the Registrable Securities (as defined herein) as follows:
1. Definitions.
(a) Capitalized terms used herein without definition shall have the
meanings ascribed thereto in the Purchase Agreement. As used in this Agreement,
the following defined terms shall have the following meanings:
"Act" or "Securities Act" means the United States Securities Act of
1933, as amended.
"Affiliate" of any specified person means any other person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with such specified person. For purposes of this definition, control of
a person means the power, direct or indirect, to direct or cause the direction
of the management and policies of such person whether by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Commission" means the United States Securities and Exchange
Commission, or any other federal agency at the time administering the Exchange
Act or the Securities Act, whichever is the relevant statute for the particular
purpose.
<PAGE> 2
"Common Stock" means the Company's Class A common stock, par value $.01
per share.
"DTC" means The Depository Trust Company.
"Effectiveness Period" has the meaning assigned thereto in Section
2(b)(i) hereof.
"Effective Time" means the date on which the Commission declares the
Shelf Registration Statement effective or on which the Shelf Registration
Statement otherwise becomes effective.
"Electing Holder" has the meaning assigned thereto in Section 3(a)(3)
hereof.
"Exchange Act" means the United States Securities Exchange Act of 1934,
as amended.
The term "holder" means, when used with respect to any Security, the
Holder (as defined in the Indenture) and, with respect to any Common Stock, the
record holder of such Common Stock.
"Indenture" means the Indenture, dated as of August 4, 1999, between
the Company and The Bank of New York, as amended and supplemented from time to
time in accordance with its terms.
"Managing Underwriters" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten offering,
if any, conducted pursuant to Section 6 hereof.
"NASD Rules" means the Rules of the National Association of Securities
Dealers, Inc., as amended from time to time.
"Notice and Questionnaire" means a Notice of Registration Statement and
Selling Securityholder Questionnaire substantially in the form of Exhibit A
hereto.
The term "person" means an individual, partnership, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.
"Prospectus" means the prospectus (including, without limitation, any
preliminary prospectus, any final prospectus and any prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act) included in the
Shelf Registration Statement, as amended or supplemented by any prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by the Shelf Registration Statement and by all
other amendments and supplements to such prospectus, including all material
incorporated by reference in such prospectus and all documents filed after the
date of such prospectus by the Company under the Exchange Act and incorporated
by reference therein.
"Purchase Agreement" means the purchase agreement dated July 29, 1999
between the Purchaser and the Company relating to the Securities.
<PAGE> 3
"Purchaser" means Goldman, Sachs & Co.
"Registrable Securities" means all or any portion of the Securities
issued from time to time under the Indenture in registered form and the shares
of Common Stock issuable upon conversion of such Securities; provided, however,
that a security ceases to be a Registrable Security when it is no longer a
Restricted Security.
"Restricted Security" means any Security or share of Common Stock
issuable upon conversion thereof except any such Security or share of Common
Stock which (i) has been effectively registered under the Securities Act and
sold in a manner contemplated by the Shelf Registration Statement, (ii) has been
transferred in compliance with Rule 144 under the Securities Act (or any
successor provision thereto) or is transferable pursuant to paragraph (k) of
such Rule 144 (or any successor provision thereto) or (iii) has otherwise been
transferred and a new Security or share of Common Stock not subject to transfer
restrictions under the Securities Act has been delivered by or on behalf of the
Company in accordance with the terms of the Indenture.
"Rules and Regulations" means the published rules and regulations of
the Commission promulgated under the Securities Act or the Exchange Act, as in
effect at any relevant time.
"Shelf Registration" means a registration effected pursuant to Section
2 hereof.
"Shelf Registration Statement" means a "shelf" registration statement
filed under the Securities Act providing for the registration of, and the sale
on a continuous or delayed basis by the holders of, all of the Registrable
Securities pursuant to Rule 415 under the Securities Act and/or any similar rule
that may be adopted by the Commission, filed by the Company pursuant to the
provisions of Section 2 of this Agreement, including the Prospectus contained
therein, any amendments and supplements to such registration statement,
including post-effective amendments, and all exhibits and all material
incorporated by reference in such registration statement.
"Trust Indenture Act" means the Trust Indenture Act of 1939, or any
successor thereto, and the rules, regulations and forms promulgated thereunder,
as the same shall be amended from time to time.
The term "underwriter" means any underwriter of Registrable Securities
in connection with an offering thereof under a Shelf Registration Statement.
(b) Wherever there is a reference in this Agreement to a percentage of
the "principal amount" of Registrable Securities or to a percentage of
Registrable Securities, Common Stock shall be treated as representing the
principal amount of Securities which was surrendered for conversion or exchange
in order to receive such number of shares of Common Stock.
2. Shelf Registration.
(a) The Company shall, within 90 calendar days following the First Time
of Delivery (as defined in the Purchase Agreement), file with the Commission a
Shelf Registration Statement
<PAGE> 4
relating to the offer and sale of the Registrable Securities and, thereafter,
shall use all reasonable efforts to cause such Shelf Registration Statement to
be declared effective under the Act within 180 calendar days after the First
Time of Delivery (as defined in the Purchase Agreement); provided, however, that
the Company may, upon written notice to all the Holders, postpone having the
Shelf Registration Statement declared effective for a reasonable period not to
exceed 90 days if the Company determines based upon the advice of counsel that
it should disclose in the Shelf Registration Statement a financing, acquisition
or other corporate transaction and the Board of Directors of the Company shall
have determined in good faith that such disclosure is not in the best interests
of the Company and its stockholders; and provided further, however, that no
holder shall be entitled to be named as a selling securityholder in the Shelf
Registration Statement or to use the Prospectus forming a part thereof for
resales of Registrable Securities unless such holder is an Electing Holder.
(b) The Company shall use all reasonable efforts:
(i) To keep the Shelf Registration Statement continuously
effective in order to permit the Prospectus forming part thereof to be
usable by holders for resales of Registrable Securities for a period of
two years from the Effective Time of the Shelf Registration Statement,
or such shorter period that will terminate when there are no
Registrable Securities outstanding (in either case, such period being
referred to herein as the "Effectiveness Period");
(ii) After the Effective Time of the Shelf Registration
Statement, promptly upon the request of any holder of Registrable
Securities that is not then an Electing Holder, to take any action
reasonably necessary to enable such holder to use the Prospectus
forming a part thereof for resales of Registrable Securities,
including, without limitation, any action necessary to identify such
holder as a selling securityholder in the Shelf Registration Statement;
provided, however, that nothing in this subparagraph shall relieve such
holder of the obligation to return a completed and signed Notice and
Questionnaire to the Company in accordance with Section 3(a)(2) hereof;
and
(iii) If at any time the Securities, pursuant to the terms of
the Indenture, are convertible into securities other than Common Stock,
the Company shall, or shall cause any successor under the Indenture to,
cause such securities to be included in the Shelf Registration
Statement no later than the date on which the Securities may then be
convertible into such securities.
The Company shall be deemed not to have used all reasonable efforts to keep the
Shelf Registration Statement effective during the Effectiveness Period if the
Company voluntarily takes any action that would result in Electing Holders not
being able to offer and sell any of their Registrable Securities during such
period, unless (i) such action is required by applicable law or (ii) the Company
determines based upon the advice of counsel that is advisable to disclose in the
Shelf Registration Statement a financing, acquisition or other corporate
transaction, and the Board of Directors of the Company shall have determined in
good faith that such disclosure is not in the best interests of the Company and
its stockholders, and, in the case of clause (i) above, the Company thereafter
promptly complies with the requirements of paragraph 3(j) below.
<PAGE> 5
3. Registration Procedures. In connection with the Shelf Registration
Statement, the following provisions shall apply:
(a) (i) Not less than 30 calendar days prior to the Effective Time of
the Shelf Registration Statement, the Company shall mail the Notice and
Questionnaire to the holders of Registrable Securities. No holder shall be
entitled to be named as a selling securityholder in the Shelf Registration
Statement as of the Effective Time, and no holder shall be entitled to use the
Prospectus forming a part thereof for resales of Registrable Securities at any
time, unless such holder has returned a completed and signed Notice and
Questionnaire to the Company by the deadline for response set forth therein;
provided, however, holders of Registrable Securities shall have at least 28
calendar days from the date on which the Notice and Questionnaire is first
mailed to such holders to return a completed and signed Notice and Questionnaire
to the Company.
(ii) After the Effective Time of the Shelf Registration
Statement, the Company shall, upon the request of any holder of
Registrable Securities that is not then an Electing Holder, promptly
send a Notice and Questionnaire to such holder. The Company shall not
be required to take any action to name such holder as a selling
securityholder in the Shelf Registration Statement or to enable such
holder to use the Prospectus forming a part thereof for resales of
Registrable Securities until such holder has returned a completed and
signed Notice and Questionnaire to the Company.
(iii) The term "Electing Holder" shall mean any holder of
Registrable Securities that has returned a completed and signed Notice
and Questionnaire to the Company in accordance with Section 3(a)(i) or
3(a)(ii) hereof.
(b) The Company shall furnish to each Electing Holder, prior to the
Effective Time, a copy of the Shelf Registration Statement initially filed with
the Commission, and shall furnish to such holders, prior to the filing thereof
with the Commission, copies of each amendment thereto and each amendment or
supplement, if any, to the Prospectus included therein, and shall use all
reasonable efforts to reflect in each such document, at the Effective Time or
when so filed with the Commission, as the case may be, such comments as such
holders and their respective counsel reasonably may propose.
(c) The Company shall promptly take such action as may be necessary so
that (i) each of the Shelf Registration Statement and any amendment thereto and
the Prospectus forming part thereof and any amendment or supplement thereto (and
each report or other document incorporated therein by reference in each case)
complies in all material respects with the Securities Act and the Exchange Act
and the respective rules and regulations thereunder, (ii) each of the Shelf
Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) each of the Prospectus forming part of the
Shelf Registration Statement, and any amendment or supplement to such
Prospectus, does not at any time during the Effectiveness Period include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
<PAGE> 6
(d) The Company shall promptly advise each Electing Holder, and shall
confirm such advice in writing if so requested by any such holder:
(i) when the Shelf Registration Statement and any amendment
thereto has been filed with the Commission and when the Shelf
Registration Statement or any post-effective amendment thereto has
become effective;
(ii) of any request by the Commission for amendments or
supplements to the Shelf Registration Statement or the Prospectus
included therein or for additional information.
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement or the
initiation of any proceedings for such purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the securities
included in the Shelf Registration Statement for sale in any
jurisdiction or the initiation of any proceeding for such purpose; and
(v) of the happening of any event or the existence of any
state of facts that requires the making of any changes in the Shelf
Registration Statement or the Prospectus included therein so that, as
of such date, such Shelf Registration Statement and Prospectus do not
contain an untrue statement of a material fact and do not omit to state
a material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading (which advice
shall be accompanied by an instruction to such holders to suspend the
use of the Prospectus until the requisite changes have been made;
provided, that the Company shall not be permitted to suspend the use of
the Prospectus for more than an aggregate of 45 days in any 90 day
period, or 90 days in any 365 day period).
(e) The Company shall use all reasonable efforts to prevent the
issuance, and if issued to obtain the withdrawal, of any order suspending the
effectiveness of the Shelf Registration Statement at the earliest possible time.
(f) The Company shall furnish to each Electing Holder, without charge,
at least one copy of the Shelf Registration Statement and all post-effective
amendments thereto, including financial statements and schedules, and, if such
holder so requests in writing, all reports, other documents and exhibits that
are filed with or incorporated by reference in the Shelf Registration Statement.
(g) The Company shall, during the Effectiveness Period, deliver to each
Electing Holder, without charge, as many copies of the Prospectus (including
each preliminary Prospectus) included in the Shelf Registration Statement and
any amendment or supplement thereto as such Electing Holder may reasonably
request; and the Company consents (except during the continuance of any event
described in Section 3(d)(v) above) to the use of the Prospectus and any
amendment or supplement thereto by each of the Electing Holders in connection
with the offering and sale of the
<PAGE> 7
Registrable Securities covered by the Prospectus and any amendment or supplement
thereto during the Effectiveness Period.
(h) Prior to any offering of Registrable Securities pursuant to the
Shelf Registration Statement, the Company shall (i) register or qualify or
cooperate with the Electing Holders and their respective counsel in connection
with the registration or qualification of such Registrable Securities for offer
and sale under the securities or "blue sky" laws of such jurisdictions within
the United States as any Electing Holder may reasonably request, (ii) keep such
registrations or qualifications in effect and comply with such laws so as to
permit the continuance of offers and sales in such jurisdictions for so long as
may be necessary to enable any Electing Holder or underwriter, if any, to
complete its distribution of Registrable Securities pursuant to the Shelf
Registration Statement, and (iii) take any and all other actions necessary or
advisable to enable the disposition in such jurisdictions of such Registrable
Securities; provided, however, that in no event shall the Company be obligated
to (A) qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to so qualify but for this
Section 3(h), (B) file any general consent to service of process in any
jurisdiction where it is not as of the date hereof so subject or (C) subject
itself to taxation in any jurisdiction where it is not as of the date hereof so
subject.
(i) Unless any Registrable Securities shall be in book-entry only form,
the Company shall cooperate with the Electing Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to the Shelf Registration Statement, which certificates, if so
required by any securities exchange upon which any Registrable Securities are
listed, shall be penned, lithographed or engraved, or produced by any
combination of such methods, on steel engraved borders, and which certificates
shall be free of any restrictive legends and in such permitted denominations and
registered in such names as Electing Holders may request in connection with the
sale of Registrable Securities pursuant to the Shelf Registration Statement.
(j) Upon the occurrence of any fact or event contemplated by paragraph
3(d)(v) above, the Company shall promptly prepare a post-effective amendment or
supplement to the Shelf Registration Statement or the Prospectus, or any
document incorporated therein by reference, or file any other required document
so that, as thereafter delivered to purchasers of the Registrable Securities
included therein, the Prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, if the Company determines based upon
the advice of counsel that it is advisable to disclose in the Shelf Registration
Statement a financing, acquisition or other corporate transaction, and the Board
of Directors of the Company shall have determined in good faith that such
disclosure would not be in the best interests of the Company and its
stockholders, the Company shall not be required to prepare and file such
amendment, supplement or document for such period (not to exceed an aggregate of
45 days in any 90 day period, or an aggregate of 90 days in any 365 day period)
as the Board of Directors of the Company shall have determined in good faith is
in the best interests of the Company and its stockholders. If the Company
notifies the Electing Holders of the occurrence of any event contemplated by
paragraph 3(d)(v) above, each Electing Holder agrees, as a consequence of the
inclusion of any of such holder's Registrable Securities in the Shelf
<PAGE> 8
Registration Statement, to suspend the use of the Prospectus until the requisite
changes to the Prospectus have been made.
(k) Not later than the Effective Time of the Shelf Registration
Statement, the Company shall provide a CUSIP number for the Registrable
Securities that are debt securities.
(l) The Company shall use all reasonable efforts to comply with all
applicable Rules and Regulations, and to make generally available to its
securityholders as soon as practicable, but in any event not later than eighteen
months after (i) the effective date (as defined in Rule 158(c) under the
Securities Act) of the Shelf Registration Statement, (ii) the effective date of
each post-effective amendment to the Shelf Registration Statement, and (iii) the
date of each filing by the Company with the Commission of an Annual Report on
Form 10-K that is incorporated by reference in the Shelf Registration Statement,
an earning statement of the Company and its subsidiaries complying with Section
11(a) of the Securities Act and the rules and regulations of the Commission
thereunder (including, at the option of the Company, Rule 158).
(m) Not later than the Effective Time of the Shelf Registration
Statement, the Company shall cause the Indenture to be qualified under the Trust
Indenture Act; in connection with such qualification, the Company shall
cooperate with the Trustee under the Indenture and the Holders (as defined in
the Indenture) to effect such changes to the Indenture as may be required for
such Indenture to be so qualified in accordance with the terms of the Trust
Indenture Act; and the Company shall execute, and shall use all reasonable
efforts to cause the Trustee to execute, all documents that may be required to
effect such changes and all other forms and documents required to be filed with
the Commission to enable such Indenture to be so qualified in a timely manner.
In the event that any such amendment or modification referred to in this Section
3(m) involves the appointment of a new trustee under the Indenture, the Company
shall appoint a new trustee thereunder pursuant to the applicable provisions of
the Indenture.
(n) In the event of an underwritten offering conducted pursuant to
Section 6 hereof, the Company shall, if requested, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the Shelf
Registration Statement such information as the Managing Underwriters reasonably
agree should be included therein and to which the Company does not reasonably
object and shall make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after it is notified of the
matters to be included or incorporated in such Prospectus supplement or
post-effective amendment.
(o) The Company shall enter into such customary agreements (including
an underwriting agreement in customary form in the event of an underwritten
offering conducted pursuant to Section 6 hereof) and take all other appropriate
action in order to expedite and facilitate the registration and disposition of
the Registrable Securities, and in connection therewith, if an underwriting
agreement is entered into, cause the same to contain indemnification provisions
and procedures substantially identical to those set forth in Section 5 hereof
with respect to all parties to be indemnified pursuant to Section 5 hereof.
(p) The Company shall:
<PAGE> 9
(i) (A) make reasonably available for inspection by Electing
Holders, any underwriter participating in any disposition pursuant to
the Shelf Registration Statement, and any attorney, accountant or other
agent retained by such holders or any such underwriter during normal
business hours all relevant financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries,
and (B) cause the Company's officers, directors and employees to supply
all information reasonably requested by such holders or any such
underwriter, attorney, accountant or agent in connection with the Shelf
Registration Statement, in each case, as is customary for similar due
diligence examinations; provided, however, that all records,
information and documents that are designated in writing by the
Company, in good faith, as confidential shall be kept confidential by
such holders and any such underwriter, attorney, accountant or agent,
unless such disclosure is made in connection with a court proceeding or
required by law, or such records, information or documents become
available to the public generally or through a third party without an
accompanying obligation of confidentiality; and provided
further that such inspection and information gathering shall, to the
greatest extent possible, be coordinated on behalf of the Electing
Holders and the other parties entitled thereto by one counsel
designated by and on behalf of Electing Holders and other parties;
(ii) in connection with any underwritten offering conducted
pursuant to Section 6 hereof, make such representations and warranties
to the holders participating in such underwritten offering and to the
Managing Underwriters, in form, substance and scope as are customarily
made by the Company to underwriters in primary underwritten offerings
of equity and convertible debt securities and covering matters
including, but not limited to, those set forth in the Purchase
Agreement;
(iii) in connection with any underwritten offering conducted
pursuant to Section 6 hereof, obtain opinions of counsel to the Company
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the Managing Underwriters) addressed to each
holder participating in such underwritten offering and the
underwriters, covering such matters as are customarily covered in
opinions requested in primary under written offerings of equity and
convertible debt securities and such other matters as may be reasonably
requested by such holders and underwriters (it being agreed that the
matters to be covered by such opinions shall include, without
limitation, as of the date of the opinion and as of the Effective Time
of the Shelf Registration Statement or most recent post-effective
amendment thereto, as the case may be, the absence from the Shelf
Registration Statement and the Prospectus, including the documents
incorporated by reference therein, of an untrue statement of a material
fact or the omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading;
(iv) in connection with any underwritten offering conducted
pursuant to Section 6 hereof, obtain "cold comfort" letters and updates
thereof from the independent public accountants of the Company (and, if
necessary, from the independent public accountants of any subsidiary of
the Company or of any business acquired by the Company for which
financial statements and financial data are, or are required to be,
included in the Shelf Registration Statement), addressed to each holder
participating in such underwritten offering (if such holder has
provided such letter, representations or documentation, if any,
<PAGE> 10
required for such cold comfort letter to be so addressed) and the
underwriters, in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
primary underwritten offerings;
(v) in connection with any underwritten offering conducted
pursuant to Section 6 hereof, deliver such documents and certificates
as may be reasonably requested by any holders participating in such
underwritten offering and the Managing Underwriters, if any, including,
without limitation, certificates to evidence compliance with Section
3(j) hereof and with any conditions contained in the underwriting
agreement or other agreements entered into by the Company.
(q) The Company will use all reasonable efforts to cause the Common
Stock issuable upon conversion of the Securities to be listed for quotation on
the National Association of Securities Dealers Automated Quotations National
Market System or other stock exchange or trading system on which the Common
Stock primarily trades on or prior to the Effective Time of the Shelf
Registration Statement hereunder.
(r) In the event that any broker-dealer registered under the Exchange
Act shall be an "affiliate" (as defined in Rule 2720(b)(1) of the NASD Rules (or
any successor provision thereto)) of the Company or has a "conflict of interest"
(as defined in Rule 2720(b)(7) of the NASD Rules (or any successor provision
thereto)) and such broker-dealer shall underwrite, participate as a member of an
underwriting syndicate or selling group or assist in the distribution of any
Registrable Securities covered by the Shelf Registration Statement, whether as a
holder of such Registrable Securities or as an underwriter, a placement or sales
agent or a broker or dealer in respect thereof, or otherwise, the Company shall
assist such broker-dealer in complying with the requirements of the NASD Rules,
including, without limitation, by (A) engaging a "qualified independent
underwriter" (as defined in Rule 2720(b)(15) of the NASD Rules (or any successor
provision thereto)) to participate in the preparation of the registration
statement relating to such Registrable Securities, to exercise usual standards
of due diligence in respect thereto and to recommend the public offering price
of such Registrable Securities, (B) indemnifying such qualified independent
underwriter to the extent of the indemnification of underwriters provided in
Section 5 hereof, and (C) providing such information to such broker-dealer as
may be required in order for such broker-dealer to comply with the requirements
of the NASD Rules.
(s) The Company shall use all reasonable efforts to take all other
steps necessary to effect the registration, offering and sale of the Registrable
Securities covered by the Shelf Registration Statement contemplated hereby.
4. Registration Expenses. The Company shall bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 2,
3 and 6 hereof and shall bear or reimburse the Electing Holders for the
reasonable fees and disbursements of a single counsel designated by the Company
and reasonably acceptable to the Holders of a majority of the Registrable
Securities covered by the Shelf Registration Statement to act as counsel
therefor in connection therewith, subject to the provisions of Section 6 with
respect to the payment of fees and expenses in connection with an underwritten
offering.
<PAGE> 11
5. Indemnification and Contribution.
(a) Indemnification by the Company. Upon the registration of the
Registrable Securities pursuant to Section 2 hereof, the Company shall indemnify
and hold harmless each Electing Holder and each underwriter, selling agent or
other securities professional, if any, which facilitates the disposition of
Registrable Securities, and each of their respective officers and directors and
each person who controls such Electing Holder, underwriter, selling agent or
other securities professional within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act (each such person being sometimes referred
to as an "Indemnified Person") against any losses, claims, damages or
liabilities, joint or several, to which such Indemnified Person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Shelf Registration Statement under which such Registrable
Securities are to be registered under the Securities Act, or any Prospectus
contained therein or furnished by the Company to any Indemnified Person, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Company hereby agrees to reimburse such Indemnified Person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that the Company shall not be liable to any such Indemnified Person in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such Shelf Registration Statement or
Prospectus, or amendment or supplement, in reliance upon and in conformity with
written information furnished to the Company by such Indemnified Person
expressly for use therein; and provided, further, that the Company shall not be
liable to any Indemnified Person under the indemnity agreement in this
subsection (a) with respect to any preliminary prospectus to the extent that any
such loss, claim, damage or liability of such Indemnified Person results from
the fact that such Indemnified Person sold Registrable Securities to a person as
to whom it shall be established that there was not sent or given, at or prior to
the written confirmation of such sale, a copy of the Prospectus (excluding
documents incorporated by reference) or the Prospectus as then amended or
supplemented (excluding documents incorporated by reference) in any case where
such delivery is required by the Act if the Company has previously furnished
copies thereof in sufficient quantity to such Indemnified Person and the loss,
claim, damage or liability of such Indemnified Person results from an untrue
statement or omission of a material fact contained in the preliminary prospectus
which was identified in writing at such time to such Indemnified Person and
corrected in the Prospectus (excluding any document incorporated by reference)
or in the Prospectus as then amended or supplemented (excluding documents
incorporated by reference) and such correction would have cured the defect
giving rise to such loss, claim, damage or liability.
(b) Indemnification by the Holders and any Agents and Underwriters.
Each Electing Holder agrees, as a consequence of the inclusion of any of such
holder's Registrable Securities in such Shelf Registration Statement, and each
underwriter, selling agent or other securities professional, if any, which
facilitates the disposition of Registrable Securities shall agree, as a
consequence of facilitating such disposition of Registrable Securities,
severally and not jointly, to (i) indemnify and hold harmless the Company, its
directors, officers who sign any Shelf Registration
<PAGE> 12
Statement and each person, if any, who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act,
against any losses, claims, damages or liabilities to which the Company or such
other persons may become subject, under the Securities Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in such Shelf Registration Statement or Prospectus,
or any amendment or supplement, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company by such holder,
underwriter, selling agent or other securities professional expressly for use
therein, and (ii) reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
any such action or claim as such expenses are incurred.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified
party under subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under this Section 5, notify such
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party shall not relieve it from any liability which
it may have to any indemnified party otherwise than under this Section 5. In
case any such action shall be brought against any indemnified party and it shall
notify an indemnifying party of the commencement thereof, such indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, such
indemnifying party shall not be liable to such indemnified party under this
Section 5 for any legal expenses of other counsel or any other expenses, in each
case subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to, or an admission of, fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(d) Contribution. If the indemnification provided for in this Section 5
is unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in connection
with the statements or omissions which resulted in such losses, claims,
<PAGE> 13
damages or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such indemnifying party or by such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 5(d) were determined by
pro rata allocation (even if the Electing Holders or any underwriters, selling
agents or other securities professionals or all of them were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 5(d).
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Electing Holders and any underwriters,
selling agents or other securities professionals in this Section 5(d) to
contribute shall be several in proportion to the percentage of principal amount
of Registrable Securities registered or underwritten, as the case may be, by
them and not joint.
(e) Notwithstanding any other provision of this Section 5, in no event
will any Electing Holder be required to undertake liability to any person under
this Section 5 for any amounts in excess of the dollar amount of the proceeds to
be received by such holder from the sale of such holder's Registrable Securities
(after deducting any fees, discounts and commissions applicable thereto)
pursuant to any Shelf Registration Statement under which such Registrable
Securities are to be registered under the Securities Act.
(f) The obligations of the Company under this Section 5 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 5 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 5 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.
6. Underwritten Offering. Any holder of Registrable Securities who
desires to do so may sell Registrable Securities (in whole or in part) in an
underwritten offering; provided that (i) the Electing Holders of at least 33
1/3% in aggregate principal amount of the Registrable Securities then covered by
the Shelf Registration Statement shall request such an offering and (ii) at
least such aggregate principal amount of such Registrable Securities shall be
included in such offering; and provided further that the Company shall not be
obligated to cooperate with more than one underwritten offering during the
Effectiveness Period. Upon receipt of such a request, the Company shall provide
all holders of Registrable Securities written notice of the request, which
notice shall inform such holders that they have the opportunity to participate
in the offering. In any such underwritten offering, the investment banker or
bankers and manager or managers that will administer the offering will be
selected by, and the underwriting arrangements with respect thereto
<PAGE> 14
(including the size of the offering) will be approved by, the Company; provided,
however, that such investment bankers and managers and underwriting arrangements
must be reasonably satisfactory to the holders of a majority of the Registrable
Securities to be included in such offering. No holder may participate in any
underwritten offering contemplated hereby unless (a) such holder agrees to sell
such holder's Registrable Securities to be included in the underwritten offering
in accordance with any approved underwriting arrangements, (b) such holder
completes and executes all reasonable questionnaires, powers of attorney,
indemnities, underwriting agreements, lock-up letters and other documents
required under the terms of such approved underwriting arrangements, and (c) if
such holder is not then an Electing Holder, such holder returns a completed and
signed Notice and Questionnaire to the Company in accordance with Section
3(a)(2) hereof within a reasonable amount of time before such underwritten
offering. The holders participating in any underwritten offering shall be
responsible for any underwriting discounts and commissions and fees and, subject
to Section 4 hereof, expenses of their own counsel. The Company shall pay all
expenses customarily borne by issuers, including but not limited to filing fees,
the fees and disbursements of its counsel and independent public accountants and
any printing expenses incurred in connection with such underwritten offering.
Notwithstanding the foregoing or the provisions of Section 3(n) hereof, upon
receipt of a request from the Managing Underwriter or a representative of
holders of a majority of the Registrable Securities to be included in an
underwritten offering to prepare and file an amendment or supplement to the
Shelf Registration Statement and Prospectus in connection with an underwritten
offering, the Company may delay the filing of any such amendment or supplement
for up to 90 days if the Board of Directors of the Company shall have determined
in good faith that the Company has a bona fide business reason for such delay.
7. Liquidated Damages. Notwithstanding any postponement permitted by
Section 2(a), additional interest ("Liquidated Damages") will accrue on the
Securities if (i) on or prior to the 90th day following the date of the First
Time of Delivery (as defined in the Purchase Agreement), a Shelf Registration
Statement has not been filed with the Commission or (ii) on or prior to the
180th day following the date of the First Time of Delivery (as defined in the
Purchase Agreement), such Shelf Registration Statement is not declared effective
by the Commission (each, a "Registration Default"), from and including the day
following such Registration Default to but excluding the day on which such
Registration Default has been cured. Such Liquidated Damages shall be paid
semi-annually in arrears, with the first semi-annual payment due on the first
Interest Payment Date (as defined in the Indenture), as applicable, following
the date on which such Liquidated Damages begin to accrue, and will accrue at a
rate per annum equal to an additional one-quarter of one percent (0.25%) of the
principal amount, to and including the 90th day following such Registration
Default and one-half of one percent (0.5%) thereof from and after the 91st day
following such Registration Default. In the event that the Shelf Registration
Statement ceases to be effective (or the Holders of Registrable Securities are
otherwise prevented or restricted by the Company from effecting sales pursuant
thereto) (an "Effective Failure") during the Effective Period for more than 45
days, whether or not consecutive, during any 90 day period, or for more than 90
days, whether or not consecutive, during any twelve-month period, then in either
case the Company shall pay Liquidated Damages in the amount of one-half of one
percent (0.5%) per annum from the 46th day of the applicable 90 day period or
the 91st day of the applicable twelve-month period, as the case may be, that
such Shelf Registration Statement ceases to be effective (or the Holders of
Registrable Securities are otherwise prevented or restricted by the Company from
effecting sales pursuant thereto) until such
<PAGE> 15
time as the Effective Failure is cured. For the purpose of determining an
Effective Failure, days on which the Company has been obligated to pay
Liquidated Damages in accordance with the foregoing in respect of a prior
Effective Failure within the applicable 90 day or twelve-month period, as the
case may be, shall not be included. The Liquidated Damages as set forth in this
Section 7 shall be the exclusive monetary remedy available to the Holders of
Registrable Securities for such Registration Default or Effective Failure. In no
event shall the Company be required to pay Liquidated Damages in excess of the
applicable maximum amount of one-half of one percent (0.5%) set forth above.
8. Miscellaneous.
(a) Other Registration Rights. The Company may grant registration
rights that would permit any Person that is a third party the right to
piggy-back on any Shelf Registration Statement, provided that if the Managing
Underwriter of any underwritten offering conducted pursuant to Section 6 hereof
notifies the Company and the Electing Holders that the total amount of
securities which the Electing Holders and the holders of such piggy-back rights
intend to include in any Shelf Registration Statement is so large as to
materially threaten the success of such offering (including the price at which
such securities can be sold), then the amount, number or kind of securities to
be offered for the account of holders of such piggy-back rights will be reduced
to the extent necessary to reduce the total amount of securities to be included
in such offering to the amount, number and kind recommended by the Managing
Underwriter prior to any reduction in the amount of Registrable Securities to be
included in such Shelf Registration Statement.
(b) Amendments and Waivers. This Agreement, including this Section
8(b), may be amended, and waivers or consents to departures from the provisions
hereof may be given, only by a written instrument duly executed by the Company
and the holders of a majority in aggregate principal amount of Registrable
Securities then outstanding. Each holder of Registrable Securities outstanding
at the time of any such amendment, waiver or consent or thereafter shall be
bound by any amendment, waiver or consent effected pursuant to this Section
8(b), whether or not any notice, writing or marking indicating such amendment,
waiver or consent appears on the Registrable Securities or is delivered to such
holder.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be given as provided in the Indenture.
(d) Parties in Interest. The parties to this Agreement intend that all
holders of Registrable Securities shall be entitled to receive the benefits of
this Agreement and that any Electing Holder shall be bound by the terms and
provisions of this Agreement by reason of such election with respect to the
Registrable Securities which are included in a Shelf Registration Statement. All
the terms and provisions of this Agreement shall be binding upon, shall inure to
the benefit of and shall be enforceable by the respective successors and assigns
of the parties hereto and any holder from time to time of the Registrable
Securities to the aforesaid extent. In the event that any transferee of any
holder of Registrable Securities shall acquire Registrable Securities, in any
manner, whether by gift, bequest, purchase, operation of law or otherwise, such
transferee shall, without any further writing or action of any kind, be entitled
to receive the benefits of and, if
<PAGE> 16
an Electing Holder, be conclusively deemed to have agreed to be bound by and to
perform all of the terms and provisions of this Agreement to the aforesaid
extent.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(h) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
(i) Survival. The respective indemnities, agreements, representations,
warranties and other provisions set forth in this Agreement or made pursuant
hereto shall remain in full force and effect, regardless of any investigation
(or any statement as to the results thereof) made by or on behalf of any
Electing Holder, any director, officer or partner of such holder, any agent or
underwriter, any director, officer or partner of such agent or underwriter, or
any controlling person of any of the foregoing, and shall survive the transfer
and registration of the Registrable Securities of such holder.
<PAGE> 17
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
AMERITRADE HOLDING CORPORATION
By:
------------------------------
Name:
Title:
Accepted as of the date hereof:
- ------------------------------------
(Goldman, Sachs & Co.)
<PAGE> 18
EXHIBIT A
AMERITRADE HOLDING CORPORATION
INSTRUCTION TO DTC PARTICIPANTS
(Date of Mailing)
URGENT - IMMEDIATE ATTENTION REQUESTED
DEADLINE FOR RESPONSE: [DATE]
The Depository Trust Company ("DTC") has identified you as a
DTC Participant through which beneficial interests in the Ameritrade Holding
Corporation's (the "Company") 5.75% convertible subordinated notes due August 1,
2004 (convertible into Class A common stock of the Company) (the "Securities")
are held.
The Company is in the process of registering the Securities
under the Securities Act of 1933 for resale by the beneficial owners thereof. In
order to have their Securities included in the registration statement,
beneficial owners must complete and return the enclosed Notice of Registration
Statement and Selling Securityholder Questionnaire.
It is important that beneficial owners of the Securities
receive a copy of the enclosed materials as soon as possible as their rights to
have the Securities included in the registration statement depend upon their
returning the Notice and Questionnaire by [Deadline for response]. Please
forward a copy of the enclosed documents to each beneficial owner that holds
interests in the Securities through you. If you require more copies of the
enclosed materials or have any questions pertaining to this matter, please
contact Ameritrade Holding Corporation, 4211 South 102nd Street, Omaha, Nebraska
68127, Attention: Corporate Secretary, telephone (402) 331-7856.
A-1
<PAGE> 19
AMERITRADE HOLDING CORPORATION
Notice of Registration Statement
and
Selling Securityholder Questionnaire
(Date)
Ameritrade Holding Corporation (the "Company") has filed or
intends shortly to file with the United States Securities and Exchange
Commission (the "Commission") a preliminary registration statement on Form S-3
(the "Shelf Registration Statement") for the registration and resale under the
United States Securities Act of 1933, as amended (the "Securities Act"), of the
Company's 5.75% Convertible Subordinated Notes due August 1, 2004 (CUSIP No.
03072HAA7) (the "Notes"), and Class A common stock issuable upon conversion
thereof, in accordance with the terms of the Registration Rights Agreement,
dated as of August 4, 1999 (the "Registration Rights Agreement") between the
Company and the Purchaser named therein. A copy of the Registration Rights
Agreement is attached hereto. All capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Registration Rights Agreement.
In order to have Registrable Securities included in the Shelf
Registration Statement (or an amendment or supplement thereto), this Notice of
Registration Statement and Selling Securityholder Questionnaire ("Notice and
Questionnaire") must be completed, executed and delivered to the Company at the
address set forth herein for receipt ON OR BEFORE [insert date that is 30 days
from the Notice date] (the "Questionnaire Deadline"). Unless the Company
otherwise consents, beneficial owners of the Registrable Securities who do not
complete, execute and return this Notice and Questionnaire by the Questionnaire
Deadline (i) will not be named as selling securityholders in the Shelf
Registration Statement (or a supplement or amendment thereto) and related
Prospectus and (ii) may not sell their Registrable Securities pursuant thereto.
Beneficial owners of Registrable Securities not having returned a Notice and
Questionnaire by the Questionnaire Deadline may, however, receive another Notice
and Questionnaire from the Company upon request. Following its receipt of a
completed and signed Notice and Questionnaire, the Company will promptly include
the Registrable Securities covered thereby in the Shelf Registration Statement.
Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related Prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Shelf Registration
Statement and related Prospectus.
The term "Registrable Securities" is defined in the
Registration Rights Agreement to mean all or any portion of the Notes issued
from time to time under the Indenture and the shares
A-2
<PAGE> 20
of Class A common stock issuable upon conversion of such Notes; provided,
however, that a security ceases to be a Registrable Security when it is no
longer a Restricted Security.
The term "Restricted Security" is defined in the Registration
Rights Agreement to mean any Note or share of Class A common stock issuable upon
conversion thereof except any such Note or share of Class A common stock which
(i) has been registered pursuant to an effective registration statement under
the Securities Act and sold in a manner contemplated by the Shelf Registration
Statement, (ii) has been transferred in compliance with Rule 144 under the
Securities Act (or any successor provision thereto) or is transferable pursuant
to paragraph (k) of such Rule 144 (or any successor provision thereto), or (iii)
has otherwise been transferred and a new Note or share of Class A common stock
not subject to transfer restrictions under the Securities Act has been delivered
by or on behalf of the Company in accordance with the Indenture.
ELECTION
The undersigned holder (the "Selling Securityholder") of
Registrable Securities hereby elects to include in the Shelf Registration
Statement the Registrable Securities beneficially owned by it and listed below
in Item (3) (unless otherwise specified under item (3)). The undersigned, by
signing and returning this Notice and Questionnaire, agrees to be bound with
respect to such Registrable Securities by the terms and conditions of this
Notice and Questionnaire and the Registration Rights Agreement, including,
without limitation, Section 5 of the Registration Rights Agreement, as if the
undersigned Selling Securityholder were an original party thereto.
Upon any sale of Registrable Securities pursuant to the Shelf
Registration Statement, the Selling Securityholder will be required to deliver
to the Company and Trustee the Notice of Transfer (completed and signed) set
forth in Exhibit 1 attached to this Notice and Questionnaire and hereby
undertakes to do so.
The Selling Securityholder hereby provides the following
information to the Company and represents and warrants that such information is
accurate and complete:
A-3
<PAGE> 21
QUESTIONNAIRE
(1) (a) Full Legal Name of Selling Securityholder:
-----------------------------------------------------------------------
(b) Full Legal Name of Registered Holder (if not the same as in
(a) above) of Registrable Securities Listed in Item (3) below:
-----------------------------------------------------------------------
(c) Full Legal Name of DTC Participant (if applicable and if not
the same as (b) above) Through Which Registrable Securities
Listed in Item (3) below are Held:
-----------------------------------------------------------------------
(2) Address for Notices to Selling Securityholder:
----------------------------------------
----------------------------------------
----------------------------------------
Telephone:
----------------------------------------
Fax:
----------------------------------------
Contact Person:
----------------------------------------
(3) Beneficial Ownership of Securities:
Except as set forth below in this Item (3), the undersigned does not
beneficially own any Notes or shares of Class A common stock issued
upon conversion, repurchase or redemption of any Notes.
(a) Principal amount of Notes beneficially owned:
-----------------
Number of shares of Class A common stock beneficially owned
and issued to date upon conversion, repurchase or redemption
of Notes (if any):
--------------------------------------------
Principal amount of Notes which the undersigned wishes to be
included in the Shelf Registration Statement:
-----------------
Number of shares of Class A common stock (if any) issued upon
conversion, repurchase or redemption of Registrable Securities
which are to be included in the Shelf Registration Statement:
--------------------------------------------------------------
(4) Other shares of Class A common stock or other securities of the Company
owned by the Selling Securityholder:
Except as set forth below in this item (4), and under item (3) above,
the undersigned Selling Securityholder is not the beneficial or
registered owner of any shares of Class A common stock or any other
securities of the Company.
A-4
<PAGE> 22
State any exception here:
(5) Relationships with the Company:
Except as set forth below, neither the Selling Securityholder nor any
of its affiliates, officers, directors or principal equity holders (5%
or more) has held any position or office or has had any other material
relationship with the Company (or its predecessors or affiliates)
during the past three years.
State any exceptions here:
(6) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder
intends to distribute the Registrable Securities listed above in Item
(3) only as follows (if at all): Such Registrable Securities may be
sold from time to time directly by the undersigned Selling
Securityholder or, alternatively, through underwriters, broker-dealers
or agents. Such Registrable Securities may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time
of sale, at varying prices determined at the time of sale, or at
negotiated prices. Such sales may be effected in transactions (which
may involve crosses or block transactions) (i) on any national
securities exchange or U.S. inter-dealer quotation system of a
registered national securities exchange on which the Registered
Securities may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such
exchanges or services or in the over-the-counter market, or (iv)
through the writing of options. In connection with sales of the
Registrable Securities or otherwise, the Selling Securityholder may
enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the Registrable Securities in the course of
hedging the positions they assume. The Selling Securityholder may also
sell Registrable Securities short and deliver Registrable Securities to
close out such short positions, or loan or pledge Registrable
Securities to broker-dealers that in turn may sell such securities.
State any exceptions here:
Note: In no event may such method(s) of distribution take the
form of an underwritten offering of the Registrable Securities without the prior
agreement of the Company.
By signing below, the Selling Securityholder acknowledges that
it understands its obligation to comply, and agrees that it will comply, with
the prospectus delivery and other
A-5
<PAGE> 23
provisions of the Securities Act and the Exchange Act and the respective rules
and regulations thereunder, particularly Regulation M.
In the event that the Selling Securityholder transfers all or
any portion of the Registrable Securities listed in Item (3) above after the
date on which such information is provided to the Company, the Selling
Securityholder agrees to notify the transferee(s) at the time of the transfer of
its rights and obligations under this Notice and Questionnaire and the
Registration Rights Agreement.
By signing below, the Selling Securityholder consents to the
disclosure of the information contained herein in its answers to Items (1)
through (6) above and the inclusion of such information in the Shelf
Registration Statement and related Prospectus. The Selling Securityholder
understands that such information will be relied upon by the Company in
connection with the preparation of the Shelf Registration Statement and related
Prospectus.
In accordance with the Selling Securityholder's obligation
under the Registration Rights Agreement to provide such information as may be
required by law for inclusion in the Shelf Registration Statement, the Selling
Securityholder agrees to promptly notify the Company of any inaccuracies or
changes in the information provided herein which may occur subsequent to the
date hereof at any time while the Shelf Registration Statement remains in
effect. All notices hereunder and pursuant to the Registration Rights Agreement
shall be made in writing, by hand-delivery, first-class mail, or air courier
guaranteeing overnight delivery as follows:
(i) To the Company:
Ameritrade Holding Corporation
4211 South 102d Street
Omaha, Nebraska 68127
Attention: Corporate Secretary
Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company, the terms of this Notice and
Questionnaire, and the representations and warranties contained herein, shall be
binding on, shall inure to the benefit of and shall be enforceable by the
respective successors, heirs, personal representatives, and assigns of the
Company and the Selling Securityholder with respect to the Registrable
Securities beneficially owned by such Selling Securityholder and listed in Item
(3) above. This Notice and Questionnaire shall be governed in all respects by
the laws of the State of New York.
A-6
<PAGE> 24
IN WITNESS WHEREOF, the undersigned, by authority duly given,
has caused this Notice and Questionnaire to be executed and delivered either in
person or by its duly authorized agent.
Dated:
---------------------------------
----------------------------------------------------------------
Selling Securityholder
(Print/type full legal name of beneficial owner of Registrable
Securities)
By:
-----------------------------------------------------------
Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY AT:
Ameritrade Holding Corporation
4211 South 102d Street
Omaha, Nebraska 68127
Attention: Corporate Secretary
A-7
<PAGE> 25
EXHIBIT B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
The Bank of New York
Corporate Trust Department
101 Barclay Street
New York, New York 10286
Ameritrade Holding Corporation
4211 South 102d Street
Omaha, Nebraska 68127
Attention: Corporate Secretary
Re: Ameritrade Holding Corporation (the "Company")
5.75% Convertible Subordinated Notes
due August 1, 2004 (the "Notes")
Dear Sirs:
Please be advised that _____________________ has transferred
$___________ aggregate principal amount of the above-referenced Notes or shares
of the Company's Class A common stock, issued on conversion, repurchase or
redemption of Notes, pursuant to an effective Registration Statement on Form S-3
(File No. 333-____) filed by the Company.
We hereby certify that the prospectus delivery requirements,
if any, of the Securities Act of 1933, as amended, have been satisfied with
respect to the transfer described above and that the above-named beneficial
owner of the Notes is named as a selling securityholder in the Prospectus dated
[date], or in amendments or supplements thereto, and that the aggregate
principal amount of the Notes or number of shares of Class A Common Stock
transferred are [a potion of] the Notes or Class A common stock listed in such
Prospectus as amended or supplemented opposite such owner's name.
Dated:
Very truly yours,
------------------------
(Name)
By:
------------------------
(Authorized Signature)
B-1
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD]
September 24, 1999
AMERITRADE HOLDING CORPORATION
4211 South 102nd Street
Omaha, Nebraska 68127
Ladies and Gentlemen:
We have acted as your counsel in connection with the registration of
$200,000,000 aggregate principle amount of 5.75% Convertible Subordinated Notes
due August 1, 2004 (the "Notes") issued by Ameritrade Holding Corporation, a
Delaware corporation (the "Company"), and 6,142,470 shares of Class A Common
Stock, $.01 par value per share (the "Shares"), of the Company into which the
Notes may be converted. The Notes and the Shares may be sold from time to time
by the holders thereof (the "Selling Securityholders").
In rendering the opinions expressed herein, we have examined and relied
upon such documents, corporate records, certificates of public officials and
certificates as to factual matters executed by officers of the Company as we
have deemed necessary or appropriate. We have assumed the authenticity, accuracy
and completeness of all documents, records and certificates submitted to us as
originals, the conformity to the originals of all documents, records and
certificates submitted to us as copies and the authenticity, accuracy and
completeness of the originals of all documents, records and certificates
submitted to us as copies. We have also assumed the legal capacity and
genuineness of the signatures of persons signing all documents in connection
with which the opinions expressed herein are rendered.
Based upon and subject to the foregoing, we are of the opinion that:
(i) The Notes to be sold by the Selling Securityholders have been
legally issued and are binding obligations of the Company; and
(ii) The Shares to be sold by the Selling Securityholders, when issued
upon conversion of the Notes, will be legally issued, fully paid and
non-assessable.
<PAGE> 2
Ameritrade Holding Corporation
September 24, 1999
Page 2
We are admitted to practice law in the State of Illinois and we express no
opinions as to matters under or involving any laws other than the laws of the
State of Illinois, the federal laws of the United States of America and the
General Corporation Law of the State of Delaware.
We hereby consent to the filing of this opinion letter as an exhibit to
the registration statement covering resales of the Notes and the Shares and to
the reference to this firm under the caption "Validity of Securities" contained
therein.
Very truly yours,
/s/ Mayer, Brown & Platt
MAYER, BROWN & PLATT
<PAGE> 1
Exhibit 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Fiscal Year Ended Nine months ended
-------------------------------------------------------- ------------------
Sept. 30 Sept. 29 Sept. 27 Sept. 26 Sept. 25 June 26 June 25
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense $ 3,912 $ 7,862 $11,040 $18,429 $29,279 $20,693 $32,163
Assumed interest element
included in rent expense 275 286 488 1,041 2,054 1,443 2,454
------- ------- ------- ------- ------- ------- -------
Total fixed charges $ 4,187 $ 8,148 $11,528 $19,470 $31,333 $22,136 $34,617
Earnings:
Pre-tax net income (loss) 7,450 10,830 18,417 21,425 531 (8,553) 32,411
Fixed charges per above 4,187 8,148 11,528 19,470 31,333 22,136 34,618
------- ------- ------- ------- ------- ------- -------
Total earnings (loss)
before fixed charges $11,637 $18,978 $29,945 $40,895 $31,864 $13,583 $67,029
Ratio of earnings
to fixed charges 2.78 2.33 2.60 2.10 1.02 -- 1.94
======= ======= ======= ======= ======= ======= =======
Deficiency of earnings
available to cover fixed charges -- -- -- -- -- $(8,553) --
======= ======= ======= ======= ======= ======= =======
</TABLE>
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Ameritrade Holding Corporation on Form S-3 of our report dated October 27, 1998
on the financial statement schedule, included in the Annual Report on Form
10-K/A of Ameritrade Holding Corporation for the year ended September 25, 1998,
and to the use of our report dated October 27, 1998 (August 4, 1999 as to Note
11) on the financial statements, appearing in the Prospectus, which is part of
this Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
September 22, 1999
<PAGE> 1
EXHIBIT 25.1
========================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) | |
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THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
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Ameritrade Holding Corporation
(Exact name of obligor as specified in its charter)
Delaware 47-0642657
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
4211 South 102nd Street
Omaha, Nebraska 68127
(Address of principal executive offices) (Zip code)
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5.75% Convertible Subordinated Notes due August 1, 2004
(Title of the indenture securities)
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1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY
TO WHICH IT IS SUBJECT.
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Name Address
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Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany,
N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16.LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(D).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to
Form T-1 filed with Registration Statement No. 33-6215, Exhibits
1a and 1b to Form T-1 filed with Registration Statement No.
33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
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SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 27th day of September, 1999.
THE BANK OF NEW YORK
By: /s/MARY LAGUMINA
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Name: MARY LAGUMINA
Title: ASSISTANT VICE PRESIDENT
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EXHIBIT 7
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Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business June 30, 1999,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS In Thousands
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ......... $ 5,597,807
Interest-bearing balances ................................. 4,075,775
Securities:
Held-to-maturity securities ............................... 785,167
Available-for-sale securities ............................. 4,159,891
Federal funds sold and Securities purchased under
agreements to resell ...................................... 2,476,963
Loans and lease financing receivables:
Loans and leases, net of unearned
income...............38,028,772
LESS: Allowance for loan and
lease losses............568,617
LESS: Allocated transfer risk
reserve........................16,352
Loans and leases, net of unearned income,
allowance, and reserve .................................. 37,443,803
Trading Assets ............................................... 1,563,671
Premises and fixed assets (including capitalized
leases) ................................................... 683,587
Other real estate owned ...................................... 10,995
Investments in unconsolidated subsidiaries and
associated companies ...................................... 184,661
Customers' liability to this bank on acceptances
outstanding ............................................... 812,015
Intangible assets ............................................ 1,135,572
Other assets ................................................. 5,607,019
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Total assets ................................................. $64,536,926
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LIABILITIES
Deposits:
In domestic offices ....................................... $26,488,980
Noninterest-bearing.......................10,626,811
Interest-bearing..........................15,862,169
In foreign offices, Edge and Agreement
subsidiaries, and IBFs .................................. 20,655,414
Noninterest-bearing..........................156,471
Interest-bearing..........................20,498,943
Federal funds purchased and Securities sold under
agreements to repurchase .................................. 3,729,439
Demand notes issued to the U.S.Treasury ...................... 257,860
Trading liabilities .......................................... 1,987,450
Other borrowed money:
With remaining maturity of one year or less ............... 496,235
With remaining maturity of more than one year
through three years ..................................... 465
With remaining maturity of more than three years .......... 31,080
Bank's liability on acceptances executed and
outstanding ............................................... 822,455
Subordinated notes and debentures ............................ 1,308,000
Other liabilities ............................................ 2,846,649
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Total liabilities ............................................ 58,624,027
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EQUITY CAPITAL
Common stock ................................................. 1,135,284
Surplus ...................................................... 815,314
Undivided profits and capital reserves ....................... 4,001,767
Net unrealized holding gains (losses) on
available-for-sale securities ............................. ( 7,956)
Cumulative foreign currency translation adjustments ( 31,510)
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Total equity capital ......................................... 5,912,899
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Total liabilities and equity capital ......................... $64,536,926
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I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Reyni }
Alan R. Griffith } Directors
Gerald L. Hassell }
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