UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10 - Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ----- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
or
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 001-13539
---------------------
AMF BOWLING, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-3873268
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8100 AMF Drive
Richmond, Virginia 23111
(Address of principal executive offices, including zip code)
--------------------
(804) 730-4000
(Registrant's telephone number, including area code)
--------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| . No _____.
At May 1, 1998, 59,707,450 shares of common stock, par value of $.01, of the
Registrant were outstanding.
<PAGE>
<TABLE>
PART I
Item 1. Financial Statements
AMF BOWLING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
<CAPTION>
<S> <C>
March 31, December 31,
1998 1997
----------- -----------
Assets (unaudited)
------
Current assets:
Cash and cash equivalents $ 29,593 $ 35,790
Accounts and notes receivable, net of allowance for
doubtful accounts of $4,894 and $5,012, respectively 67,133 73,991
Inventories 67,444 56,568
Deferred taxes and other current assets 18,627 17,049
----------- -----------
Total current assets 182,797 183,398
Property and equipment, net 804,756 750,885
Leasehold interests, net 47,623 47,180
Deferred financing costs, net 17,930 18,911
Goodwill, net 771,342 772,348
Investments in and advances to joint ventures 24,564 19,999
Other assets 40,939 39,331
----------- -----------
Total assets $ 1,889,951 $ 1,832,052
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 32,900 $ 41,583
Accrued expenses 61,803 64,865
Income taxes payable 4,709 5,644
Long-term debt, current portion 29,251 27,376
----------- -----------
Total current liabilities 128,663 139,468
Long-term debt, less current portion 1,099,921 1,033,223
Other long-term liabilities 5,190 5,333
Deferred income taxes - -
----------- -----------
Total liabilities 1,233,774 1,178,024
----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock (par value $.01, 200,000,000 shares authorized,
59,697,250 shares issued and outstanding at March 31, 1998,
59,630,000 shares issued and outstanding at December 31, 1997) 597 596
Paid-in capital 749,433 748,053
Retained deficit (75,679) (75,048)
Equity adjustment from foreign currency translation (18,174) (19,573)
----------- -----------
Total stockholders' equity 656,177 654,028
----------- -----------
Total liabilities and stockholders' equity $ 1,889,951 $ 1,832,052
=========== ===========
The accompanying notes are an integral part of these condensed
consolidated balance sheets.
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share data)
<CAPTION>
Three Months
Ended March 31,
-----------------------------
1998 1997
--------- ---------
Operating revenue $ 187,564 $ 157,589
--------- ---------
Operating expenses:
Cost of goods sold 38,857 38,050
Bowling center operating expenses 78,713 55,342
Selling, general, and administrative expenses 16,939 14,000
Depreciation and amortization 26,790 20,500
--------- ---------
Total operating expenses 161,299 127,892
--------- ---------
Operating income 26,265 29,697
--------- ---------
Nonoperating expenses (income):
Interest expense 25,974 27,672
Other expenses, net 573 1,509
Interest income (533) (685)
--------- ---------
Total nonoperating expenses 26,014 28,496
--------- ---------
Income before income taxes 251 1,201
Provision for income taxes 530 1,120
--------- ---------
Net income (loss) before equity in loss of joint ventures (279) 81
Equity in loss of joint ventures (352) -
--------- ---------
Net income (loss) $ (631) $ 81
========= =========
Net income (loss) per share - basic and diluted $ (0.01) $ 0.00
========= =========
Weighted average shares outstanding 59,661 42,323
========= =========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
<CAPTION>
Three Months
Ended March 31,
-------------------
1998 1997
-------- --------
Cash flows from operating activities:
Net income (loss) $ (631) $ 81
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 26,790 20,500
Equity in loss of joint ventures 352 -
Deferred income taxes - (410)
Amortization of bond discount 5,667 8,301
Loss on the sale of property and equipment, net 269 106
Changes in assets and liabilities:
Accounts and notes receivable, net 7,287 (4,128)
Inventories (10,077) (10,265)
Other assets (2,047) (4,178)
Accounts payable and accrued expenses (15,802) 12,094
Income taxes payable (673) (1,029)
Other long-term liabilities (40) 2,495
-------- --------
Net cash provided by operating activities 11,095 23,567
-------- --------
Cash flows from investing activities:
Acquisitions of operating units, net of cash acquired (65,615) (33,641)
Investments in and advances to joint ventures (4,565) -
Purchases of property and equipment (11,641) (6,907)
Proceeds from the sale of property and equipment 104 215
-------- --------
Net cash used in investing activities (81,717) (40,333)
-------- --------
Cash flows from financing activities:
Proceeds from long-term debt, net of deferred financing costs 72,000 29,002
Payments on long-term debt (9,093) -
Repurchase of shares - (500)
Issuance of shares 1,381 -
Payments of noncompete obligations (258) (166)
-------- --------
Net cash provided by financing activities 64,030 28,336
-------- --------
Effect of exchange rates on cash 395 (2,072)
-------- --------
Net (decrease) increase in cash (6,197) 9,498
Cash and cash equivalents at beginning of period 35,790 43,568
-------- --------
Cash and cash equivalents at end of period $ 29,593 $ 53,066
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization
The accompanying unaudited consolidated financial statements reflect all
adjustments (consisting of normal recurring accruals) which are, in the opinion
of management, necessary for a fair presentation of the results of operations
for the interim periods. The interim financial information and notes thereto
should be read in conjunction with the December 31, 1997 and 1996 audited
consolidated financial statements of AMF Bowling, Inc. ("AMF Bowling") and its
subsidiaries (collectively, the "Company") presented in AMF Bowling's Form 10-K
Annual Report for the fiscal year ended December 31, 1997 filed with the U.S.
Securities and Exchange Commission. The results of operations for the three
months ended March 31, 1998, are not necessarily indicative of results to be
expected for the entire year.
The Company is principally engaged in two business segments: (i) the
ownership or operation of bowling centers, consisting of 399 U.S. bowling
centers and 104 international bowling centers ("Bowling Centers"), including
fourteen joint venture centers described in "Note 8. Acquisitions", as of March
31, 1998, and (ii) the manufacture and sale of bowling equipment such as
automatic pinspotters, automatic scoring equipment, bowling pins, lanes, ball
returns, certain spare parts, and the resale of allied products such as bowling
balls, bags, shoes, and certain other spare parts ("Bowling Products"). The
principal markets for bowling equipment are U.S. and international bowling
center operators.
AMF Bowling Worldwide, Inc. ("Bowling Worldwide") is a wholly owned, direct
subsidiary of AMF Group Holdings Inc. ("AMF Group Holdings"). AMF Group Holdings
is a wholly owned, direct subsidiary of AMF Bowling. AMF Group Holdings and
Bowling Worldwide are Delaware corporations organized by GS Capital Partners II,
L.P., and certain other investment funds (collectively, "GSCP") affiliated with
Goldman, Sachs & Co. ("Goldman Sachs") to effect the Acquisition (defined
below). AMF Group Holdings and AMF Bowling are holding companies only. The
principal assets in each are comprised of investments in subsidiaries.
Pursuant to a Stock Purchase Agreement dated February 16, 1996, between AMF
Group Holdings and the stockholders (the "Prior Owners") of AMF Bowling Group
(the "Predecessor Company"), on May 1, 1996 (the "Closing Date"), AMF Group
Holdings acquired the Predecessor Company through a stock purchase by AMF Group
Holdings' subsidiaries of all the outstanding stock of the separate domestic and
foreign corporations that constituted substantially all of the Predecessor
Company and through the purchase of certain of the assets of the Predecessor
Company's bowling center operations in Spain and Switzerland (the
"Acquisition"). The purchase price for the Acquisition was approximately $1.37
billion. The Acquisition was accounted for by the purchase method of accounting,
pursuant to which the purchase price was allocated among the acquired assets and
liabilities in accordance with estimates of fair market value on the Closing
Date.
On November 7, 1997, AMF Bowling completed an initial public offering (the
"Initial Public Offering") of 15,525,000 shares of common stock (the "Common
Stock"), which trades on the New York Stock Exchange under the symbol "PIN". The
net proceeds of $279.1 million from the Initial Public Offering were contributed
by AMF Bowling to Bowling Worldwide and used by Bowling Worldwide to reduce and
refinance its bank debt pursuant to Bowling Worldwide's third amended and
restated credit agreement (the "Credit Agreement") and to redeem a portion of
Bowling Worldwide's senior subordinated discount notes.
As of March 31, 1998, the Company has acquired 212 bowling centers and
constructed one bowling center since the Acquisition for a combined purchase
price of $389.2 million. The Company has funded its acquisitions and center
construction from internally generated cash, borrowings under the senior secured
revolving credit facility (the "Bank Facility") under the Credit Agreement, and
issuances of Common Stock. See "Note 8. Acquisitions".
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 2. Significant Accounting Policies
Basis of Presentation
The condensed consolidated results of operations of the Company have been
presented for the three months ended March 31, 1998 and 1997, respectively. All
significant intercompany balances and transactions have been eliminated in the
accompanying condensed consolidated financial statements. All dollar amounts are
in thousands, except where otherwise indicated.
Goodwill
As a result of the Acquisition and subsequent purchases of bowling centers
discussed in "Note 8. Acquisitions", and in accordance with the purchase method
of accounting for all acquisitions, the Company recorded goodwill representing
the excess of the purchase price over the allocation among the acquired assets
and liabilities in accordance with estimates of fair market value on the dates
of acquisition. Goodwill is being amortized over 40 years. Amortization expense
was $5,037 and $4,900 for the three months ended March 31, 1998 and 1997,
respectively.
Comprehensive Income
Effective January 1, 1998, the Company adopted, as required, Statement of
Financial Accounting Standards ("SFAS") No. 130 "Reporting Comprehensive
Income." Comprehensive income for the three months ended March 31, 1998 was $768
and comprehensive loss for the three months ended March 31, 1997 was $3,889.
Note 3. Inventories
Inventories at March 31, 1998, and December 31, 1997 consisted of the
following:
March 31, December 31,
1998 1997
------------------- -------------------
(unaudited)
Bowling Products, at FIFO:
Raw materials $ 17,035 $ 15,283
Work in progress 2,379 2,279
Finished goods and spare parts 40,143 33,082
Bowling Centers, at average cost:
Merchandise and spare parts 7,887 5,924
------------------- -------------------
$ 67,444 $ 56,568
=================== ===================
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 4. Property and Equipment
Property and equipment at March 31, 1998, and December 31, 1997, consisted
of the following:
March 31, December 31,
1998 1997
--------------- ---------------
(unaudited)
Land $ 125,769 $ 113,629
Buildings and improvements 297,646 280,046
Equipment, furniture, and fixtures 489,822 444,437
Other 5,777 7,282
--------------- ---------------
919,014 845,394
Less: accumulated depreciation and amortization (114,258) (94,509)
--------------- ---------------
$ 804,756 $ 750,885
=============== ===============
Depreciation and amortization expense related to property and equipment was
$20,519 and $13,735 for the three months ended March 31, 1998 and 1997,
respectively.
Note 5. Long-Term Debt
Long-term debt at March 31, 1998, and December 31, 1997 consisted of the
following:
March 31, December 31,
1998 1997
--------------- ----------------
(unaudited)
Bank debt $ 682,268 $ 619,362
Senior subordinated notes 250,000 250,000
Senior subordinated discount notes 194,928 189,261
Mortgage and equipment notes 1,976 1,976
--------------- ----------------
Total debt 1,129,172 1,060,599
Current maturities (29,251) (27,376)
--------------- ----------------
Total long-term debt $ 1,099,921 $ 1,033,223
=============== ================
The Company's bank debt (the "Senior Debt") was incurred pursuant to a
credit agreement, dated as of May 1, 1996, and amended and restated in
connection with the Initial Public Offering, as of November 3, 1997, as the
Credit Agreement among Bowling Worldwide and its lenders. The Credit Agreement
provides for (i) three senior secured term loan facilities aggregating $455.3
million (the "Term Facilities") and (ii) the Bank Facility which provides for
borrowings up to $355.0 million on a revolving basis. At March 31, 1998, amounts
outstanding under the Term Facilities and Bank Facility were $437,156 and
$245,112, respectively.
Note 6. Commitments and Contingencies
Litigation and Claims
The Company is involved in certain lawsuits arising out of normal business
operations. The majority of these relate to accidents at bowling centers.
Management believes that the ultimate resolution of such matters will not have a
material adverse effect on the Company's results of operations or financial
position. While the ultimate outcome of the litigation and claims against the
Company cannot presently be determined, management believes the Company has made
adequate provision for possible losses.
Note 7. Employee Benefit Plans
AMF Bowling, Inc. 1996 Stock Incentive Plan
The total number of shares of Common Stock ("Stock Options") reserved and
available at March 31, 1998 for grant under the AMF Bowling, Inc. 1996 Stock
Incentive Plan (the "1996 Plan") was 1,767,151. At March 31, 1998, the number of
shares of Common Stock subject to Stock Options outstanding to senior
management, other employees, consultants and directors totaled 1,530,650 at an
exercise price of $10.00 per share. In addition to Stock Options outstanding
under the 1996 Plan, 130,000 Stock Options granted to Douglas J. Stanard on May
1,
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
1996 were outstanding at March 31, 1998. Of the total Stock Options awarded
under the 1996 Plan, 265,966 were exercisable at March 31, 1998 and 17,250 were
exercised in the three months ended March 31, 1998. Forfeited Stock Options
under the 1996 Plan totaled 273,100 through March 31, 1998. There were 219,251
shares of Common Stock available for grant under the 1996 Plan as of March 31,
1998.
AMF Bowling, Inc. 1998 Stock Incentive Plan
Subject to shareholder approval, AMF Bowling's Board of Directors has
approved the AMF Bowling, Inc. 1998 Stock Incentive Plan (the "1998 Plan") under
which AMF Bowling may grant incentive awards in the form of Restricted Stock
Awards, Stock Options and Stock Appreciation Rights in substantially the same
manner as provided under the 1996 Plan. Two million shares have been reserved
and will be available for issuance under the 1998 Plan. In addition, shares of
Common Stock that have been reserved but not issued under the 1996 Plan, and
shares which are subject to awards under the 1996 Plan that expire or otherwise
terminate, may be granted as awards pursuant to the 1998 Plan. As of March 31,
1998, no awards were granted under the 1998 Plan.
Note 8. Acquisitions
Since the Acquisition and prior to December 31, 1997, Bowling Centers
purchased an aggregate of 179 bowling centers from unrelated sellers. The
combined purchase price, net of cash acquired, was approximately $340.7 million
(including amounts paid in 1998 for certain bowling centers included in the 1997
total), and was funded with approximately $40.0 million from the sale of equity
by AMF Bowling to its institutional stockholders and one of its directors, and
with $300.7 million from available borrowing under Bowling Worldwide's
acquisition facility then existing under the bank credit agreement and under the
Bank Facility.
From January 1, 1998 through March 31, 1998, the Company acquired 29
centers in the United States, two centers in the United Kingdom and two centers
in Australia from unrelated sellers, including fifteen centers from Active West,
Inc. ("Active West"). The aggregate purchase price was approximately $48.5
million, including $28.0 million funded with borrowings under the Bank Facility
and, with respect to the Active West acquisition, the issuance of 50,000 shares
of Common Stock.
Between March 31, 1998 and April 30, 1998, the Company acquired one bowling
center in the United States, eleven centers in the United Kingdom and one center
in Australia from unrelated sellers. As a result of these acquisitions, and
after giving effect to the closing of eight U.S. centers and one international
center in 1997, the Company owned or operated 400 U.S. bowling centers and 116
international bowling centers as of April 30, 1998.
As of April 30, 1998, the Company had entered into purchase agreements
regarding the acquisitions of twelve additional U.S. bowling centers from
unrelated sellers. The aggregate purchase price is expected to be approximately
$15.1 million and is expected to be funded with available borrowing under the
Bank Facility and cash generated from operations.
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 9. Business Segments
The Company operates in two major lines of business: operating bowling
centers and manufacturing of bowling and related products. Information
concerning operations in these businesses for the three months ended March 31,
1998 and 1997, respectively, is presented below (in millions):
<TABLE>
<CAPTION>
<S> <C>
Three Months Ended March 31, 1998
--------------------------------------------------------------------------------
Bowling Centers Bowling Products
----------------------- -----------------------
Inter- Sub- Inter- Sub- Elim-
U.S. national total U.S. national total Corporate inations Total
---- -------- ----- ---- -------- ----- --------- -------- -----
Revenue from unaffiliated customers $ 125.3 $ 25.2 $ 150.5 $ 13.6 $ 23.5 $ 37.1 $ - $ - $ 187.6
Intersegment sales - - - 3.7 0.3 4.0 - - 4.0
Operating income (loss) 32.6 2.3 34.9 (3.9) (1.4) (5.3) (4.0) 0.7 26.3
Identifiable assets 865.4 312.4 1,177.8 631.3 75.1 706.4 3.9 1.9 1,890.0
Depreciation and amortization 17.4 4.5 21.9 5.1 0.3 5.4 0.2 (0.7) 26.8
Capital expenditures 7.0 0.9 7.9 3.2 0.5 3.7 - - 11.6
Research and development expense - - - 0.2 - 0.2 - - 0.2
<CAPTION>
Three Months Ended March 31, 1997
--------------------------------------------------------------------------------
Bowling Centers Bowling Products
----------------------- -----------------------
Inter- Sub- Inter- Sub- Elim-
U.S. national total U.S. national total Corporate inations Total
---- -------- ----- ---- -------- ----- --------- -------- -----
Revenue from unaffiliated customers $ 82.6 $ 25.9 $ 108.5 $ 23.5 $ 25.6 $ 49.1 $ - $ - $ 157.6
Intersegment sales - - - 2.0 0.9 2.9 - - 2.9
Operating income (loss) 23.0 2.8 25.8 6.7 0.5 7.2 (3.6) 0.3 29.7
Depreciation and amortization 11.6 4.5 16.1 4.5 0.3 4.8 - (0.4) 20.5
Capital expenditures 4.0 1.5 5.5 0.9 0.2 1.1 0.4 (0.1) 6.9
Research and development expense - - - 0.2 - 0.2 - - 0.2
</TABLE>
Note 10. Subsequent Event
On May 12, 1998, AMF Bowling issued its zero coupon convertible debentures
(the "Debentures") for gross proceeds of approximately $284.1 million. The
Debentures, which were sold in a private placement to qualified institutional
buyers, mature on May 12, 2018 and have a yield to maturity of 7% per annum. The
Debentures were issued pursuant to an Indenture (the "Indenture") dated as of
May 12, 1998 between AMF Bowling and The Bank of New York, as Trustee, at an
original price of $252.57 per $1,000 principal amount at maturity. The
Debentures are convertible at any time prior to maturity into shares of Common
Stock at a conversion rate of 8.6734 shares per $1,000 principal amount at
maturity. If held to maturity and not redeemed or repurchased by AMF Bowling,
the Debentures will accrue to an aggregate principal amount at maturity of
$1.125 billion. The Debentures are not entitled to a sinking fund.
The Debentures are not redeemable at the option of AMF Bowling before May
12, 2003. Thereafter, the Debentures are redeemable for cash at the option of
AMF Bowling at redemption prices specified in the Debentures, the form of which
is attached as an annex to the Indenture.
The Debentures will be purchased by AMF Bowling, at the option of holders
of the Debentures, as of May 12, 2003, May 12, 2008 and May 12, 2013 for
purchase prices specified in the Debentures. The Debentures may also be redeemed
at the option of the holders of the Debentures upon the occurrence of a Change
of Control (as defined in the Indenture) at redemption prices specified in the
Debentures. AMF Bowling may elect to pay any such purchase price or redemption
price in cash or Common Stock, or any combination thereof.
AMF Bowling has reserved 9,757,575 shares of Common Stock for issuance
upon conversion, redemption or repurchase of the Debentures.
In connection with the issuance of the Debentures, AMF Bowling has
agreed pursuant to a registration rights agreement (the "Registration Rights
Agreement") to file with the Securities and Exchange Commission a shelf
registration statement in respect of the Debentures and the Common Stock
issuable on conversion, redemption or repurchase thereof. If the shelf
registration statement has not been filed within 90 days or declared effective
within 180 days, after May 12, 1998, AMF Bowling must pay liquidated damages as
specified in the Registration Rights Agreement. AMF Bowling has agreed to keep
the shelf registration statement effective until the earlier of (i) the sale
pursuant to the shelf registration statement of all the securities registered
thereunder and (ii) the expiration of the holding period applicable to
non-affiliates of AMF Bowling under Rule 144(k) of the Securities Act of 1933
(which is currently two years).
The net proceeds of the offering were approximately $275.6 million and were
contributed by AMF Bowling as equity to Bowling Worldwide and used to repay
senior bank indebtedness under the Credit Agreement. The senior bank
indebtedness repaid remains available for reborrowing, and such repayment and
resulting ability to reborrow will enable the Company to incur additional
indebtedness under the Credit Agreement to fund the Company's ongoing bowling
center acquisition program and for other corporate purposes.
The foregoing descriptions of the Debentures, the Indenture and the
Registration Rights Agreement are not complete and references are made to the
Indenture (including the form of Debenture attached as an annex thereto) and the
Registration Rights Agreement, filed as Exhibits 4.1 and 10.1, respectively, to
this Form 10-Q for a more complete description of their terms.
Note 11. Condensed Consolidating Financial Statements
The following condensed consolidating financial information presents: (i)
the condensed consolidating balance sheet as of March 31, 1998, and condensed
consolidating statements of income and cash flows for the three months ended
March 31, 1998 and (ii) elimination entries necessary to combine the entities
comprising the Company.
Bowling Worldwide's senior subordinated notes and senior subordinated
discount notes are jointly and severally guaranteed on a full and unconditional
basis by AMF Group Holdings and the first and second-tier subsidiaries of
Bowling Worldwide. AMF Bowling and the third-tier subsidiaries of Bowling
Worldwide have not provided guarantees of such indebtedness.
<PAGE>
<TABLE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
AMF BOWLING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
As of March 31, 1998
(unaudited)
(in thousands)
<CAPTION>
<S> <C>
Non-
Guarantor Guarantor
Companies Companies Eliminations Consolidated
----------------- -------------- ---------------- ----------------
Assets
Current assets:
Cash and cash equivalents $ 27,222 $ 2,371 $ - $ 29,593
Accounts and notes receivable, net
of allowance for doubtful accounts 64,146 2,987 - 67,133
Accounts receivable - intercompany 7,917 1,962 (9,879) -
Inventories 65,739 1,705 - 67,444
Deferred taxes and other assets 16,684 1,943 - 18,627
----------------- -------------- ---------------- ----------------
Total current assets 181,708 10,968 (9,879) 182,797
Notes receivable - intercompany 16,660 1,663 (18,323) -
Property and equipment, net 761,695 41,970 1,091 804,756
Investment in subsidiaries 24,717 630,254 (654,971) -
Goodwill and other assets 895,632 6,766 - 902,398
----------------- -------------- ---------------- ----------------
Total assets $ 1,880,412 $ 691,621 $ (682,082) $ 1,889,951
================= ============== ================ ================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 30,207 $ 2,693 $ - $ 32,900
Accounts payable - intercompany 2,000 7,879 (9,879) -
Accrued expenses 56,706 5,097 - 61,803
Income taxes payable 503 4,206 - 4,709
Long-term debt, current portion 29,251 - - 29,251
----------------- -------------- ---------------- ----------------
Total current liabilities 118,667 19,875 (9,879) 128,663
Long-term debt 1,099,921 - - 1,099,921
Notes payable - intercompany 1,663 16,660 (18,323) -
Other long-term liabilities 5,190 - - 5,190
Deferred income taxes - - - -
----------------- -------------- ---------------- ----------------
Total liabilities 1,225,441 36,535 (28,202) 1,233,774
----------------- -------------- ---------------- ----------------
Commitments and contingencies
Stockholders' equity:
Common stock - 597 - 597
Paid-in capital 748,526 747,429 (746,522) 749,433
Retained earnings (deficit) (75,381) (74,766) 74,468 (75,679)
Equity adjustment from foreign
currency translation (18,174) (18,174) 18,174 (18,174)
----------------- -------------- ---------------- ----------------
Total stockholders' equity 654,971 655,086 (653,880) 656,177
----------------- -------------- ---------------- ----------------
Total liabilities and stockholders' equity $ 1,880,412 $ 691,621 $ (682,082) $ 1,889,951
================= ============== ================ ================
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
AMF BOWLING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Three Months Ended March 31, 1998
(unaudited)
(in thousands)
<CAPTION>
Non-
Guarantor Guarantor
Companies Companies Eliminations Consolidated
------------- ------------ ------------ -------------
Operating revenue $ 174,939 $ 12,625 $ - $ 187,564
------------- ------------ ------------ -------------
Operating expenses:
Cost of goods sold 36,417 2,440 - 38,857
Bowling center operating expenses 72,849 5,864 - 78,713
Selling, general, and administrative expenses 16,045 894 - 16,939
Depreciation and amortization 25,249 1,624 (83) 26,790
------------- ------------ ------------ -------------
Total operating expenses 150,560 10,822 (83) 161,299
------------- ------------ ------------ -------------
Operating income 24,379 1,803 83 26,265
------------- ------------ ------------ -------------
Nonoperating expenses (income):
Interest expense 25,974 - - 25,974
Other expenses, net (221) 794 - 573
Interest income (459) (74) - (533)
Equity in (income) loss of subsidiaries (69) 732 (663) -
------------- ------------ ------------ -------------
Total nonoperating expenses 25,225 1,452 (663) 26,014
------------- ------------ ------------ -------------
Income (loss) before income taxes (846) 351 746 251
Provision (benefit) for income taxes (535) 1,065 - 530
------------- ------------ ------------ -------------
Net income (loss) before equity in loss of
joint ventures (311) (714) 746 (279)
Equity in loss of joint ventures (352) - - (352)
------------- ------------ ------------ -------------
Net loss $ (663) $ (714) $ 746 $ (631)
============= ============ ============ =============
<PAGE>
AMF BOWLING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
AMF BOWLING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 1998
(unaudited)
(in thousands)
<CAPTION>
Non-
Guarantor Guarantor
Companies Companies Eliminations Consolidated
-------------- ------------- --------------- -----------------
Cash flows from operating activities:
Net loss $ (663) $ (714) $ 746 $ (631)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 25,249 1,624 (83) 26,790
Equity in loss of joint ventures 352 - - 352
Deferred income taxes - - - -
Amortization of bond discount 5,667 - - 5,667
Equity in earnings of subsidiaries (69) 732 (663) -
Loss on the sale of property and equipment, net 269 - - 269
Changes in assets and liabilities:
Accounts and notes receivable 7,522 (235) - 7,287
Receivables and payables - affiliates (2,406) 2,406 - -
Inventories (10,203) 126 - (10,077)
Other assets (2,063) 16 - (2,047)
Accounts payable and accrued expenses (16,130) 328 - (15,802)
Income taxes payable (1,532) 859 - (673)
Other long-term liabilities (40) - - (40)
-------------- ------------- --------------- -----------------
Net cash provided by operating activities 5,953 5,142 - 11,095
-------------- ------------- --------------- -----------------
Cash flows from investing activities:
Acquisitions of operating units, net of cash acquired (60,792) (4,823) - (65,615)
Investments in and advances to joint ventures (4,565) - - (4,565)
Purchases of property and equipment (11,075) (566) - (11,641)
Proceeds from sale of property and equipment 104 - - 104
-------------- ------------- --------------- -----------------
Net cash used in investing activities (76,328) (5,389) - (81,717)
-------------- ------------- --------------- -----------------
Cash flows from financing activities:
Proceeds from long-term debt, net of deferred financing costs 72,000 - 72,000
Payments on long-term debt (9,093) - - (9,093)
Issuance of shares 1,381 - - 1,381
Noncompete obligations (258) - - (258)
-------------- ------------- --------------- -----------------
Net cash provided by financing activities 64,030 - - 64,030
-------------- ------------- --------------- -----------------
Effect of exchange rates on cash 110 285 - 395
-------------- ------------- --------------- -----------------
Net decrease in cash (6,235) 38 - (6,197)
Cash and cash equivalents at beginning of period 33,457 2,333 - 35,790
-------------- ------------- --------------- -----------------
Cash and cash equivalents at end of period $ 27,222 $ 2,371 $ - $ 29,593
============== ============= =============== =================
</TABLE>
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Information in this report contains forward-looking statements, which are
statements other than historical information or statements of current condition.
Some forward-looking statements may be identified by use of terms such as
"believes", "anticipates", "intends", or "expects". These forward-looking
statements relate to the plans and objectives of AMF Bowling, Inc. ("AMF
Bowling") and its subsidiaries (collectively, the "Company") for future
operations. In light of the risks and uncertainties inherent in all future
projections, the inclusion of forward-looking statements in this report should
not be regarded as a representation by the Company or any other person that the
objectives or plans of the Company will be achieved. Many factors could cause
the Company's actual results to differ materially from those in the
forward-looking statements, including, among other things: (i) the Company's
ability to execute successfully acquisition opportunities and to integrate
acquired operations into its business, (ii) the continued development and growth
of new bowling markets and the Company's ability to continue to identify those
markets and to generate sales of products in those markets, (iii) the risk of
adverse political acts or developments in the Company's existing or proposed
markets for its products or in which it operates its bowling centers, (iv) the
Company's ability to retain experienced senior management, (v) the ability of
AMF Bowling and its subsidiaries to generate sufficient cash flow in a timely
manner to satisfy principal and interest payments on their indebtedness, (vi)
the popularity of bowling as an activity in the United States and abroad and
(vii) the continuation or worsening of economic difficulties currently being
experienced by certain countries in the Asia Pacific region. In addition, actual
results may differ materially from forward-looking statements in this report as
a result of factors generally applicable to companies in similar businesses,
including, among other things: (i) a decline in general economic conditions,
(ii) an adverse judgment in pending or future litigation and (iii) increased
competitive pressure from current competitors and future market entrants. The
foregoing review of important factors should not be construed as exhaustive and
should be read in conjunction with other cautionary statements that are included
elsewhere in this report. AMF Bowling undertakes no obligation to release
publicly the results of any future revisions it may make to forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
Background
This discussion should be read in conjunction with the information
contained under "Selected Financial Data" and AMF Bowling's Consolidated
Financial Statements (unaudited) included elsewhere herein.
The financial information presented below includes the Company's operating
results expressed in terms of EBITDA, which represents earnings before net
interest expense, income taxes, depreciation and amortization, and other net
income or net expenses. EBITDA information is included because the Company
understands that such information is used by certain investors as one measure of
an issuer's historical ability to service debt. EBITDA is not intended to
represent and should not be considered more meaningful than, or an alternative
to, other measures of performance determined in accordance with U.S. generally
accepted accounting principles.
General
The Company is principally engaged in two business segments: (i) the
ownership or operation of 399 U.S. bowling centers and 104 international bowling
centers ("Bowling Centers"), including fourteen joint ventures operated with
third parties, as of March 31, 1998; and (ii) the manufacture and sale of
bowling equipment such as automatic pinspotters, automatic scoring equipment,
bowling pins, lanes, ball returns, certain spare parts, and the resale of allied
products such as bowling balls, bags, shoes, and certain other spare parts
("Bowling Products").
<PAGE>
To facilitate a meaningful comparison, in addition to discussing the
consolidated results of the Company, certain portions of this Management's
Discussion and Analysis of Financial Condition and Results of Operations
discusses results of Bowling Centers and Bowling Products separately.
The results of Bowling Centers, Bowling Products and the consolidated group
are set forth below. The business segment results presented below are before
intersegment eliminations since the Company's management believes that this will
provide a more accurate comparison of performance by segment from year to year.
The intersegment eliminations are not material. Interest expense is presented on
a gross basis. The results of Bowling Centers for the first quarter of 1998
reflect the inclusion of 140 centers acquired and one new center constructed
since April 1, 1997.
Acquisitions
The Company has continued, and expects to continue, its aggressive bowling
center acquisition program. The Company is engaged in ongoing evaluations of and
discussions with third parties regarding possible bowling center acquisitions.
Management's plans to expand the bowling center operations are subject to, among
other things, the availability of funds and the continuation of favorable
economic and financial conditions, which are generally not within the Company's
control.
From January 1, 1998 through March 31, 1998, the Company acquired 29
bowling centers in the United States, two centers in the United Kingdom and two
centers in Australia from unrelated sellers. Between March 31, 1998 and April
30, 1998, the Company acquired one bowling center in the United States, eleven
centers in the United Kingdom and one center in Australia from unrelated
sellers. See "Note 8. Acquisitions" in the Notes to Condensed Consolidated
Financial Statements for a discussion of these transactions.
<PAGE>
AMF BOWLING, INC.
Selected Financial Data
(unaudited)
(in millions of dollars)
Three Months
Ended March 31,
-------------------
1998 1997
------- -------
Bowling Centers (before intersegment eliminations)
Operating revenue $ 150.5 $ 108.5
------- -------
Cost of goods sold 13.4 9.4
Bowling center operating expenses 78.8 55.6
Selling, general, and administrative expenses 1.5 1.6
Depreciation and amortization 21.9 16.1
------- -------
Operating income $ 34.9 $ 25.8
Bowling Products (before intersegment eliminations)
Operating revenue $ 41.1 $ 52.0
Cost of goods sold 29.3 31.2
------- -------
Gross profit 11.8 20.8
Selling, general, and administrative expenses 11.7 8.8
Depreciation and amortization 5.4 4.8
------- -------
Operating income (loss) $ (5.3) $ 7.2
======= =======
Consolidated
Operating revenue $ 187.6 $ 157.6
------- -------
Cost of goods sold 38.9 38.1
Bowling center operating expenses 78.7 55.3
Selling, general, and administrative expenses 16.9 14.0
Depreciation and amortization 26.8 20.5
------- -------
Operating income 26.3 29.7
Interest expense, gross 26.0 27.7
Other expense, net 0.1 0.8
------- -------
Income before income taxes 0.2 1.2
Provision for income taxes 0.5 1.1
------- -------
Net income (loss) before equity in loss of joint ventures (0.3) 0.1
Equity in loss of joint ventures (0.3) -
------- -------
Net income (loss) $ (0.6) $ 0.1
======= =======
Selected Data:
EBITDA
Bowling Centers $ 56.8 $ 41.9
Bowling Products $ 0.1 $ 12.0
EBITDA margin
Bowling Centers 37.7% 38.6%
Bowling Products 0.2% 23.1%
<PAGE>
Bowling Centers
The Bowling Centers results shown in "Selected Financial Data" reflect both
U.S. and international Bowling Centers operations. Bowling Centers derives its
revenue and profits from three principal sources: (i) bowling, (ii) food and
beverage and (iii) other sources, such as shoe rental, amusement games,
billiards and pro shops. For the three months ended March 31, 1998, bowling,
food and beverage and other revenue represented 60.7%, 26.8% and 12.5% of total
Bowling Centers revenue, respectively. For the three months ended March 31,
1997, bowling, food and beverage and other revenue represented 62.2%, 24.9% and
12.9% of total Bowling Centers revenue, respectively.
First Quarter of 1998 Compared to First Quarter of 1997
Bowling Centers operating revenue increased $42.0 million, or 38.7%. An
increase of $47.1 million is attributable to 155 new centers which were acquired
and one new center which was constructed after December 31, 1996, of which $45.2
million is from U.S. centers, while $1.9 million is from international centers.
Of these new centers, 140 centers were acquired and one center was constructed
since April 1, 1997. Constant centers (centers in operation for at least one
full fiscal year) operating revenue decreased $3.7 million, or 3.6%. U.S.
constant centers revenue decreased $1.9 million primarily as a result of lower
lineage (games per lane per day) caused by mild weather and aggressive
acquisition activity. International constant centers operating revenue decreased
$1.8 million primarily due to unfavorable exchange rate fluctuations in
Australia, Japan, Mexico and France. On a constant exchange rate basis,
international operating revenue would have increased $0.1 million in the first
quarter of 1998 compared to first quarter of 1997. Most countries' results
exceeded those of the prior year except Japan and Hong Kong which were affected
by weak economies. A decrease of $1.4 million was attributable to seven centers
which were closed since March 31, 1997.
Cost of goods sold increased $4.0 million, or 42.6%, primarily as a result
of the net increase in the number of centers.
Operating expenses increased $23.2 million, or 41.7%. An increase of $22.4
million was attributable to the net increase in the number of centers and an
increase of $0.8 million was primarily attributable to increased regional
staffing costs and increased advertising spending aimed at promoting the AMF
national brand. As a percentage of its revenue, Bowling Centers operating
expenses were 51.2% for the first quarter of 1997 compared to 52.4% for the
first quarter of 1998.
Selling, general and administrative expenses decreased $0.1 million, or
6.3%, primarily due to exchange rate fluctuations.
EBITDA increased $14.9 million, or 35.5%, primarily as a result of the net
increase in the number of centers. Additionally, Bowling Centers EBITDA was
impacted by increased staffing and advertising spending and, internationally, by
the exchange rates as discussed above. EBITDA margin for the first quarter of
1998 was 37.7% compared to 38.6% in the first quarter of 1997.
Bowling Products
First Quarter of 1998 Compared to First Quarter of 1997
Bowling Products operating revenue decreased $10.9 million, or 21.0%. New
Center Package (defined as all the equipment necessary to outfit one bowling
lane) ("NCP" or "NCPs") revenue decreased $6.1 million, or 25.6%, and
Modernization and Consumer Products revenue decreased $4.8 million, or 17.1%.
Operating results have been adversely impacted by current economic difficulties
in certain markets of the Asia Pacific region which have reduced the order rate,
level of shipments and backlog for NCPs and Modernization and Consumer Products
sales. During the first quarter of 1998, Bowling Products recorded NCP shipments
of 504 units compared to shipments of 897 units for the first quarter of 1997
and 1,013 units for the fourth quarter of 1997. The decrease in Modernization
and Consumer Products revenue is primarily due to decreased sales to Asia
Pacific distributors and U.S. customers.
<PAGE>
Gross profit decreased $9.0 million, primarily as a result of the decreased
levels of shipments, lower prices attributable to the strong U.S. dollar which
resulted in competitive pricing pressure and Bowling Products' unabsorbed
manufacturing overhead.
Bowling Products selling, general and administrative expenses increased
$2.9 million, or 33.0%, as a result of increases of $1.0 million in advertising
expenses and $1.9 million related to staffing. Of the increase in staffing, $0.5
million was attributable to reclassification of expenses from Bowling Products
cost of goods sold, $0.3 million was attributable to reclassification of
expenses from Bowling Centers operating expenses and Corporate selling, general
and administrative expenses, $0.5 million was attributable to increased staffing
expenses primarily in the international sales offices, $0.4 million related to
increased sales commissions, and $0.2 million related to the establishment of a
regional office in Europe.
Bowling Products EBITDA decreased $11.9 million, or 99.2%, and the Bowling
Products EBITDA margin decreased from 23.1% in the first quarter of 1997 to 0.2%
in the first quarter of 1998 as a result of the lower gross profit and increased
selling, general and administrative expense discussed above.
Consolidated
Depreciation and Amortization
Depreciation and amortization increased $6.3 million or 30.7% in the first
quarter of 1998 compared to 1997. The increase is primarily attributable due to
depreciation of property and equipment of centers acquired since March 31, 1997.
Incremental depreciation expense was also incurred as a result of capital
expenditures.
Interest Expense
Gross interest expense decreased $1.7 million, or 6.1%, in the first
quarter of 1998 compared to 1997. Interest savings associated with the reduction
of bank debt and redemption of a portion of Bowling Worldwide's senior
subordinated discount notes with proceeds of AMF Bowling's initial public
offering (the "Initial Public Offering") were partially offset by interest
incurred on increased levels of bank debt as a result of center acquisitions.
See "Liquidity and Capital Resources" for further discussion of bank debt.
Non-cash bond interest amortization totaled $5.7 million and $8.3 million for
the three months ended March 31, 1998 and 1997, respectively.
Net Loss
Net loss in the first quarter of 1998 was $0.6 million compared to net
income of $0.1 million in the first quarter of 1997. The decrease of $0.7
million was primarily a result of decreases in Bowling Products revenue and
EBITDA discussed above and the increase in depreciation expense. Other expense
decreased $0.7 million, or 87.5%, primarily as a result of foreign currency
transaction gains experienced in the first quarter of 1998 compared to losses
experienced in the first quarter of 1997. The provision for income taxes
decreased $0.6 million in the first quarter of 1998 compared to the same period
in 1997. The Company recorded $0.3 million in equity in loss of joint ventures
in the first quarter of 1998.
Income Taxes
Prior to the Acquisition, certain of the companies within the Predecessor
Company elected S corporation status under the Internal Revenue Code of 1986, as
amended (the "Code"). Upon consummation of the Acquisition, those companies
became taxable corporations under the Code.
In connection with the Acquisition, the two principal subsidiaries of the
Company elected under Section 338 (h) (10) of the Code to treat the stock
purchase in the Acquisition as a deemed asset acquisition for the purposes of
U.S. federal income taxes. These elections permitted both of the
<PAGE>
affiliated companies to revalue their assets to fair market value and to treat
any amortizable goodwill as tax deductible over fifteen years.
As of December 31, 1997, the Company had net operating losses of
approximately $110.0 million and foreign tax credits of $12.4 million which will
carry over to future years to offset U.S. taxes. The foreign tax credits will
begin to expire in the year 2001 and the net operating losses will begin to
expire in the year 2011. The Company had not recorded a valuation reserve as of
December 31, 1997 because the Company expects to utilize these net operating
losses and foreign tax credits prior to their expirations.
Liquidity
The Company's primary source of liquidity is cash provided by operations
and credit facilities as described below. Working capital on December 31, 1997
was $43.9 million compared to $54.1 million as of March 31, 1998, an increase of
$10.2 million. Increases in working capital were primarily attributable to an
increase of $10.9 million in inventory balances primarily due to new product
introductions, a decrease of $8.7 million in accounts payable and a net increase
of $3.7 million in other current assets and liabilities. These increases were
offset by a decrease of $6.2 million in cash primarily due to interest and
principal payments on debt outstanding under the Credit Agreement and internal
funding of bowling center acquisitions and a decrease of $6.9 million in
accounts receivable as a result of increased collection efforts implemented in
the first quarter of 1998.
Net cash flows provided by operating activities were $23.6 million for the
three months ended March 31, 1997 compared to $11.1 million for the three months
ended March 31, 1998, a decrease of $12.5 million. A decrease of $27.9 million
was caused by decreased levels of accounts payable and accrued expenses, a
decrease of $2.6 million was attributable to lower levels of bond amortization
resulting from the redemption of a portion of Bowling Worldwide's senior
subordinated discount notes in connection with the Initial Public Offering and a
decrease of $0.7 million was attributable to the net loss of $0.6 million
recorded in the first quarter of 1998 compared to net income of $0.1 million in
the same period in 1997. These decreases were offset by an increase of $11.4
attributable to lower levels of accounts receivable, an increase of $6.3 million
in depreciation and amortization and a net increase of $1.0 million attributable
to changes in other operating activities.
Net cash flows used in investing activities were $40.3 million for the
three months ended March 31, 1997 compared to net cash flows used of $81.7
million for the three months ended March 31, 1998. Bowling Center acquisition
spending and purchases of property and equipment increased by $32.0 million and
$4.7 million, respectively, in the first quarter of 1998 compared to the same
period in 1997. In the first quarter of 1998, 33 centers were purchased compared
to 15 centers in the same period in 1997. Investments in and advances to joint
ventures totaled $4.6 million in the first quarter of 1998 compared to no
investments in or advances to joint ventures in the first quarter of 1997. Other
cash flows provided from investing activities decreased $0.1 million. See "Note
8. Acquisitions" and "Capital Expenditures" for additional discussion of these
investing activities.
Net cash provided by financing activities was $28.3 million for the three
months ended March 31, 1997 compared to net cash provided of $64.0 million for
the three months ended March 31, 1998, an increase of $35.7 million. Borrowings
under the Credit Agreement increased $43.0 million primarily as a result of the
increase in the number of centers acquired in the first quarter of 1998 compared
to the same period in 1997. Payments on long-term debt were higher by $9.1
million in 1998 compared to 1997 because the 1997 first quarter payment actually
occurred in the second quarter of 1997. In the first quarter of 1998, $1.4
million of common stock was issued. Of this amount, $1.2 was attributable to the
Active West acquisition and $0.2 million related to employee stock option
exercises. Net cash flows provided by other financing activities increased $0.4
million. See "Note 5. Long-Term Debt", "Note 7. Employee Benefit Plans", and
"Note 8. Acquisitions" in the Notes to Condensed Consolidated Financial
Statements.
As a result of the aforementioned, cash increased by $9.5 million for the
three months ended March 31, 1997 compared to a decrease of $6.2 million for the
three months ended March 31, 1998.
For a description of the recent offering by AMF Bowling of its zero coupon
convertible debentures, see "Note 10. Subsequent Event" in the Notes to
Condensed Consolidated Financial Statements and "-Capital Resources" below.
<PAGE>
Capital Resources
The Company's total indebtedness increased substantially as a result of the
Acquisition and the Company's ongoing bowling center acquisition program. At
March 31, 1998, the Company's debt structure consisted of $684.3 million of
Senior Debt, $250.0 million of senior subordinated notes and $194.9 million of
senior subordinated discount notes. The Company's Senior Debt consisted of
$437.2 million outstanding under the Term Facilities, $245.1 million outstanding
under the Bank Facility and $2.0 million represented by one mortgage note. At
March 31, 1998, the Company was also capitalized with equity of $656.2 million.
The Company has the ability to borrow for general corporate purposes and
for acquisitions pursuant to the $355.0 million Bank Facility, subject to
certain conditions. At March 31, 1998, $109.9 million was available for
borrowing under the Bank Facility. Between March 31, 1998 and April 30, 1998,
additional borrowings under the Bank facility totaled $35.0 million and were
used to fund the acquisitions of bowling centers described above and for general
corporate purposes. At April 30, 1998, $280.1 million was outstanding under the
Bank Facility.
On May 12, 1998, AMF Bowling issued its zero coupon convertible debentures
(the "Debentures") for gross proceeds of approximately $284.1 million. The
Debentures, which were sold in a private placement to qualified institutional
buyers, mature on May 12, 2018 and have a yield to maturity of 7% per annum. The
Debentures were issued pursuant to an Indenture (the "Indenture") dated as of
May 12, 1998 between AMF Bowling and The Bank of New York, as Trustee, at an
original price of $252.57 per $1,000 principal amount at maturity. The
Debentures are convertible at any time prior to maturity into shares of Common
Stock at a conversion rate of 8.6734 shares per $1,000 principal amount at
maturity. If held to maturity and not redeemed or repurchased by AMF Bowling,
the Debentures will accrue to an aggregate principal amount at maturity of
$1.125 billion. The Debentures are not entitled to a sinking fund.
The Debentures are not redeemable at the option of AMF Bowling before May
12, 2003. Thereafter, the Debentures are redeemable for cash at the option of
AMF Bowling at redemption prices specified in the Debentures, the form of which
is attached as an annex to the Indenture.
The Debentures will be purchased by AMF Bowling, at the option of holders
of the Debentures, as of May 12, 2003, May 12, 2008 and May 12, 2013 for
purchase prices specified in the Debentures. The Debentures may also be redeemed
at the option of the holders of the Debentures upon the occurrence of a Change
of Control (as defined in the Indenture) at redemption prices specified in the
Debentures. AMF Bowling may elect to pay any such purchase price or redemption
price in cash or Common Stock, or any combination thereof.
AMF Bowling has reserved 9,757,575 shares of Common Stock for issuance
upon conversion, redemption or repurchase of the Debentures.
In connection with the issuance of the Debentures, AMF Bowling has
agreed pursuant to a registration rights agreement (the "Registration Rights
Agreement") to file with the Securities and Exchange Commission a shelf
registration statement in respect of the Debentures and the Common Stock
issuable on conversion, redemption or repurchase thereof . If the shelf
registration statement has not been filed within 90 days, or declared effective
within 180 days, after May 12, 1998, AMF Bowling must pay liquidated damages as
specified in the Registration Rights Agreement. AMF Bowling has agreed to keep
the shelf registration statement effective until the earlier of (i) the sale
pursuant to the shelf registration statement of all the securities registered
thereunder and (ii) the expiration of the holding period applicable to
non-affiliates of AMF Bowling under Rule 144(k) of the Securities Act of 1933
(which is currently two years).
<PAGE>
The net proceeds of the offering were approximately $275.6 million and were
contributed by AMF Bowling as equity to Bowling Worldwide and used to repay
senior bank indebtedness under the Credit Agreement. The senior bank
indebtedness repaid remains available for reborrowing, and such repayment and
resulting ability to reborrow will enable the Company to incur additional
indebtedness under the Credit Agreement to fund the Company's ongoing bowling
center acquisition program and for other corporate purposes.
The foregoing descriptions of the Debentures, the Indenture and the
Registration Rights Agreement are not complete and references are made to the
Indenture (including the form of Debenture attached as an annex thereto) and the
Registration Rights Agreement, filed as Exhibits 4.1 and 10.1, respectively, to
this Form 10-Q for a more complete description of their terms.
The Company has funded its cash needs through the Bank Facility as well as
cash flow from operations. A substantial portion of the Company's available cash
will be applied to service outstanding indebtedness. For the quarter ended March
31, 1998, the Company incurred cash interest expense of $19.9 million,
representing 37.5% of EBITDA for the quarter. For the quarter ended March 31,
1997, the Company incurred cash interest expense of $18.9 million, representing
37.6% of EBITDA for the quarter.
The indentures governing the senior subordinated notes and the senior
subordinated discount notes and the provisions of the Credit Agreement contain
financial and operating covenants and significant restrictions on the ability of
the Company to pay dividends, incur indebtedness, make investments and take
certain other corporate actions.
The Company's ability to make scheduled payments of principal of, or to pay
interest on, or to refinance its indebtedness depends on its future performance,
which, to a certain extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors beyond its control,
including the conditions of the debt and equity markets. Based upon the current
level of operations, management believes that available cash flow, together with
available borrowings under the Credit Agreement and other sources of liquidity,
will be adequate to meet the Company's requirements for working capital, capital
expenditures, scheduled payments of principal of, and interest on, its Senior
Debt, and interest on the senior subordinated notes and senior subordinated
discount notes. There can be no assurance, however, that the Company's business
will generate sufficient cash flow from operations or that future borrowings
will be available in an amount sufficient to enable the Company to service its
indebtedness, make necessary capital expenditures, or that any refinancing would
be available on commercially reasonable terms or at all.
Capital Expenditures
For the three months ended March 31, 1998, the Company's capital
expenditures were $11.6 million compared to $6.9 million for the three months
ended March 31, 1997, an increase of $4.7 million. Bowling Centers maintenance
expenditures increased $2.2 million attributable to the higher number of centers
as a result of the Company's acquisition program, Bowling Products expenditures
increased $1.9 million as a result of expenditures on production equipment for
certain new products, and expenditures on company-wide information systems
increased $1.3 million. These increases were offset by a net decrease of $0.7
million in other expenditure categories.
The Company funds its capital expenditures from cash generated by
operations and, with respect to the construction and acquisition of new centers,
internally generated cash, the Bank Facility and issuances of common equity. The
Company's management believes that after the issuance of the Debentures, the
amount available under the Bank facility will be adequate to fund the Company's
ongoing acquisition program at its current rate for approximately 12 months. See
"Note 8. Acquisitions" in the Notes to Condensed Consolidated Financial
Statements, "--Liquidity" and "--Capital Resources" for discussions of funding
of acquisitions of new bowling centers and a description of the Debentures.
Seasonality and Cyclicality
On a consolidated basis, revenue and EBITDA of the Company's businesses are
neither highly seasonal nor highly cyclical. The geographic diversity of the
Company's Bowling Centers, which operate
<PAGE>
across different regions of the U.S. and across eleven other countries, has
provided stability to the Company's annual cash flows. Although financial
performance of Bowling Centers operations is seasonal in nature in many
countries, with cash flows typically peaking in the winter months and reaching
their lows in the summer months, the geographic diversity of the Company's
bowling centers has helped reduce this seasonality as bowling centers in certain
countries in which the Company operates exhibit different seasonal sales
patterns. As a result of the growing number of U.S. centers attributable to the
Company's acquisition program, however, the seasonality described above may be
accentuated. In Australia, where the Company has its largest number of
international centers, the reversal of seasons relative to the U.S. helps
mitigate the seasonality in worldwide operations. The Company's cash flows are
further stabilized by the location of many centers in regions where the climates
have high average temperatures and high humidity. In the U.S., during the summer
months when league bowling is generally less active, bowling centers in the
southern U.S. continue to show strong performance. Similarly, in regions with
warm summer climates such as Hong Kong and Mexico, where bowling in
air-conditioned centers may be more attractive than outdoor activities, bowling
centers show strong performance. See "Note 9. Business Segments" in the Notes to
Condensed Consolidated Financial Statements.
Modernization and Consumer Products sales display seasonality. The U.S.
market, which is the largest market for Modernization and Consumer Products, is
driven by the beginning of league play in the fall of each year. Operators
typically sign purchase orders, particularly for replacement equipment, during
the first four months of the year, after they receive winter league revenue
indications. Equipment is shipped and installed during the summer months, when
leagues are generally less active. Sales of modernization equipment, such as
automatic scoring and synthetic lane overlays, are less predictable and
fluctuate more than the replacement equipment because of the four to ten year
life cycles of these major products.
The NCP category of Bowling Products experiences significant fluctuations
due to changes in demand for NCPs as certain markets experience high growth
followed by market maturity, at which time sales to that market decline,
sometimes rapidly. Market cycles for individual countries have, in the past,
spanned several years, with periods of high demand for several markets (e.g.,
South Korea and Taiwan) which, in the Company's experience, last five years or
more. Current economic difficulties in certain markets of the Asia Pacific
region have resulted in the reduction in the order rate, level of shipments and
backlog for NCPs. See "--International Operations."
International Operations
The Company's international operations are subject to the usual risks
inherent in operating abroad, including, but not limited to, risks with respect
to currency exchange rates, economic and political destabilization, other
disruption of markets, restrictive laws and actions by foreign governments (such
as restrictions on transfer of funds, import and export duties and quotas,
foreign customs, tariffs and value added taxes and unexpected changes in
regulatory environments), difficulty in obtaining distribution and support,
nationalization, the laws and policies of the United States affecting trade,
international investment and loans, and foreign tax laws.
The Company has a history of operating in a number of international
markets, in some cases, for over thirty years. As in the case of other
U.S.-based manufacturers with export sales, local currency devaluation increases
the cost of the Company's bowling equipment in that market. As a result, a
strengthening U.S. dollar exchange rate may adversely impact sales volume and
profit margins during such periods.
Current economic difficulties in certain markets of the Asia Pacific region
have resulted in a reduction in the order rate, level of shipments and backlog
for NCPs. Management believes that many Asia Pacific customers are delaying
purchases of NCP and modernization equipment as they await the return of
economic stability to their regions. As of March 31, 1998, the NCP backlog was
1,612 units, which represents a reduction of 3.1% compared to a backlog of 1,663
units as of March 31, 1997, and a reduction of 6.6% compared to a backlog of
1,725 units as of December 31, 1997.
<PAGE>
For the quarter ended March 31, 1998, NCP sales and backlog to China, Japan
and other Asia Pacific markets represented 53.2% and 62.2% of total NCP unit
sales and backlog, respectively. For the year ended December 31, 1997, NCP sales
and backlog to China, Japan and other Asia Pacific markets represented 72.7% and
70.4% of total NCP unit sales and backlog, respectively.
Foreign currency exchange rates also impact the translation of operating
results from international bowling centers. For the quarter ended March 31,
1998, revenue and EBITDA of international bowling centers represented 13.4% and
12.8% of consolidated results, respectively. For the quarter ended March 31,
1997, revenue and EBITDA of international bowling centers represented 16.4% and
14.5% of consolidated results, respectively. For the year ended December 31,
1997, revenue and EBITDA of international bowling centers represented 14.6% and
16.0% of consolidated results, respectively.
Backlog: Recent NCP Sales
The total backlog of NCPs was 1,612 units as of March 31, 1998,
representing a reduction of 6.6% compared to 1,725 units as of December 31,
1997, and a reduction of 3.1% compared to 1,663 units as of March 31, 1997. NCP
orders included in the backlog are sometimes cancelled by customers in the
normal course of business. Accordingly, the Company has experienced, and expects
to continue to experience, the cancellation of a portion of its NCP orders. NCP
shipments were 504 units for the three months ended March 31, 1998, representing
a reduction of 50.3% compared to shipments of 1,013 units for the three months
ended December 31, 1997, and a reduction of 43.8% compared to shipments of 897
units for the three months ended March 31, 1997, largely attributable to the
recent economic difficulties in the Asia Pacific region. See "--International
Operations."
Impact of Inflation
The Company has historically offset the impact of inflation through price
increases and expense reductions. Periods of high inflation could have an
material adverse impact on the Company to the extent that increased borrowing
costs for floating rate debt may not be offset by increases in cash flow.
Environmental Matters
The Company's operations are subject to federal, state, local and foreign
environmental laws and regulations that impose limitations on the discharge of,
and establish standards for the handling, generation, emission, release,
discharge, treatment, storage and disposal of, certain materials, substances and
wastes.
The Company currently and from time to time is subject to environmental
claims. In management's opinion, the various claims in which the Company
currently is involved are not likely to have a material adverse impact on its
financial position or results of operations. However, it is not possible to
ensure the ultimate outcome of such claims.
The Company cannot predict with any certainty whether existing conditions
or future events, such as changes in existing laws and regulations, may give
rise to additional environmental costs. Furthermore, actions by federal, state,
local and foreign governments concerning environmental matters could result in
laws or regulations that could increase the cost of producing the Company's
products, or providing its services, or otherwise adversely affect the demand
for its products or services.
Recent Accounting Pronouncements
Effective for the fiscal year ended December 31, 1998, the Company is
required to adopt Statement of Financial Accounting Standard ("SFAS") No. 130
"Reporting Comprehensive Income", SFAS No. 131 "Disclosures About Segments of an
Enterprise and Related Information and SFAS No. 132 "Employers' Disclosures
About Pensions and Other Post-Retirement Benefits." The Company does not expect
that adoption of these standards will have a material impact on the Company's
financial position or results of operations. See "Note 2. Significant Accounting
Policies - Comprehensive Income" in the Notes to Condensed Consolidated
Financial Statements regarding adoption of SFAS No. 130.
<PAGE>
Year 2000
The Company is currently developing and installing new worldwide financial,
information, retail and operational systems. Worldwide system implementation is
expected to be complete by December 31, 1999. In connection with this
implementation, system programs have been designed so that the year 2000 will be
recognized as a valid date and will not affect the processing of date-sensitive
information. As of March 31, 1998, the Company spent a total of $14.8 million on
systems installation. The Company expects to spend an additional $5.4 million to
complete the installation. In addition, the Company sells automatic scoring that
is computerized and has developed a software program for a cost to the Company
of approximately $50,000 that will address the year 2000 issue in its automatic
scoring. This software will be made available to customers with service
contracts at no cost and will be sold to customers without service contracts.
The Company believes that the year 2000 issue is being appropriately addressed
through the implementation of these new systems and software development and
does not expect the year 2000 issue to have a material adverse impact on the
financial position, results of operations or cash flows in future periods.
PART II
Item 1. Legal
The Company currently and from time to time is subject to claims and
actions arising in the ordinary course of its business, including environmental
claims, discrimination claims, workers' compensation claims, and personal injury
claims from customers of Bowling Centers. In some actions, plaintiffs request
punitive or other damages that may not be covered by insurance. In management's
opinion, the claims and actions in which the Company is involved will not have a
material adverse impact on its financial position or results of operations.
However, it is not possible to assure the outcome of such claims and actions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 Indenture, dated as of May 12, 1998, between AMF Bowling, Inc.
and The Bank of New York, as trustee, with respect to zero
coupon convertible debentures.
10.1 Registration Rights Agreement, dated as of May 12, 1998, by
and among AMF Bowling, Inc. and certain other parties thereto,
with respect to zero coupon convertible debentures.
27.1 Financial Data Schedule for the three months ended March 31,
1998.
(b) Reports on Form 8-K: None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly authorized this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMF Bowling, Inc.
(Registrant)
/s/ Stephen E. Hare May 15, 1998
- ----------------------------------
Stephen E. Hare
Executive Vice President,
Chief Financial Officer
(Duly Authorized Officer)
/s/ Michael P. Bardaro May 15, 1998
- ---------------------------------
Michael P. Bardaro
Vice President, Corporate Controller
and Assistant Secretary
(Chief Accounting Officer)
Zero Coupon Convertible Debentures due 2018
AMF Bowling, Inc., Issuer
INDENTURE
Dated as of May 12, 1998
The Bank of New York, Trustee
<PAGE>
TABLE OF CONTENTS(1)
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions........................................................................................2
Section 1.02. Incorporation by Reference of Trust Indenture Act..................................................8
Section 1.03. Rules of Construction..............................................................................8
ARTICLE II THE SECURITIES
Section 2.01. Form and Dating....................................................................................8
Section 2.02. Execution and Authentication.......................................................................9
Section 2.03. Registrar, Paying Agent and Conversion Agent.......................................................9
Section 2.04. Paying Agent to Hold Money and Securities in Trust................................................10
Section 2.05. Securityholder Lists..............................................................................10
Section 2.06. Exchange and Registration of Transfer of Securities; Restrictions on Transfers; Depositary........10
Section 2.07. Replacement Securities............................................................................13
Section 2.08. Outstanding Securities; Determinations of Holders' Action.........................................14
Section 2.09. Temporary Securities..............................................................................15
Section 2.10. Cancellation......................................................................................15
Section 2.11. Persons Deemed Owners.............................................................................15
Section 2.12. CUSIP Numbers.....................................................................................15
ARTICLE III REDEMPTION AND PURCHASES
Section 3.01. Right to Redeem; Notices to Trustee...............................................................16
Section 3.02. Selection of Securities to be Redeemed............................................................16
Section 3.03. Notice of Redemption..............................................................................16
Section 3.04. Effect of Notice of Redemption....................................................................17
Section 3.05. Deposit of Redemption Price.......................................................................17
Section 3.06. Securities Redeemed in Part.......................................................................17
Section 3.07. Conversion Arrangement on Call for Redemption.....................................................18
Section 3.08. Purchase of Securities at Option of the Holder....................................................18
Section 3.09. Redemption at the Option of the Holder upon a Change of Control...................................23
Section 3.10. Effect of Purchase Notice or Repurchase Notice....................................................27
Section 3.11. Deposit of Purchase Price or Change of Control Redemption Price...................................28
Section 3.12. Securities Purchased in Part......................................................................28
Section 3.13. Covenant to Comply with Securities Laws upon Purchase of Securities...............................28
Section 3.14. Repayment to the Company..........................................................................28
Section 3.15. No Purchase in Event of Default...................................................................28
ARTICLE IV COVENANTS
Section 4.01. Payment of Securities.............................................................................29
</TABLE>
-i-
(1) This Table of Contents shall not, for any purpose, be deemed to be part of
the Indenture.
<PAGE>
<TABLE>
<S> <C>
Section 4.02. Financial Information; SEC Reports................................................................29
Section 4.03. Compliance Certificate............................................................................30
Section 4.04. Further Instruments and Acts......................................................................30
Section 4.05. Maintenance of Office or Agency...................................................................30
Section 4.06. Existence.........................................................................................31
Section 4.07. Maintenance of Properties.........................................................................31
Section 4.08. Payment of Taxes and Other Claims.................................................................31
Section 4.09. Calculation of Original Issue Discount............................................................31
ARTICLE V SUCCESSOR CORPORATION
Section 5.01. When the Company May Merge or Transfer Assets.....................................................32
ARTICLE VI DEFAULTS AND REMEDIES
Section 6.01. Events of Default.................................................................................32
Section 6.02. Acceleration......................................................................................33
Section 6.03. Other Remedies....................................................................................34
Section 6.04. Waiver of Past Defaults...........................................................................34
Section 6.05. Control by Majority...............................................................................34
Section 6.06. Limitation on Suits...............................................................................34
Section 6.07. Rights of Holders to Receive Payment..............................................................35
Section 6.08. Collection Suit by Trustee........................................................................35
Section 6.09. Trustee May File Proofs of Claim..................................................................35
Section 6.10. Priorities........................................................................................36
Section 6.11. Undertaking for Costs.............................................................................36
Section 6.12. Waiver of Stay, Extension or Usury Laws...........................................................36
ARTICLE VII TRUSTEE
Section 7.01. Duties of Trustee.................................................................................36
Section 7.02. Rights of Trustee.................................................................................37
Section 7.03. Individual Rights of Trustee......................................................................38
Section 7.04. Trustee's Disclaimer..............................................................................38
Section 7.05. Notice of Defaults................................................................................38
Section 7.06. Reports by Trustee to Holders.....................................................................38
Section 7.07. Compensation and Indemnity........................................................................38
Section 7.08. Replacement of Trustee............................................................................39
Section 7.09. Successor Trustee by Merger.......................................................................40
Section 7.10. Eligibility; Disqualification.....................................................................40
Section 7.11. Preferential Collection of Claims Against Company.................................................40
Section 7.12. Trustee's Application for Instructions from the Company...........................................40
ARTICLE VIII DISCHARGE OF INDENTURE
Section 8.01. Discharge of Liability on Securities..............................................................40
Section 8.02. Repayment to the Company..........................................................................40
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
ARTICLE IX AMENDMENTS
Section 9.01. Without Consent of Holders........................................................................41
Section 9.02. With Consent of Holders...........................................................................41
Section 9.03. Compliance with Trust Indenture Act...............................................................42
Section 9.04. Revocation and Effect of Consents, Waivers and Actions............................................42
Section 9.05. Notation on or Exchange of Securities.............................................................42
Section 9.06. Trustee to Sign Supplemental Indentures...........................................................42
Section 9.07. Effect of Supplemental Indentures.................................................................42
ARTICLE X CONVERSION
Section 10.01. Conversion Privilege..............................................................................43
Section 10.02. Conversion Procedure..............................................................................43
Section 10.03. Fractional Shares.................................................................................44
Section 10.04. Taxes on Conversion...............................................................................44
Section 10.05. Company to Provide Stock..........................................................................44
Section 10.06. Adjustment of Conversion Rate.....................................................................44
Section 10.07. When Adjustment May Be Deferred...................................................................47
Section 10.08. When No Adjustment Required.......................................................................47
Section 10.09. Notice of Adjustment..............................................................................47
Section 10.10. Voluntary Increase................................................................................47
Section 10.11. Notice of Certain Transactions....................................................................48
Section 10.12. Effect of Reclassification, Consolidation, Merger or Sale.........................................48
Section 10.13. Company Determination Final.......................................................................48
Section 10.14. Trustee's Adjustment Disclaimer...................................................................48
Section 10.15. Simultaneous Adjustments..........................................................................49
Section 10.16. Successive Adjustments............................................................................49
Section 10.17. General Considerations............................................................................49
ARTICLE XI MISCELLANEOUS
Section 11.01. Trust Indenture Act...............................................................................49
Section 11.02. Notices...........................................................................................49
Section 11.03. Communication by Holders with Other Holders.......................................................50
Section 11.04. Certificate and Opinion as to Conditions Precedent................................................51
Section 11.05. Statements Required in Certificate or Opinion.....................................................51
Section 11.06. Separability Clause...............................................................................51
Section 11.07. Rules by Trustee, Paying Agent, Conversion Agent and Registrar....................................51
Section 11.08. Legal Holidays....................................................................................51
Section 11.09. Governing Law.....................................................................................51
Section 11.10. No Recourse Against Others........................................................................51
Section 11.11. Successors........................................................................................52
Section 11.12. Multiple Originals................................................................................52
Section 11.13. Liquidated Damages................................................................................52
EXHIBIT A--Form of Security
</TABLE>
-iii-
<PAGE>
CROSS REFERENCE TABLE*
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C>
310(a)(1).........................................................................................................7.10
(a)(2).......................................................................................................7.10
(a)(3).....................................................................................................N.A.**
(a)(4).......................................................................................................N.A.
(b)....................................................................................................7.08; 7.10
(c)..........................................................................................................N.A.
3.11(a)...........................................................................................................7.11
(b)..........................................................................................................7.11
(c)..........................................................................................................N.A.
3.12(a)...........................................................................................................2.05
(b).........................................................................................................11.03
(c).........................................................................................................11.03
(d)..........................................................................................................7.06
3.13(a)...........................................................................................................7.06
(b)(1).......................................................................................................N.A.
(b)(2).......................................................................................................7.06
(c).........................................................................................................11.02
(d)..........................................................................................................7.06
3.14(a)....................................................................................................4.02; 11.02
(b)..........................................................................................................N.A.
(c)(1)......................................................................................................11.04
(c)(2)......................................................................................................11.04
(c)(3).......................................................................................................N.A.
(d)..........................................................................................................N.A.
(e).........................................................................................................11.05
3.15(a)...........................................................................................................7.01
(b)...................................................................................................7.05; 11.02
(c)..........................................................................................................7.01
(d)..........................................................................................................7.01
(e)..........................................................................................................6.11
3.16(a) (last sentence)...........................................................................................2.08
(a)(1)(A)....................................................................................................6.05
(a)(1)(B)....................................................................................................6.04
(a)(2).......................................................................................................N.A.
(b)..........................................................................................................6.07
3.17(a)(1)........................................................................................................6.08
(a)(2).......................................................................................................6.09
(b)..........................................................................................................2.04
3.18(a)..........................................................................................................11.01
</TABLE>
* Note: This Cross Reference Table shall not, for any purpose, be deemed
to be part of the Indenture
** Note: N.A. means Not Applicable
<PAGE>
INDENTURE, dated as of May 12, 1998, between AMF Bowling, Inc., a Delaware
corporation (the "Company"), and The Bank of New York, a New York banking
corporation (the "Trustee").
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the Holders of the Company's Zero Coupon
Convertible Debentures due 2018 (the "Securities"):
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section I.1. Definitions. Unless the context otherwise requires, the
following terms are used in this Indenture with the meanings specified or
referred to below:
"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".
"Applicable Conversion Price" means, as of any date of determination, the
Applicable Principal Amount per $1,000 Principal Amount of Securities as of such
date of determination divided by the Conversion Rate in effect as of such date
of determination.
"Applicable Principal Amount" means, as of any date of determination, with
respect to each $1,000 Principal Amount of Securities, the Issue Price of such
Securities plus accrued Original Issue Discount with respect to such Securities
through such date of determination.
"Bankruptcy Law" has the meaning assigned thereto in Section 6.01 hereof.
"Board of Directors" means either the board of directors of the Company or
any duly authorized committee of such board.
"Board Resolution" means a vote duly adopted by the Board of Directors, a
copy of which, certified by the Secretary or an Assistant Secretary of the
Company to have been duly adopted by the Board of Directors and to be in full
force and effect on the date of such certification, shall have been delivered to
the Trustee.
"Business Day" means each day of the year on which banking institutions
are not required or authorized by law or executive order to close in The City of
New York or the city in which the Corporate Trust Office is located.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Cash" has the meaning assigned thereto in Section 3.08(b) hereof.
"Cash Distribution" means the distribution by the Company to all holders
of its Common Stock of Cash, other than any Cash that is distributed upon a
merger or consolidation to which Section 10.12 applies or as part of a
distribution referred to in paragraph (d) of Section 10.06.
A "Change of Control" shall be deemed to have occurred at the time, after
the Issue Date, of:
<PAGE>
(A) the acquisition by any Person, other than the Permitted Holders and
their Related Parties, of beneficial ownership, directly or indirectly,
through a purchase, merger or other acquisition transaction or series of
transactions, of shares of capital stock of the Company entitling such
Person to exercise 50% or more of the total voting power of all shares of
capital stock of the Company entitled to vote generally in the elections
of directors other than any such acquisition by the Company, any
Subsidiary of the Company or any employee benefit plan of the Company, and
such Person beneficially owns more of such voting stock than the Permitted
Holders and their Related Parties; or
(B) any consolidation of the Company with, or merger of the Company
into, any other Person other than the Permitted Holders and their Related
Parties, any merger of another Person, other than the Permitted Holders
and their Related Parties, into the Company, or any sale or transfer of
all or substantially all of the assets of the Company to another Person
other than the Permitted Holders and their Related Parties (other than (a)
any such transaction (x) which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock
and (y) pursuant to which holders of Common Stock immediately prior to
such transaction have the entitlement to exercise, directly or indirectly,
50% or more of the total voting power of all shares of capital stock
entitled to vote generally in the election of directors of the continuing
or surviving Person immediately after such transaction and (b) any merger
which is effected solely to change the jurisdiction of incorporation of
the Company and results in a reclassification, conversion or exchange of
outstanding shares of Common Stock into solely shares of common stock);
provided, however, that a Change of Control shall not be deemed to have occurred
if either (x) the closing price per share of the Common Stock for any five
Trading Days within the period of 10 consecutive Trading Days ending immediately
after the later of the date of the Change of Control or the date of the public
announcement of the Change of Control (in the case of a Change of Control under
clause (i) above) or ending immediately prior to the date of the Change of
Control (in the case of a Change of Control under clause (ii) above) shall equal
or exceed 105% of the Applicable Conversion Price in effect on each such Trading
Day or (y) all of the consideration (excluding cash payments for fractional
shares) in the transaction or transactions constituting the Change of Control
consists of common stock traded on a national securities exchange or quoted on
the Nasdaq National Market and as a result of such transaction or transactions
the Securities become convertible solely into such common stock. For purposes of
this definition, the term "beneficial owner" shall be determined in accordance
with Rule 13d-3, as in effect on the date of the original execution of this
Indenture, promulgated by the SEC pursuant to the Exchange Act.
"Change of Control Company Notice" has the meaning assigned thereto in
Section 3.09(b)(i) hereof.
"Change of Control Redemption Price" has the meaning assigned thereto in
Section 3.09(a) hereof.
"Common Stock" means any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company. Subject to the provisions
of Section 10.12, however, shares of Common Stock issuable upon conversion,
redemption or repurchase of the Securities shall include only shares of Common
Stock, par value of $0.01 per share, of the Company as it exists on the date of
this Indenture or shares of any class or classes resulting from any
reclassification or reclassifications thereof and which have no preference in
respect of dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company and which are
not subject to redemption by the Company; provided that if at any time there
shall be more than one such resulting class, the shares of each such class then
so issuable shall be substantially in the proportion which the total number of
shares of such class resulting from all such reclassifications bears to the
total number of shares of all such classes resulting from all such
reclassifications.
"Company" means the party named as the "Company" in the first paragraph of
this Indenture until a successor Person replaces it pursuant to the applicable
provisions of this Indenture and, thereafter, "Company" shall mean such
successor Person. The foregoing sentence shall likewise apply to any subsequent
such successor or successors.
"Company Notice" has the meaning assigned thereto in Section 3.08(e)
hereof.
-2-
<PAGE>
"Company Notice Date" has the meaning assigned thereto in Section 3.08(c)
hereof.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board of Directors, any
Vice Chairman of the Board of Directors, its Chief Executive Officer, its
President, its Chief Operating Officer, its Chief Financial Officer or any Vice
President, and by its Treasurer, any Assistant Treasurer, its Controller, its
Secretary or any Assistant Secretary, and delivered to the Trustee.
"Conversion Agent" has the meaning assigned thereto in Section 2.03
hereof.
"Conversion Date" has the meaning assigned thereto in Section 10.02
hereof.
"Conversion Rate" has the meaning assigned thereto in Section 10.01
hereof.
"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.
"Current Market Price" means the Sale Price per share of Common Stock on
the Trading Day next succeeding the date on which a payment in respect of such
Common Stock is made.
"Custodian" shall mean The Bank of New York, as custodian for the
Depositary with respect to the Securities in global form, or any successor
entity thereto.
"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 issuable or issued in
whole or in part in global form, the Person specified in Section 2.06 as the
Depositary with respect to the Securities, until a successor Person replaces it
pursuant to the applicable provisions of this Indenture, and thereafter,
"Depositary" shall mean or include such successor. The foregoing sentence shall
likewise apply to any subsequent such successor or successors.
"Determination Date" means, in the case of a dividend or other
distribution, including the issuance of rights, options or warrants, to
shareholders, the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution and, in the case of a tender offer,
the last time that tenders could have been made pursuant to such tender offer.
"Event of Default" has the meaning assigned thereto in Section 6.01
hereof.
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Excess Purchase Payment" means the excess, if any, of (i) the amount of
cash plus the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and set forth in a Board Resolution) of any
non-cash consideration required to be paid with respect to one share of Common
Stock acquired or to be acquired in a tender offer made by the Company or any of
its Subsidiaries for all or any portion of the Common Stock over (ii) the
Current Market Price.
"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.
-3-
<PAGE>
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (i) currency exchange or interest rate swap agreements,
currency exchange or interest rate cap agreements and currency exchange or
interest rate collar agreements and (ii) other agreements or arrangements
designed to protect such Person against fluctuations in currency exchange or
interest rates.
"Holder" or "Securityholder" means a Person in whose name a Security is
registered on the Registrar's books.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any Indebtedness of any other Person.
"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.
"Initial Purchasers" means Goldman, Sachs & Co., Cowen & Company, Morgan
Stanley & Co. Incorporated and Schroder & Co. Inc.
"Issue Date" of any Security means the date on which the Security was
originally issued or deemed issued as set forth on the face of the Security.
"Issue Price" of any Security means, in connection with the original
issuance of such Security, the initial issue price at which the Security is
issued as set forth on the face of the Security.
"Legal Holiday" has the meaning assigned thereto in Section 11.08 hereof.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or 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).
"Liquidated Damages" shall have the meaning specified in the Registration
Rights Agreement.
"Market Capitalization" means, with respect to a specified date, the
product of (i) the current market price per share (determined as provided in
paragraph (h) of Section 10.06) of the Common Stock as of such date times (ii)
the number of shares of Common Stock outstanding on such date.
"Market Price" has the meaning assigned thereto in Section 3.08(d) hereof.
"Nasdaq National Market" means the electronic inter-dealer quotation
system operated by The Nasdaq Stock Market, Inc., a subsidiary of the National
Association of Securities Dealers, Inc.
"Notice of Default" has the meaning assigned thereto in Section 6.01
hereof.
-4-
<PAGE>
"NYSE" means The New York Stock Exchange, Inc.
"Officer" means the Chairman of the Board of Directors, any Vice Chairman,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, any Vice President, the Controller, the Treasurer or
the Secretary or any Assistant Treasurer or Assistant Secretary of the Company.
"Officers' Certificate" means a written certificate containing the
information specified in Sections 11.04 and 11.05, signed in the name of the
Company by its Chairman of the Board, any Vice Chairman, its Chief Executive
Officer, its President, its Chief Operating Officer, its Chief Financial Officer
or any Vice President, and by its Treasurer, any Assistant Treasurer, its
Controller, its Secretary or any Assistant Secretary, and delivered to the
Trustee.
"Opinion of Counsel" means a written opinion containing the information
specified in Sections 11.04 and 11.05, from legal counsel who may be counsel to,
or any officer or employee of, the Company.
"Original Issue Discount" of any Security means the difference between the
Issue Price and the Principal Amount of the Security as set forth on the face of
the Security. For purposes of this Indenture and the Securities, accrual of
Original Issue Discount shall be calculated on the basis of a 360-day year of
twelve 30-day months, beginning on May 12, 1998.
"outstanding", when used with respect to Securities, shall be determined
in accordance with and as defined in Section 2.08 hereof.
"Over-allotment Option" has the meaning assigned thereto in Section 2.02
hereof.
"Paying Agent" has the meaning assigned thereto in Section 2.03 hereof.
"Permitted Holders" means Goldman, Sachs & Co. and any of its Affiliates.
"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.
"Portal Market" means The Portal_ Market operated by the National
Association of Securities Dealers, Inc. or any successor thereto.
"Principal Amount" of a Security means the principal amount at maturity
set forth under the caption "Principal Amount" on the face of the Security.
"Purchase Agreement" means the Purchase Agreement, dated May 6, 1998,
relating to the Securities, among the Company, the Designated Subsidiaries named
therein and the Initial Purchasers.
"Purchase Date" has the meaning assigned thereto in Section 3.08(a)
hereof.
"Purchase Notice" has the meaning assigned thereto in Section 3.08(a)
hereof.
"Purchase Price" has the meaning assigned thereto in Section 3.08(a)
hereof.
"Redemption Date" means a date specified for redemption of the Securities
(other than redemption upon a Change of Control at the option of the
Securityholder) in accordance with the terms of the Securities and Section 3.01
of this Indenture.
"Redemption Price" has the meaning assigned thereto in paragraph 5 of the
Securities.
"Registrar" has the meaning assigned thereto in Section 2.03 hereof.
-5-
<PAGE>
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of May 12, 1998, among the Company, the Designated
Subsidiaries named therein and the Initial Purchasers, as the same may be
amended from time to time.
"Related Parties" means any Person controlled by the Permitted Holders,
including any partnership of which any of the Permitted Holders or their
Affiliates is a general partner.
"Repurchase Date" has the meaning assigned thereto in Section 3.09(a)
hereof.
"Repurchase Notice" has the meaning assigned thereto in Section
3.09(b)(ii) hereof.
"Restricted Securities" has the meaning assigned thereto in Section
2.06(d) hereof.
"Rule 144A" means Rule 144A as promulgated under the Securities Act, or
any successor rule.
"Rule 144(k)" means Rule 144(k) as promulgated under the Securities Act,
or any successor rule.
"Sale Price" has the meaning assigned thereto in Section 3.08(d) hereof.
"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" shall have the meaning set forth in the second paragraph of
this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Securityholder" or "Holder" means a person in whose name a Security is
registered on the Registrar's books.
"Stated Maturity", when used with respect to any Security, means the date
specified in such Security as the fixed date on which an amount equal to the
Principal Amount of such Security is due and payable.
"Subsidiary" means, with respect to any Person, (a) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (b) any partnership (i) the sole general partner or managing
general partner of which is such Person or a Subsidiary of such Person or (ii)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939, as amended, as in effect on
the date of this Indenture, except as provided in Section 9.03.
"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.
"Trigger Event" has the meaning assigned thereto in Section 10.06(g)
hereof.
"Trust Officer" means when used with respect to the Trustee, any officer
within the corporate trust department of the Trustee, including any vice
president, assistant vice president, assistant secretary, assistant treasurer,
trust officer or any other officer of the Trustee who customarily performs
functions similar to those performed by the Persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred
because of such person's knowledge of and familiarity with the particular
subject and who shall have direct responsibility for the administration of this
Indenture.
-6-
<PAGE>
"Trustee" means the party named as the "Trustee" in the first paragraph of
this Indenture until a successor replaces it pursuant to the applicable
provisions of this Indenture and, thereafter, "Trustee" shall mean such
successor Trustee. The foregoing sentence shall likewise apply to any subsequent
such successor or successors.
Section I.2. Incorporation by Reference of Trust Indenture Act. Whenever
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"Commission" means the SEC.
"Indenture Securities" means the Securities.
"Indenture Security Holder" means a Securityholder.
"Indenture to be Qualified" means this Indenture.
"Indenture Trustee" or "Institutional Trustee" means the Trustee.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rules have the
meanings assigned to them by such definitions.
Section I.3. Rules of Construction. Unless the context otherwise requires:
(a) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(b) "or" is not exclusive;
(c) "including" means including, without limitation; and
(d) words in the singular include the plural, and words in the plural
include the singular.
ARTICLE II
THE SECURITIES
Section II.1. Form and Dating. The Securities and the Trustee's
certificate of authentication for the Securities shall be substantially in the
form of Exhibit A, which is a part of this Indenture. The Securities may have
any notations, legends or endorsements required by law, stock exchange rule or
usage (provided that any such notation, legend or endorsement required by usage
is in a form acceptable to the Company). The Company shall provide any such
notations, legends or endorsements to the Trustee in writing. Each Security
shall be dated the date of its authentication. The Securities are issuable only
in registered form without coupons in denominations of $1,000 or any integral
multiple thereof.
Any Security in global form shall represent such of the outstanding
Securities as shall be specified therein and shall provide that it shall
represent the aggregate amount of outstanding Securities from time to time
endorsed thereon and that the aggregate amount of outstanding Securities
represented thereby may from time to time be reduced to reflect transfers and
conversions, redemptions or repurchases permitted hereby. Any endorsement of a
Security in global form to reflect the amount of any decrease in the amount of
outstanding Securities represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in such manner and upon instructions
given by the Holder of such Security in accordance with this Indenture. Payment
of the Principal Amount, Issue Price, accrued Original Issue Discount, accrued
Liquidated Damages, if any, Redemption Price, Purchase Price, Change of Control
Redemption Price or interest, if any, on any Security in global form shall be
made to the Holder of such Security.
-7-
<PAGE>
Section II.2. Execution and Authentication. The Securities shall be
executed on behalf of the Company by its Chairman of the Board, its President,
its Chief Executive Officer, its Chief Financial Officer or any Vice President
and attested by its Treasurer, any Assistant Treasurer, its Controller, its
Secretary or any Assistant Secretary. The signature of any of these officers on
the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper Officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of authentication of such Securities.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee by manual signature of an authorized officer, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder.
The Trustee shall authenticate and deliver Securities for original issue
in an aggregate Principal Amount of $900,000,000 upon a Company Order without
any further action by the Company; provided, however, that if the Company sells
any Securities pursuant to the Initial Purchasers' overallotment option (the
"Over-allotment Option") granted pursuant to the Purchase Agreement, then the
Trustee shall also authenticate and deliver additional Securities for original
issue in an aggregate Principal Amount of up to $225,000,000 pursuant to the
Over-Allotment Option upon a Company Order without any further action by the
Company. The aggregate Principal Amount of Securities outstanding at any time
may not exceed the amount set forth in the foregoing sentence, except as
provided in Section 2.07.
Section II.3. Registrar, Paying Agent and Conversion Agent. The Company
shall maintain an office or agency where Securities may be presented for
registration of transfer or for exchange (the "Registrar"), an office or agency
where Securities may be presented for purchase or payment (the "Paying Agent")
and an office or agency where Securities may be presented for conversion into
Common Stock (the "Conversion Agent"). The Registrar shall keep a register of
the Securities and of their transfer , conversion, redemption, repurchase and
exchange. The Company may have one or more co-registrars, one or more additional
paying agents and one or more additional conversion agents. The term Paying
Agent includes any additional paying agent. The term Conversion Agent includes
any additional conversion agent, including any named pursuant to Section 4.05.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent, Conversion Agent or co-registrar (if not the Trustee or
an Affiliate of the Trustee). The agreement shall implement the provisions of
this Indenture that relate to such agent and the Securities. The Company shall
promptly notify the Trustee of the name and address of any such agent. If the
Company fails to maintain a Registrar, Paying Agent or Conversion Agent, the
Trustee shall act as such and shall be entitled to appropriate compensation
therefor pursuant to Section 7.07. The Company or an Affiliate of the Company
may act as Paying Agent, Registrar, Conversion Agent or co-registrar.
The Company initially appoints the Trustee as Registrar, Conversion Agent
and Paying Agent in connection with the Securities.
Section II.4. Paying Agent to Hold Money and Securities in Trust. Except
as otherwise provided herein, prior to or on each due date of payments in
respect of any Security, the Company shall deposit with the Paying Agent a sum
of money or shares of Common Stock, if payment in securities is permitted,
sufficient to make such payments when such payments are due. The Company shall
require each Paying Agent (other than the Trustee) to agree in writing that the
Paying Agent shall hold in trust for the benefit of Holders or the Trustee all
money and shares of Common Stock held by the Paying Agent for the making of
payments in respect of the Securities and shall notify the Trustee of any
default by the Company in making any such payment. At any time during the
continuance of any such default, the Paying Agent shall, upon the written
request of the Trustee, forthwith pay to the Trustee all money and shares of
Common Stock so held in trust. If the Company or an Affiliate of the Company
acts as Paying Agent, it shall segregate the money and shares of Common Stock
held by it as Paying Agent and hold it as a separate trust fund. The Company at
any time may require a Paying Agent to pay or deliver all money and shares of
Common Stock held by it to the Trustee and to account for any funds and shares
of Common Stock disbursed by it. Upon doing so, the Paying Agent shall have no
further liability for the money or shares of Common Stock.
-8-
<PAGE>
Section II.5. 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 Holders. If the Trustee is not the Registrar, the
Company shall cause to be furnished to the Trustee at least semiannually on May
12 and November 12 a listing of Holders dated within 10 days of the date on
which the list is furnished 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 Holders.
Section II.6. Exchange and Registration of Transfer of Securities;
Restrictions on Transfers; Depositary
(a) Upon surrender for registration of transfer of any Security at any
office or agency of the Company designated as Registrar or co-registrar pursuant
to Section 2.03 and satisfaction of the requirements for such transfer set forth
in this Section 2.06, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of any authorized denominations and of a
like aggregate Principal Amount and bearing such restrictive legends as may be
required by this Indenture.
Securities may be exchanged for a like aggregate Principal Amount of
Securities of other authorized denominations. Securities to be exchanged shall
be surrendered at the office or agency of any Registrar or co-registrar and the
Company shall execute, and the Trustee shall authenticate and deliver in
exchange therefor, the Security or Securities which the Securityholder making
the exchange shall be entitled to receive, bearing registration numbers not
contemporaneously outstanding.
All Securities presented for registration of transfer or for exchange into
like Securities, for conversion, redemption or repurchase or for payment shall
(if so required by the Company, the Trustee, the Registrar or any co-registrar)
be duly endorsed by, or be accompanied by a written instrument or instruments of
transfer in form satisfactory to the Company and the Trustee, duly executed by
the Holder or such Holder's attorney duly authorized in writing.
No service charge shall be charged to the Securityholder for any exchange
for like Securities or registration of transfer of Securities, but the Company,
as a condition to any exchange or transfer, may require payment of a sum
sufficient to cover any tax, assessments or other governmental charges that may
be imposed in connection therewith.
None of the Company, the Trustee, the Registrar or any co-registrar shall
be required to exchange for like Securities or register a transfer of (i) any
Securities for a period of 15 days next preceding any selection of Securities to
be redeemed, or (ii) any Securities or portions thereof selected or called for
redemption, or (iii) any Securities or portion thereof surrendered for
conversion into Common Stock, or (iv) any Securities or portion thereof
surrendered for repurchase or redemption (and not withdrawn) pursuant to Section
3.08 or 3.09, respectively.
All Securities issued upon any transfer or exchange for like Securities
shall be valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture as the Securities surrendered
upon such exchange or transfer.
(b) So long as the Securities are eligible for book-entry settlement with
the Depositary (as defined below), or unless otherwise required by law, all of
the Securities shall be represented by one or more Securities in global form
registered in the name of the Depositary or the nominee of the Depositary,
except as otherwise specified below. The transfer and exchange of beneficial
interests in such Security in global form shall be effected through the
Depositary in accordance with this Indenture and the procedures of the
Depositary therefor.
Except as provided below, beneficial owners of a Security in global form
shall not be entitled to have certificates registered in their names, will not
receive or be entitled to receive physical delivery of certificates in
definitive form and will not be considered Holders of such Securities in global
form.
-9-
<PAGE>
(c) Any Security in global form may be endorsed with or have incorporated
in the text thereof such legends or recitals or changes not inconsistent with
the provisions of this Indenture as may be required by the Custodian, the
Depositary or the National Association of Securities Dealers, Inc. in order for
the Securities to be tradeable on the Portal Market or as may be required for
the Securities to be tradeable on any other market developed for trading of
securities pursuant to Rule 144A or required to comply with any applicable law
or any regulation thereunder or with the rules and regulations of any securities
exchange upon which the Securities may be listed or traded or to conform with
any usage with respect thereto, or to indicate any special limitations or
restrictions to which any particular Securities are subject.
(d) Every Security that bears or is required under this Section 2.06(d) to
bear the legend set forth in this Section 2.06(d) (together with any Common
Stock issued upon conversion, redemption or repurchase of the Securities and
required to bear the legend required under Section 2.06(e), collectively, the
"Restricted Securities") shall be subject to the restrictions on transfer set
forth in this Section 2.06(d) (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 2.06(d) and 2.06(e), the term "transfer"
encompasses any sale, pledge, transfer or other disposition whatsoever of any
Restricted Security.
Any certificate evidencing such Security (and all securities issued in
exchange therefor or substitution thereof, other than Common Stock, if any,
issued upon conversion, redemption or repurchase thereof, which shall bear the
legend required under Section 2.06(e), if applicable) shall bear a legend in
substantially the following form, unless such Security has been sold pursuant to
a registration statement that has been declared effective under the Securities
Act (and which continues to be effective at the time of such transfer) or such
Security is fully transferable by a non-affiliate pursuant to Rule 144(k) under
the Securities Act (or any successor provision), or unless otherwise agreed by
the Company in writing, with written notice thereof to the Trustee:
THIS SECURITY AND ANY COMMON STOCK ISSUABLE UPON THE CONVERSION,
REDEMPTION OR REPURCHASE OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS
SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER.
THIS SECURITY AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS CONVERSION,
REDEMPTION OR REPURCHASE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (II) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 904 OF REGULATION
S UNDER THE SECURITIES ACT, (III) TO AN INSTITUTION THAT IS AN ACCREDITED
INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) or (7) UNDER THE
SECURITIES ACT IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, (IV) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), OR (V) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND IN EACH OF
CASES (I) THROUGH (V) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES AND OTHER JURISDICTIONS OF THE UNITED STATES. NO REPRESENTATION CAN BE
MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 FOR RESALES OF
THE SECURITIES OR ANY SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION,
REDEMPTION OR REPURCHASE THEREOF.
-10-
<PAGE>
THIS SECURITY, ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS CONVERSION,
REDEMPTION OR REPURCHASE AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER
TRANSFERS OF THIS SECURITY AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN
APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES
RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE
HOLDER OF THIS SECURITY AND ANY SUCH SHARES SHALL BE DEEMED BY THE ACCEPTANCE OF
THIS SECURITY OR ANY SUCH SHARES TO HAVE AGREED TO ANY SUCH AMENDMENT OR
SUPPLEMENT.
Any Security (or security issued in exchange or substitution therefor) 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 Securities for
exchange to the Registrar in accordance with the provisions of this Section
2.06, be exchanged for a new Security or Securities, of like tenor and aggregate
Principal Amount, which shall not bear the restrictive legend required by this
Section 2.06(d).
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in this Section 2.06(d)), a Security in global form may not
be transferred as a whole or in part except by the Depositary to a nominee of
the Depositary or by a nominee of the Depositary to the Depositary or another
nominee to a successor Depositary or a nominee of such successor Depositary.
The Depositary shall be a clearing agency registered under the Exchange
Act. The Company initially appoints The Depository Trust Company to act as
Depositary with respect to the Securities in global form. Initially, the
Securities in global form shall be issued to the Depositary, registered in the
name of Cede & Co., as the nominee of the Depositary, and deposited with the
Custodian for Cede & Co.
If at any time the Depositary for a Security in global form notifies the
Company that it is unwilling, unable or ineligible to continue as Depositary for
such Security, the Company may appoint a successor Depositary with respect to
such Security. If (i) a successor Depositary for the Security is not appointed
by the Company within 90 days after the Company receives such notice or (ii) the
Company, at any time in its sole discretion, determines not to have any
Securities in global form, the Company will execute, and the Trustee, upon
receipt of an Officers' Certificate for authentication and delivery of
Securities, will authenticate and deliver, Securities in certificated form, in
an aggregate Principal Amount equal to the Principal Amount of the Securities in
global form, in exchange for such Securities in global form.
Securities in certificated form issued in exchange for a Security in
global form pursuant to this Section 2.06 shall be registered in such names and
in such authorized denominations as the Depositary shall instruct the Trustee.
Upon execution and authentication, the Trustee shall deliver such Securities in
certificated form to the Persons in whose names such Securities in certificated
form are so registered.
At such time as all interests in a Security in global form have been
converted, redeemed, repurchased or canceled for Securities in certificated
form, or transferred to a transferee who receives Securities in certificated
form, such Security in global form shall be, upon receipt thereof, canceled by
the Trustee in accordance with standing procedures and instructions existing
between the Custodian and Depositary. At any time prior to such cancellation, if
any interest in a Security in global form is converted, redeemed or repurchased
by the Company pursuant to Article III or canceled, the Principal Amount of such
Security in global form shall, in accordance with the standing procedures and
instructions existing between the Custodian and the Depositary, be reduced and
an endorsement shall be made on such Security in global form, by the Trustee or
the Custodian, at the direction of the Trustee, to reflect such reduction.
(e) Any stock certificate representing Common Stock issued upon
conversion, redemption or repurchase of a Security shall bear a legend in
substantially the same form as set forth in the preceding paragraph (d), unless
such Common Stock has been sold pursuant to a registration statement that has
been declared effective under the Securities Act (and which continues to be
effective at the time of such transfer), such Common Stock has been issued upon
conversion, redemption or repurchase of Securities that have been transferred
pursuant to a registration statement that has been declared effective under the
Securities Act or such Common Stock is fully transferable by a non-affiliate
pursuant to Rule 144(k) under the Securities Act (or any successor provision),
or unless otherwise agreed by the Company in writing with written notice thereof
to the transfer agent for the Common Stock.
-11-
<PAGE>
Any such 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 Common Stock for
exchange in accordance with the procedures of the transfer agent for the Common
Stock, be exchanged for a new certificate or certificates for a like number of
shares of Common Stock, which shall not bear the restrictive legend required by
this Section 2.06(e).
Section II.7. Replacement Securities. If (a) any mutilated Security is
surrendered to the Trustee, or (b) the Company and the Trustee receive evidence
to their satisfaction of the destruction, loss or theft of any Security, and
there is delivered to the Company and the Trustee such security or indemnity as
may be required by them to save each of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall execute and, upon its written request,
the Trustee shall authenticate and deliver, in exchange for any such mutilated
Security or in lieu of any such destroyed, lost or stolen Security, a new
Security of like tenor and Principal Amount, bearing a registration number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, or is about to be converted, redeemed or
repurchased by the Company pursuant to Article 3 hereof, the Company in its
discretion may, instead of issuing a new Security, pay, convert, redeem or
repurchase such Security, as the case may be.
Upon the issuance of any new Securities under this Section 2.07, the
Company may, as a condition to such issuance, require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Trustee) connected therewith.
Every new Security issued pursuant to this Section 2.07 in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
The provisions of this Section 2.07 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
Section II.8. Outstanding Securities; Determinations of Holders' Action.
Securities outstanding at any time are all the Securities authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation
and those described in this Section 2.08 as not outstanding. A Security does not
cease to be outstanding because the Company or an Affiliate thereof holds the
Security; provided, however, that in determining whether the Holders of the
requisite Principal Amount of Securities have given or concurred in any request,
demand, authorization, direction, notice, consent or waiver hereunder,
Securities owned by the Company or any Affiliate of the Company shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which a
Trust Officer of the Trustee actually knows to be so owned shall be so
disregarded. Subject to the foregoing, only Securities outstanding at the time
of such determination shall be considered in any such determination (including,
without limitation, determinations pursuant to Articles VI and IX).
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent holds, in accordance with this Indenture, on a
Redemption Date, or on the Business Day following a Purchase Date or a
Repurchase Date, or on Stated Maturity, money or shares of Common Stock, if
permitted hereunder, sufficient to pay Securities payable on that date, then on
and after that date such Securities shall cease to be outstanding and Original
Issue Discount and interest, if any, on such Securities shall cease to accrue,
whether or not book-entry transfer of such Securities is made or such Securities
are delivered to the Paying Agent, and the Holders thereof shall have no other
rights as such (other than the right to receive such payment); 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.
-12-
<PAGE>
If a Security is converted in accordance with Article X, then from and
after such conversion such Security shall cease to be outstanding and Original
Issue Discount and interest, if any, shall cease to accrue on such Security.
Section II.9. Temporary Securities. Pending the preparation of definitive
Securities, the Company may execute, and upon Company Order the Trustee shall
authenticate and deliver, temporary Securities which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 2.03,
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities the Company shall execute, and the Trustee shall
authenticate and deliver in exchange therefor, a like Principal Amount of
definitive Securities of authorized denominations. Until so exchanged the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
Section II.10. Cancellation. All Securities surrendered for payment,
purchase by the Company pursuant to Article 3, conversion, redemption or
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly canceled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly canceled by the Trustee. The Company may not issue new
Securities to replace Securities it has repurchased pursuant to Article III
hereof or delivered to the Trustee for cancellation or that any Holder has
converted pursuant to Article X. No Securities shall be authenticated in lieu of
or in exchange for any Securities canceled as provided in this Section 2.10,
except as expressly permitted by this Indenture. All canceled Securities held by
the Trustee shall be returned to the Company.
Section II.11. Persons Deemed Owners. Prior to due presentment of a
Security for registration of transfer, the Company, the Trustee and any agent of
the Company or the Trustee may treat the Person in whose name such Security is
registered as the owner of such Security for the purpose of receiving payment of
the Principal Amount, the Issue Price, accrued Original Issue Discount, accrued
Liquidated Damages, if any, the Redemption Price, the Purchase Price, the Change
of Control Redemption Price and interest, if any, in respect thereof, for the
purpose of conversion and for all other purposes whatsoever, whether or not such
Security be overdue, and none of the Company, the Trustee or any agent of the
Company or the Trustee shall be affected by notice to the contrary.
Section II.12. CUSIP Numbers. The Company in issuing the Securities may
use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the "CUSIP" numbers.
ARTICLE III
REDEMPTION AND PURCHASES
-13-
<PAGE>
Section III.1. Right to Redeem; Notices to Trustee. The Company, at its
option, may redeem the Securities in accordance with the provisions of
paragraphs 5 and 7 of the Securities. If the Company elects to redeem Securities
pursuant to paragraphs 5 and 7 of the Securities, it shall notify the Trustee in
writing of the Redemption Date, the Principal Amount of Securities to be
redeemed and the Redemption Price.
The Company shall give the notice to the Trustee provided for in this
Section 3.01 (a) in the case of any redemption of fewer than all of the
Securities, at least 40 days before the Redemption Date and (b) in the case of a
redemption of all of the Securities, no later than the date that the Company is
required to give notice to the Holders pursuant to Section 3.03, in each case
unless a shorter notice shall be satisfactory to the Trustee.
Section III.2. Selection of Securities to be Redeemed. If less than all
the Securities held in definitive form are to be redeemed, the Trustee shall
select the definitive Securities to be redeemed pro rata or by lot or by a
method the Trustee considers fair and appropriate (as long as such method is not
prohibited by the rules of any stock exchange on which the Securities are then
listed). The Trustee shall make the selection at least 35 days, but not more
than 60 days, before the Redemption Date from outstanding definitive Securities
not previously called for redemption. The Trustee may select for redemption
portions of the Principal Amount of Securities that have denominations larger
than $1,000. Securities and portions of them the Trustee selects shall be in
Principal Amounts of $1,000 or an integral multiple of $1,000. Provisions of
this Indenture that apply to definitive Securities called for redemption also
apply to portions of definitive Securities called for redemption. The Trustee
shall notify the Company promptly of the definitive Securities or portions of
definitive Securities to be redeemed.
Any interest in a Security held in global form by and registered in the
name of the Depositary or its nominee to be redeemed in whole or in part will be
redeemed in accordance with the procedures of the Depositary.
If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed (so
far as may be) to be the portion selected for redemption. Securities which have
been converted during a selection of Securities to be redeemed may be treated by
the Trustee as outstanding for the purpose of such selection.
Section III.3. Notice of Redemption. At least 30 days but not more than 60
days before a Redemption Date, the Company shall mail a notice of redemption by
first-class mail, postage prepaid, to each Holder of Securities to be redeemed.
The notice shall fully identify the Securities to be redeemed and shall
state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) the Conversion Rate;
(d) the name and address of the Paying Agent and the Conversion Agent;
(e) that Securities called for redemption may be converted at any time
before the close of business on the applicable Redemption Date;
(f) that Holders who want to convert Securities must satisfy the
requirements set forth in paragraph 8 of the Securities;
(g) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(h) if fewer than all the outstanding Securities are to be redeemed, the
certificate number and Principal Amounts of the particular Securities to be
redeemed;
(i) that Original Issue Discount and interest, if any, on Securities
called for redemption will cease to accrue on and after the Redemption Date; and
-14-
<PAGE>
(j) the CUSIP number or numbers for the Securities.
The notice if mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the Holder receives such
notice. In any case, failure to give such notice by mail or any defect in the
notice to the Holder of any Security designated for redemption as a whole or in
part shall not affect the validity of the proceedings for the redemption of any
other Security.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at the Company's expense.
Section III.4. Effect of Notice of Redemption. Once notice of redemption
is given, Securities called for redemption become due and payable on the
Redemption Date and at the Redemption Price stated in the notice except for
Securities which are converted in accordance with the terms of this Indenture.
Upon the later of the Redemption Date or the date such Securities are
surrendered to the Paying Agent, such Securities shall be paid at the Redemption
Price stated in the notice.
Section III.5. Deposit of Redemption Price. Prior to or by 10:00 a.m. on
the Redemption Date, the Company shall deposit with the Paying Agent (or if the
Company or an Affiliate of the Company is the Paying Agent, shall segregate and
hold in trust) money sufficient to pay the Redemption Price of all Securities to
be redeemed on that date other than Securities or portions of Securities called
for redemption which prior thereto have been delivered by the Company to the
Trustee for cancellation or have been converted for Common Stock, and on or
after the Redemption Date (unless the Company shall default in the payment of
the Securities at the Redemption Price) Original Issue Discount on the
Securities or portion of Securities called for redemption shall cease to accrue
and such Securities shall cease after the close of business on the Redemption
Date to be convertible into Common Stock and, except as provided in this Section
3.05 and Section 8.02, to be entitled to any benefit or security under this
Indenture, and the Holders thereof shall have no right in respect of such
Securities except the right to receive the Redemption Price thereof and unpaid
interest, if any, and Liquidated Damages, if any, to (but excluding) the
Redemption Date. The Paying Agent shall as promptly as practicable return to the
Company any money (with interest, if any, thereon), not required for that
purpose because of conversion of Securities. If such money is then held by the
Company in trust and is not required for such purpose it shall be discharged
from such trust.
Section III.6. Securities Redeemed in Part. Upon surrender of a Security
that is redeemed in part, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder a new Security in an authorized
denomination equal in Principal Amount to the unredeemed portion of the Security
surrendered.
Section III.7. Conversion Arrangement on Call for Redemption. In
connection with any redemption of Securities, the Company may arrange for the
purchase and conversion for Common Stock of any Securities called for redemption
by an agreement with one or more investment bankers or other purchasers to
purchase such Securities by paying to the Paying Agent in trust for the Holders,
on or before the close of business on the Redemption Date, an amount that,
together with any amounts deposited with the Paying Agent by or on behalf of the
Company for the redemption of the Securities, is not less than the Redemption
Price, including interest, if any, to the Redemption Date, of such Securities.
Notwithstanding anything to the contrary contained in this Article III, the
obligation of the Company to pay the Redemption Price of such Securities,
including all accrued Original Issue Discount, shall be deemed to be satisfied
and discharged to the extent such amount is so paid by such purchasers. If such
an agreement is entered into, any Securities not duly surrendered for conversion
by the Holders thereof may, at the option of the Company, be deemed, to the
fullest extent permitted by law, acquired by such purchasers from such Holders
and (notwithstanding anything to the contrary contained in Article X)
surrendered by such purchasers for conversion, all immediately prior to the
close of business on the Redemption Date, subject to payment of the above amount
as aforesaid. The Paying Agent shall hold and pay to the Holders whose
Securities are selected for redemption any such amount paid to it in the same
manner as it would money deposited with it by the Company for the redemption of
Securities. Without the Paying Agent's prior written consent, no arrangement
-15-
<PAGE>
between the Company and such purchasers for the purchase and conversion of any
Securities shall increase or otherwise affect any of the powers, duties,
responsibilities or obligations of the Paying Agent as set forth in this
Indenture, and the Company agrees to indemnify the Paying Agent from, and hold
it harmless against, any and all losses, liabilities, claims, damages or
expenses arising out of or in connection with any such arrangement for the
purchase and conversion of any Securities between the Company and such
purchasers, including the costs and expenses incurred by the Paying Agent in the
defense of any claim or liability arising out of or in connection with the
exercise or performance of any of its powers, duties, responsibilities or
obligations under this Indenture.
Section III.8. Purchase of Securities at Option of the Holder
(a) General. Securities shall be purchased by the Company pursuant to
paragraph 6(a) of the Securities as of May 12, 2003, May 12, 2008 and May 12,
2013 (each, a "Purchase Date"), at the purchase price specified therein (each, a
"Purchase Price") at the option of the Holder thereof, upon:
(i) delivery to the Paying Agent by the Holder of a written notice of
purchase (a "Purchase Notice") at any time from the opening of business on the
date that is 20 Business Days prior to such Purchase Date until the close of
business on such Purchase Date, which Purchase Notice has not been withdrawn,
stating:
(A) the certificate number of the Security delivered by such Holder
to be purchased;
(B) the portion of the Principal Amount of such Security delivered by
such Holder to be purchased, which portion must be $1,000 in Principal
Amount or an integral multiple thereof;
(C) that such Security shall be purchased as of the Purchase Date
pursuant to the terms and conditions specified in paragraph 6(a) of the
Securities and in this Indenture; and
(D) if the Company elects, pursuant to a Company Notice, to pay the
Purchase Price to be paid as of such Purchase Date, in whole or in part,
in Common Stock but such Purchase Price shall ultimately be payable to
such Holder entirely in Cash because any of the conditions to the payment
of the Purchase Price (or such portion) in Common Stock is not satisfied
prior to or on the Purchase Date, as set forth in Section 3.08(d), whether
such Holder elects (1) to withdraw such Purchase Notice as to some or all
of the Securities to which such Purchase Notice relates (stating the
Principal Amount and certificate numbers of the Securities as to which
such withdrawal shall relate), or (2) to receive Cash in respect of the
entire Purchase Price for all Securities (or portions thereof) to which
such Purchase Notice relates; and
(ii) book-entry transfer or delivery of such Security (together with all
necessary endorsements) to the Paying Agent at any time (whether prior to, on or
after the Purchase Date) after delivery of the Purchase Notice at the offices of
the Paying Agent, such delivery being a condition to receipt by the Holder of
the Purchase Price therefor; provided, however, that such Purchase Price shall
be so paid pursuant to this Section 3.08 only if the Security so delivered to
the Paying Agent shall conform in all respects to the description thereof in the
related Purchase Notice.
If a Holder, in such Holder's Purchase Notice (and in any written notice
of withdrawal of a portion of a Holder's Securities previously submitted for
purchase pursuant to a Purchase Notice, in respect of the portion that remains
subject to the Purchase Notice), fails to indicate such Holder's choice with
respect to the election set forth in clause (D) of Section 3.08(a)(i), such
Holder shall be deemed to have elected to receive Cash in respect of the entire
Purchase Price for all Securities subject to such Purchase Notice in the
circumstances set forth in such clause (D).
The Company shall purchase from the Holder thereof, pursuant to this
Section 3.08, a portion of a Security only if and to the extent that the
Principal Amount of such portion to be repurchased is $1,000 or an integral
multiple of $1,000. Provisions of this Indenture that apply to the purchase of
all of a Security also apply to the purchase of any such portion of a Security.
-16-
<PAGE>
Any purchase by the Company contemplated pursuant to the provisions of
this Section 3.08 shall be consummated by the delivery of the consideration to
be received by the Holder promptly following the later of the Purchase Date and
the time of book-entry transfer or delivery of the Security.
Notwithstanding anything herein to the contrary, any Holder delivering to
the Paying Agent the Purchase Notice contemplated by this Section 3.08(a) shall
have the right to withdraw such Purchase Notice by delivery at any time prior to
the close of business on the Purchase Date of a written notice of withdrawal to
the Paying Agent in accordance with Section 3.10.
The Paying Agent shall promptly notify the Company of the receipt by it of
any Purchase Notice or written notice of withdrawal thereof.
(b) Company's Right to Elect Manner of Payment of Purchase Price. The
Company may elect with respect to any Purchase Date to pay the Purchase Price in
respect of the Securities to be purchased pursuant to Section 3.08(a) as of such
Purchase Date, in U.S. legal tender ("Cash") or Common Stock, or in any
combination of Cash and Common Stock, subject to the conditions set forth in
Sections 3.08(c) and (d). The Company shall designate, in the Company Notice
delivered pursuant to Section 3.08(e), whether the Company will purchase the
Securities for Cash or Common Stock, or, if a combination thereof, the
percentages of the Purchase Price of Securities in respect of which it will pay
in Cash and/or Common Stock; provided that the Company will pay Cash for
fractional interests in Common Stock. For purposes of determining the existence
of potential fractional interests, all Securities subject to purchase by the
Company held by a Holder shall be considered together (no matter how many
separate certificates are to be presented). Each Holder whose Securities are
purchased pursuant to this Section 3.08 shall receive the same percentage of
Cash and/or Common Stock in payment of the Purchase Price for such Securities,
except (i) as provided in Section 3.08(d) with regard to the payment of Cash in
lieu of fractional interests in Common Stock and (ii) in the event that the
Company is unable to purchase the Securities of a Holder or Holders for Common
Stock because any necessary qualifications or registrations of the Common Stock
under applicable federal or state securities laws cannot be obtained, in which
case the Company may purchase the Securities of such Holder or Holders for Cash.
Once the Company has given its Company Notice to Holders the Company may not
change its election with respect to the consideration (or components or
percentages of components thereof) to be paid except pursuant to this Section
3.08(b) or Section 3.08(d).
At least two Business Days before the Company Notice Date, the Company
shall deliver an Officers' Certificate to the Trustee specifying:
(i) the manner of payment selected by the Company;
(ii) the information required by Section 3.08(e);
(iii) if the Company elects to pay the Purchase Price, or a
specified percentage thereof, in Common Stock, that the conditions to such
manner of payment set forth in Section 3.08(d) have been or will be
complied with; and
(iv) whether the Company desires the Trustee to give the Company
Notice required by Section 3.08(e).
(c) Purchase with Cash. At the option of the Company, the Purchase Price
of Securities in respect of which a Purchase Notice pursuant to Section 3.08(a)
has been given, or a specified percentage thereof, may be paid by the Company
with Cash equal to the aggregate Purchase Price, or such specified percentage
thereof, as the case may be, of such Securities. If the Company elects to
purchase Securities, in whole or in part, with Cash, a Company Notice as
provided in Section 3.08(e) shall be sent to Holders (and to beneficial owners
as required by applicable law) not less than 20 Business Days prior to the
Purchase Date (the "Company Notice Date").
(d) Payment by Issuance of Common Stock. At the option of the Company, the
Purchase Price of Securities in respect of which a Purchase Notice pursuant to
Section 3.08(a) has been given, or a specified percentage thereof, may be paid
by the Company by the issuance of a number of shares of Common Stock equal to
the quotient obtained by dividing (i) the amount of Cash to which the Holders
would have been entitled had the Company elected to pay all or such specified
percentage, as the case may be, of the Purchase Price of such Securities in Cash
by (ii) the Market Price of a share of Common Stock, subject to the next
succeeding paragraph.
-17-
<PAGE>
The Company will not issue a fractional share of Common Stock in payment
of the Purchase Price. Instead the Company will pay Cash for the current market
value of the fractional share. The current market value of a fraction of a share
shall be determined by multiplying the Market Price by such fraction and
rounding the product to the nearest whole cent. If a Holder elects to have more
than one Security purchased, the number of shares of Common Stock issuable upon
repurchase shall be based on the aggregate amount of Securities to be purchased.
If the Company elects to purchase the Securities by the issuance of shares
of Common Stock, a Company Notice as provided in Section 3.08(e) shall be sent
to the Holders in the manner provided in Section 11.02 (and to beneficial owners
as required by applicable law) not later than the Company Notice Date.
The Company's right to exercise its election to purchase the Securities
pursuant to Section 3.08 through the issuance of shares of Common Stock shall be
conditioned upon:
(i) the Company having given timely Company Notice of election to
purchase all or a specified percentage of the Securities with Common Stock as
provided herein;
(ii) the registration of the shares of Common Stock to be issued in
respect of the payment of the specified percentage of the Purchase Price under
the Securities Act, unless the shares of Common Stock so issued can be resold by
the Securityholder receiving such shares without registration under the
Securities Act pursuant to Rule 144 under the Securities Act or otherwise
(unless such Securityholder is the Company or an Affiliate of the Company);
(iii) compliance with all other applicable federal and state securities
laws, if any, including any necessary qualification or registration under other
applicable federal and state securities laws or the availability of an exemption
from such qualification and registration;
(iv) the fact that the information necessary to calculate the Market
Price of the Common Stock is reported in a daily newspaper of national
circulation; and
(v) the receipt by the Trustee of an Officers' Certificate and an
Opinion of Counsel each stating that (A) the terms of the issuance of the Common
Stock are in conformity with this Indenture and (B) the shares of Common Stock
to be issued by the Company in payment of the specified percentage of the
Purchase Price in respect of Securities have been duly authorized and, when
issued and delivered pursuant to the terms of this Indenture in payment of the
specified percentage of the Purchase Price in respect of Securities, will be
validly issued, fully paid and nonassessable, and, in the case of such Officers'
Certificate, stating that conditions (i), (ii), (iii) and (iv) above have been
satisfied and, in the case of such Opinion of Counsel, stating that conditions
(ii) and (iii) above have been satisfied. Such Officers' Certificate shall also
set forth the number of shares of Common Stock to be issued for each $1,000
Principal Amount of Securities and the Sale Price of a share of Common Stock on
each Trading Day during the period during which the Market Price is calculated
and ending on the Purchase Date.
If such conditions are not satisfied with respect to a Holder or Holders
prior to or on the Purchase Date and the Company elected to purchase the
Securities to be purchased as of such Purchase Date pursuant to this Section
3.08 through the issuance of shares of Common Stock, the Company shall pay the
entire Purchase Price in respect of such Securities of such Holder or Holders in
Cash.
The "Market Price" means the average of the Sale Prices of the Common
Stock for the five Trading Day period ending on the third Business Day prior to
the applicable Purchase Date if the third Business Day prior to the applicable
Purchase Date is a Trading Day, or if it is not a Trading Day, then on the last
Trading Day prior to such third Business Day, appropriately adjusted to take
into account the occurrence, during the period commencing on the first of such
Trading Days during such five Trading Day period and ending on such Purchase
Date, of any event described in Section 10.06; subject, however, to the
conditions set forth in Sections 10.07 and 10.08. The "Sale Price" of the Common
Stock on any date means the closing per share sale price (or if no closing sale
price is reported the average of the bid and ask prices or, if more than one in
either case, the average of the average bid and average ask prices) on such date
as reported in the composite transactions for the principal United States
securities exchange on which the Common Stock is traded or, if the Common Stock
is not listed on a United States national or regional stock exchange, as
reported by the Nasdaq National Market.
-18-
<PAGE>
Upon determination of the actual number of shares of Common Stock in
accordance with the foregoing provisions, the Company will publish such
determination in a daily newspaper of national circulation.
(e) Notice of Election. The Company's notices of election to purchase with
Cash or Common Stock, or any combination thereof, shall be sent to the Holders
(and to beneficial owners as required by applicable law) in the manner provided
in Section 11.02 at the time specified in Section 3.08(c) or (d), as applicable
(each, a "Company Notice"). Such Company Notices shall state the manner of
payment elected and shall contain the following information:
In the event the Company has elected to pay a Purchase Price (or a
specified percentage thereof) with Common Stock, the Company Notice shall:
(i) state that each Holder whose securities are to be repurchased
will receive Common Stock with a Market Price determined as of a specified date
prior to the Purchase Date equal to such specified percentage of the Purchase
Price of the Securities delivered by such Holder (except any Cash amount to be
paid in lieu of fractional share); and
(ii) set forth the method of calculating the Market Price and state
that because the Market Price of Common Stock will be determined prior to the
Purchase Date, the Holders will bear the market risk with respect to the value
of the Common Stock to be received from the date such Market Price is determined
to the Purchase Date.
In any case, each Company Notice shall state:
(A) the Purchase Price and Conversion Rate;
(B) the name and address of the Paying Agent and the Conversion
Agent;
(C) that Securities as to which a Purchase Notice has been given
may be converted only if the applicable Purchase Notice has been withdrawn
in accordance with the terms of this Indenture;
(D) that Securities must be surrendered to the Paying Agent to
collect payment;
(E) that the Purchase Price for any Security as to which a
Purchase Notice has been given and not withdrawn will be paid promptly
following the later of the Purchase Date and the time of surrender of such
Security as described in (D);
(F) the procedures the Holder must follow under this Section
3.08;
(G) briefly, the conversion rights of the Securities; and
(H) the procedures for withdrawing a Purchase Notice (including,
without limitation, for a conditional withdrawal pursuant to the terms of
Section 3.08(a)(i)(D) or Section 3.10).
At the Company's request, the Trustee shall give the Company Notice in the
Company's name and at the Company's expense; provided, however, that, in all
cases, the text of the Company Notice shall be prepared by the Company.
(f) Covenants of the Company. All shares of Common Stock delivered upon
conversion or purchase of the Securities shall be duly and validly issued and
fully paid and non-assessable and shall be free from preemptive rights and free
of any lien or adverse claim.
-19-
<PAGE>
The Company will endeavor promptly to comply with all Federal and state
securities laws regulating the issuance and delivery of shares of Common Stock
upon repurchase of Securities, if any, and will use its best efforts to list or
cause to have quoted all such shares of Common Stock on each United States
national securities exchange or over-the-counter or other domestic market on
which the Common Stock is then listed or quoted.
(g) Procedure upon Purchase. On the Business Day following the Purchase
Date, the Company shall deposit with the Trustee or with the Paying Agent Cash
(in respect of a Cash purchase under Section 3.08(c) or for fractional
interests, as applicable), or shares of Common Stock, or a combination thereof,
as applicable, sufficient to pay the aggregate Purchase Price of the Securities
to be purchased pursuant to this Section 3.08. As soon as practicable after the
Purchase Date, the Company shall deliver to each Holder entitled to receive
Common Stock, through the Paying Agent, a certificate for the number of full
shares of Common Stock, as applicable, issuable in payment of such Purchase
Price and Cash in lieu of any fractional interests. Any issuance of Common Stock
in respect of the Purchase Price shall be deemed to have been effected
immediately prior to the close of business on the applicable Purchase Date and
the Person or Persons in whose name or names any certificate or certificates for
Common Stock shall be issuable upon such repurchase shall be deemed to have
become on such Purchase Date the holder or holders of record of the shares
represented thereby; provided, however, that any surrender for repurchase on a
date when the stock transfer books of the Company shall be closed shall
constitute the Person or Persons in whose name or names the certificate or
certificates for such shares are to be issued as the recordholder or holders
thereof for all purposes at the opening of business on the next succeeding day
on which such stock transfer books are open. Subject to Section 3.08(d), no
payment or adjustment will be made for dividends on the Common Stock the record
date for which occurred on or prior to the Purchase Date.
(h) Taxes. If a Holder of a Security is paid in Common Stock, the Company
shall pay any documentary, stamp or similar issue or transfer tax due on such
issue of shares of Common Stock. However, the Holder shall pay any such tax
which is due because the Holder requests the shares of Common Stock to be issued
in a name other than the Holder's name. The Paying Agent may refuse to deliver
the certificates representing the Common Stock being issued in a name other than
the Holder's name until the Paying Agent receives a sum sufficient to pay any
tax which will be due because the shares of Common Stock are to be issued in a
name other than the Holder's name. Nothing herein shall preclude any income tax
withholding required by law or regulations.
Section III.9. Redemption at the Option of the Holder upon a Change of
Control
(a) Right to Require Repurchase. If a Change of Control shall occur, then
each Holder shall have the right, at the Holder's option, to require the Company
to repurchase, and upon the exercise of such right the Company shall repurchase,
all of such Holder's Securities, or any portion of the Principal Amount thereof
that is equal to U.S. $1,000 or any integral multiple of U.S. $1,000 in excess
thereof, on the date (the "Repurchase Date") that is 45 days after the date of
the Change of Control Company Notice at a purchase price (the "Change of Control
Redemption Price") equal to the Issue Price plus accrued Original Issue Discount
and interest, if any, and Liquidated Damages, if any, to the Repurchase Date.
Such right to require the repurchase of the Securities shall not continue after
a discharge of the Company from its obligations with respect to the Securities
in accordance with Article VIII, unless a Change of Control shall have occurred
prior to such discharge. At the option of the Company, the Change of Control
Redemption Price, or a portion thereof, may be paid in Cash or, subject to the
conditions specified in Section 3.09(c), in Common Stock.
(b) Notices; Method of Exercising Repurchase Right, Etc. (i) Unless the
Company shall have theretofore called for redemption all of the outstanding
Securities, on or before the 30th day after the occurrence of a Change of
Control, the Company shall give to all Holders of Securities, in the manner
provided in Section 11.02, notice (the "Change of Control Company Notice") of
the occurrence of the Change of Control and of the repurchase right set forth
herein arising as a result thereof. The Company shall also deliver a copy of
such notice of a repurchase right to the Trustee.
Each Change of Control Company Notice shall state:
-20-
<PAGE>
(A) the Repurchase Date,
(B) the date by which the repurchase right must be exercised,
(C) the Change of Control Redemption Price,
(D) a description of the procedure which a Holder must follow to
exercise a repurchase right, and the place or places where such
Securities are to be surrendered for payment of the Change of
Control Redemption Price,
(E) that on the Repurchase Date the Change of Control Redemption
Price will become due and payable upon each such Security
designated by the Holder to be repurchased, and that interest,
if any, and Original Issue Discount shall cease to accrue on and
after said date,
(F) the Conversion Rate then in effect, the date on which the right
to convert the Principal Amount of the Securities to be
repurchased will terminate and the place or places where such
Securities may be surrendered for conversion, and
(G) the place or places that the certificate required by the
Securities to elect repurchase upon a Change of Control shall be
delivered, and the form of such certificate.
In addition, at least two Business Days preceding the Repurchase
Date, the Company shall give to all Holders of the Securities, in the
manner provided in Section 11.02, notice specifying whether the Change of
Control Redemption Price will be payable in cash or Common Stock or a
combination of Cash and Common Stock (specifying the percentage of each)
and shall deliver a copy of such notice to the Trustee.
At the Company's request, the Trustee shall give the Change of
Control Company Notice or such notice with respect to the payment of the
purchase price in the Company's name and at the Company's expense;
provided, however, that, in all cases, the text of either such notice
shall be prepared by the Company.
No failure of the Company to give the foregoing notices or defect
therein shall limit any Holder's right to exercise a repurchase right or
affect the validity of the proceedings for the repurchase of Securities.
If any of the foregoing provisions or other provisions of this
Article are inconsistent with applicable law, such law shall govern.
(ii) To exercise a repurchase right, a Holder shall deliver to the
Trustee on or before the 30th day after the date of the Change of Control
Company Notice (A) written notice (a "Repurchase Notice") of the Holder's
exercise of such right, which notice shall set forth (w) the certificate
number of the Security which the Holder will deliver to be purchased; (x)
the portion of the Principal Amount of such Security to be purchased,
which portion must be $1,000 in Principal Amount or an integral multiple
thereof; (y) that such Security shall be purchased as of the Repurchase
Date pursuant to the terms and conditions specified in paragraph 6(b) of
the Securities and in this Indenture; and (z) if the Company elects to pay
the Change of Control Redemption Price to be paid as of such Repurchase
Date, in whole or in part, in Common Stock but such portion of the Change
of Control Redemption Price shall ultimately be payable to such Holder in
Cash because any of the conditions to the payment of the Change of Control
Redemption in Common Stock are not satisfied prior to or on the Repurchase
Date, as set forth in Section 3.09(d) or (e), whether such Holder elects
(1) to withdraw such Purchase Notice as to some or all of the Securities
to which such Repurchase Notice relates (stating the Principal Amount and
certificate numbers of the Securities as to which such withdrawal shall
relate), or (2) to receive Cash in respect of the entire Change of Control
Redemption Price for all Securities (or portions thereof) to which such
Repurchase Notice relates; and (B) via book-entry transfer or delivery,
such Security to the Paying Agent at any time (whether prior to, on or
after the Repurchase Date) after delivery of such Repurchase Notice
(together with all necessary endorsements) at the offices of the Paying
Agent, such delivery being a condition to receipt by the Holder of the
Change of Control Redemption Price therefor; provided, however, that such
Purchase Price shall be so paid pursuant to this Section 3.09 only if the
Security so delivered to the Paying Agent shall conform in all respects to
the description thereof in such Repurchase Notice. If a Holder, in such
Holder's Repurchase Notice pursuant to this section 3.09 (and in any
withdrawal notice with respect to a portion of a Holder's Securities
previously submitted for purchase pursuant to a Repurchase Notice, the
portion that remains subject to such Repurchase Notice), fails to indicate
such Holder's choice with respect to the election set forth in clause (z)
of this paragraph, such Holder shall be deemed to have elected to receive
Cash in respect of the entire Change of Control Redemption Price for all
Securities subject to such Repurchase Notice in the circumstances set
forth in such clause (z).
-21-
<PAGE>
Any purchase by the Company contemplated pursuant to the provisions of
this Section 3.09 shall be consummated by the delivery of the consideration to
be received by the Holder promptly following the later of the Repurchase Date
and the time of book-entry transfer or delivery of the Security.
Notwithstanding anything herein to the contrary, any Holder delivering to
the Paying Agent the Repurchase Notice contemplated by this Section 3.09 shall
have the right to withdraw such notice by delivery at any time prior to the
close of business on the Repurchase Date of a withdrawal notice to the Paying
Agent in accordance with Section 3.10.
The Paying Agent shall promptly notify the Company of the receipt by it of
any Repurchase Notice of a Holder pursuant to this Section 3.09.
(c) Company's Right to Elect Manner of Payment of Change of Control
Redemption Price. The Company may elect with respect to any Repurchase Date to
pay the Change of Control Redemption Price in respect of the Securities to be
purchased pursuant to Section 3.08(a) as of such Repurchase Date, in Cash or
Common Stock, or in any combination of Cash and Common Stock, subject to the
conditions set forth in Sections 3.09(d) and (e); provided that the Company will
pay Cash for fractional interests in Common Stock. For purposes of determining
the existence of potential fractional interests, all Securities subject to
purchase by the Company held by a Holder shall be considered together (no matter
how many separate certificates are to be presented). Each Holder whose
Securities are purchased pursuant to this Section 3.09 shall receive the same
percentage of Cash and/or Common Stock in payment of the Change of Control
Redemption Price for such Securities, except (i) as provided in this Section
3.09(c) with regard to the payment of Cash in lieu of fractional interests in
Common Stock and (ii) in the event that the Company is unable to purchase the
Securities of a Holder or Holders for Common Stock because any necessary
qualifications or registrations of the Common Stock under applicable federal or
state securities laws cannot be obtained, in which case the Company may purchase
the Securities of such Holder or Holders for Cash. Once the Company has given
its Change of Control Company Notice to Holders the Company may not change its
election with respect to the consideration (or components or percentages of
components thereof) to be paid except pursuant to this Section 3.09(c) or
Section 3.09(d).
(d) Payment by Issuance of Common Stock. At the option of the Company, the
Change of Control Redemption Price of Securities in respect of which a
Repurchase Notice of a Holder pursuant to Section 3.09(b) has been given, or a
specified percentage thereof, may be paid by the Company by the issuance of a
number of shares of Common Stock equal to the quotient obtained by dividing (i)
the amount of Cash to which the Holders would have been entitled had the Company
elected to pay all or such specified percentage, as the case may be, of the
Change of Control Redemption Price of such Securities in Cash by (ii) 95% of the
Market Price of a share of Common Stock, subject to the next succeeding
paragraph.
The Company will not issue a fractional share of Common Stock in payment
of the Change of Control Redemption Price. Instead the Company will pay Cash for
the current market value of the fractional share. The current market value of a
fraction of a share shall be determined by multiplying the Market Price by such
fraction and rounding the product to the nearest whole cent. If a Holder elects
to have more than one Security purchased, the amount of Cash payable in respect
of fractional shares of Common Stock shall be based on the aggregate amount of
Securities to be purchased.
-22-
<PAGE>
The Company's right to exercise its election to pay the Change of Control
Redemption Price, in whole or in part, through the issuance of shares of Common
Stock shall be conditioned upon:
(i) the Company having given timely the notice required pursuant to
Section 3.09(a) of its election to purchase all or a specified percentage
of the Securities with Common Stock as provided herein;
(ii) the registration of the shares of Common Stock to be issued in
respect of the payment of the specified percentage of the Change of
Control Redemption Price under the Securities Act, unless the shares of
Common Stock so issued can be resold by the Securityholder receiving such
shares without registration under the Securities Act pursuant to Rule 144
under the Securities Act or otherwise (unless such Securityholder is the
Company or an Affiliate of the Company);
(iii)compliance with all other applicable federal and state
securities laws, if any, including any necessary qualification or
registration under other applicable federal and state securities laws or
the availability of an exemption from such qualification and registration;
and
(iv) the fact that the information necessary to calculate the Market
Price of the Common Stock is reported in a daily newspaper of national
circulation; and
(v) the receipt by the Trustee of an Officers' Certificate and an
Opinion of Counsel each stating that (A) the terms of the issuance of the
Common Stock are in conformity with this Indenture and (B) the shares of
Common Stock to be issued by the Company in payment of the specified
percentage of the Change of Control Redemption Price in respect of
Securities have been duly authorized and, when issued and delivered
pursuant to the terms of this Indenture in payment of the specified
percentage of the Change of Control Redemption Price in respect of
Securities, will be validly issued, fully paid and nonassessable, and, in
the case of such Officers' Certificate, stating that conditions (i), (ii)
and (iii) above have been satisfied and, in the case of such Opinion of
Counsel, stating that conditions (ii) and (iii) above have been satisfied.
Such Officers' Certificate shall also set forth the number of shares of
Common Stock to be issued for each $1,000 Principal Amount of Securities
and the Sale Price of a share of Common Stock on each Trading Day during
the period during which the Market Price is calculated and ending on the
Repurchase Date.
If such conditions are not satisfied with respect to a Holder or Holders
prior to or on the Repurchase Date and the Company elected to purchase the
Securities to be purchased as of such Repurchase Date pursuant to this Section
3.08 through the issuance of shares of Common Stock, the Company shall pay the
entire Change of Control Redemption Price in respect of such Securities of such
Holder or Holders in Cash.
Upon determination of the actual number of shares of Common Stock in
accordance with the foregoing provisions, the Company will publish such
determination in a daily newspaper of national circulation.
(e) Procedure upon Purchase. The provisions of 3.08(f), (g) and (h) shall
apply, mutatis mutandis, to the delivery of Cash and shares of Common Stock in
satisfaction of the Change of Control Redemption Price pursuant to this Section
3.09.
Section 11.10. Effect of Purchase Notice or Repurchase Notice. Upon
receipt by the Company of the Purchase Notice or Repurchase Notice specified in
Section 3.08(a) or Section 3.09(b), as applicable, the Holder of the Security in
respect of which such Purchase Notice or Repurchase Notice, as the case may be,
was given shall (unless such Purchase Notice or Repurchase Notice is withdrawn
as specified in the following two paragraphs) thereafter be entitled to receive
solely the Purchase Price or Change of Control Redemption Price, as the case may
be, with respect to such Security. Such Purchase Price or Change of Control
Redemption Price shall be paid to such Holder promptly following the later of
(x) the Purchase Date or the Repurchase Date, as the case may be, with respect
to such Security (provided the conditions in Section 3.08(a) or Section 3.09(b),
as applicable, have been satisfied) and (y) the time of delivery of such
Security to the Paying Agent by the Holder thereof in the manner required by
Section 3.08(a) or Section 3.09(b), as applicable. Securities in respect of
which a Purchase Notice or Repurchase Notice, as the case may be, has been given
by the Holder thereof may not be converted for shares of Common Stock on or
after the date of the delivery of such Purchase Notice or Repurchase Notice, as
the case may be, unless such Purchase Notice or Repurchase Notice, as the case
may be, has first been validly withdrawn as specified in the following two
paragraphs.
-23-
<PAGE>
A Purchase Notice or Repurchase Notice, as the case may be, may be
withdrawn by means of a written notice of withdrawal delivered to the office of
the Paying Agent at any time prior to the close of business on the Purchase Date
or the Repurchase Date, as the case may be, to which it relates specifying:
(a) the certificate number of the Security in respect of which such notice
of withdrawal is being submitted;
(b) the Principal Amount of the Security with respect to which such notice
of withdrawal is being submitted; and
(c) the Principal Amount, if any, of such Security which remains subject
to the original Purchase Notice or Repurchase Notice, as the case may be, and
which has been or will be delivered for purchase by the Company.
A written notice of withdrawal of a Purchase Notice or Repurchase Notice,
as the case may be, may be in the form of (i) a conditional withdrawal contained
in a Purchase Notice pursuant to the terms of Section 3.08(a)(i)(D) or
3.09(b)(ii)(1), as the case may be, or (ii) a conditional withdrawal containing
the information set forth in Section 3.08(a)(i)(D) or 3.09(b)(ii)(1), as the
case may be, and the preceding paragraph and contained in a written notice of
withdrawal delivered to the Paying Agent as set forth in the preceding
paragraph.
Section III.11. Deposit of Purchase Price or Change of Control Redemption
Price. On or before the Business Day following a Purchase Date or a Repurchase
Date, as the case may be, the Company shall deposit with the Trustee or with the
Paying Agent (or, if the Company or an Affiliate of the Company is acting as the
Paying Agent, shall segregate and hold in trust as provided in Section 2.04) an
amount of Cash and/or shares of Common Stock, if permitted hereunder, sufficient
to pay the aggregate Purchase Price or Change of Control Redemption Price, as
the case may be, of all the Securities or portions thereof which are to be
purchased as of such Purchase Date or Repurchase Date, as the case may be.
Section III.12. Securities Purchased in Part. Any Security that is to be
purchased pursuant to Section 3.08 or Section 3.09 only in part shall be
surrendered at the office of the Paying Agent (with, if the Company or the
Trustee so requires, due endorsement by, or a written instrument of transfer in
form satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or such Holder's attorney duly authorized in writing) and the Company
shall execute and the Trustee shall authenticate and deliver to the Holder of
such Security, without service charge, a new Security or Securities, of any
authorized denomination as requested by such Holder in aggregate Principal
Amount equal to, and in exchange for, the portion of the Principal Amount of the
Security so surrendered which is not purchased or redeemed.
Section III.13. Covenant to Comply with Securities Laws upon Purchase of
Securities. In connection with any offer to purchase of Securities under Section
3.08 or 3.09 hereof, the Company shall (a) comply with Rule 13e-4 (which term,
as used herein, includes any successor provision thereto) under the Exchange
Act, if applicable, (b) file the related Schedule 13E-4 (or any successor
schedule, form or report) under the Exchange Act, if applicable, and (c)
otherwise comply with all Federal and state securities laws so as to permit the
rights and obligations under Section 3.08 and 3.09 to be exercised in the time
and in the manner specified in Section 3.08 and 3.09.
Section III.14. Repayment to the Company. Subject to Section 8.02 hereof,
the Trustee and the Paying Agent shall return to the Company any Cash or shares
of Common Stock or other property that remain unclaimed as provided in paragraph
13 of the Securities, together with interest or dividends, if any, thereon, held
by them for the payment of a Purchase Price or Change of Control Redemption
Price, as the case may be; provided, however, that to the extent that the
aggregate amount of Cash or shares of Common Stock deposited by the Company
pursuant to Section 3.11 exceeds the aggregate Purchase Price or Change of
Control Redemption Price, as the case may be, of the Securities or portions
thereof which the Company is obligated to purchase as of the Purchase Date or
Repurchase Date, as the case may be, then promptly after the Business Day
following the Purchase Date or Repurchase Date, as the case may be, the Trustee
and the Paying Agent shall return any such excess to the Company together with
interest or dividends, if any, thereon.
-24-
<PAGE>
Section III.15. No Purchase in Event of Default. There shall be no
purchase of any Securities pursuant to Section 3.08 or repurchase pursuant to
Section 3.09 (other than through the issuance of Common Stock in payment of the
Purchase Price or Change of Control Redemption Price, including Cash in lieu of
any fractional shares) if there has occurred (prior to, on or after, as the case
may be, the giving, by the Holders of such Securities, of the required Purchase
Notice or Repurchase Notice, as the case may be) and is continuing an Event of
Default (other than a default in the payment of the Purchase Price or Change of
Control Redemption Price, as the case may be, with respect to such Securities).
ARTICLE IV
COVENANTS
Section IV.1. Payment of Securities. The Company shall promptly make all
payments in respect of the Securities on the dates and in the manner provided in
the Securities or pursuant to this Indenture. The Principal Amount, Issue Price,
accrued Original Issue Discount, accrued Liquidated Damages, if any, Redemption
Price, Purchase Price, Change of Control Redemption Price and interest, if any,
shall be considered paid on the applicable date due or, in the case of a
Purchase Price or Change of Control Redemption Price, on the Business Day
following the applicable Purchase Date or Repurchase Date, as the case may be,
if on such date the Trustee or the Paying Agent holds, in accordance with this
Indenture, money or securities, if permitted hereunder, sufficient to pay all
such amounts then due.
The Company shall pay interest on overdue amounts at the rate set forth in
paragraph 1 of the Securities and it shall pay interest on overdue interest at
the same rate compounded semiannually (to the extent that the payment of such
interest shall be legally enforceable), which interest on overdue interest shall
accrue from the date such amounts became overdue and, in the case of any late
payment of the Principal Amount, Purchase Price or Change of Control Redemption
Price, shall be in lieu of, and not in addition to, the continued accrual of
Original Issue Discount. Such interest shall be payable on demand.
Section IV.2. Financial Information; SEC Reports. The Company will deliver
to the Trustee (a) as soon as available (and in any event no later than the time
within which the Company is required to file its Form 10-K with the SEC) after
the end of each fiscal year of the Company (i) a consolidated balance sheet of
the Company and its Subsidiaries as of the end of such fiscal year and the
related consolidated statements of operations, stockholders' equity and cash
flows for such fiscal year, all reported on by an independent public accountant
of nationally recognized standing and (ii) a report containing a management's
discussion and analysis of the financial condition and results of operations and
a description of the business and properties of the Company, and (b) as soon as
available (and in any event no later than the time within which the Company is
required to file its Forms 10-Q with the SEC) after the end of each of the first
three quarters of each fiscal year of the Company (i) an unaudited consolidated
financial report for such quarter and (ii) a report containing a management's
discussion and analysis of the financial condition and results of operations of
the Company; provided that the foregoing shall not be required for any fiscal
year or quarter, as the case may be, with respect to which the Company files or
expects to file with the Trustee an annual report or quarterly report, as the
case may be, pursuant to the third paragraph of this Section 4.02.
So long as the Securities or the Common Stock issued upon conversion of
the Securities are Restricted Securities, if the Company is not subject to
either Section 13 or 15(d) of the Exchange Act, the Company shall at the request
of any Holder of Securities (or holders of Common Stock issued upon conversion
of the Securities) provide to such Holder of Securities (or holders of such
Common Stock) and any prospective purchaser designated by such Holders (or
holders of such Common Stock), as the case may be, such information, if any,
required by Rule 144A(d)(4) under the Securities Act.
The Company shall file with the Trustee, within 15 days after it files
such annual and quarterly reports, information, documents and other reports with
the SEC, copies of its annual report and of the information, documents and other
-25-
<PAGE>
reports (or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe) which the Company is required to file with the
SEC pursuant to Section 13 or 15(d) of the Exchange Act
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).
Section IV.3. Compliance Certificate. The Company shall deliver to the
Trustee, within 120 days after the end of each fiscal year of the Company, an
Officers' Certificate in which one of the two Officers signing such certificate
is either the principal executive officer, principal financial officer or
principal accounting officer of the Company, stating whether or not to the best
knowledge of the signers thereof the Company is in Default in the performance
and observance of any of the terms, provisions and conditions of this Indenture
(without regard to any period of grace or requirement of notice provided
hereunder) and, if the Company shall be in Default, specifying all such Defaults
and the nature and status thereof of which the signers may have knowledge.
The Company will deliver to a Trust Officer of the Trustee, forthwith upon
becoming aware of any Default in the performance or observance of any covenant,
agreement or condition contained in this Indenture, or any Event of Default, an
Officers' Certificate specifying with particularity such Default or Event of
Default and further stating what action the Company has taken, is taking or
proposes to take with respect thereto.
Any notice required to be given under this Section 4.03 shall be delivered
to a Trust Officer of the Trustee at its Corporate Trust Office.
Section IV.4. Further Instruments and Acts. Upon request of the Trustee,
the Company will execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.
Section IV.5. 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 may be presented or surrendered for payment, where Securities 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 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 may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes.
Section IV.6. Existence. Subject to Article V, the Company will do or
cause to be done all things necessary to preserve and keep in full force and
effect its existence and rights (charter and statutory); provided, however, that
the Company shall not be required to preserve any such right if the Board of
Directors, in its sole discretion, shall determine that the preservation thereof
is no longer desirable in the conduct of the business of the Company and that
the loss thereof is not disadvantageous in any material respect to the Holders.
Section IV.7. Maintenance of Properties. The Company will cause all
properties used or useful in the conduct of its business or the business of any
Subsidiary to be maintained and kept in good condition, repair and working order
-26-
<PAGE>
and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that nothing in this Section 4.07 shall prevent
the Company from discontinuing the operation or maintenance of any of such
properties if such discontinuance is, in the judgment of the Company, desirable
in the conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
Section IV.8. Payment of Taxes and Other Claims. The Company will pay or
discharge, or cause to be paid or discharged, before the same may become
delinquent, (a) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Subsidiary, or upon the income, profits or
property of the Company or any Subsidiary, (b) all claims for labor, materials
and supplies which, if unpaid, might by law become a lien or charge upon the
property of the Company or any Subsidiary, and (c) all stamp and other duties,
if any, which may be imposed by the United States or any political subdivision
thereof or therein in connection with the issuance, transfer, exchange or
conversion of any Securities or with respect to this Indenture; provided,
however, that, in the case of clauses (a) and (b), the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim (i) if the failure to do so will not, in the
aggregate, have a material adverse impact on the Company, or (ii) if the amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
Section IV.9. Calculation of Original Issue Discount. The Company shall
file with the Trustee promptly at the end of each calendar year (i) a written
notice specifying the amount of Original Issue Discount (including daily rates
and accrual periods) accrued on outstanding Securities as of the end of such
year and (ii) such other specific information relating to such Original Issue
Discount as may then be relevant under the Internal Revenue Code of 1986, as
amended from time to time.
-27-
<PAGE>
ARTICLE V
SUCCESSOR CORPORATION
Section V.1. When the Company May Merge or Transfer Assets. The Company
shall not consolidate with or merge into any other Person or convey, transfer or
lease its properties and assets substantially as an entirety to another Person,
unless:
(a) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which acquires
by conveyance, transfer or lease the properties and assets of the Company
substantially as an entirety shall be a corporation, limited liability company,
partnership or trust organized and validly existing under the laws of the United
States or any State thereof or the District of Columbia, and shall expressly
assume by an indenture supplemental hereto, executed and delivered to the
Trustee in form satisfactory to the Trustee, the due and punctual payment of the
Principal Amount, Issue Price, accrued Original Issue Discount, accrued
Liquidated Damages, if any, Redemption Price, Purchase Price, Change of Control
Redemption Price or interest, if any, on the Securities, according to their
tenor, and the due and punctual performance of all of the covenants and
obligations of the Company under the Securities and this Indenture, and shall
have provided for conversion rights in accordance with the Indenture;
(b) immediately after giving effect to such transaction, no Default
shall have occurred and be continuing; and
(c) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture,
comply with this Article V and that all conditions precedent herein provided for
relating to such transaction have been satisfied.
The successor Person formed by such consolidation or into which the
Company is merged or the successor Person to which such conveyance, transfer or
lease 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 had been named as the Company herein; and thereafter, except in
the case of a lease, the Company shall be discharged from all obligations and
covenants under this Indenture and the Securities.
ARTICLE VI
DEFAULTS AND REMEDIES
Section VI.1. Events of Default. An "Event of Default" occurs if:
(a) the Company defaults in the payment of the Principal Amount,
Issue Price, accrued Original Issue Discount, accrued Liquidated Damages, if
any, interest, if any, Redemption Price, Purchase Price or Change of Control
Redemption Price on any Security when the same becomes due and payable at its
Stated Maturity, upon redemption, upon declaration, when due for purchase by the
Company or otherwise, as applicable, provided that, in the case of a default in
the payment of Liquidated Damages, such default in payment of Liquidated Damages
continues for a period of 30 days;
(b) the Company fails to comply with any of its agreements or
covenants in the Securities or this Indenture (other than those referred to in
clause (a) above) and such failure continues for 60 days after receipt by the
Company of a Notice of Default (plus an additional 60 days in the case of
defaults subject to cure, provided the Company commences such cure within the
initial 60 days and is diligently pursuing such cure);
(c) any default which results in the acceleration of any Indebtedness
of the Company or any of its Subsidiaries in an aggregate principal amount of
$25 million or more;
-28-
<PAGE>
(d) a decree or order by a court having jurisdiction in the premises
shall have been entered adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization of the Company
under any Bankruptcy Law, and such decree or order shall have continued
undischarged and unstayed for a period of 60 consecutive days; or a decree or
order of a court having jurisdiction in the premises of the appointment of a
receiver or liquidator or trustee or assignee in bankruptcy or insolvency of the
Company or of its property, or for the winding-up or liquidation of its affairs,
shall have been entered, and such decree or order shall have remained in force
undischarged and unstayed of a period of 60 consecutive days; or
(e) the Company shall institute proceedings to be adjudicated a
voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding
against it, or shall file a petition or answer or consent seeking reorganization
under any Bankruptcy Law, or shall consent to the filing of any such petition,
or shall consent to the appointment of a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of it or of its property or shall make an
assignment for the benefit of creditors, or shall admit in writing its inability
to pay its debts generally as they become due.
"Bankruptcy Law" means Title 11, United States Code, or any similar
Federal or state law for the relief of debtors.
A Default under clause (b) above is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 25% in aggregate
Principal Amount of the Securities at the time outstanding notify the Company
and the Trustee, of the Default and the Company does not cure such Default (and
such Default is not waived) within the time specified in clause (b) above after
actual receipt of such notice (a "Notice of Default"). Any such notice must
specify the Default, demand that it be remedied and state that such notice is a
Notice of Default.
Section VI.2. Acceleration. If an Event of Default (other than an Event of
Default specified in Section 6.01(d) or (e)) occurs and is continuing, the
Trustee by notice to the Company, or the Holders of at least 25% in aggregate
Principal Amount of the Securities at the time outstanding by notice to the
Company and the Trustee, may declare the Issue Price and accrued Original Issue
Discount and interest, if any, and any Liquidated Damages to the date of
declaration on all the Securities to be immediately due and payable. Upon such a
declaration, such Issue Price and accrued Original Issue Discount and interest,
if any, and any such Liquidated Damages shall be due and payable immediately. If
an Event of Default specified in Section 6.01(d) or (e) occurs and is
continuing, the Issue Price and accrued Original Issue Discount and interest, if
any, and any Liquidated Damages on all Securities shall become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holders. The Holders of a majority in aggregate Principal
Amount of the Securities at the time outstanding, by notice to the Company and
the Trustee (and without notice to any other Securityholder), may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of the Issue Price and accrued Original Issue Discount
and interest, if any, and any Liquidated Damages that have become due solely as
a result of acceleration. No such rescission shall affect any subsequent Default
or impair any right consequent thereto.
Section VI.3. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of the Issue Price and accrued Original Issue Discount, interest, if any,
Liquidated Damages, if any, and any other amounts payable in respect of the
Securities or to enforce the performance of any provision of the Securities or
this Indenture.
The Trustee may maintain a proceeding even if the Trustee does not possess
any of the Securities or does not produce any of the Securities 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.
Section VI.4. Waiver of Past Defaults. The Holders of a majority in
aggregate Principal Amount of the Securities at the time outstanding, by notice
to the Company and the Trustee (and without notice to any other Securityholder),
may waive an existing Default and its consequences except (a) an Event of
-29-
<PAGE>
Default described in Section 6.01(a), (b) a Default in respect of a provision
that under Section 9.02 cannot be amended without the consent of each
Securityholder affected, or (c) a Default with respect to the right of the
Holder to convert any Security in accordance with the terms of Article X. When a
Default is waived, it is deemed cured, but no such waiver shall extend to any
subsequent or other Default or impair any consequent right.
Section VI.5. Control by Majority. The Holders of a majority in aggregate
Principal Amount of the Securities at the time outstanding may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or of exercising any trust or power conferred on the Trustee. However,
the Trustee may refuse to follow any direction that conflicts with law or this
Indenture or that the Trustee determines in good faith is unduly prejudicial to
the rights of other Holders or would involve the Trustee in personal liability
unless the Trustee is offered indemnity satisfactory to it.
Section VI.6. Limitation on Suits. A Securityholder may not pursue any
remedy with respect to this Indenture or the Securities unless:
(a) the Holder gives to the Company and the Trustee written notice
stating that an Event of Default is continuing;
(b) the Holders of at least 25% in aggregate Principal Amount of the
Securities at the time outstanding make a written request to the Trustee
to pursue the remedy;
(c) such Holder or Holders offer to the Trustee security or indemnity
reasonably satisfactory to it against any cost, liability or expense
satisfactory to the Trustee;
(d) the Trustee does not comply with the request within 60 days after
receipt of the notice, the request and the offer of security or indemnity;
and
(e) the Holders of a majority in aggregate Principal Amount of the
Securities at the time outstanding do not give the Trustee a direction
inconsistent with the request during such 60 day period.
No Securityholder may use this Indenture to prejudice the rights of any
other Securityholder or to obtain a preference or priority over any other
Securityholder.
Section VI.7. Rights of Holders to Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder to receive payment of
the Principal Amount, Issue Price, accrued Original Issue Discount, accrued
Liquidated Damages, if any, Redemption Price, Purchase Price, Change of Control
Redemption Price or interest, if any, in respect of a default in the payment of
any such amounts on a Security held by such Holder, on or after the respective
due dates expressed in such Security and to convert the Securities in accordance
with Article X, or to bring suit for the enforcement of any such payment on or
after such respective dates or the right to convert, shall not be impaired or
adversely affected without the consent of each such Holder.
Section VI.8. Collection Suit by Trustee. If an Event of Default described
in Section 6.01(a) occurs and is continuing, the Trustee may recover judgment in
its own name and as trustee of an express trust against the Company for the
whole amount owing with respect to the Securities and the amounts provided for
in Section 7.07.
Section VI.9. Trustee May File Proofs of Claim. In case of the pendency of
any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Securities or the property of the
Company or of such other obligor or their creditors, the Trustee (irrespective
of whether the Principal Amount, Issue Price, accrued Original Issue Discount,
accrued Liquidated Damages, if any, Redemption Price, Purchase Price, Change of
Control Redemption Price or interest, if any, in respect of the Securities shall
then be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Company
for the payment of any such amount) shall be entitled and empowered, by
intervention in such proceeding or otherwise,
-30-
<PAGE>
(a) to file and prove a claim for the whole amount of the Principal
Amount, Issue Price, accrued Original Issue Discount, accrued Liquidated
Damages, if any, Redemption Price, Purchase Price, Change of Control
Redemption Price or interest, if any, and to file such other papers or
documents as may be necessary or advisable in order to have the claims of
the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and
counsel) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due 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 7.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claims of any Holder in any such proceeding.
Section VI.10. Priorities. If the Trustee collects any money pursuant to
this Article VI, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the Securities for
the Principal Amount, Issue Price, accrued Original Issue Discount,
accrued Liquidated Damages, if any, Redemption Price, Purchase Price,
Change of Control Redemption Price or interest, if any, as the case may
be, ratably, without preference or priority of any kind, according to such
amounts due and payable on the Securities; and
Third: the balance, if any, to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders 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.
Section VI.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 (other than the Trustee) in the suit of
an undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit
by Holders of more than 10% in aggregate Principal Amount of the Securities at
the time outstanding.
Section VI.12. Waiver of Stay, Extension or Usury Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury or other law
wherever enacted, now or at any time hereafter in force, which would prohibit or
forgive the Company from paying all or any portion of the Principal Amount,
Issue Price, accrued Original Issue Discount, accrued Liquidated Damages, if
any, Redemption Price, Purchase Price or Change of Control Redemption Price in
respect of Securities, or any interest on any such amounts, as contemplated
herein, or which may affect the covenants or the performance of this Indenture;
and the Company (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such laws and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
-31-
<PAGE>
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
ARTICLE VII
TRUSTEE
Section VII.1. Duties of Trustee
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise 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 individual
would exercise or use under the circumstances in the conduct of his or her own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
This Section 7.01(b) shall be in lieu of Section 315(a) of the TIA and such
Section 315(a) is hereby expressly excluded from this Indenture, as permitted by
the TIA.
(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:
(i) this paragraph (c) does not limit the effect of paragraph
(b) of this Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05. Subparagraphs (c)(i), (ii) and
(iii) shall be in lieu of Sections 315(d)(1), 315(d)(2) and 315(d)(3) of
the TIA and such Sections 315(d)(1), 315(d)(2) and 315(d)(3) are hereby
expressly excluded from this Indenture, as permitted by the TIA.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 7.01.
(e) The Trustee may refuse to perform any duty or exercise any right
or power or extend or risk its own funds or otherwise incur any financial
liability unless it receives security or indemnity reasonably satisfactory to it
against any cost, liability or expense.
(f) Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law.
Section VII.2. Rights of Trustee
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
-32-
<PAGE>
(b) Before the Trustee acts or refrains from acting, it may require a
Company Order, an Officers' Certificate or an Opinion of Counsel. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on a Company Order, Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) Subject to the provisions of Section 7.01(c), the Trustee shall
not be liable for any action it takes or omits to take in good faith which it
believes to be authorized or within its rights or powers.
(e) The Trustee may consult with counsel selected by it and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it hereunder
in good faith and in accordance with such advice or Opinion of Counsel.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture, unless the Holders shall have
offered to the Trustee security or indemnity reasonably satisfactory to it
against the costs, expenses and liabilities which may be incurred therein or
thereby.
Section VII.3. Individual Rights of Trustee. The Trustee in its individual
or any other capacity may become the owner or pledgee of Securities and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not Trustee. Any Paying Agent, Registrar, Conversion Agent or
co- registrar may do the same with the like rights. However, the Trustee must
comply with Section 7.10 and 7.11.
Section VII.4. Trustee's Disclaimer. The Trustee makes no representation
as to the validity or adequacy of this Indenture or the Securities, and it shall
not be accountable for Company's use of the proceeds from the Securities, it
shall not be responsible for any statement in the offering memorandum for the
Securities or in the Indenture or the Securities (other than its certificate of
authentication), the acts of a prior Trustee hereunder, or the determination as
to which beneficial owners are entitled to receive any notices hereunder.
Section VII.5. Notice of Defaults. If a Default occurs and is continuing
and if it is actually known to a Trust Officer of the Trustee, the Trustee shall
give to each Securityholder notice of the Default within 90 days after it
occurs. Except in the case of a Default described in Section 6.01(a), the
Trustee may withhold the notice if and so long as a committee of its Trust
Officers in good faith determines that withholding the notice is in the
interests of Holders. The second sentence of this Section 7.05 shall be in lieu
of the proviso to Section 315(b) of the TIA and such provision is hereby
expressly excluded from this Indenture, as permitted by the TIA. The Trustee
shall not give notice of a Default pursuant to Section 6.01(b) until at least
sixty days have passed since its occurrence.
Section VII.6. Reports by Trustee to Holders. Within 60 days after each
May 1, beginning with the May 1 following the date of this Indenture, the
Trustee shall mail to each Holder a brief report dated as of such May 1 that
complies with TIA Section 313(a), if required by such Section 313(a). The
Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Holders shall be filed
with the SEC and each securities exchange on which the Securities are listed.
The Company agrees to notify the Trustee whenever the Securities become listed
on any securities exchange and of any delisting thereof.
Section VII.7. Compensation and Indemnity. The Company agrees:
(a) to pay to the Trustee from time to time reasonable compensation for
all services rendered by it hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an express
trust);
(b) to reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Indenture (including the reasonable compensation and the
expenses, advances and disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to its negligence or bad
faith; and
-33-
<PAGE>
(c) to indemnify the Trustee for, and to hold it harmless against, any
cost, liability or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of this
trust, including the 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.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay the Principal
Amount, Issue Price, accrued Original Issue Discount, accrued Liquidated
Damages, if any, Redemption Price, Purchase Price, Change of Control Redemption
Price or interest, if any, as the case may be, on particular Securities.
The Company's payment obligations pursuant to this Section 7.07 shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 6.01(d) or (e), the expenses
are intended to constitute expenses of administration under any Bankruptcy Law.
Section VII.8. Replacement of Trustee. The Trustee may resign by so
notifying the Company; provided, however, that no such resignation shall be
effective until a successor Trustee has accepted its appointment pursuant to
this Section 7.08. The Holders of a majority in aggregate Principal Amount of
the Securities at the time outstanding may remove the Trustee by so notifying
the Trustee and may appoint a successor Trustee. The Company shall remove the
Trustee if:
(a) the Trustee fails to comply with, or ceases to be eligible under,
Section 7.10;
(b) the Trustee is adjudged bankrupt or insolvent;
(c) a receiver, conservator or public officer takes charge of the
Trustee or its property; or
(d) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason and, in the case of removal by the Holders (as set
forth above), the Holders of a majority in aggregate Principal Amount of the
Securities at the time outstanding have not appointed a successor Trustee within
30 days of such removal, the Company shall promptly appoint, by Board
Resolution, a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Holders. The retiring
Trustee shall promptly transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided for in Section 7.07.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in aggregate Principal Amount of the Securities at the
time outstanding may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Section VII.9. Successor Trustee by Merger. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trustee business (including the trust created by this Indenture) or
assets to, another corporation, the resulting, surviving or transferee
corporation without any further act shall be the successor Trustee.
Section VII.10. Eligibility; Disqualification. The Trustee shall at all
times satisfy the requirements of TIA Sections 310(a)(1) and 310(b). The Trustee
-34-
<PAGE>
shall have a combined capital and surplus of at least $50,000,000 (or if the
Trustee is a member of a bank holding company system, its bank holding company
shall have a combined capital and surplus of $50,000,000) as set forth in its
most recent published annual report of conditions. Nothing herein contained
shall prevent the Trustee from filing with the SEC the application referred to
in the penultimate paragraph of TIA Section 310(b). 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 VII.
Section VII.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.
Section 7.12. 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 VIII
DISCHARGE OF INDENTURE
Section VIII.1. Discharge of Liability on Securities. When (a) the Company
delivers to the Trustee all outstanding Securities (other than Securities
replaced pursuant to Section 2.07) for cancellation or (b) all outstanding
Securities have become due and payable and the Company deposits with the Trustee
Cash and/or securities, as permitted by the terms hereof, sufficient to pay at
Stated Maturity the Principal Amount of all outstanding Securities (other than
Securities replaced pursuant to Section 2.07), and if in either case the Company
pays all other sums due and payable hereunder by the Company, then this
Indenture shall, subject to Section 7.07, cease to be of further effect. The
Trustee shall join in the execution of a document prepared by the Company
acknowledging satisfaction and discharge of this Indenture on demand of the
Company accompanied by an Officers' Certificate and Opinion of Counsel and at
the cost and expense of the Company.
Section VIII.2. Repayment to the Company. The Trustee and the Paying Agent
shall return to the Company upon written request any Cash, securities or other
property held by them for the payment of any amount with respect to the
Securities that remains unclaimed for two years, provided, however, that the
Trustee or such Paying Agent, before being required to make any such return, may
at the expense of the Company cause to be published once in a newspaper of
general circulation in The City of New York, or mail to each such Holder, notice
that such money or securities remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication
or mailing, any unclaimed money or securities then remaining will be returned to
the Company.
ARTICLE IX
AMENDMENTS
Section IX.1. Without Consent of Holders. The Company and the Trustee may
amend this Indenture and the Securities without the consent of any
Securityholder:
(a) to cure any ambiguity, defect or inconsistency;
-35-
<PAGE>
(b) to comply with Article V or Section 10.12 hereof;
(c) to provide for uncertificated Securities in addition to
certificated Securities so long as such uncertificated Securities are in
registered form for purposes of the Internal Revenue Code of 1986, as amended;
(d) to make any change that does not adversely affect the right of
any Securityholder; or
(e) to make any change to comply with the TIA, or any amendment
thereto, or to comply with any requirement of the SEC in connection with the
qualification, if any, of the Indenture under the TIA.
Section IX.2. With Consent of Holders. The Company and the Trustee, with
the written consent of the Holders of at least a majority in aggregate Principal
Amount of the Securities at the time outstanding, may amend this Indenture or
the Securities or the Registration Rights Agreement. However, without the
consent of each Securityholder affected, an amendment or supplement to this
Indenture or the Securities (or, in the case of clause (b) below, the
Registration Rights Agreement) may not:
(a) make any change to the Principal Amount of Securities whose
Holders must consent to an amendment;
(b) make any change to the manner or rate of accrual of Original
Issue Discount, Liquidated Damages, if any, or interest, if any, reduce the rate
of interest referred to in paragraph 1 of the Securities, extend the time for
payment of or impair or adversely affect the right of any Holder to receive
Original Issue Discount, Liquidated Damages, if any, or interest, if any, on any
Security;
(c) reduce or impair or adversely affect the right of any Holder to
receive the Principal Amount or the Issue Price of or extend the Stated Maturity
of any Security;
(d) reduce or impair or adversely affect the right of any Holder to
receive the Redemption Price, Purchase Price or Change of Control Redemption
Price of any Security;
(e) make any Security payable in money or securities other than that
stated in this Indenture or the Security;
(f) 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
Securities,
(g) make any change in Section 6.04, Section 6.07 or this Section
9.02, except to increase any percentage of Securities the Holders of which must
consent to any matter;
(h) make any change that impairs or adversely affects the right to
convert any Security into Common Stock; or
(i) make any change that adversely affects the right to require the
Company to repurchase the Securities pursuant to Section 3.08, or the right to
require the Company to repurchase the Securities upon a Change of Control
pursuant to Section 3.09, in accordance with the terms thereof and this
Indenture.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section 9.02 becomes effective, the Company
shall mail to each Holder a notice briefly describing the amendment.
Section IX.3. Compliance with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article IX shall comply with the TIA as then
in effect, if then required to so comply.
Section IX.4. Revocation and Effect of Consents, Waivers and Actions.
Until an amendment, waiver or other action becomes effective, a consent to it or
-36-
<PAGE>
any other action by a Holder of a Security is a continuing consent by the Holder
and every subsequent Holder of that Security or portion of the Security that
evidences the same obligation as the consenting Holder's Security, even if
notation of the consent, waiver or action is not made on the Security. However,
any such Holder or subsequent Holder may revoke the consent, waiver or action as
to such Holder's Security or portion of the Security if the Trustee receives the
notice or revocation before the date the amendment, waiver or action becomes
effective. After an amendment, waiver or action becomes effective, it shall bind
every Securityholder.
Section IX.5. Notation on or Exchange of Securities. Securities
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and shall if required by the Trustee, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Company shall so determine, new Securities so
modified as to conform, in the opinion of the Trustee and the Board of
Directors, to any such supplemental indenture may be prepared and executed by
the Company and authenticated and delivered by the Trustee in exchange for
outstanding Securities.
Section IX.6. Trustee to Sign Supplemental Indentures. The Trustee shall
sign any supplemental indenture authorized pursuant to this Article IX if the
amendment does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. If it does, the Trustee may, but need not, sign such
supplemental indenture. In signing such amendment the Trustee shall receive, and
(subject to the provisions of Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture.
Section IX.7. Effect of Supplemental Indentures. Upon the effectiveness of
any supplemental indenture under this Article IX, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form a
part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.
ARTICLE X
CONVERSION
Section X.1. Conversion Privilege. A Holder of a Security may convert such
Security for Common Stock at any time during the period stated in paragraph 8 of
the Securities. The number of shares of Common Stock issuable upon conversion of
a Security per $1,000 of Principal Amount thereof (the "Conversion Rate") shall
be that set forth in paragraph 8 of the Securities, subject to adjustment as
herein set forth.
A Holder may convert a portion of the Principal Amount of a Security if
the portion is $1,000 or an integral multiple of $1,000. Provisions of this
Indenture that apply to conversion of all of a Security also apply to conversion
of a portion of a Security.
Section X.2. Conversion Procedure. To convert a Security a Holder must
satisfy the requirements in paragraph 8 of the Securities. The date on which the
Holder of Securities satisfies all those requirements is the conversion date
(the "Conversion Date"). As soon as practicable after the Conversion Date, the
Company shall deliver to the Holder, through the Conversion Agent, a certificate
for the number of full shares of Common Stock issuable upon the conversion and
Cash in lieu of any fractional share determined pursuant to Section 10.03. Any
issuance of Common Stock pursuant to Section 10.01 shall be deemed to have been
effected immediately prior to the close of business on the applicable Conversion
Date and the Person or Persons in whose name or names any certificate or
certificates for Common Stock shall be issuable upon such repurchase shall be
deemed to have become on such Conversion Date the holder or holders of record of
the shares represented thereby; provided, however, that any surrender for
repurchase on a date when the stock transfer books of the Company shall be
closed shall constitute the Person or Persons in whose name or names the
certificate or certificates for such shares are to be issued as the recordholder
or holders thereof for all purposes at the opening of business on the next
succeeding day on which such stock transfer books are open. Upon conversion of a
Security, such Person shall no longer be a Holder of such Security.
Except as provided in this Article X, no payment or adjustment will be
made for (a) the issuance of Common Stock or any securities convertible into or
-37-
<PAGE>
exchangeable for Common Stock or carrying the right to purchase any of the
foregoing, (b) dividends on or other distribution with respect to any Common
Stock or (c) accrued Original Issue Discount. On conversion of a Security, that
portion of accrued Original Issue Discount attributable to the period from the
Issue Date of the Security to the Conversion Date with respect to the converted
Security shall not be canceled, extinguished or forfeited, but rather shall be
deemed to be paid in full to the Holder thereof through delivery of the Common
Stock (together with the Cash payment, if any, in lieu of fractional shares) in
exchange for the Security being converted pursuant to the provisions hereof.
If more than one Security shall be delivered for conversion by the same
Holder, the number of full shares of Common Stock which shall be issuable upon
such conversion shall be computed on the basis of the aggregate Principal Amount
of all the Securities so delivered.
Any Security that is to be converted only in part shall be surrendered at
the office of the Paying Agent (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or such
Holder's attorney duly authorized in writing) and the Company shall execute and
the Trustee shall authenticate and deliver to the Holder of such Security,
without service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder in aggregate Principal Amount equal to,
and in exchange for, the portion of the Principal Amount of the Security so
surrendered which is not converted.
Section X.3. Fractional Shares. The Company will not issue a fractional
share of Common Stock upon conversion of a Security. Instead the Company will
pay Cash for the current market value of the fractional share. The current
market value of a fraction of a share shall be determined by multiplying the
Market Price by such fraction and rounding the product to the nearest whole
cent. If a Holder elects to have more than one Security purchased, the amount of
Cash payable in respect of fractional shares of Common Stock shall be based on
the aggregate amount of Securities to be purchased.
Section X.4. Taxes on Conversion. If a Holder converts a Security, the
Company shall pay any documentary, stamp or similar issue or transfer tax due on
the issue of shares of Common Stock upon the conversion. However, the Holder
shall pay any such tax which is due because the Holder requests the shares to be
issued in a name other than the Holder's name. The Conversion Agent may refuse
to deliver the certificates representing the Common Stock being issued in a name
other than the Holder's name until the Conversion Agent receives a sum
sufficient to pay any tax which will be due because the shares are to be issued
in a name other than the Holder's name. Nothing herein shall preclude any tax
withholding required by law or regulations.
Section X.5. Company to Provide Stock. The Company shall, prior to
issuance of any Securities hereunder, and from time to time as may be necessary,
reserve out of its authorized but unissued Common Stock a sufficient number of
shares of Common Stock to permit the conversion of the Securities.
All shares of Common Stock delivered upon conversion of the Securities
shall be duly and validly issued and fully paid and nonassessable and shall be
free from preemptive rights and free of any lien or adverse claim.
The Company will endeavor promptly to comply with all Federal and state
securities laws regulating the issuance and delivery of shares of Common Stock
upon conversion of Securities, if any, and will use its best efforts to list or
cause to have quoted all such shares of Common Stock on each United States
national securities exchange or over-the-counter or other domestic market on
which the Common Stock is then listed or quoted.
Section X.6. Adjustment of Conversion Rate. The Conversion Rate shall be
subject to adjustments from time to time as follows:
(a) If the Company shall pay or make a dividend or other distribution on
any class of capital stock of the Company payable in shares of Common Stock, the
Conversion Rate in effect at the opening of business on the day following the
Determination Date for such dividend or other distribution shall be increased by
dividing such Conversion Rate by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding at the close of business on such
-38-
<PAGE>
Determination Date 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 such Determination Date. For the purposes of this paragraph
(a), the number of shares of Common Stock at any time outstanding shall not
include shares held in the treasury of the Company but shall include shares
issuable in respect of scrip certificates issued in lieu of fractions of shares
of Common Stock. The Company will not pay any dividend or make any distribution
on shares of Common Stock held in the treasury of the Company.
(b) Subject to the last sentence of paragraph (g) of this Section 10.06,
if the Company shall issue rights, options or warrants to all holders of its
Common Stock entitling them to subscribe for or purchase shares of Common Stock
at a price per share less than the current market price per share (determined as
provided in paragraph (h) of this Section 10.06) of the Common Stock on the
Determination Date for such distribution, the Conversion Rate in effect at the
opening of business on the day following such Determination Date shall be
increased by dividing such Conversion Rate by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding at the close of
business on such Determination Date plus the number of shares of Common Stock
which the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would purchase at such
Current Market Price and the denominator shall be the number of shares of Common
Stock outstanding at the close of business on such Determination Date plus the
number of shares of Common Stock so offered for subscription or purchase, such
increase to become effective immediately after the opening of business on the
day following such Determination Date. For the purposes of this paragraph (b),
the number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of Common
Stock. The Company will not issue any rights, options or warrants in respect of
shares of Common Stock held in the treasury of the Company. If any right, option
or warrant terminates or expires without being exercised, the Conversion Rate
shall, upon such termination or expiration, be changed to the Conversion Rate
that would have been in effect at the time of such termination or expiration had
such right, option or warrant, to the extent outstanding immediately prior to
such expiration or termination, never been issued.
(c) If outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the Conversion Rate in effect at the
opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately increased, and, conversely, if
outstanding shares of Common Stock shall each be combined into a smaller number
of shares of Common Stock, the Conversion Rate in effect at the opening of
business on the day following the day upon which such combination becomes
effective shall be proportionately reduced, such increase or reduction, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
(d) Subject to the last sentence of paragraph (g) of this Section 10.06,
if the Company shall, by dividend or otherwise, distribute to all holders of its
Common Stock evidences of its indebtedness, shares of any class of capital
stock, or other property (including securities, but excluding (i) any rights,
options or warrants referred to in paragraph (b) of this Section, (ii) any
dividend or distribution paid exclusively in cash, (iii) any dividend or
distribution referred to in paragraph (a) of this Section and (iv) any merger or
consolidation to which Section 10.12 applies), the Conversion Rate shall be
adjusted by dividing the Conversion Rate in effect immediately prior to the
close of business on the Determination Date for such distribution by a fraction
of which the numerator shall be the current market price per share (determined
as provided in paragraph (h) of this Section 10.06) of the Common Stock on such
Determination Date 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 or
evidences of indebtedness so distributed applicable to one share of Common Stock
and the denominator shall be such current market price per share of the Common
Stock, such adjustment to become effective immediately prior to the opening of
business on the day following such Determination Date. If the Board of Directors
determines the fair market value of any distribution for purposes of this
paragraph (d) 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 (h) of this Section 10.06.
-39-
<PAGE>
(e) If the Company shall, by dividend or otherwise, make a Cash
Distribution in an aggregate amount that, together with (i) the aggregate amount
of any other Cash Distributions made within the 12 months preceding the date of
payment of such distribution in respect of which no adjustment pursuant to this
paragraph (e) or paragraph (f) of this Section 10.06 has been made and (ii) any
Excess Purchase Payment made within the 12 months preceding the date of such
distribution and in respect of which no adjustment pursuant to this paragraph
(e) or paragraph (f) of this Section 10.06 has been made, exceeds 12.5% of the
Company's Market Capitalization on the Determination Date for such Cash
Distribution, then, and in each such case, immediately after the close of
business on the Determination Date for such Cash Distribution, the Conversion
Rate shall be adjusted by dividing the Conversion Rate in effect immediately
prior to the close of business on such Determination Date by a fraction (x) the
numerator of which shall be equal to the current market price per share
(determined as provided in paragraph (h) of this Section 10.06) of the Common
Stock on such Determination Date less an amount equal to the quotient of (1) the
amount of such excess divided by (2) the number of shares of Common Stock
outstanding on such Determination Date and (y) the denominator of which shall be
equal to the current market price per share (determined as provided in paragraph
(h) of this Section 10.06) of the Common Stock on such Determination Date.
(f) If the Company or any its Subsidiaries shall make Excess Purchase
Payments in an aggregate amount that, together with (i) the aggregate amount of
any other Excess Purchase Payments made by the Company or any Subsidiary within
the 12 months preceding such Excess Purchase Payment in respect of which no
adjustment pursuant to this paragraph (f) or paragraph (e) of this Section 10.06
has been made and (ii) the aggregate amount of any Cash Distributions made
within the 12 months preceding such Excess Purchase Payment in respect of which
no adjustment pursuant to this paragraph (f) and paragraph (e) of this Section
10.06 has been made, exceeds 12.5% of the Company's Market Capitalization as of
the Determination Date for such Excess Purchase Payment, then, and in each such
case, immediately prior to the opening of business on the day after the tender
offer in respect of which such Excess Purchase Payment is to be made expires,
the Conversion Rate shall be adjusted by dividing the Conversion Rate in effect
immediately prior to the close of business on the Determination Date for such
tender offer by a fraction (x) the numerator of which shall be equal to the
current market price per share (determined as provided in paragraph (h) of this
Section 10.06) of the Common Stock on such Determination Date less an amount
equal to the quotient of (1) the amount of such excess divided by (2) the number
of shares of Common Stock outstanding on such Determination Date (excluding any
shares purchased in such tender offer) and (y) the denominator of which shall be
equal to the current market price per share (determined as provided in paragraph
(h) of this Section 10.06) of the Common Stock on such Determination Date.
(g) The reclassification of Common Stock into securities other than Common
Stock (other than any reclassification to which Section 10.12 applies) shall be
deemed to involve (i) a distribution of such securities other than Common Stock
to all holders of Common Stock (and the effective date of such reclassification
shall be deemed to be the Determination Date), and (ii) a subdivision or
combination, as the case may be, of the number of shares of Common Stock
outstanding immediately prior to such reclassification into the number of shares
of Common Stock outstanding immediately thereafter (and the effective date of
such reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective",
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (c) of this Section 10.06).
Rights or warrants issued by the Company to all holders of its Common Stock
entitling the holders thereof to subscribe for or purchase shares of Common
Stock, which rights or warrants (i) are deemed to be transferred with such
shares of Common Stock, (ii) are not exercisable and (iii) are also issued in
respect of future issuances of Common Stock, in each case in clauses (i) through
(iii) until the occurrence of a specified event or events ("Trigger Event"),
shall for purposes of this Section 10.06 not be deemed issued until the
occurrence of the earliest Trigger Event.
(h) For the purpose of any computation under paragraphs (b), (d), (e) or
(f) of this Section 10.06, the current market price per share of Common Stock on
any date shall be calculated by the Company and be deemed to be the average of
the daily Sale Prices for the five consecutive Trading Days selected by the
Company commencing not more than 10 Trading Days before, and ending not later
than, the earlier of the day in question and the day before the "ex" date with
respect to the issuance or distribution requiring such computation. For purposes
of this paragraph, the term "ex date", when used with respect to any issuance or
distribution, means the first date on which the Common Stock trades regular way
in the applicable securities market or on the applicable securities exchange
without the right to receive such issuance or distribution.
-40-
<PAGE>
Section X.7. When Adjustment May Be Deferred. No adjustment in the
Conversion Rate need be made unless the adjustment would require an increase or
decrease of at least 1% in the Conversion Rate. Any adjustments that are not
made shall be carried forward and taken into account any subsequent adjustment.
All calculations under this Article X shall be made to the nearest cent or
to the nearest 1/100th of a share, as the case may be.
Section X.8. When No Adjustment Required. No adjustment need be made for
rights to purchase Common Stock pursuant to a Company plan for reinvestment of
dividends or interest.
No adjustment need be made for a change in the par value or no par value
of the Common Stock.
To the extent the Securities become convertible into Cash, assets,
property or securities (other than capital stock of the Company), no adjustment
need be made thereafter as to the Cash, assets, property or such securities.
Interest will not accrue on the Cash.
Section X.9. Notice of Adjustment. Whenever the Conversion Rate is
adjusted, the Company shall promptly mail to Holders a notice of the adjustment.
The Company shall file with the Trustee and the Conversion Agent such notice.
The certificate shall, absent manifest error, be conclusive evidence that the
adjustment is correct. Neither the Trustee nor any Conversion Agent shall be
under any duty or responsibility with respect to any such certificate except to
exhibit the same to any Holder desiring inspection thereof.
Section X.10. Voluntary Increase. The Company may, at its option, make
such increases in the Conversion Rate, in addition to those required by Section
10.06, as the Board of Directors considers to be advisable to avoid or diminish
any income tax to holders of Common Stock or rights to purchase Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes. To the extent
permitted by applicable law, the Company may from time to time 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 the period and the Board of
Directors shall have made a determination, in its sole discretion, that such
increase would be in the best interests of the Company, which determination
shall be conclusive. Whenever the Conversion Rate is so increased, the Company
shall mail to Holders and file with the Trustee and the Conversion Agent a
notice of such increase. The Company shall mail such notice at least 15 days
before the date the increased Conversion Rate takes effect. The notice shall
state the increased Conversion Rate and the period it will be in effect.
Section X.11. Notice of Certain Transactions. If:
(a) the Company makes any distribution or dividend that would require
an adjustment in the Conversion Rate pursuant to Section 10.06; or
(b) the Company takes any action that would require a supplemental
indenture pursuant to Section 10.12; or
(c) there is a liquidation, dissolution or winding-up of the
Company; then the Company shall mail to Holders and file with the Trustee and
the Conversion Agent a notice stating the proposed record date for a dividend or
distribution or the proposed effective date of a subdivision, combination,
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up. The Company shall file and mail the notice at least
15 days before such date; provided that failure to file or mail the notice or
any defect in it shall not affect the validity of the transaction.
Section X.12. Effect of Reclassification, Consolidation, Merger or Sale.
If any of the following events occur, namely (a) any reclassification of Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
-41-
<PAGE>
(b) any consolidation, combination or merger of the Company with another
corporation as a result of which holders of Common Stock shall be entitled to
receive stock, securities or other property or assets (including cash) with
respect to or in exchange for such Common Stock, or (c) any sale or conveyance
of the properties and assets of the Company as, or substantially as, an entirety
to any other corporation as a result of which holders of Common Stock shall be
entitled to receive stock, securities or other property or assets (including
cash) with respect to or in exchange for such Common Stock, then the Company or
the successor or purchasing corporation, as the case may be, shall execute with
the Trustee a supplemental indenture, providing that each Security shall be
convertible into the kind and amount of shares of stock and other securities or
property or assets (including cash) receivable upon such reclassification,
consolidation, merger, combination, sale or conveyance by a holder of a number
of shares of Common Stock issuable upon conversion of such Securities
immediately prior to such reclassification, consolidation, merger, combination,
sale or conveyance, assuming that a Holder thereof would not have exercised any
rights of election as to the stock, securities or other property or assets
(including Cash) receivable in connection therewith. Such supplemental indenture
shall provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each Holder of Securities in the manner provided for
in Section 11.02 of this Indenture.
The above provisions of this Section shall similarly apply to successive
reclassifications, consolidations, mergers, combinations, and sales.
If this Section applies, Section 10.06 shall not apply.
Section X.13. Company Determination Final. Any determination that the
Company or the Board of Directors must make pursuant to this Article X is
conclusive.
Section X.14. Trustee's Adjustment Disclaimer. The Trustee has no duty to
determine when an adjustment under this Article X should be made, how it should
be made or what it should be. The Trustee has no duty to determine whether a
supplemental indenture under Section 10.12 need be entered into or whether any
provisions of any supplemental indenture are correct. The Trustee shall not be
accountable for and makes no representation as to the validity or value of any
securities or assets issued upon conversion of Securities. The Trustee shall not
be responsible for the Company's failure to comply with this Article X, and
shall not be deemed to have knowledge of any adjustment unless and until it
shall have received a notice of adjustment pursuant to Section 10.09. Each
Conversion Agent shall have the same protection under this Section 10.14 as the
Trustee.
Section X.15. Simultaneous Adjustments. In the event that this Article X
requires adjustments to the Conversion Rate under more than one of Sections
10.06(a), 10.06(b), 10.06(d) or 10.06(e), and the record dates for the
distributions giving rise to such adjustments shall occur on the same date, then
such adjustments shall be made by applying, first, the provisions of Section
10.06(d), second, the provisions of Section 10.06(e), third, the provisions of
Section 10.06(a) and, fourth, the provisions of Section 10.06(b), provided that
the Conversion Rate will not be adjusted under two provisions for the same
event.
Section X.16. Successive Adjustments. After an adjustment to the
Conversion Rate under this Article X, any subsequent event requiring an
adjustment under this Article X shall cause an adjustment to the Conversion Rate
as so adjusted.
Section X.17. General Considerations. Whenever successive adjustments to
the Conversion Rate are called for pursuant to this Article X, such adjustments
shall be made to the provisions of Section 10.06(h) as may be necessary or
appropriate to effectuate the intent of this Article X and to avoid unjust or
inequitable results as determined in good faith by the Board of Directors.
ARTICLE XI
MISCELLANEOUS
-42-
<PAGE>
Section XI.1. Trust Indenture Act. This Indenture is hereby made subject
to, and shall be governed by, the provisions of the TIA required to be part of
and to govern indentures qualified under the TIA; provided, however that this
Section 11.01 shall not require this Indenture or the Trustee to be qualified
under the TIA prior to the time such qualification is in fact required under the
terms of the TIA, nor shall it constitute any admission or acknowledgment by any
party that any such qualification is required prior to the time such
qualification is in fact required under the terms of the TIA. If any provision
hereof limits, qualifies or conflicts with another provision hereof which is
required to be included in an indenture qualified under the TIA, such required
provision shall control. If any provision hereof modifies or excludes any
provision of the TIA that may be so modified or excluded, the latter provision
of the TIA shall be deemed to apply to this Indenture as so modified or to be
excluded, as the case may be.
Section XI.2. Notices. Any request, demand, authorization, notice, waiver,
consent or communication shall be in writing and delivered in Person or mailed
by first class mail, postage prepaid, addressed as follows or transmitted by
facsimile transmission (confirmed by overnight courier) to the following
facsimile numbers:
If to the Company:
AMF Bowling, Inc.
8100 AMF Drive
Richmond, VA 23111
Attn: Secretary
Telephone Number: (804) 730-4000
Facsimile Number: (804) 730-4327
With a copy to:
McGuire, Woods, Battle & Boothe LLP
901 East Cary Street
Richmond, VA 23219
Attn: Joseph C. Carter, III, Esq.
Telephone Number: (804) 775-1000
Facsimile Number: (804) 775-1061
and to
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attn: Daniel A. Neff, Esq.
Telephone Number: (212) 403-1000
Facsimile Number: (212) 403-2000
If to the Trustee:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
(Attention: Corporate Trust Administration)
Telephone Number: (212) 815-5939
Facsimile Number: (212) 815-5915
The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
-43-
<PAGE>
Any notice or communication given to a Securityholder shall be mailed to
the Securityholder, by first class mail, postage prepaid, at the
Securityholder's address as it appears on the registration books of the
Registrar and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not received by the addressee.
If the Company mails a notice or communication to the Holders, it shall
mail a copy to the Trustee and each Registrar, Paying Agent, Conversion Agent or
co-registrar.
Section XI.3. Communication by Holders with Other Holders. Holders may
Communication by Holders with Other Holders communicate pursuant to TIA Section
312(b) with other Holders with respect to their rights under this Indenture or
the Securities. The Company, the Trustee, the Registrar, the Paying Agent, the
Conversion Agent and anyone else shall have the protection of TIA Section
312(c).
Section XI.4. Certificate and Opinion as to Conditions Precedent. Upon any
request or application by the Company to the Trustee to take any action under
this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate 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
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Section XI.5. Statements Required in Certificate or Opinion. Each
Officers' Certificate or Opinion of Counsel with respect to compliance with a
covenant or condition provided for in this Indenture shall include:
(a) a statement that each individual making such Officers'
Certificate or Opinion of Counsel has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
Officers' Certificate or Opinion of Counsel are based;
(c) a statement that, in the opinion of each such individual, he or
she has made such examination or investigation as is necessary to enable him or
her to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement that, in the opinion of such individual, such
covenant or condition has been complied with.
Section XI.6. Separability Clause. In case any provision in this Indenture
or in 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.
Section XI.7. Rules by Trustee, Paying Agent, Conversion Agent and
Registrar. The Trustee may make reasonable rules for action by or a meeting of
Holders. The Registrar, Conversion Agent and the Paying Agent may make
reasonable rules for their functions.
Section XI.8. Legal Holidays. A "Legal Holiday" is any day other than a
Business Day. If any specified date (including a date for giving notice) is a
Legal Holiday, the action shall be taken on the next succeeding day that is not
a Legal Holiday, and to the extent applicable no Original Issue Discount or
interest, if any, or Liquidated Damages, if any, shall accrue for the
intervening period. If the last day (other than the Stated Maturity) on which a
Security may be converted is a Legal Holiday in a place where a Conversion Agent
is located, the Security may be surrendered to that Conversion Agent on the next
succeeding day that it is not a Legal Holiday.
-44-
<PAGE>
Section XI.9. Governing Law. THE LAWS OF THE STATE OF NEW YORK SHALL
GOVERN THIS INDENTURE AND THE SECURITIES, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.
Section XI.10. No Recourse Against Others. A director, officer, employee
or stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Securities.
Section XI.11. Successors. All agreements of the Company in this Indenture
and the Securities shall bind its successor. All agreements of the Trustee in
this Indenture shall bind its successor.
Section XI.12. Multiple Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Indenture.
Section XI.13. 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 Securities and the Common
Stock issuable upon conversion, redemption or repurchase thereof in accordance
with, and subject to, the terms and conditions set forth herein and therein.
-45-
<PAGE>
IN WITNESS WHEREOF, the undersigned, being duly authorized, has executed
this Indenture on behalf of the respective parties hereto as of the date first
written above.
AMF BOWLING, INC.
By_____________________________
Name:
Title:
THE BANK OF NEW YORK
By_____________________________
Authorized Signatory
-46-
<PAGE>
STATE OF NEW YORK ) ss.:
COUNTY OF NEW YORK )
On the _____ day of May, 1998, before me personally came Stephen E.
Hare, to me known, who, being by me duly sworn, did depose and say that he is
the Executive Vice President of AMF Bowling, Inc., one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
------------------------------
STATE OF NEW YORK ) ss.:
COUNTY OF NEW YORK )
On the _____ day of May, 1998, before me personally came
___________________________, to me known, who, being by me duly sworn, did
depose and say that he is ___________________________________________________ of
The Bank of New York, one of the corporations described in and which executed
the foregoing instrument; that he knows the seal of said corporation; that the
seal affixed to said instrument is such corporate seal; that it was so affixed
by authority of the Board of Directors of said corporation, and that he signed
his name thereto by like authority.
------------------------------
-47-
<PAGE>
EXHIBIT A
[FORM OF FACE OF SECURITY]
FOR UNITED STATES FEDERAL INCOME TAX PURPOSES, THIS SECURITY BEARS
ORIGINAL ISSUE DISCOUNT. INFORMATION INCLUDING THE ISSUE PRICE, AMOUNT OF
ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE, AND THE YIELD TO MATURITY WILL BE MADE
AVAILABLE TO HOLDERS UPON REQUEST TO THE SECRETARY OF THE COMPANY AT (804)
730-4000.
[FORM OF LEGEND FOR GLOBAL SECURITY]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THIS SECURITY AND ANY COMMON STOCK ISSUABLE UPON THE CONVERSION,
REDEMPTION OR REPURCHASE OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS
SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER.
THIS SECURITY AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS CONVERSION,
REDEMPTION OR REPURCHASE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (II) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 904 OF REGULATION
S UNDER THE SECURITIES ACT, (III) TO AN INSTITUTION THAT IS AN ACCREDITED
INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) or (7) UNDER THE
SECURITIES ACT IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, (IV) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), OR (V) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND IN EACH OF
CASES (I) THROUGH (V) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES AND OTHER JURISDICTIONS OF THE UNITED STATES. NO REPRESENTATION CAN BE
MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 FOR RESALES OF
THE SECURITIES OR ANY SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION,
REDEMPTION OR REPURCHASE THEREOF.
THIS SECURITY, ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS CONVERSION,
REDEMPTION OR REPURCHASE AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER
TRANSFERS OF THIS SECURITY AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN
APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES
RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE
HOLDER OF THIS SECURITY AND ANY SUCH SHARES SHALL BE DEEMED BY THE ACCEPTANCE OF
THIS SECURITY OR ANY SUCH SHARES TO HAVE AGREED TO ANY SUCH AMENDMENT OR
SUPPLEMENT.
<PAGE>
AMF BOWLING, INC.
ZERO COUPON CONVERTIBLE DEBENTURE DUE 2018
No. _________ CUSIP: 03113VAA7
Issue Date: May 12, 1998 Original Issue Discount: $743.43
Issue Price: $252.57 (for each $1,000 Principal Amount)
(for each $1,000 Principal Amount)
AMF Bowling, Inc., a Delaware corporation, promises to pay to or
registered assigns, on May 12, 2018 [the Principal Amount of
Dollars ($ )].(1)
This Security shall not bear interest except as specified on the other
side of this Security. Original Issue Discount will accrue as specified on the
other side of this Security. This Security is convertible and subject to
repurchase or redemption as specified on the other side of this Security.
Additional provisions of this Security are set forth on the other side of
this Security.
IN WITNESS WHEREOF, AMF Bowling, Inc. has caused this instrument to be
duly executed under its corporate seal.
AMF BOWLING, INC.
By:_________________________________
Name:
Title:
[SEAL]
Attest:
By:_________________________________
Name:
Title:
Dated: May 12, 1998
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
THE BANK OF NEW YORK,
as Trustee, certifies that this is one of the Securities
referred to in the within-mentioned Indenture.
By_____________________________
Authorized Signatory
(1) The global Security will read instead: "The Principal Amount then shown on
Schedule A hereto."
A-2
<PAGE>
[FORM OF REVERSE SIDE OF SECURITY]
AMF BOWLING, INC.
ZERO COUPON CONVERTIBLE DEBENTURE DUE 2018
1. Interest
This Security shall not bear interest, except that if any amount payable
hereunder is not paid when due (whether upon acceleration pursuant to Section
6.02 of the Indenture, upon the date set for payment of the Redemption Price
pursuant to paragraph 5 hereof, upon the date set for payment of a Purchase
Price or Change of Control Redemption Price pursuant to paragraph 6 hereof or
upon the Stated Maturity of this Security, or otherwise), then in each such case
the overdue amount shall bear interest at the rate of 7% per annum, compounded
semiannually (to the extent that the payment of such interest shall be legally
enforceable), which interest shall accrue from the date such overdue amount was
due to the date payment of such amount, including interest thereon, has been
made or duly provided for. All such interest shall be payable on demand. The
accrual of such interest on overdue amounts shall, in the case of any late
payment of the Principal Amount, Purchase Price or Change of Control Redemption
Price, be in lieu of, and not in addition to, the continued accrual of Original
Issue Discount.
The Original Issue Discount (the difference between the Issue Price and
the Principal Amount of the Security) in the period during which a Security
remains outstanding, shall accrue at 7% per annum, on a semiannual bond
equivalent basis using a 360-day year composed of twelve 30-day months,
commencing on May 12, 1998.
2. Method of Payment
Subject to the terms and conditions of the Indenture, the Company will
make payments in respect of the Securities to the Persons who are registered
Holders of Securities at the close of business on the Business Day preceding the
Redemption Date or Stated Maturity, as the case may be, or at the close of
business on a Purchase Date or Repurchase Date, as the case may be. Holders must
surrender Securities to a Paying Agent to collect such payments in respect of
the Securities. The Company will pay cash amounts in money of the United States
that at the time of payment is legal tender for payment of public and private
debts.
3. Paying Agent, Conversion Agent and Registrar
Initially, The Bank of New York, a New York banking corporation (the
"Trustee"), will act as Paying Agent, Conversion Agent and Registrar. The
Company may appoint and change any Paying Agent, Conversion Agent, Registrar or
co-registrar without notice, other than notice to the Trustee. The Company or
any of its Subsidiaries or any of their Affiliates may act as Paying Agent,
Conversion Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture (the "Indenture"),
dated as of May 12, 1998, between the Company and the Trustee. Capitalized terms
used herein and not defined herein have the meanings ascribed thereto in the
Indenture. The Securities are subject to all such terms, and Holders are
referred to the Indenture for a statement of those terms.
The Securities are general unsecured obligations of the Company limited to
$900,000,000 aggregate Principal Amount (subject to Sections 2.02 and 2.07 of
the Indenture). The Indenture does not limit the incurrence of other
indebtedness of the Company, secured or unsecured.
A-3
<PAGE>
5. Redemption at the Option of the Company
No sinking fund is provided for the Securities. Subject to the terms and
conditions of the Indenture, the Securities are redeemable as a whole, or from
time to time in part, at any time at the option of the Company at the Redemption
Prices set forth below, provided that the Securities are not redeemable prior to
May 12, 2003.
The "Redemption Price" of any Security shall be equal to the Issue Price
of such Security plus accrued Original Issue Discount, interest, if any, and
Liquidated Damages, if any, thereon to the date of redemption. The table below
shows the Redemption Price of a Security per $1,000 Principal Amount on the
dates shown below and at Stated Maturity, which prices reflect accrued Original
Issue Discount calculated to each such date. The Redemption Price of a Security
redeemed between such dates would include an additional amount reflecting the
additional Original Issue Discount accrued since the next preceding date in the
table to the actual Redemption Date.
<TABLE>
<CAPTION>
(1) (2) (3)
Security Issue Accrued Original Redemption
Price Issue Discount at 7% Price
Redemption Date (1) + (2)
- -------------------------- ----------------- --------------------- --------------------
<S> <C>
May 12, 2003............. $252.57 $103.71 $356.28
May 12, 2004............. 252.57 129.08 381.65
May 12, 2005............. 252.57 156.27 408.84
May 12, 2006............. 252.57 185.39 437.96
May 12, 2007............. 252.57 216.58 469.15
May 12, 2008............. 252.57 250.00 502.57
May 12, 2009............. 252.57 285.79 538.36
May 12, 2010............. 252.57 324.14 576.71
May 12, 2011............. 252.57 365.21 617.78
May 12, 2012............. 252.57 409.21 661.78
May 12, 2013............. 252.57 456.35 708.92
May 12, 2014............. 252.57 506.84 759.41
May 12, 2015............. 252.57 560.93 813.50
May 12, 2016............. 252.57 618.87 871.44
May 12, 2017............. 252.57 680.94 933.51
Stated Maturity.......... 252.57 747.43 1,000.00
</TABLE>
6. Purchase by the Company at the Option of the Holder; Redemption at the
Option of the Holder Upon a Change of Control
(a) Subject to the terms and conditions of the Indenture, the Company
shall become obligated to purchase, at the option of the Holder, the Securities
held by such Holder on the following Purchase Dates and at a Purchase Price
equal to the Issue Price of such Security plus accrued Original Issue Discount,
A-4
<PAGE>
interest, if any, and Liquidated Damages, if any, thereon to the date of
purchase, upon delivery of a Purchase Notice containing the information set
forth in the Indenture, from the opening of business on the date that is 20
Business Days prior to such Purchase Date until the close of business on such
Purchase Date and upon delivery of the Securities to the Paying Agent by the
Holder as set forth in the Indenture. Such Purchase Prices may be paid, at the
option of the Company, in cash or by the issuance and delivery of shares of
Common Stock of the Company, or in any combination thereof.
PURCHASE DATE PURCHASE PRICE
------------ --------------
May 12, 2003 $356.28
May 12, 2008 $502.57
May 12, 2013 $708.92
Securities in denominations larger than $1,000 of Principal Amount may be
required by the Holder to be purchased in part, but only in integral multiples
of $1,000 of Principal Amount.
(b) At the option of the Holder and subject to the terms and
conditions of the Indenture, the Company shall become obligated to redeem the
Securities held by such Holder 45 days after the date of the Company's notice of
a Change of Control occurring on or prior to May 12, 2018 for a Change of
Control Redemption Price per $1,000 Principal Amount equal to the Issue Price
plus accrued Original Issue Discount, interest, if any, and Liquidated Damages,
if any, to the Repurchase Date. Securities in denominations larger than $1,000
of Principal Amount may be required by the Holder to be redeemed in part in
connection with a Change of Control, but only in integral multiples of $1,000 of
Principal Amount.
(c) Holders have the right to withdraw any Purchase Notice or
Repurchase Notice, as the case may be, by delivering to the Paying Agent a
written notice of withdrawal in accordance with the provisions of the Indenture.
(d) If the Paying Agent holds, in accordance with the Indenture, on
the Business Day following a Purchase Date or a Repurchase Date money or
securities, if permitted hereunder and under the Indenture, sufficient to pay
the Securities payable on that date, then on and after that date such Securities
shall cease to be outstanding and Original Issue Discount and interest, if any,
on such Securities shall cease to accrue, whether or not book-entry transfer of
such Securities is made or such Securities are delivered to the Paying Agent,
and the Holders thereof shall have no other rights as such (other than the right
to receive such payment).
7. Notice of Redemption at the Option of the Company
Notice of redemption at the option of the Company will be mailed at least
30 days but not more than 60 days before the Redemption Date to each Holder of
Securities at the Holder's registered address. If the Paying Agent holds, in
accordance with this Indenture, on a Redemption Date money sufficient to pay the
Securities payable on that date, then on and after that date such Securities
shall cease to be outstanding and Original Issue Discount and interest, if any,
on such Securities shall cease to accrue, whether or not book-entry transfer of
such Securities is made or such Securities are delivered to the Paying Agent,
and the Holders thereof shall have no other rights as such (other than the right
to receive such payment); provided that notice of such redemption has been duly
given pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made. Securities in denominations larger than $1,000 of
Principal Amount may be redeemed in part but only in integral multiples of
$1,000 of Principal Amount.
8. Conversion
Subject to the next two succeeding sentences and the terms and conditions
of the Indenture, a Holder of a Security may convert this Security for Common
Stock of the Company at any time prior to the close of business on May 12, 2018.
If this Security is called for redemption, the Holder may convert it at any time
before the close of business on the applicable Redemption Date unless the
Company defaults in the payment of the Redemption Price. A Security in respect
of which a Holder has delivered a notice of exercise of the option to require
the Company to purchase such Security pursuant to Section 3.08 of the Indenture
or to repurchase such Security in the event of a Change of Control pursuant to
Section 3.09 of the Indenture may be converted only if the notice of such
exercise is withdrawn in accordance with the terms of the Indenture.
<PAGE>
The initial Conversion Rate is 8.6734 shares of Common Stock per $1,000
Principal Amount, subject to adjustment in certain events specified in Section
10.06 of the Indenture. The Company will deliver Cash in lieu of any fractional
share of Common Stock as provided in the Indenture.
To convert this Security a Holder must (1) complete and manually sign the
conversion notice on the back of this Security (or complete and manually sign a
facsimile of such notice) and deliver such notice to the Conversion Agent, (2)
surrender this Security to the Conversion Agent, (3) furnish appropriate
endorsements and transfer documents if required by the Conversion Agent, the
Company or the Trustee and (4) pay any transfer or similar tax, if required.
A Holder may convert a portion of this Security if the Principal Amount of
such portion is $1,000 or an integral multiple of $1,000. No payment or
adjustment will be made for dividends on the Common Stock except as provided in
the Indenture. On conversion of this Security, that portion of accrued Original
Issue Discount attributable to the period from the Issue Date to the Conversion
Date with respect to the converted portion of this Security shall not be
canceled, extinguished or forfeited, but rather shall be deemed to be paid in
full to the Holder thereof through the delivery of the Common Stock (together
with any cash payment in lieu of fractional shares) in exchange for the portion
of this Security being converted pursuant to the terms hereof.
9. Conversion Arrangement on Call for Redemption
Any Securities called for redemption, unless surrendered for conversion
before the close of business on the last Trading Day prior to the Redemption
Date, may be deemed to be purchased from the Holders of such Securities at an
amount not less than the Redemption Price, by one or more investment bankers or
other purchasers who may agree with the Company to purchase such Securities from
the Holders, to convert them for Common Stock of the Company and to make payment
for such Securities to the Trustee in trust for such Holders.
10. Registration Rights
The Holder of this Security and the 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 as of May 12, 1998,
among the Company, the Designated Subsidiaries named therein and the Initial
Purchasers.
11. Denominations; Transfer; Exchange
The Securities are in registered form, without coupons, in denominations
of $1,000 of Principal Amount and integral multiples of $1,000. A Holder may
transfer or convert Securities in accordance with the Indenture. The Registrar
may require a Holder, among other things, to furnish appropriate endorsements
and transfer documents and to pay any taxes and fees required by law or
permitted by the Indenture. The Registrar need not transfer or exchange any
Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or any
Securities in respect of which a Purchase Notice or Repurchase Notice has been
given and not withdrawn (except, in the case of a Security to be purchased in
part, the portion of the Security not to be purchased) or any Securities for a
period of 15 days before a selection of Securities to be redeemed.
<PAGE>
12. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of this
Security for all purposes.
13. Unclaimed Money or Securities
The Trustee and the Paying Agent shall return to the Company upon written
request any money or securities held by them for the payment of any amount with
respect to the Securities that remains unclaimed for two years, provided,
however, that the Trustee or such Paying Agent, before being required to make
any such return, may at the expense of the Company cause to be published once in
a newspaper of general circulation in The City of New York or mail to each such
Holder notice that such money or securities remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such publication or mailing, any unclaimed money or securities then remaining
will be returned to the Company.
14. Amendment; Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in aggregate Principal Amount of the Securities
at the time outstanding and (ii) certain defaults or noncompliance with certain
provisions may be waived with the written consent of the Holders of a majority
in aggregate Principal Amount of the Securities at the time outstanding. Subject
to certain exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company and the Trustee may amend the Indenture or the
Securities to cure any ambiguity, defect or inconsistency, or to comply with
Article V or Section 10.12 of the Indenture, to provide for uncertificated
Securities in addition to or in place of certificated Securities or to make any
change that does not adversely affect the rights of any Securityholder or to
comply with any requirement of the SEC in connection with the qualification of
the Indenture under the TIA.
15. Defaults and Remedies
If an Event of Default (as defined in the Indenture) occurs and is
continuing, the Trustee, or the Holders of at least 25% in aggregate Principal
Amount of the Securities at the time outstanding, may declare all the Securities
to be due and payable immediately. Certain events of bankruptcy or insolvency
are Events of Default which will result in the Securities being declared due and
payable immediately upon the occurrence of such Events of Default.
Holders may not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee may refuse to enforce the Indenture or the
Securities unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in aggregate Principal Amount of the
Securities at the time outstanding may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders notice of any continuing
Default (except a Default in payment of amounts due under this Security) if it
determines that withholding notice is in their interests.
16. Trustee Dealings with the Company
The Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledgee of Securities and may otherwise deal with and
collect obligations owed to it by the Company or its Affiliates and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not Trustee.
<PAGE>
17. No Recourse Against Others
A director, officer, employee or stockholder, 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 creation. By accepting a Security, each
Securityholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.
18. Authentication
This Security shall not be valid until an authorized officer of the
Trustee manually signs the Trustee's Certificate of Authentication on the other
side of this Security.
19. Abbreviations
Customary abbreviations may be used in the name of a Securityholder or an
assignee, such as TEN COM (=tenants in common), TENANT (=tenants by the
entireties), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. Governing Law
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THIS
SECURITY, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
<PAGE>
[FORM OF CONVERSION NOTICE]
CONVERSION NOTICE
To: AMF Bowling, Inc.
The undersigned registered holder of this Security hereby irrevocably
exercises the option to convert this Security, or portion hereof (which is $
1,000 Principal Amount or an integral multiple thereof) below designated, for
shares of Common Stock of AMF Bowling, Inc. in accordance with the terms of the
Indenture referred to in this Security, and directs that the shares issuable and
deliverable upon such conversion, together with any check in payment for
fractional shares and any Securities representing any unconverted Principal
Amount hereof, be issued and delivered to the registered holder hereof unless a
different name has been indicated below. If shares or any portion of this
Security not converted are to be issued in the name of a Person other than the
undersigned, the undersigned will pay any documentary, stamp or similar issue or
transfer taxes payable with respect thereto.
Dated:
------------------------------
------------------------------
Signature (s)
Fill in for registration of shares if to be
delivered, and Securities if to be issued
other than to and in the name of the
registered holder:
- --------------------------------------
(Name)
- --------------------------------------
(Street Address)
- --------------------------------------
(City, state and zip code)
Please print name and address
Principal amount to be
converted (if less than
all):
$----------
---------------------------------
Social Security or Other Taxpayer
Identification Number
<PAGE>
[FORM OF ELECTION OF HOLDER TO REQUIRE
REDEMPTION UPON A CHANGE OF CONTROL]
To: The Bank of New York
The undersigned registered holder of this Security hereby acknowledges
receipt of a notice from AMF Bowling, Inc. (the "Company") as to the occurrence
of a Change of Control with respect to the Company and requests and instructs
the Company to repurchase this Security, or the portion hereof (which is $1,000
Principal Amount or an integral multiple thereof) below designated, as of the
Repurchase Date pursuant to the terms and conditions specified in paragraph 6(b)
of this Security and in the Indenture the Indenture referred to in this
Security.
The undersigned hereby directs the Company to pay ____________________ an
amount in Cash or, at the Company's election, Common Stock valued as set forth
in the Indenture, equal to the Issue Price plus accrued Original Issue Discount
and interest, if any, and Liquidated Damages, if any, to the Repurchase Date
(the "Change of Control Redemption Price"), as provided in the Indenture;
provided that if the Company elects to pay any portion of the Change of Control
Redemption Price in Common Stock but such portion will ultimately be payable in
Cash, pursuant to Section 3.09(d) or (e) of the Indenture, then the undersigned
elects (check one):
( ) to withdraw this notice with respect to the following Securities:
Principal Amount:
Certificate numbers:
( ) to receive Cash in respect of the entire Change of Control Redemption
Price with respect to the Securities that are subject to this notice.
Notice: If the Holder fails to make an election, the Holder shall be deemed to
have elected to receive Cash in respect of the entire Change of Control
Redemption Price for all Securities subject to this notice.
Dated: __________
- -----------------
--------------------------------
Signature (s)
Security certificate number:
Principal Amount to be redeemed
(if less than all): $_____________
Remaining Principal Amount after
redemption: $________________
--------------------------------
Social Security or Other Taxpayer
Identification Number
<PAGE>
(FORM OF SCHEDULE FOR ENDORSEMENTS ON GLOBAL SECURITY
TO REFLECT CHANGES IN PRINCIPAL AMOUNT]
Schedule A
Principal Amount of Global Security: $____________, reduced as set forth below.
Changes to Principal Amount of Global Security
<TABLE>
<CAPTION>
Date Principal Amount of Securities by which Remaining Principal Amount Notation Made
this Global Security is to be Reduced, of this Global Security by
and Reason for Reduction
<S> <C>
- ----------- -------------------------------------------------- ------------------------------ -------------------
- ----------- -------------------------------------------------- ------------------------------ -------------------
- ----------- -------------------------------------------------- ------------------------------ -------------------
- ----------- -------------------------------------------------- ------------------------------ -------------------
- ----------- -------------------------------------------------- ------------------------------ -------------------
- ----------- -------------------------------------------------- ------------------------------ -------------------
- ----------- -------------------------------------------------- ------------------------------ -------------------
- ----------- -------------------------------------------------- ------------------------------ -------------------
- ----------- -------------------------------------------------- ------------------------------ -------------------
- ----------- -------------------------------------------------- ------------------------------ -------------------
</TABLE>
AMF Bowling, Inc.
Zero Coupon Convertible Debentures due 2018
Registration Rights Agreement
Dated as of May 12, 1998
Goldman, Sachs & Co.,
Cowen & Company,
Morgan Stanley & Co. Incorporated,
Schroder & Co. Inc.,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
AMF Bowling, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to the Purchasers (as defined herein) upon the terms set forth in
the Purchase Agreement (as defined herein) its Zero Coupon Convertible
Debentures due 2018 (the "Securities"). As an inducement to the Purchasers to
enter into the Purchase Agreement and in satisfaction of a condition to the
obligations of the Purchasers thereunder, the Company agrees with the Purchasers
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:
"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".
"Applicable Conversion Price" means, as of any date of determination,
the Applicable Principal Amount per $1,000 principal amount at maturity of
Securities as of such date of determination divided by the Conversion Rate (as
defined in the Indenture) in effect as of such date of determination or, if no
Securities are then outstanding, the Conversion Rate that would be in effect if
Securities were then outstanding.
<PAGE>
"Applicable Principal Amount" means, as of any date of determination,
with respect to each $1,000 principal amount at maturity of Securities, the
Issue Price (as defined in the Indenture) of such Securities plus accrued
Original Issue Discount (as defined in the Indenture) with respect to such
Securities through such date of determination or, if no Securities are then
outstanding, such sum calculated as if such Securities were then outstanding.
"Commission" means the United States Securities and Exchange
Commission, or any successor thereto.
"Common Stock" means the Company's common stock, par value $0.01 per
share.
"Effectiveness Period" has the meaning assigned thereto in Section
2(b)(i)(A) 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" means any holder of Registrable Securities that has
returned a completed and signed Notice and Questionnaire to the Company in
accordance with Section 3(a)(1) or 3(a)(2) hereof.
"Exchange Act" means the United States Securities Exchange Act of 1934,
as amended.
"Filing Notice" has the meaning assigned thereto in Section 3(d)(1)
hereof.
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 May 12, 1998, between the
Company and The Bank of New York, as amended and supplemented from time to time
in accordance with its terms.
"Liquidated Damages" has the meaning assigned thereto in Section 2(c)
hereof.
"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.
"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.
"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 Securities 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 any material
incorporated by reference in such prospectus and any documents filed after the
date of such prospectus by the Company under the Exchange Act and incorporated
by reference therein.
<PAGE>
"Purchase Agreement" means the purchase agreement, dated May 6, 1998,
among the Purchasers, the Company and the Designated Subsidiaries named therein.
"Purchasers" means the Purchasers named in Schedule I to the Purchase
Agreement.
"Registrable Securities" means all or any portion of the Securities and
the shares of Common Stock issuable upon conversion, redemption or repurchase of
such Securities; provided, however, that a security shall cease to be a
Registrable Security when it is no longer a Restricted Security.
"Registration Default" has the meaning assigned thereto in Section 2(c)
hereof.
"Restricted Security" means any Security or shares of Common Stock
issuable upon conversion, redemption or repurchase thereof except any such
Security or 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
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 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.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"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 at maturity" of Registrable Securities or to a percentage
of Registrable Securities, Common Stock shall be treated as representing the
principal amount at maturity 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, as soon as practicable
but in any event within 90 calendar days following the First Time of Delivery,
file with the Commission a Shelf Registration Statement relating to the offer
and sale of the Registrable Securities and, thereafter, shall use its best
efforts to cause such Shelf Registration Statement to be declared effective
under the Securities Act as promptly as is practicable but in any event within
180 calendar days following the First Time of Delivery; provided, 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.
<PAGE>
(b)(i) The Company shall use its best efforts:
(A) Subject to the proviso to clause (b)(ii), 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 until the earlier of: (x) such time as all
Registrable Securities covered by the Shelf Registration Statement have
been sold pursuant to the Shelf Registration Statement, and (y) such
time as all of the Registrable Securities held by Persons that are not
Affiliates of the Company are eligible for resale pursuant to Rule
144(k) (or any successor provision thereto) under the Securities Act
(in each case, such period being referred to herein as the
"Effectiveness Period");
(B) After the Effective Time of the Shelf Registration Statement
and prior to the end of the Effectiveness Period, as provided in
Section 3(a)(2) hereof, to take any action reasonably necessary to
enable any holder of Registrable Securities that is not then an
Electing 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
(C) If at any time, the Securities, pursuant to Article X 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.
After the end of the Effectiveness Period, the Company will not
be required to file or maintain the effectiveness of any registration
statement, including, without limitation, the Shelf Registration
Statement, with respect to the Securities or the Common Stock issuable
upon conversion, redemption or repurchase thereof.
(ii) The Company shall be deemed not to have used its best
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; provided however, that the
Company will be permitted to suspend the use of the Prospectus (x) in
connection with pending corporate developments, public filings with the
Commission and similar events, for a period not to exceed 30 days in
any three-month period or 90 days (whether or not consecutive) in any
twelve-month period or (y) in connection with any corporate acquisition
or similar transaction, for a period not to exceed 60 days in any
three-month period or 90 days (whether or not consecutive) in any
twelve-month period.
<PAGE>
(c) If (i) on or prior to the 90th calendar day following the First
Time of Delivery, a Shelf Registration Statement has not been filed with the
Commission, (ii) on or prior to the 180th calendar day following the First Time
of Delivery, such Shelf Registration Statement is not declared effective by the
Commission, (iii) the Shelf Registration Statement is filed and declared
effective and, prior to the end of the Effectiveness Period, ceases to be
effective (except as set forth in the proviso to Section 2(b)(ii)) and is not
immediately succeeded by an additional effective Shelf Registration Statement
satisfying the requirements of this Agreement, or (iv) prior to the end of the
Effectiveness Period the Prospectus is unavailable (whether pursuant to a
blackout period (as defined in Section 3(j) hereof) or otherwise for periods in
excess of those set forth in the proviso to Section 2(b)(ii) hereof, or (v)
prior to the end of the Effectiveness Period the Company fails to make any
filing within the periods required under Section 3(a)(2)(x) hereof, or (vi)
prior to the end of the Effectiveness Period any filing required pursuant to
Section 3(a)(2)(y) hereof is a post-effective amendment required to be declared
effective under the Securities Act and such amendment is not declared effective
within 45 days of the filing thereof (each of the events described in clauses
(i) through (vi), a "Registration Default"), then the Company shall pay
liquidated damages (the "Liquidated Damages") to the holders of the Securities
and the Common Stock issuable upon conversion, redemption or repurchase thereof
from and including the day on which such Registration Default first occurs to
but excluding the day on which such Registration Default is cured. Such
Liquidated Damages shall accrue (x) in respect of any Securities, at a rate per
annum equal to one-quarter of one percent (0.25%) for the first 90 days after
the occurrence of such Registration Default and one-half of one percent (0.50%)
thereafter of the Applicable Principal Amount thereof, and (y) in respect of any
shares of Common Stock issued upon conversion, redemption or repurchase of the
Securities, at a rate per annum equal to one-quarter of one percent (0.25%) for
the first 90 days after the occurrence of such Registration Default and one-half
of one percent (0.50%) thereafter of the Applicable Conversion Price as in
effect from time to time. Such Liquidated Damages shall be payable quarterly in
arrears March 12, June 12, September 12 and December 12 of each year to the
holders of record of the Securities or the Common Stock issued upon conversion,
redemption or repurchase thereof.
Except as provided in this Section 2(c), the Company shall have no
other liability for monetary damages with respect to its registration
obligations; provided, however, that if the Company breaches, fails to comply
with, defaults in its performance of, or violates Sections 2 and 3 hereof, the
Purchasers, the holders and beneficial owners of the Registrable Securities may
be entitled to, and the Company shall not contest or oppose the granting of, any
equitable relief, including specific performance, injunctive relief and
declaratory orders.
3. Registration Procedures. In connection with the Shelf Registration
Statement, the following provisions shall apply:
(a) (1) 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. Any
Person that acquires any Registrable Securities from an Electing Holder
(excluding any Registrable Securities that were not identified in the
Notice and Questionnaire delivered by such Electing Holder) will be
entitled to have such Registrable Securities included in the Shelf
Registration Statement so long as such transferee provides the Company
with an updated Notice and Questionnaire. If any such Electing Holder's
or transferee's Notice and Questionnaire is received on or prior to the
10th day prior to the Effective Time, such Electing Holder or
transferee will be entitled to have such Electing Holder's or
transferee's Registrable Securities included in the Shelf Registration
Statement at the Effective Time; if such Electing Holder's or
transferee's Notice and Questionnaire is received subsequent to such
10th day, the Registrable Securities covered by such Notice and
Questionnaire will be included in the Shelf Registration Statement
reasonably promptly after receipt (which date of inclusion may be
subsequent to the Effective Time), as provided in Section 3(a)(2)
below. 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 30 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.
<PAGE>
(2) After the Effective Time of the Shelf Registration Statement
and prior to the end of the Effectiveness Period, 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. Upon receipt of a completed Notice and Questionnaire, together
with such other information as may be reasonably requested by the
Company, from a holder following the Effective Time and prior to the
end of the Effectiveness Period, the Company will (x) as promptly as
practicable but in any event within 5 business days of such receipt,
file such amendments to the Shelf Registration Statement or supplements
to the Prospectus as are necessary to permit such holder to deliver the
Prospectus to purchasers of Registrable Securities (subject to the
Company's right to suspend the use of the Prospectus as provided in
Section 2(b) hereof) and (y) if a post-effective amendment to the Shelf
Registration Statement is required to be declared effective under the
Securities Act, use its best efforts to cause such amendment to be
declared effective within 45 days of the filing thereof.
(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.
(c) During the Effectiveness Period, the Company shall reasonably
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.
(d) During the Effectiveness Period, the Company shall reasonably
promptly advise each Electing Holder, and shall confirm such advice in
writing if so requested by any such holder:
(1) when the Shelf Registration Statement and any amendment
thereto has been filed with the Commission (a "Filing Notice") and when
the Shelf Registration Statement or any post-effective amendment
thereto has become effective; and
<PAGE>
(2) of any request by the Commission for amendments or
supplements to the Shelf Registration Statement or the Prospectus
included therein or for additional information.
(3) 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;
(4) 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
(5) of the happening of any event 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).
(e) During the Effectiveness Period, the Company shall use its
best 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) During the Effectiveness Period, 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)(5) 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 Registrable Securities covered by the
Prospectus and any amendment or supplement thereto during the
Effectiveness Period.
(h) During the Effectiveness Period, prior to any offering of
Registrable Securities pursuant to the Shelf Registration Statement,
the Company shall use its reasonable best efforts to (1) 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 in writing and (2) 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 (i) 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), (ii) file any general consent to service of process in
any jurisdiction where it is not as of the date hereof so subject or
(iii) subject itself to taxation in any such jurisdiction if it is not
so subject.
<PAGE>
(i) During the Effectiveness Period, unless any Registrable
Securities shall be in book-entry only form at the applicable time of
sale, the Company shall cooperate with the Electing Holders to
facilitate the preparation and delivery within the times required for
regular way of settlement 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 writing in
connection with the sale of Registrable Securities pursuant to the
Shelf Registration Statement.
(j) During the Effectiveness Period, upon the occurrence of any
fact or event contemplated by paragraph 3(d)(5) 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 as the Board of
Directors of the Company shall have determined in good faith is in the
best interests of the Company (any such period hereinafter referred to
as a "blackout period"). If the Company notifies the Electing Holders
of the occurrence of any event contemplated by paragraph 3(d)(5) above,
each Electing Holder agrees, as a consequence of the inclusion of any
of such holder's Registrable Securities in the Shelf 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 its best 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.
<PAGE>
(n) In the event of an underwritten offering conducted pursuant
to Section 6 hereof, the Company shall, if requested, reasonably
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:
(i)(A) make reasonably available during regular business
hours 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 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 such holders and any such underwriter, attorney,
accountant or agent, shall be required to maintain in confidence
and not to disclose to any other person any information or
records reasonably designated by the Company in writing as being
confidential, unless and until such time as (A) such information
becomes a matter of public record (whether by virtue of its
inclusion in such Shelf Registration Statement or otherwise), or
(B) such person shall be required so to disclose such information
pursuant to the subpoena or order of any court or other
governmental agency or body having jurisdiction over the matter
(subject to the requirements of such order, and only after such
person shall have given the Company prompt prior written notice
of such requirement), or (C) such information is required to be
set forth in such Shelf Registration Statement or the Prospectus
included therein or in an amendment to such Shelf Registration
Statement or an amendment or supplement to such Prospectus in
order that such Shelf Registration Statement, Prospectus,
amendment or supplement, as the case may be, does not contain an
untrue statement of a material fact or omit to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading; 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;
<PAGE>
(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) in customary form addressed to each holder
participating in such underwritten offering and the underwriters,
covering such matters as are customarily covered in opinions
requested in primary underwritten 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 may be
subject to customary qualifications and exceptions and 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, 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
customary conditions contained in the underwriting agreement or
other agreements entered into by the Company.
(q) The Company will use its best efforts to cause the Common
Stock issuable upon conversion, redemption or repurchase of the
Securities to be listed for quotation on the New York Stock Exchange,
Inc. 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)
if required by the NASD Rules, 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.
<PAGE>
(s) The Company shall use its reasonable best 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.
(t) The Company may require each Electing Holder to furnish to
the Company such information regarding such Electing Holder as the
Company may from time to time reasonably require for inclusion in such
Shelf Registration Statement or any amendment or supplement thereof.
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 the fees and expenses of a single counsel to the Purchasers.
In addition, in the event of an underwritten offering of Registrable Securities
conducted pursuant to Section 6 hereof, the Company shall pay the fees and
expenses incurred by it in connection with such offering including those of its
independent counsel and accountants, and will also pay up to a maximum of
$75,000 for the fees and expenses of a single counsel selected by a plurality of
the Electing Holders of not less than 25% of the Registrable Securities to be
included in such underwritten offering to represent them. The Electing Holders
participating in such offering shall be responsible, on a pro rata basis based
on the respective amount of their Registrable Securities included in such
offering, for all fees and expenses of such counsel in excess of $75,000. Except
as provided in this Section 4, each holder of Registrable Securities to be
included in the Shelf Registration Statement will be responsible for all
underwriting discounts and commissions payable in connection with the sale of
such holder's Registrable Securities and any other fees and expenses incurred by
it in connection with the Shelf Registration Statement.
5. Indemnification and Contribution.
(a) Indemnification by the Company and the Designated Subsidiaries.
Upon the registration of the Registrable Securities pursuant to Section 2
hereof, the Company and the Designated Subsidiaries (as defined in the Purchase
Agreement), jointly and severally, 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 and the
Designated Subsidiaries hereby agree 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 and the Designated Subsidiaries
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.
<PAGE>
(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 and
the Designated Subsidiaries (and, in the case of an Electing Holder, each other
Electing Holder who participates in such offering), their respective directors,
officers who sign any Shelf Registration Statement and each Person, if any, who
controls the Company (or, in the case of an Electing Holder, any such other
Electing Holder) 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, the Designated Subsidiaries (or, in the case
of an Electing Holder, any such other Electing Holder) 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 and the Designated Subsidiaries (and, in
the case of an Electing Holder, each other Electing Holder who participates in
such offering) for any legal or other expenses reasonably incurred by the
Company and the Designated Subsidiaries (or, in the case of an Electing Holder,
any such other Electing Holder) 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, which consent shall
not be unreasonably withheld, 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, which consent shall not be unreasonably withheld,
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. The
indemnifying party shall not be required to indemnify any indemnified party for
any amount paid or payable by such indemnified party in the settlement of any
action, proceeding or investigation without the written consent of the
indemnifying party, which consent shall not be unreasonable withheld.
<PAGE>
(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, 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
at maturity 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 (i) 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 and
(ii) any underwriter, selling agent or other securities professional be required
to undertake liability to any Person hereunder for any amounts in excess of the
discount, commission or other compensation payable to such underwriter, selling
agent or other securities professional with respect to the Registrable
Securities underwritten by it and distributed to the public.
(f) The obligations of the Company and the Designated Subsidiaries,
under this Section 5 shall be in addition to any liability which the Company and
the Designated Subsidiaries 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 and the Designated Subsidiaries and shall extend, upon the same
terms and conditions, to each officer and director of the Company and the
Designated Subsidiaries and each Person who controls the Company and the
Designated Subsidiaries within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act. 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.
<PAGE>
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_%
in aggregate principal amount at maturity of the Registrable Securities then
covered by the Shelf Registration Statement shall request such an offering and
(ii) at least such aggregate principal amount at maturity 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 (including the size of the offering) will be selected by the Company. 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. 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 granted after
the date hereof 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
7(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 at maturity 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 7(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.
<PAGE>
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be given as provided in the Indenture; provided, that
any notice pursuant to Section 3(d)(1) hereof with respect to the filing and
effectiveness of the Shelf Registration Statement shall be given by release made
to Reuters Economic Services and Bloomberg Business News.
(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 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, without giving effect to any
provisions relating to conflicts of laws.
(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>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
AMF Bowling, Inc.
AMF Group Holdings Inc.
AMF Bowling Worldwide, Inc.
AMF BCO-China, Inc.
AMF BCO-France One, Inc.
AMF BCO-France Two, Inc.
AMF BCO-UK One, Inc.
AMF BCO-UK Two, Inc.
AMF Beverage Company of Oregon, Inc.
AMF Beverage Company of W. Va., Inc.
AMF Bowling Centers, Inc.
AMF Bowling Centers China, Inc.
AMF Bowling Centers International Inc.
AMF Bowling Centers (Aust) International Inc.
AMF Bowling Centers (Canada) International Inc.
AMF Bowling Centers (Hong Kong) International, Inc.
AMF Bowling Centers Holdings Inc.
AMF Bowling Centers Spain Inc.
AMF Bowling Centers Switzerland Inc.
AMF Bowling Products, Inc.
AMF Bowling Holdings Inc.
AMF Bowling Mexico Holding, Inc.
AMF Worldwide Bowling Centers Holdings Inc.
Boliches AMF, Inc.
Bush River Corporation
King Louie Lenaxa, Inc.
American Recreation Centers Inc.
Burleigh Recreation, Inc.
300, Inc.
Lake Grove Centers, Inc.
Michael Jordan Golf Company, Inc.
Michael Jordan Golf-Water Tower, Inc.
MJG-O'Hare, Inc.
By:________________________
Name: Stephen E. Hare
Title: Executive Vice President
The foregoing Registration Rights Agreement is hereby confirmed and accepted as
of the date first above written.
Goldman, Sachs & Co.
Cowen & Company
Morgan Stanley & Co. Incorporated
Schroder & Co. Inc.
By: ____________________________
(Goldman, Sachs & Co.)
On behalf of each of the Purchasers
<PAGE>
Exhibit A
AMF Bowling, Inc.
INSTRUCTION TO DTC PARTICIPANTS
([Mailing Date], 1998)
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 AMF Bowling, Inc. (the
"Company") Zero Coupon Convertible Debentures due 2018 (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 Daniel M. McCormack, Esq., 8100 AMF Drive, Richmond, Virginia 23111
(804) 730-4471.
<PAGE>
AMF Bowling, Inc.
Notice of Registration Statement
and
Selling Securityholder Questionnaire
(Date)
AMF Bowling, Inc. (the "Company") has filed or intends shortly to file
with the Securities and Exchange Commission (the "Commission") a preliminary
registration statement (the "Shelf Registration Statement") for the registration
and resale under the Securities Act of 1933, as amended (the "Securities Act"),
of the Company's Zero Coupon Convertible Debentures due 2018 (CUSIP No.
03113VAA7) (the "Debentures"), and common stock, par value $0.01 per share, of
the Company (the "Common Stock") issuable upon conversion, redemption or
repurchase thereof, in accordance with the terms of the Registration Rights
Agreement, dated as of May 12, 1998 (the "Registration Rights Agreement"),
between the Company and the purchasers named therein (the "Initial Purchasers").
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 a supplement or amendment 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 such date (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 who have not 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 in return, the Company will reasonably 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 Debentures issued under the
Indenture and the Common Stock issuable upon conversion, redemption or
repurchase of such Debentures, 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 Debenture or shares of Common Stock issuable upon
conversion, redemption or repurchase thereof except any such Debenture or 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 Debenture
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 Indenture.
<PAGE>
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 therein). 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 undersigned Selling Securityholder will be required
to deliver to the Company and the 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 undersigned Selling Securityholder hereby provides the following
information to the Company and represents and warrants that such information is
accurate and complete:
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 (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 (3) below
are Held:
----------------------------------------------------------------------
(2) Address for Notices to Selling Securityholder:
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Telephone: _________________________
Fax:_______________________________
Contact:____________________________
(3) Beneficial Ownership of Registrable Securities (as defined in the
Registration Rights Agreement):
Except as set forth below in this Item (3), the undersigned Selling
Securityholder does not beneficially own any Debentures or Common Stock
previously issued upon conversion, redemption or repurchase of any
Debenture.
(a) Principal amount of Debentures beneficially owned:____________________
Number of shares of Common Stock beneficially owned and issued to date
upon conversion, redemption or repurchase of Debentures (if
any):_______________________________________
<PAGE>
CUSIP No(s). of Registrable Securities:_______________________________
(b) Principal amount at maturity of Debentures which the undersigned wishes
to be included in the Shelf Registration
Statement:____________________________________________________________
Number of shares of Common Stock (if any) issued upon conversion,
redemption or repurchase of Registrable Securities which are to be
included in the Shelf Registration Statement:
-----------------------------------------------------------------------
CUSIP No(s). of Registrable Securities to be included in the Shelf
Registration Statement:_______________________________________________
(4) Beneficial Ownership of Other Securities of the Company:
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 Debentures, shares of Common Stock or any other
securities of the Company.
State any exceptions here:
(5) Relationships with the Company:
Except as set forth below, neither the undersigned 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 exchanges or U.S. inter-dealer quotation system of a
registered national securities association on which the Registrable
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 undersigned 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 undersigned
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.
<PAGE>
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 undersigned Selling Securityholder acknowledges
that it understands its obligation to comply, and agrees that it will comply,
with the prospectus delivery and other provisions of the Securities Act and
Exchange Act and the respective rules and regulations thereunder, particularly
Regulation M.
In the event that the undersigned 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 undersigned
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 undersigned 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 undersigned 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 undersigned 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
undersigned 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:
To the Company:
AMF Bowling, Inc.
8100 AMF Drive
Richmond, VA 23111
Attention: Secretary
Once this Notice and Questionnaire is executed by the undersigned
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 undersigned Selling Securityholder with respect to the
Registrable Securities beneficially owned by such undersigned Selling
Securityholder and listed in Item (3) above. This Agreement shall be governed in
all respects by the laws of the State of New York.
<PAGE>
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 [30 DAYS FROM NOTICE DATE] TO THE COMPANY AT:
AMF Bowling, Inc.
8100 AMF Drive
Richmond, VA 23111
Attention: Secretary
<PAGE>
EXHIBIT 1
NOTICE TO TRANSFER PURSUANT TO REGISTRATION STATEMENT
AMF Bowling, Inc.
8100 AMF Drive
Richmond, VA 23111
Attention: Secretary
Re: AMF Bowling, Inc. (the "Company")
Zero Coupon Convertible Debentures due 2018 (the "Debentures")
Ladies and Gentlemen:
Please be advised that ________________ has transferred $_______
aggregate principal amount of the above-referenced Debentures or ______ shares
of the Company's Common Stock, issued on conversion, redemption or repurchase of
Debentures, pursuant to the Registration Statement (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
Debentures or Common Stock is named as a selling securityholder in the
Prospectus dated __________ or in amendments or supplements thereto, and that
the aggregate principal amount of the Debentures or number of shares of Common
Stock transferred are the Debentures or Common Stock listed in such Prospectus,
as amended or supplemented, opposite such owner's name.
Dated:__________________
Very truly yours,
-----------------------------
(Name)
By:__________________________
(Authorized Signature)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 29,593
<SECURITIES> 0
<RECEIVABLES> 67,133
<ALLOWANCES> 4,894
<INVENTORY> 67,444
<CURRENT-ASSETS> 182,797
<PP&E> 804,756
<DEPRECIATION> 20,519
<TOTAL-ASSETS> 1,889,951
<CURRENT-LIABILITIES> 128,663
<BONDS> 1,099,921
0
0
<COMMON> 750,030
<OTHER-SE> (93,853)
<TOTAL-LIABILITY-AND-EQUITY> 1,889,951
<SALES> 187,564
<TOTAL-REVENUES> 187,564
<CGS> 38,857
<TOTAL-COSTS> 161,299
<OTHER-EXPENSES> 40
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,974
<INCOME-PRETAX> 251
<INCOME-TAX> 530
<INCOME-CONTINUING> (279)
<DISCONTINUED> 0
<EXTRAORDINARY> (352)
<CHANGES> 0
<NET-INCOME> (631)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
